A Closer Look at the "L" Word

As an agent, I receive calls or visits from someone wanting to get started on the home buying process on a regular basis. The question is always the same “ What is the first thing I need to do to buy a home?” The answer is always the same “ The first step after finding the right agent is to talk to a financial institution and get pre-qualified/pre-approved.”

Unfortunately this is the step where most people tend to stop the process. For whatever reason many people are hesitant to talk to lender about getting a home loan. I know talking to a lender can feel daunting or perhaps every scary, primarily because we all have a fear of rejection but unless you have cash there is no other way to buy a home than with a loan. Many people don’t know what to ask, because well, its not like you buy a house everyday, for most people its a once in a lifetime thing.

Luckily for you, I’m here to help. I recently sat down with Mandy Mulligan of Fairway Independent Mortgage and asked her about the most common questions many buyers have and some highlights on the different loan types available. I will also give you some of my tips of questions to ask a lender to help decide which is the right one for you.

The first question I often get is what the different loan types are and what the difference is. In Morgan County, the most common loan types are: Conventional, FHA, USDA, and VA check with your financial institution about the loan types they offer as not all offer every loan type. Now lets delve into each of these a little deeper. A Conventional Loan with Fairway requires a 620 credit score, 20% down payment and carries no mortgage insurance. An FHA loan requires a 600 credit score, 3.5% down payment, and upfront mortgage insurance of about 1.75% of the purchase price. Mandy said although you can sometimes qualify for a loan with a 600 credit score this could also mean paying a higher mortgage insurance premium and a higher interest rate; so if you can do a couple of things to increase your credit score it will greatly benefit you to do so. A USDA loan requires a 640 credit score, no down payment, but there are additional requirements to qualify. A VA also carries additional requirements, no down payment and no mortgage insurance. These are just some of the basic requirements. Most loans also have additional requirements such as income maximums and debt-to-income ratios. Talk to a financial institution for list of additional requirements as those can vary.

Mandy was able to offer some helpful advice to for potential home buyers.One important tip is don’t forget about closing costs (we’ll discuss this in a later blog). Closing costs are charges related to the closing of your home loan and are separate from your down payment. She also recommends saving money for moving expenses in addition to your down payment. She said plan for the process to take at least 6 months, as tempting as it may be don’t rush through it. Its always wise to have your lender run your payments before making an offer, this will allow you to make sure your comfortable with the potential payment. You don’t want to be '“house poor” . Once you do go under contract get insurance quotes asap to again make sure your payment is within your budget.

Some important tips for anyone already approved or currently under contract are:

1.Don’t open any new debt(store cards,credit credit, cards, co-sign)

2. No Late Payments on current loans or cards

3. Stay updated on whats going on with your loan, call your LOAN OFFICER for any loan questions

4. Get any required documents to your lender ASAP

Now, although I can’t endorse or recommend which lender to go to I can give you some tips on finding the right one for you. Having the right one can make or break your purchase so its important to do your homework when picking one. First, ask friends or family who they have used, be sure to ask for the name of the loan officer not just the financial institution. Next, call or meet in person to interview them, you want to make sure your comfortable with them. This also helps with my next tip, make sure they communicate well. The last thing you want is to have questions during the process and have a lender who won’t answer your calls or messages. You will also want to ask about the loan types they offer. Different banks offer various loan types depending on whether they originate the loan, service the loan, and also if they are conventional bank versus a mortgage company. If you would like a list of financial institutions my clients have worked with in the past stop by the office or give me a call and I would be happy to help. If you would like to contact Mandy directly or apply for a loan with her you can visit her website by clicking here.

Most importantly once you are prequalified/pre-approved give me a call 970-370-0135! I would love to help you find your next home!

***Information provided is deemed reliable but not guaranteed.Nether Adriana Otero nor Gateway Realty Colorado specifically endorse or have a vested interest in the above named service providers. We cannot guarantee the level of service provided by the above named service provider.It is recommended that you explore additional service providers not mentioned in this blog to meet your individual needs.