How Does Real Estate Financing Work? Who Should I Talk to About It?
Unless you have hundreds of thousands of cash to spare, you need to find a main source of funding to be able to buy a house. Traditional suggestions would tell to you seek loan pre-approval as step one. In reality, however, it is still better to find a real estate agent that you can trust before talking to lenders.
An experienced agent can recommend reliable local lenders that they have worked with in the past. With future referrals at stake, lenders who are acquainted with your agent will more likely provide you with better service and faster communication. Hence, you can skip the stressful waiting game and possible delays from unfamiliar lenders.
Talk to your agent about real estate financing first, and he/she can guide you on the things that you should prepare and discuss with possible lenders. Doing it right for the first time will raise your chances of getting pre-approved.
Lenders will review your financial status and history to determine your purchase qualification. Upon learning how much you can afford, it is only then that you can start shopping for homes with your agent.
A serious homebuyer would seek pre-approval. To achieve this, you must prepare your documents ahead of time. A good to excellent credit score will up your chances of getting qualified, as well as your savings fund. Of course, you need to have a stable source of income to prove that you can afford the monthly payments.
Lenders usually use the credit score to determine the mortgage rate that you will get. You should score at least 700 or more to qualify for a lower interest rate.
Typically, homebuyers pay 10% of the purchase price as a down payment, and choose a 30-year, fixed rate mortgage.
Aside from the down payment, you also have to pay for mortgage insurance, property taxes, and closing costs. These expenses are no longer funded by your lender, so you should have at least prepared a savings fund for it.
A lot of things happen in between mortgage pre-approval and the actual home purchase. Upon finding a home that you love, your agent will negotiate the best offer for you, and then comes the escrow process, a pre-purchase inspection, home appraisal, and a ton of paperwork before the lender releases the funds for your loan.
There are a few lenders who might delay the funds, which ultimately affects the closing schedule. This is why it is important to get a lender that is already proven reliable by your agent.
Be careful with your finances and avoid other big purchases and new loans while on the home buying process. Your most recent credit report will still be reviewed by the lender before releasing your loan on the closing date, to ensure that your credit status still meets their qualifications.
Your agent’s local knowledge may provide you with other home financing solutions that you may not be aware of, like a down payment assistance program for first-time homebuyers. For instance, your state may be offering grants at the moment, or you may be qualified for some funding programs which you may not be aware of.
The key is to stick a price range that is lower than what the lender says you can afford. Do not stretch your budget too much, because a less expensive home will allow you to live a more comfortable life in the years to come. The financial experts at Bankrate recommend homebuyers to “look for a home that costs no more than 2.5 times of what you make in a year.” With so many things that can affect your future financial status, it makes sense to buy within your means.
Looking for beautiful yet competitively priced homes? Bryan County OK has a lot to offer, let us show you around. Call or email us today.