Financing
Financing the purchase of a home often unnecessarily intimidating and mysterious
process. By doing some reading and understanding the process a buyer or seller can
easily negotiate the finance process and maneuver it to their advantage.
Few people can buy a home for cash. According to the National Association of
Realtors (NAR), nearly nine out of 10 buyers in 1999 financed their purchase, which
means that virtually all buyers -- especially first-time purchasers -- required a
loan.
The real issue with real estate financing is not getting a loan virtually anyone
can. Instead, the idea is to get the loan that's right for you -- the mortgage with
the lowest cost and best terms.
Real estate consultants routinely suggest that consumers start the mortgage
process well before bidding on a home. Many lenders (the sources of money) and
programs, for example, are available through recommendations from local Realtors.
By meeting with lenders -- either online or face to face -- and looking at loan
options, you will find which programs best meet your needs and how much you can
afford.
Realtors also recommend pre-approvals for another reason: Purchase forms often
require buyers to apply for financing within a given time period, in many cases,
seven to 10 days. By meeting with loan officers in advance and identifying mortgage
programs, it won't be necessary to quickly find a lender, check credit, and rush
into a financing decision that may not be the best option.
What is pre-approval?
"Pre-approval" means you have met with a loan officer, your credit files have
been reviewed and the loan officer believes you can readily qualify for a given
loan amount with one or more specific mortgage programs. Based on this information,
the lender will provide a pre-approval letter, which shows your borrowing power.
You can visit as many lenders as you like and get several pre-approvals, but keep
in mind that each one carries with it a new credit check, which will show up on
future credit reports.
Although not a final loan commitment, the pre-approval letter can be shown to
listing brokers when bidding on a home. It demonstrates your financial strength
and shows that you have the ability to go through with a purchase. This information
is important to owners since they do not want to accept an offer that is likely to
fail because financing cannot be obtained.
How do you get pre-approval?
Real estate financing is available from numerous sources, including mortgage
companies that have worked with local Realtors and in some cases, individual
Realtors themselves. Based on his or her experience, the Real estate consultant
may suggest one or more lenders with a history of offering competitive programs
and delivering promised rates and terms.
The loan officer will carefully review your financial situation, including
your credit report and other information. The lender will then suggest programs
which most-closely meet your needs. For instance, a first-time buyer may qualify
for state-backed mortgage programs with little money down and low interest rates,
while a repeat purchaser (someone who has bought a home before) with more equity
(money invested in the home) might want to get a 15-year loan and the lower overall
interest costs it represents. Typically, first-time buyers opt for the traditional
30-year loan, with either a floating interest rate or a fixed rate of interest
over the life of the loan.
By researching and understanding the finance process you can have the best real
estate experience possible. I am happy to provide you with a list of recommended
mortgage companies or to sit down with you and provide a consultation free of
charge.
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