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"Now is a great time to buy", "Mortgage rates have never been lower", "Home prices as at all time low", you've seen these headlines, right? Of course you have! We see them everyday! We also see the articles that tell you how hard it is to get a mortgage and how lenders have been tightening the guidelines and making it impossible to qualify for a loan. While some of this IS true, there are a lot of myths out there and I'm here to tell you how to choose your lender and how to be sure to get approved.
There are so many options out there for mortgages that it can make your head spin! Finding a lender that you trust is important. This person will have all of your personal financial information and you need to know that they are working for you and in your best interest.
Take the time to speak to a few different lenders. Start with your bank! If you belong to a credit union or local bank, see what incentives they are offering, check on their rates and see if they have a good loan program for the type of buyer that you are. There are different loans for condos, houses, land, construction and 2nd homes so make sure you are specific when talking to them. Don't just ask what rates are right now, that is not enough information to make an informed decision.
Get a Good Faith Estimate (GFE) or some sort of estimation of the closing costs, prepaids and/or points. This is a powerful tool that help you see exactly what costs you will have as a buyer. Don't be afraid to ask questions! If you see a charge that you don't understand, ask your lender to explain it to you. A good lender will be willing to answer any question that you have without hesitation.
Last but not least, and this is my personal opinion, stay away from online lenders that promise the world! In my experience, if something is too good to be true, it usually is. Working with a local lender is a great choice because it puts you in the hands of someone who is familiar with the market, uses local appraisers with knowledge of local market conditions, and can save you money in the long run. Not to mention the comfort and convenience of knowing you can speak face to face with your loan officer if you have a question or concern and, to me, that offers peace of mind.
When you take your taxes into your accountant you gather all of the necessary information that they will need to get you the most money back or find you enough deductions to keep the amount you pay as low as possible, right? If you don't know exactly what they need, you ask them! Getting a mortgage is no different. You need to be sure that you provide your lender with all of the documents they need to get you the best program, the best rate and the lowest payment. If you don't know what they need, ASK!! If you provide the needed documents quickly and correctly then you will eliminate most of the frustration of getting your pre-approval in the very beginning.
If you don't know how your credit is, ASK! You can even look this up yourself if you choose to. You will never know what you can do unless you know where your credit stands. I know this can be scary to some people and rejection is not fun but if you are proactive and know your score you will be far better off. Most people are pleasantly surprised and if there are issues, your lender will be able to help you overcome them and get you to the point where you will be able to qualify in time.
There are no 0% down loans anymore. Though you can still get 100% financing in some rural areas, you will typically have a higher interest rate and pay more in fees that you would if you simply went with an FHA loan. FHA loans offer the most options with a low down payment of 3.5% of the purchase price of the property. No matter which loan you choose, you will need to bring an amount with you to the closing for your down payment and closing costs. If you don't have it saved there are options, such as gifts from family members, that are available and allowed by your lender. This makes home ownership available for those who may not otherwise qualify. Check with your lender to see what loan programs are available for you and how much you will need to have in order to close.
Last but not least, stick to your budget!! Your lender may tell you that you can afford a $200,000 house without a problem but you had planned on only spending $150,000 after looking at your monthly expenses. If you know that's what you can afford then don't spend more! Your lender looks at the items listed on your credit report and calculates your debt to income ratio based on that report. You know what's NOT on there, everyday expenses. Things like, gas for your vehicles, car insurance, life insurance, doctor bills, groceries, utilities, etc. You are the only one who knows exactly what your monthly expenses are so stay within them. Stretching a little bit is not such a bad thing but being house poor is. Stay true to your numbers and stay within your price range and you be do great!