The Basics of Buying a Home
Once borrowers feel they are ready to search for a home there are two sources to access home loan financing; either from mortgage brokers or direct lenders (also known as mortgage lenders or banks).
The actual money a borrowers gets for the home originates from the lender. The lender also makes the ultimate decision to give you the go-ahead based on your application. The drawback to using a lender is they have limited loan programs to access.
Mortgage brokers, on the other hand, have multiple loan programs and lenders to select from to accommodate any custom financing needs when banks do not have a loan to suit the borrower. Brokers are able to shop various lenders at one time for their clients.
For example, if your credit falls below the acceptable threshold or down payment requirements are higher than you anticipated, for one particular lender, an experienced mortgage broker may be able to offer you multiple loan choices to suit your needs. Some of these choices include an alternative income program, the rental property cash flow loan, and financing for those who had a recent foreclosure or bankrutpcy. Because of their expertise in placing loans, mortgage brokers are paid a commission based on the loan amount you borrow. Overall, each source for getting approved financing can turn out to be a real blessing.
Along with shopping, you'll also have to compare the interest rate, the loan fees ( loan origination, broker , processing, underwriting, appraisal, etc. ), prepayment penalties, the loan term, and a few others.
How Much of a Down Payment Should I Make?
It has become common knowledge, with the housing collapse, that it's a wise choice for homebuyers to allot a portion of their own money down when buying a house. Lenders feel that putting your own money into real estate offers support that the homeowners will make their mortgage payments.
So how much of a down payment is reasonable? 5-percent, 10-percent, 20%?
The down payment depends entirely on how much you are comfortable paying every month. It is wise to not make your payment more than two-times what you are paying right now even if you will receive a raise or job promotion. Make sure you are consistently earning that kind of money for a while before thinking nothing can go wrong.
In addition, before you begin this process, your credit should be in the best shape it can be to get the best rate possible. The lender will run a credit check on you to take a look at your credit history to see if you’re qualified. Even with the housing decline, there are special loan programs for people who have bad credit, want to get a loan after a short sale or foreclosure.
With bad credit, it mainly depends on you how much you can put down along with the higher interest rate and payment you’ll have. So, once again do your best to raise your credit score for the lender, especially for the most recent 24 months , to see that it is indeed spotless.
If that checks out then you'll have to supply additional documentation including paycheck stubs, bank account statements, tax returns, investment earnings reports, rental agreements, divorce decrees, proof of insurance, and other documentation.
Whether you're a first-time homebuyer or are looking to sell your current home and get another, a duly licensed mortgage loan officer will help to answer your questions regarding down payment scenarios, and each type of loan you can qualify for so you have a clear understanding of what you can comfortably afford.
With this easy prequalification process, you will receive a typed loan summary in easy-to-understand language displaying the important terms of the home loan choices available to you.
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