Do you need Financing? No Problem!
When purchasing a home, financing can be the biggest hurdle. There are some key terms that you need to know that will help you expedite and have less stress through the experience.
The Interest Rate: The interest rate is the lenders charge to use their funds. Represented by a percentage, the interest rate reflects your personal situation and the total economy in terms of the costs of money. Interest rates are typically fixed or variable (can change).
Principal and Interest: A loan is amortized over the life of that loan. Most mortgages are 30 years but you can get financing for 15, 10, and other lengths of time. Principal is the amount of your payment that is applied directly to your indebtedness. The interest portion is the amount of your payment that is applied to the cost of borrowing.
Mortgage Loans: These are secured loans typically secured with the "Borrowers" property. These are typically 30 years or 360 months.
Downpayment: Most mortgage loans, depending on your line of financing, will require some form of downpayment. FHA and Conventional loans are very common and both require a downpayment. Occasionally there are first time home buyer tax credits and incentives that are highly advisable to research. There is also the USDA loan which requires very little money as a down payment or for closing costs. When you contact your Loan officer, please ask them for a consultation.
Closing Costs: These are the costs paid at the closing table. These can be bank fees, pre-paid interest, application fees, and title fees. On your initial meeting with your loan officer, please ask them to specify what amount of money you will need to have at closing. These factors are also considered while getting your approval.
Loan Officer: This person will have all the answers to your questions regarding the current interest rates and what you qualify for. The loan officer and their team will evaluate your situation and determine what amount you qualify for. The loan officer will use formulas based on your current income and debts to determine your maximum monthly payment.
Owner Financing: Owner financing comes in many shapes and is a case to case basis. These arrangements are negotiated between both buyer and seller typically through a neutral third party. These terms can sometimes be favorable to the higher-risk borrower. Not every owner of property is willing to work these arrangements out so is advisable to secure financing through an institution.
Tax Documents: These are the forms that you annually file with the IRS. Please verify that you have copies of your most recent tax documents. Sometimes you will need three years worth of data to show evidence of income.
Employment: Some of us are self-employees and some of us work for great organizations. Either way, in-order to secure funds it is important to have verification of employment. This can be from pay-stubs or tax records. Please consult with a banking professional for accurate proof source documents.
Truth in Lending Laws: Please read about this to answer more questions! https://en.wikipedia.org/wiki/Truth_in_Lending_Act
There are many details that are better explained from the source! If you currently have a banking institution, please contact them to answer your questions. If you do not have a preferred Loan Officer, please do not hesitate to contact me. I will set you on the right path!