FinancingOne of the most important decisions that you will have to make is regarding how you will finance your new property. The earlier you establish and pre-qualify for your price range, the more focused and successful your search will be. Whether you are a first-time buyer |
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Types of Mortgage
Fixed-Rate MortgageWith a fixed-rate mortgage, your interest rate stays the same for the term of the mortgage, which is usually 30 years. Your principal and interest payment remains stable, making it easier to plan a monthly budget. |
Adjustable-Rate MortgageWith an ARM, your interest rate and monthly payments start out lower than with a fixed-rate, but your rate and payments can change either up or down, depending on where interest rates in general are going. |
FHA-Insured MortgageIn this type of loan, the Federal Government insures the lender against loss in case the homebuyer defaults on the loan. This program was set up so that Americans who can't afford the 10% to 20% down payment required by most lenders can still buy a home. You do not have to be a first-time buyer in order to qualify for an FHA loan. |
VA LoanUnder this program, the Department of Veterans Affairs guarantees the lender against loss. VA loans are used for active and retired military. VA loans can be used with no money down and with the closing costs paid by the seller. |
Assumable or Non-Assumable. You may find a home with a mortgage loan you can "assume" from the previous owner. This means that the lender is willing to transfer the old loan on the home to you.
Before you decide which loan is right for you, talk to your loan officer.
You will get information that will help you figure out which option best suits your needs.
Down payment requirements
Most loans today require a minimum down payment. For example, conventional loans require 5-10% of the sales price, while FHA's minimum requirement varies form 3-5% of the sales price. Veterans have the opportunity to use their VA certificate and purchase a home with no down payment. The down payment is payable at the time of closing.
Whether you are a first-time buyer or looking to move up, knowing, how much house you can buy is always the best place to start. Just as there is more than one kind of home, there is more than one way to finance it. Mortgage lenders have come up with many different methods of helping you pay for a home, each one with its own advantages and disadvantages.
FINANCING TIPS
Get financial advice at the earliest possible opportunity.
If you start shopping for a loan before purchasing your new home, the more focused and successful your search will be.
Check your Credit Report
A lender will run a credit report, but you should see it first, in order to clear up any credit problem before you submit your loan application.
Get pre-approved
A written pre-approval includes a completed credit application and a certificate guaranteeing you a mortgage to a specified amount. Get pre-approval allows you to shop for your home in confidence that finance will be available.
Explore your options
Compare fixed-rate with adjustable rate mortgages. Look down the road. Where will you be in 15 years, 30 years? What obligations might you have? Take those things into consideration as you choose a loan.
Evaluate your finances
A lender will tell you how much you qualify for, but you should budget the monthly expenses associated with your home and loan purchase. Your monthly payment, including principal, interest, taxes and insurance, should not be more that one third of your gross monthly income.
Mortgage Brokers and other Lenders
When you are ready to contact a mortgage broker or other lender regarding your financing needs, you can count on our experience to point you in the right direction.