Here is a quick guide to financing your next home.
I want to first start out by saying that I am a Realtor, Iowa's Okayest Realtor... not a lender. My purpose with this article is to inform, and get you the consumer going in the right direction. Luckily 98% of the transactions that I have represented have needed financing of some sort.
Financing is one of the most important factors to home buying, without it the deal can't survive. Being ready sooner rather than later will increase your chance to lock in the lowest interest rate possible. Follow this easy guide and you will be on your way to buying your dream home!
Know your budgets. Before you start looking at real estate listings, you should talk to a lender so you know how much you have to spend. Next, speak with a Realtor®, that way you have an idea of what kind of market you will be competing in. So many people search for homes but don't know what price point they want to land on. Do your homework, it will pay in dividends.
Check your Credit Report. If you don't know your credit score, or what is on your credit report you will definitely want to look, now. There are many different avenues for you to check your credit. Start with a lender.
Maximize your credit score. Its simple, the higher the score will increase your chances of being approved as well as lower your interest rate. Getting pre-approved below 620 is totally possible, however we want you going into this journey with your best score. Paying down revolving debt such as credit cards will make the most significant impact. Ensure that there are no outstanding negative debt such as a collections that haven't been paid. In the months leading up to your purchase try not to settle out of any debt, or pay lesser the amount to the creditor. These will show up on the credit report and you will have to explain them to the lender. These are things you shouldn't worry about it, remember the past is in the past and we need to work toward the future - your new home. Establishing good habits like paying bills on time are a must leading up to purchasing.
Figure out your down payment. Save your money! Average down payments range from 0% to 20%. Federal Housing Administration (FHA Loans) are available with down payments as low as 3.5 percent of the purchase price. Loans such as a Veterans Affair Loan (VA) or United States Department of Agriculture loans (USDA) require no money down! Get a hold of me for more info on this.
Get a pre-approval letter. Once you have chosen a lender, you will receive a pre-approval letter. This will be necessary in order to get into homes you may want to buy. Pre-approval letters tell the seller that lenders have vetted your finances and reviewed your credit. In order to get pre-approved you may have to verify income and bank statements, and lenders will also pull your credit.
Shop around! If you are not happy with the service or products your lender has available, seek out a new lender. This is one of the few times it is ok to have your credit pulled more than once. It is your right by law to have the opportunity to shop for the lowest rates and the best deals. Remember the lowest rate don't always mean the best deal! Never forget, terms and conditions.
Reaching out to your Realtor®... (cough cough ME), is a good first step to figuring out the road map to financing your new home. Call me today!