Be Prepared . . .
When a seller is looking at an offer a major consideration is the buyer’s financial ability to afford the sale price. This is why it is important to be prepared. Submitting an offer with a pre-approval from a mortgage lender will make any offer a stronger one. A pre-approval is a step further than a pre-qualification, as the pre-approval means the mortgage agent has seen the client’s financial information, including their credit report, and determined what the buyer can afford to purchase. Click here to begin this process.
Mortgages 101
Points - A Point = A Percent of Loan Amount. If you have capital, over and above your down money, to put toward your property purchase you can buy down your mortgage by paying 1-5% of the loan amount. As a reward for this, each point prepaid will result in a lower interest rate on the mortgage which can drastically reduce your interest payment over the life of the loan.
Good Faith Estimate - Any reputable loan institution will supply you with a written statement outlining the costs involved in processing your loan. These costs include an application fee and appraisal cost. Conventional Fixed Rate - This is the most commonly used form of mortgage. The buyer puts a percentage of the sale price, 20% or more, and then a financial institution loans the buyer the balance. The loan is normally for 15 or 30 years to be paid back monthly with interest.
PMI - Private Mortgage Insurance is added to any conventional mortgage if the buyer is using less than 20% of their own money to make the purchase. This insurance can be pre-paid at the time of purchase or be part of their monthly payment. This insurance can be removed once your equity in the property has reached 20%.
ARM’S - Adjustable Rate Mortgages should only be used with careful consideration. They generally provide the borrower with a 5-7 year low fixed rate mortgage which will be adjusted at the end of that period to a much higher rate. If you know you will only be living in the home for a short time this may be an option to look at.
FHA - This may be a good option for anyone who doesn’t have a lot of capital to put down. In addition, this option has more lenient guidelines regarding credit history. Combined with the lower down payment requirements, this is a popular choice for many first-time homebuyers.
