Find the Right Loan
Obtaining a mortgage does not have to be stressful! The First Step is to be Pre-Qualified or Pre-approved with your choice of a lender, to make sure you are searching within your budget.
Pre-Qualified: The lender estimates how much you can be eligible to borrow based on information you supply, including debt/income/assets.
Pre-Approved: The lender can provide more specific loan details / amounts for you based on the information + documentation / proof you provide, with an application and a credit check.
Determine the Type of Mortgage + Down Payment you prefer:
Conventional: Possible minimum 3.0% down payment (cannot be multi-unit or over $417,000 and min. credit score 650) **With a Conventional Mortgage, putting 20% down removes the need for private mortgage insurance BUT 20% down is NOT necessary!
FHA: 3.5% down payment (min. credit score 580)
USDA: NO down payment (Fee added to loan at closing, min. credit score 620) aka Rural Housing Loan, since only certain areas qualify.
VA: NO down payment; Available to members of the U.S. Military and surviving spouses.
HomePath Mortgage: Specialty programs offered only on Fannie Mae-owned homes. These properties are foreclosed homes, homes taken back as deed-in-lieu of foreclosure (where the borrower deeds the property back to the investor — Fannie Mae — in return for a release of liability from the mortgage loan) or forfeiture. Minimum 5% down payment on owner-occupied properties (10% on second homes and investment properties). No private mortgage insurance (PMI) is required. No lender-ordered appraisal is required.
Loan for Raw Land: Unimproved “raw” land is usually the hardest to finance or get with favorable terms. Lenders consider raw land as the least desirable collateral for all land uses. Most will require more money down (up to 50 percent) and charge a much higher interest rate.
Loan for Lot Land: Lot loans are usually available from local lenders and some national lenders. A lot loan typically consists of one or more building sites for residential construction. These sites usually have been improved with the addition of sewer and water systems, streets and easy access to other utilities. Typically lot loans require 10-20 percent down, with amortization terms up to 20 years. These lots are also financed by home equity or cash out refinances on the borrower’s current home.
Reverse Mortgage: A loan that allows qualified homeowners, age 62 or older, to take part of their home’s equity as cash, either as a line of credit, or monthly, or lump sum payment, or combo of a credit line and payments. It requires no repayment, until the borrower no longer occupies the residence. Borrowers with reverse mortgages are still required to pay the real estate taxes, homeowners insurance, flood insurance, and association dues.
A Home Equity Loan: also known as a second mortgage, term loan or equity loan — is when a mortgage lender lets a homeowner borrow money against the equity in his or her home. A home equity loan or second mortgage is paid every month on top of the mortgage you already pay, hence the name “second mortgage.” A home equity loan or second mortgage can be a source of money to fund your major financial goals, such as paying for college education or medical bills, and can prevent building up credit card debt with high interest rates.
When you’re ready to find a home, the last thing you want to do is limit your possibilities. Dream big, right? But you’d be totally bummed if you found a perfect pad, only to learn you don’t qualify for the home of your dreams. If you don’t earn a loan pre-approval before you start looking, you might actually prevent yourself from finding—and buying—your dream home.
Streamlined Hunting With Pre-Approval:
Most homeowners start out by browsing homes for sale online to get an idea of what neighborhoods and housing styles they like. If you don’t know what you can afford, you may be looking out of your price range and wasting your time. You may also be looking below what you would have qualified for and not getting the right home for you.
If you start off by getting a pre-approval, you can sort by price, identify the right loan type and , and find your dream home much faster.
Better Results From a REALTOR®:
The bottom line is this: REALTORS® prefer to work with home buyers who have a pre-approval in hand for two reasons. First, a REALTOR® knows the deal isn’t likely to fall through, and second, when they know what you want and what you can afford, REALTORS® are able to do a better job of finding your dream home.
For example, you told a REALTOR® you want a historic home, but the asking price for these homes varies widely. If they don’t know what you can afford, they can only do a general search across several price ranges and may miss hidden gems.
On the other hand, if you have pre-approval, a REALTOR® would know what exactly what to focus on and would be able to suggest different neighborhoods, sizes and conditions of homes to match your needs—making it easier to get you exactly what you want.
Higher Acceptance Rate for Buyers With Pre-Approval:
Once you find the perfect home, the next step can go two different ways depending on a pre-approval.
If you’re not pre-approved and you find a home you want to make an offer on, you’re taking a gamble. REALTORS® and sellers are less willing to accept offers from a buyer without a pre-approval. Odds are, they’ll go on to the next offer—and you’ll miss out.
However, if you are pre-approved, you have more room to haggle. Sellers may be more willing to lower the asking price, include appliances, cover closing costs or make other allowances to work with a pre-approved buyer.
Less Stress With Pre-Approval:
Finally, skipping this step can wreak havoc on your stress level. If you aren’t pre-approved, you’ll spend longer looking for homes. You may not feel like you’re getting great service from a REALTOR®. You may get turned down once you’re ready to make an offer.
All of this adds more time and stress to what should be a very exciting time in your life. On the other hand, if you’re pre-approved, you have less to worry about: you know you’re a qualified buyer, you know there are lenders willing to work with you, and you can feel pretty confident when you make an offer.
CONTACT: Nicholas DeJesus