Category: Buyer Tips

GET PREAPPROVED

Getting preapproved requires that a lender verify your financial information, and it serves as their commitment to lend a specified amount based on that information. It will give you a number of advantages. When you find a property, sellers will take your offer more seriously given that you have a lender that has committed to backing your offer.

It also gives you the assurance that you’re looking at homes you can confidently afford to finance. Your efforts will be focused on properties that match your financing abilities.

You’ll have an edge over other buyers who aren’t preapproved. In situations where there are multiple offers on a property, this can be the difference between having your offer accepted or losing the property to another buyer.

FINANCING METHODS

Fixed-Rate Mortgage

The interest rate stays the same for the entire term of the loan — usually 15 or 30 years — so the interest and principal portions of your monthly payment remain the same. Your payments are stable and predictable, but initial interest rates tend to be higher on a fixed-rate mortgage than on adjustable-rate loans.

Adjustable-Rate Mortgage (ARM)

The interest on an adjustable-rate mortgage is linked to a financial index, such as a Treasury security, so your monthly payments can vary, up or down, over the life of the loan – usually 30 years. Some adjustable-rate mortgages have a cap on the interest rate increase to protect the borrower. The lower initial payments on ARMs make it easier for buyers to qualify.

Conventional Loan

A conventional loan can have as little as 3% down with mortgage insurance. To avoid mortgage insurance, you have to have a minimum of 20% down. The maximum amount for conventional loans is $424,100. Loans above $424,100 require a jumbo loan. The advantage of a conventional loan is that there is no upfront mortgage insurance payment and mortgage insurance can be removed when you have paid the loan down to 80%.

FHA

An FHA loan requires at least a 3.5% down payment. The advantage of an FHA loan is that it has lower credit score guidelines and allows higher debt to income ratios to qualify. This is generally a good choice for first time homebuyers, but be sure to talk to a trusted lender to determine if this is the right product for you.

VA

A VA loan requires zero down payment and does not require mortgage insurance. It also has lower credit score guidelines and allows higher debt to income ratios. This loan is reserved for qualified veterans. To determine if you qualify, you can work with your trusted lender to obtain your certificate of eligibility.

USDA

USDA loans require zero down payments, but they do require guarantee insurance, which is similar to mortgage insurance. Homes are restricted to designated rural areas determined by USDA, and USDA has maximum household income limits for eligibility.

Click here to download a LOAN PRE-APPLICATION CHECK LIST

Shawna O’Brien
shawna.obrien@talktotucker.com
F.C. Tucker Geist
The Tumbarello Group

 

GET PREAPPROVED

Getting preapproved requires that a lender verify your financial information, and it serves as their commitment to lend a specified amount based on that information. It will give you a number of advantages. When you find a property, sellers will take your offer more seriously given that you have a lender that has committed to backing your offer.

It also gives you the assurance that you’re looking at homes you can confidently afford to finance. Your efforts will be focused on properties that match your financing abilities.

You’ll have an edge over other buyers who aren’t preapproved. In situations where there are multiple offers on a property, this can be the difference between having your offer accepted or losing the property to another buyer.

FINANCING METHODS

Fixed-Rate Mortgage

The interest rate stays the same for the entire term of the loan — usually 15 or 30 years — so the interest and principal portions of your monthly payment remain the same. Your payments are stable and predictable, but initial interest rates tend to be higher on a fixed-rate mortgage than on adjustable-rate loans.

Adjustable-Rate Mortgage (ARM)

The interest on an adjustable-rate mortgage is linked to a financial index, such as a Treasury security, so your monthly payments can vary, up or down, over the life of the loan – usually 30 years. Some adjustable-rate mortgages have a cap on the interest rate increase to protect the borrower. The lower initial payments on ARMs make it easier for buyers to qualify.

Conventional Loan

A conventional loan can have as little as 3% down with mortgage insurance. To avoid mortgage insurance, you have to have a minimum of 20% down. The maximum amount for conventional loans is $424,100. Loans above $424,100 require a jumbo loan. The advantage of a conventional loan is that there is no upfront mortgage insurance payment and mortgage insurance can be removed when you have paid the loan down to 80%.

FHA

An FHA loan requires at least a 3.5% down payment. The advantage of an FHA loan is that it has lower credit score guidelines and allows higher debt to income ratios to qualify. This is generally a good choice for first time homebuyers, but be sure to talk to a trusted lender to determine if this is the right product for you.

VA

A VA loan requires zero down payment and does not require mortgage insurance. It also has lower credit score guidelines and allows higher debt to income ratios. This loan is reserved for qualified veterans. To determine if you qualify, you can work with your trusted lender to obtain your certificate of eligibility.

USDA

USDA loans require zero down payments, but they do require guarantee insurance, which is similar to mortgage insurance. Homes are restricted to designated rural areas determined by USDA, and USDA has maximum household income limits for eligibility.

Click here to download a LOAN PRE-APPLICATION CHECK LIST

Shawna O’Brien
shawna.obrien@talktotucker.com
F.C. Tucker Geist
The Tumbarello Group

Buying a home is most likely the largest purchases you will ever make. Before you hire a realtor and before you make an offer on a home, you should get pre-approved for a mortgage loan by the lender first.

Here’s why:

#1     A pre-approval will tell you exactly what you can afford.  You don’t want to waste time looking at homes you don’t qualify to purchase.

To receive a pre-approval from a lender you are required to provide specific information regarding your income, assets and debts.  The lender will ask to see paycheck stubs, sometimes two years tax returns, and they will call your employer to verify employment and the stability of your employment.  The lender will require bank statements, any investments, and other assets to verify your ability to pay your debts and to verify where the money will come from for your down payment.  Your credit will be pulled so the lender can view your monthly minimum payments on all your credit debts to factor your debt to income ratio, and determine at what loan amount you will qualify. 

#2     A pre-approval tells your realtor and the sellers you are a serious buyer. 

Not only can your realtor fine tune the search based on your qualified purchase price and better guide and advise you through the home buying process, but the sellers will feel confident in accepting your offer.  They know you have met the criteria and are approved to purchase their home. A seller is most likely to accept the offer from a pre-approved buyer then one that is not pre-approved.

#3      A pre-approval helps you understand what monthly mortgage payment you will be comfortable with once you factor in property taxes, homeowners insurance, private mortgage insurance (if applicable) and possible HOA dues in some communities.

I’ve shown homes at the same price point in various communities but the property taxes and HOA fees have varied enough that it made a difference in the monthly payment and affected whether or not my buyers felt comfortable with the monthly debt.

#4      Letting a lender pull your credit sooner then later in your home buying process can help you reduce your debt and increase your disposable income.

If you haven’t yet looked at your credit report, asking a lender to prequalify you for a home loan may reveal items on your report you never knew were there and there may be items negatively affecting your ability to qualifying for a home loan.  You may have outstanding liens or late payments that are bringing your overall credit score down and/or the monthly minimum payments on your credit debts may be exceeding the acceptable ratio for purchasing in your desired price point.  Looking at your credit history with an expert may uncover areas in which you can reduce debt, increase disposable income and qualify for a better interest rate (which affects your overall monthly payments on your home loan).  The lender can educate and advise you on how the above items are impacting your credit and assist you with how to reach your goal of home ownership

Please note, you can’t rely on the “free” credit reports advertised and the calculators online to determine your qualification.  Free credit report sites do not use the same algorithm as the lenders use to determine your overall credit average and different loan programs have different criteria.

Have you ever seen any surprises on your credit report when you applied for a pre-approval?  Or, have you ever adjusted your home search price point, either up or down, after receiving a pre-approval?

Shawna O’Brien
shawna.obrien@talktotucker.com
F.C. Tucker Geist
The Tumbarello Group

 

 

Shawna O’Brien
shawna.obrien@talktotucker.com
317-506-0039
F.C. Tucker Geist Fishers