Soooo. . . you're thinking of buying? Where should you start?
While knowing how much you can afford is the first step, sellers will be much more receptive to potential buyers who have been pre-approved. Applying for a loan and obtaining approval before you find a home you want to buy can be a distinct advantage. Making loan application is going to be necessary eventually anyway, unless you are going to pay cash for the home.
Pre-qualification is a procedure where you get an opinion from a mortgage officer about how much you qualify for. In the process, any obvious difficulties that might cause problems might be discovered. This process is always recommended but it doesn’t have the advantages of a pre-approval.
Pre-approval requires a complete application with credit reports and verifications. The Mortgage Company will issue a commitment subject to a specific interest rate and points and a satisfactory appraisal when the property is identified. Time limits are usually placed on pre-approval commitments. It is recommended to be ready to look at homes and make a decision after you receive your pre-approval commitment.
The advantages of being pre-approved is:
- Looking at the right-priced homes.
- Avoiding disappointment in deciding on a home that you can’t afford.
- Saving money with a seller who is confident about taking their home off the market with buyers who have a definite loan commitment.
- One less contingency that the seller will be concerned with to get their home sold.
- Closing more quickly- the lengthiest contingency is usually the mortgage approval. The appraisal can be done quickly.
- Minimizing the anxiety of not knowing whether or not you qualify.
So what are the different loan programs available? Here's just a sampling:
Conventional Loans - I have money to put down!
Conventional options are available for as little as 3% down. These loans also present several ways of handling mortgage insurance and loans with no Mortgage Insurance options. See how these can benefit you. If you have the ability to put 20% down- Conventional loans are the best option for you. Your 20% down payment means the best rates for 30 year amortization with no mortgage insurance.
FHA - I have some money!
Do you lack the funds for a large down payment? Less than perfect credit? Not much credit or need to build credit? FHA loans are the answer for you. With just 3.5% down you can own your own home. Manual underwrites are possible with a FICO of 580 or higher. If you have 10% down, your score can be as low as 500. Buyers are eligible for up to 6% closing cost help from the seller – this means your investment is minimal and your gain is great.
FHA 203k Renovation - I found a great house, but it needs work!
Find a good home, but want to make it great? Want to update the kitchen or the bathroom? Then the FHA 203k renovation loan might be just what you need. We have 2 options to suit your renovation needs. If your repairs and updates are less than $35,000 then the Streamline option is just what you need. If your renovation work entails more; than the standard 203k renovation loan is in order. This allows you to buy a house with potential and make it your own.
Veterans Administration Loan - If you are saying "I'm a Veteran, is there a program for me?", then this one's for you!
As a Veteran you are eligible for 100% financing at great market rates for your service to our country. This is one loan at 100% with no mortgage insurance and if you are disabled from a service related injury, you may be eligible to waive the funding fee. Manual underwrites are available with a fico score of 580 or higher, but most lenders prefer at least 620. With the possibility of seller paid closing costs of +4%, you can get into your new home with little to no money.
Guaranteed Rural Housing - I have no money, can you help?
Did you know that 100% financing for properties outside major city limits is still available through this program backed by the U.S. Department of Agriculture? If your family of 4 makes less than $101,000, or your family of 5-8 makes no more than $133,300, you could be eligible for this little known loan program. If you have child care costs subtract that amount off of your income, which means you could actually earn more than the limits. Income limits are county dependent. It is one loan at 100% with no mortgage insurance option- this program can’t be beat.
Reverse Mortgages - If you are 62 or older, this could be a great option!
With reverse mortgage programs there are no employment, income, assets or credit verification required. If you are age 62 or over, a purchase money reverse mortgage may be a great option to provide cash flow solutions for your financial challenges. A reverse mortgage allows you to pull money out of your primary residence and you never have to make a payment on the balance for as long as you live!