I can help you to compare interest rates and terms to find out which mortgage plan is best for you. I can refer you to a mortgage professional that will assist you in the best ways to finance your new home. When you meet with a lender to discuss your case in detail you will be able to determine:
what kind of loan the lender offers
What amount is required for the down payment for each loan.
what fees are required credit report, appraisal, survey
Points, title insurance and any other cost associated with the loan
How Long it will take to process your application
what inspections the lender will require
what kind of insurance and how much coverage you will be required to have and much more
Here is a run down of the four major mortgage plans.
Fixed rate conventional - A conventional loan is a loan made to a buyer without third party participation such as VA or, FHA. Fixed rate loans are typically paid off in monthly payments spread out over 15-30 years. Shorter terms mean more rapid equity growth and less interest over the course of the loan but they alos mean higher payments. terms of a conventional loan vary among lenders but may be obtained with as little as 5-10% down. When the down payment is less than 20% the lender will in most cases require private mortgage insurance (PMI) to protect the lender from default. The advantages of a conventional loan are a quick closing, and stable payments.
Adjustable Rate Mortgage (ARM) The interest rate may go up or down over the length of the loan. The interest rate is normally tied to financial markets (such as 1 year T Bills. Most ARM's set a cap on the total maximum increase over the life of the loan.
The advantages of an ARM is a lower initial interest rate and lower initial payments. Caps offer piece of mind with a fixed ceiling but often the fixed ceiling is higher than the current conventional rate.
FHA loans - strictly speaking the fha doesn't make loans it insures loans which increase the lenders willingness to make loans with a lower down payment. With an fha insured loan a homebuyer can make a smaller down payment. A Buyer must have a minimum of 3% in "the deal" which means that some closing costs, pre-paid items and other lender fees may be paid by the seller. This loan is particularly attractive for first time buyers.
VA Loans - Qualified veterans can take out loans with no down payment. VA qualifications a more flexible than conventional loans. The Veterans credit can be less than perfect and many cost can be paid by the seller or rolled into the loan.
Should you shop for a loan before you find a place to buy?
It is an excellent idea. Building a relationship with a lender is a great start on the road to buying your own home. By meeting with a lender you can provide documents to get pre approved. A pre approved buyer carries much more weight with a seller than a buyer who is not pre approved. In fact at least 90% of the home buyers in our market are pre qualified or pre approved before starting the house hunting project.
What will the lender ask when you are set to get pre approved?
Lenders loan applications are as complete a picture as possible of your financial health. The lender will ask the kind of loan you are applying for, verifiable source of a down payment.
The term of the loan
Your employment history including your employers name, phone and address.
your Social Security Number (for a credit check)
Your ASSETS including your monthly income, bank balances, your current home, personal property, retirement accounts and any other assets you may have.
Your Debts both on the credit report and not.
If you are applying for a Home rather than a pre approval we will also provide the lender with the sales contract, the sellers disclosures, and any other documents the lender requires.
At this point its a good idea to discuss the down payment with your lender. Most types of mortgages require a minimum amount. There are advantages to both large and small down payments. Which you choose depends on your circumstances and personal choice.
The advantage to a large down payment is less of a mortgage to payoff. That can mean either a shorter term or a smaller payment whichever you prefer. With a less than a 20% down payment you will be required to pay private mortgage insurance.
Some of the best sources for a down payment are:
Your current savings account
The equity released through the sale of your current home.
A gift (must be documented by a gift letter)
Barrowing against a pension plan or life insurance policy.
Cash in a retirement plan (check with your account about possible early withdrawal penalties)
The seller can also contribute to some coast to reduce the amount you must bring to the closing table for some prepaid items.
How does the lender approve your loan?
Typically the lender will review your loan application and then send it on to a person called an underwriter. the underwriter will review all of the documents that make up your loan application. The other procedures that the lender may require are:
Having the perspective property appraised to ensure that it is worth the price you are paying. Its is a benefit to both you and the lender to ensure that the true value of the home doesn't exceed the purchase price.
Verifying the information you provided concerning your employment, income, credit, and your ability to repay the debt.
Verifying the funds for the down payment and ensuring sufficient funds to carry you for a couple of months.
The lender and your realtor will work together to oder and review any inspections that are required such as:
Housing or building codes
FHA or VA inspections
Termite or wood destroying insect inspection
Ensuring that clear title is being passed to you
