Find Financing Before You Go House Hunting
To avoid getting stuck at the closing table without a loan, introduce yourself to a couple of lenders that participate in the traditional Fannie Mae and Freddie Mac secondary lending systems. By arranging to be “pre-qualified” by these lenders prior to your actual search, you will know what you can and cannot afford when it comes to obtaining a mortgage. Armed with the knowledge that you are pre-qualified and for what price range, you can negotiate confidently, because you’ll know that your best offer will stick.
Chase Your Paper
Gone are the days where low-documentation loans, especially those that rely mainly on the borrower’s word about income and assets, are available. Find, organize and make copies of all the papers that prove what you make and how much money you have: W-2 forms for the past two years; savings and investments account statements for the past several quarters, and pay stubs for the past month.
Expect To Put In Equity
100 percent financing is virtually unheard of nowadays; you need to put money down. For example, in a 95 percent loan to value, you can expect to put down at least 5 percent. Check your credit score before turning in your loan application – your score can affect your minimum down payment. A score of 680 used to be good enough, but now an applicant typically needs at least a 720. One great place to check your credit score is annualcreditreport.com.
Reconcile your expectations with your budget before you launch into a jammed schedule of open houses and house tours. Calculate what you can afford, assuming you opt for a traditional fixed-rate, 30-year mortgage. Mortgage Chart is available in The Greater Charleston New Homes Guide Mortgage Section.
Your goal is to gauge affordability based on the highest monthly payment you’d have to make – namely its standard monthly payment, which won’t change for the length of the loan (other than its property tax & insurance components) – and not on artificially low adjustable rate teasers offered by the few aggressive lenders left in the market.
Choose a fixed interest rate to give you a stable, predictable house payment. People who chose other types of rate structures in the past several years are largely the homeowners who are now scrambling to refinance, sell or stave off foreclosure.
Do Your Homework
If you’re a first-time buyer, look for assistance, even if you don’t think you need it. Buying a home can be a painless procedure if you know exactly what you are doing. On the other hand, a mistake can be costly and can stay with you for a very long time. Look for local organizations that offer classes on the basics of buying a home.
It’s worthwhile to attend the classes, if for no other reason than to learn the language of the acronym-filled process, so you can speak the same abbreviated language as your lending officer does. That way you can talk the talk and walk the walk.