Secure Your Financing
You’ve done the preparation, the next step is to find financing for your home. It is important to have your financing in place first before you start looking at houses. This way you know how much budget you really have to work with and once you find the perfect home, you are in position to place an offer immediately. Sellers will take your offer more seriously and be more apt to negotiate with you when you are pre-qualified for fianancing.
This is how to do it.
Step 4. Shop your loan:
Once you are ready to shop for your mortgage, take your time. Prepare to shop around for the best rates and the type of loan that will work best for your needs. You can start with your own bank but be sure and call other banks, credit unions and mortgage companies as well. These days there are loans you can find from online mortgage lenders too. A mortgage broker can be helpful in this process. A broker has access to a variety of lenders and can shop around for you.
Here is a quick run down of some basic loan types.
Government Backed Loans
FHA – easier to qualify, lower down payments, allow gift funds for down payment, allow assistance programs for down payment. Single family, FHA approved condos and town homes, mobile homes. More info
VA – for veterans, no down payment and lower costs. More info
USDA – up to 100% financing, no down payment, for rural areas, there are maximum income limits. 640 credit score. More info
Non-Government Backed Loans
Conventional – Conventional loans are not backed by a government agency but conform to standards set by Fannie Mae and Freddie Mac. Some conventionals require a standard 20% down but there are some options that only require a 3-10% down payment. These are the least restrictive type of loans.
Piggy Back Loan – A type of conventional loan that combines two loans in different combinations and so avoid private mortgage insurance. Can be as low as 10% down payment.
Conventional97 – Conventional loans backed by Fannie Mae that compete with FHA. 3% down payment, requires PMI but rates lower than FHA. For first time buyers only – no ownership in last 36 months. 620 credit score. Single family, condos and townhomes, homes in need of repairs.
There are other kinds of conventional loans out there. Ask the lenders you speak to what kinds of loans they offer.
Step 5. Get Pre-qualified/Pre-approved
Getting a pre-qualification before you start looking at homes is imperative. You don’t want to fall in love with a house you can’t afford and you don’t want to lose one you can afford because you had to shop for a loan after you found it and someone else scooped it up. Getting pre-qualified insures when you find the right place, you can move quickly to get it under contract. In many cases, if you have the opportunity to lock in a great rate, if the market is moving very quicky or if you have a definite time frame which you need to move in, it may benefit you to get pre-approved. Whats the difference?
A pre-qualification is an estimate of what you can afford to spend on a home purchase. It does not lock in a rate or initiate a hard pull on your credit.
A pre-approval means that the lender has run a credit check and verified your documentation and approved you for up to a specific amount. This will lock in your rate for a time period.
Now you are ready for the house hunt! In order to find a home, you need to find a Realtor.
Other Pages in this guide:
As you read through the guide, remember that I can refer you to mortgage professionals and real estate attorneys who can help you along the way. I would be happy to talk to you about any questions you may have. Please take a few minutes to tell me about your situation. I am here to help, because your home matters.
Tracy Shubin, REALTOR®
Fletcher Realty Services, Inc.