If one of your goals this year is to purchase a home, now is the perfect time to do so. Following basic steps can help you realize that goal.
First, talk with a licensed mortgage professional to get preapproved for a loan program and loan amount. You will need to gather up your recent pay stubs to cover one month, 2012 and 2013 W2s, bank statements and retirement account statements from the last two months to provide to your loan officer so they have accurate information to work with.
There are two loan products available that offer no down payment. The Veterans Administration and the U.S. Department of Agriculture 100 percent Guarantee Rural Housing Home Loan require no down payment and also do not require any monthly private mortgage insurance. They are both 30-year fixed-rate loans and have very affordable interest rates. Plus, the seller can pay all closing costs for the buyer. Federal Housing Administration loans require 3.5 percent down payment, and conventional loans require at least 5 percent down.
If your credit score is not sufficient to qualify for a loan right now, work on the items you can to improve your scores. If you don’t have a credit score, you can provide some alternative credit references such as letters from your landlord, fuel oil company, insurance company and electric company. If your debt-to-income ratio is too high, make it a top priority to pay off some debts to lower this ratio.
A food faith estimate provides the potential buyer details about the fees and charges involved with the purchase. It also will show any credits they will receive in the amount of sellers' help toward closing costs. It shows the interest rate, loan product and term of loan.
Once you are preapproved for a certain loan amount, contact a realtor to act as your buyer’s agent, one who looks out for your best interests. They will set up the appointments for you to tour homes in your price range and in the area you want. Once you have decided on a home, you will make an offer. Make sure your realtor communicates with your loan officer to assure you include everything needed in your sales contract.
You will provide a check for an earnest money deposit with your offer. If your financing doesn’t materialize or if the seller is unwilling to make repairs needed, you will have your money refunded. But, if you merely decide you don’t want to proceed with purchasing the home, your money will not be refunded.
Once the seller has agreed and signed off on the sales contract, things start in motion. Your attorney will request a title search on the property be done, an appraisal is ordered and the home inspection is ordered. You complete your loan application, underwriting of your loan begins, and once approved, the processor clears the conditions of the approved loan. You will also select a homeowners insurance agent during this time.
Once all the conditions of your loan have been cleared, you will prepare for the closing (settlement), This is usually held at your attorney’s office. The real estate coordinator of the attorney’s office prepares the HUD form, which details all the fees and charges involved in the purchase of your home. This will closely match your GFE. There will be a bottom-line figure that you will need to either bring or receive at closing.
JoAnn Moore is a Licensed Mortgage Professional, Certified Military Housing Specialist and president of The Mortgage Market of Delaware located in Georgetown. NMLS# 165477. Office 302-855-1306, Cell 302-236-1229; MMODJoAnn@aol.com. www.TheMortgageMarketofDelaware.com.