In this day and age, it is very important for you to get Pre-Qualified and/or Pre-Approved BEFORE you begin searching for homes. Pre-approval is a lender’s commitment to lend; pre-qualifying is a verbal exchange in which the lender tells borrowers in advance how much money they can borrow. With Pre-Approval you actually go through the loan process. This can be a real ace in your pocket if you get into a multiple-offer situation as your lender letter will be stronger than a pre-qual letter. With this crazy, fast paced market we have today, a pre-qualification letter at the very least is necessary.
It is important to educate yourself and find a lender or mortgage broker you are comfortable with. Check with your bank and/or local banks, or use a Mortgage Broker, who will research several lenders and find the best option for you. I can supply you with a list of mortgage lenders I would recommend. Please note, I do not receive any type of compensation for referrals - I only do so because I know you will be well taken care of.
USDA is a government sponsored loan program (US Dept of Agriculture) trying to promote “rural” housing. Most of the homes in our area are eligible. There are income limits, but they are not as low as you might think. Click here to check the limits on their website. If you qualify, it allows for 0 down payment. If we are able to roll your closing costs into your loan you may truly be able to come to the closing table with no monies due (inspections and appraisal are always out of pocket expenses for the buyer). These loans do carry extra fees, please discuss these with your lender to see if this loan works for you.
FHA offers a 3.5% down payment. They raised their loan limits in our area in 2014 to $305,900. They, however, charge a 1.75% up-front fee AND a monthly fee that never goes away. They are also more diligent about home condition for loan approval. They have recently dropped the MIP (Mortgage Insurance Premium) rate making it affordable again, however it still never goes away and will increase your monthly payments.
VA offers low interest, 0 down payment loans to vets with no mortgage insurance required. If you are a Veteran, this is a great option for you to check out. They too have requirements about the condition of the home. Also check out the Texas Verterans Land Board (VLB), they too have much to offer a Texas Vet.
Conventional Loans require anywhere from 5% - 20% down. They will have PMI (basically the same as the MIP) insurance until you have 22% equity in the house. They are more lenient on the condition of the home but have some stipulations on foreclosures. Update: First Time Homebuyers can now get a 3% down Conventional Loan entitling them to the 20% equity PMI benefit and only one purchaser must be a first time buyer.
Jumbo Loans come in at anything over $417,000. These days lenders are offering rates on jumbo mortgages that are more than a quarter of a percentage point lower than Conventional loans! Now is the time to move on a Jumbo Loan, this is an unusual twist, and hopefully a permanent one.
Mortgages may be another option that may work for you, if you
are 62 or older, and are looking to purchase a new home. In order to
qualify, you will be required to put down a fixed amount (normally
around 65%, but that varies depending on your age). A reverse mortgage
allows you to purchase more home than you would be able to with a
conventional loan or cash purchase. Another benefit of a reverse
mortgage, is that you will never be required to make a mortgage
payment! However, these loans do still collect interest and MIP
(mortgage insurance premiums) throughout the life of the loan, as is
the same with most loans. Another good option here is to pay the
interest and MIP payments each month, so your loan value never
increases. Even though you don’t make monthly mortgage payments, you
will be required to pay your yearly homeowners insurance and taxes on
the home. The mortgage company gets paid when you (or your heirs) sell
the home. The mortgage gets paid off just like a regular mortgage, and
the remainder is the profits for the seller (be it you or your heirs).
These are FHA backed and are “no fault” loans, meaning you will never
have any liability for more than the home’s value (for instance, if
there is a market crash). There are many reverse mortgage options
available. You can even use it to refinance your home and use the
equity as a line of credit to receive in monthly payments or in a lump
sum payment (with no monthly payments due – use that money for an
investment and put your equity to work for you!). This is just a
highlight of the many possibilities with a reverse mortgage. Contact
us today and we can refer you to a specialist who can explain the
entire process in more detail.
There's something for everyone and every stage of life. The goal of this page is to provide you with detailed information to assist you in making an intelligent and informed decision. Remember, if you have any questions about the process, I'm only a phone call or email away!
How to secure home financing the smart way
Three elements are crucial to the purchase of a home—the down payment, closing costs, and qualifying for a mortgage. Here is a quick rundown of what you should know:
Typically, conventional lenders will require a 10% – 20% down payment, although you may be able to find loans with down payments of as little as 5% (perhaps less in some cases). With down payments less than 20%, you likely will have to pay private mortgage insurance (PMI), which guarantees the lender will be repaid in case of default. Mortgages insured by the Federal Housing Administration (FHA) and those available to U.S. Veterans often require very low down payments. Ask your lender if you can qualify for one of these loans.
No matter what home you buy, there will be closing costs. These can include: discount points, title insurance, escrow fees, attorney fees, termite report, recording fees, appraisal fees, document preparation fees, notary fees, and a loan underwriting fee. Usually these are due in cash, but sometimes they can be folded into the mortgage.
The size of the mortgage you qualify for is based mainly on the interest rate offered and your income. The higher the interest rate, the higher the monthly payment. And, the higher the monthly payment, the more income you will need to qualify for the mortgage.
Contacting a lender before you’re actually ready to make an offer on a house is a very good idea. This head start gives you a chance to work out any problems that may arise without the pressure of contract deadlines.