It can be helpful for home buyers to get information from others who have experienced the different aspects of buying a home in order to be more prepared. Here are some tips:
Maximum home price – A mortgage pre-approval can save time and effort in your home search, and tells others that you are ready and able to buy. It determines your maximum price range based on credit scores, income, and funds to close.
Protect deposit money – A home buyer depends on a good real estate agent to make sure all the bases are covered. An agent can write contingency clauses in a purchase offer to protect a buyer’s deposit money if the offer needs to be withdrawn.
FHA loans for condos – A condominium project must be FHA approved in order to get an FHA loan. If the condo project is not approved, the FHA spot loan program is designed to provide home loans to buy an individual condo.
Credit issues – An FHA mortgage makes it easier for buyers to qualify, including lower credit scores than a conventional loan. A previous bankruptcy only needs to be discharged for 2 years, and open collection accounts may not have to be paid off.
Credit report errors – Credit errors can reduce credit scores. A reported credit dispute must be investigated and confirmed by the credit bureaus within 30 days of a consumer reporting an error. Providing support documentation can help expedite the process.
Down payment – An FHA loan offers financing with 3.5% down payment, which is the lowest down payment for a first time home buyer loan, other than a VA loan. All or part of the down payment can be a documented gift from a close relative.
Potential cost savings – Some conventional lenders and all FHA lenders will allow the seller of a property to pay up to 6% of the home purchase price to be contributed to a home buyer’s total closing costs.
Debt ratio – The following monthly payments are normally counted along with a new mortgage payment to calculate the back-end debt ratio for qualifying: credit card minimums, car loans, student loans, personal loans, alimony, child support, tax liens.
Tax and insurance impounds – An impound account is money that’s collected at closing, and each month with your loan payment to be set aside in reserve to pay property taxes and insurance. It’s usually required when buying a home with less than 20% down.
Short term savings – If you plan to keep your home for less than five years, you could save money on a lower rate by getting a hybrid mortgage that has a fixed rate for the first 5 years, and then converts to an adjustable rate.
Zero point option – Many home buyers need to have the lowest closing costs. Lenders usually provide the option of decreasing the loan points by increasing the rate. If a home buyer pays zero points for a loan, the mortgage rate and loan payment will increase.
New credit accounts – Applying for a new credit card or financing the purchase of a car or other item before or during the mortgage process can cause credit scores to decrease and debt ratios to increase, which can affect mortgage qualifying.
Changing jobs – If you plan on making a job change, especially if the change involves sales commission or a different line of work, it is better to wait until after your mortgage loan has funded to avoid creating a qualifying problem.