When you are starting to look for a home, one of the first things you will want to do it speak with a Residential Mortgage Loan Officer and obtain pre-approval for a loan. You could start with your current bank since you already have a relationship with them or speak with a local lender. Your real estate agent might also have some recommendations for you.
Many people call and say that they want to look at homes first, and then if they find one they like, then they will go and speak with a lender. There area few reasons why speaking with a lender first is a good idea.
- Speaking with a lender first will narrow down the price range you can afford based on many factors including income, credit score and debt to income ratio.
- You will save time by avoiding homes priced either too low or too high
- Being pre-approved turns you into a cash buyer, proving to the sellers you are serious about the offer giving you a stronger negotiating position.
There are several different financing options available to home buyers today.
Veterans Administration (VA) Financing
For veterans who have served at least 6 months in the military, you have earned the benefit of 100% financing guaranteed by the VA. Many people don’t realize that you may use this benefit more than once, even if you currently have homes with VA loans as long as the total of all the homes does not exceed your benefit amount. Another common misconception is that the VA grants the loans or guarantees the whole loan, it does not. The VA is guaranteeing 25% to the bank which is the entity to qualify the borrower. VA loans have many benefits to qualifying home buyers.
Federal Housing Administration (FHA) Financing
FHA loans are also very common. Currently the down payment required for FHA financing is 3.5% and these usually have higher debt-to-income (DTI) ratios allowed and lower interest rates. This program is where the federal government is guaranteeing the loan for the bank, reducing the bank’s risk and thus allowing them to offer a lower interest rate.
Conventional Financing has its benefits as well. There are less restrictions on the type of home and condition, so if you are looking for a fixer upper then conventional financing will be the way to go. This is typically offered with a 20% down payment, however some programs are available with 10% or even 5% down.
To determine which financing option is best for you, we recommend speaking with your local mortgage professional. At the Lockhart Real Estate Team we offer a free buyers consultation where we first listen to you and your needs, then we walk you through the entire buying process from beginning to end ensuring you understand each step along the way and answer all your questions. To schedule a no-obligation consultation, please call us today at 940-704-7058.
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