Credits and Loans
Understanding and Being Prepared for Financing a Home
- Alex Whatley, Mortgage Originator
The great “American Dream” of being a homeowner is exciting. Whether you’re looking online, driving around your favorite neighborhood or watching HGTV’s House Hunters, we all hope our dream of homeownership will come true. However, let’s be realistic for a minute too – the process of financing a new home can be intimidating or may even seem completely out of reach for many consumers. Here are a few myths or misunderstood facts about financing a home along with some great tips for being prepared.
- You must have a large down payment saved to purchase a new home. FALSE! There are many low down payment options and even a couple of zero down payment options available for consumers who may not have a lot in savings to go toward a new home.
- Perfect credit is required. FALSE! Loan programs such as those from the FHA (Federal Housing Administration) allow for imperfect credit. Whether a person has had credit issues in the past or just has a low credit score then FHA may just have the solution needed.
- Monitor and know your credit. The cleaner your credit and the higher your credit score the better. TRUE! This will open doors to more loan programs and often a better interest rate. Monitoring can be done for FREE via numerous sites online such as NerdWallet https://www.nerdwallet.com/?
- Be mindful of the transactions associated with your deposit accounts. TRUE! Keep your checking and savings accounts in good standing. Limit non-payroll related deposits such as cash as these may cause issues with loan approval. The source of all deposits must be noted and when they’re cash it’s difficult to document.
- Save what you can. TRUE! You will appear as a stronger borrower when you have money in savings, and adding to it on a regular basis is smart too.
- Get Pre-Qualified. TRUE! It is always best to get pre-qualified prior to searching for homes so you know exactly what you can afford. This will allow you to look at homes in your price range rather than finding a home to only be disappointed when you learn you can’t afford it.
- Be comfortable – Avoid anxiety and stress. Mortgage lenders can tell you what you qualify for, but always put yourself first to make sure you are comfortable with the payment and can actually afford it.
- Closing Costs. Many borrowers find they have enough for a good down payment but can’t scrape up enough for the closing costs. Don’t let that stop you – many times the closing costs can be paid by the seller or even possibly the lender. Don’t walk away until you’ve asked and negotiated.
- Be Patient. Obtaining a mortgage can be a stressful process. Remember this is probably the largest purchase you will ever make, and there are lots of guidelines in place to not only protect the lender but to protect you as the borrower. You may be asked for items that seem a little crazy, however, there is always a reason for it so do your best to provide what you can.
- Be Prompt. The quicker you can deliver information that is requested by the lender the quicker you can close your loan.
- Banks usually offer more. Most mortgage lenders can offer the standard products such as Conventional, FHA, USDA, and VA – programs financed by third party organizations. However, banks also have the ability to offer “In-House” loans which can be a huge advantage. An “In-House” loan is one that the financial institution keeps on their books and services as well. A few of the “In-House” loan products banks may offer are construction loans, land only loans, bridge loans, home equity loans, and more.