According to the National Association of Realtors, 88% of all buyers financed their homes in 2017. The median down payment for all those buyers was 10%. Many buyers were putting down as little as 3-5%.
Today we are breaking down the initial steps of the buying process; financing.
The market has been a ‘sellers market’ for quite some time, meaning that there are more people looking for homes than there are homes available. This often leads to a bidding war when a suitable home does hit the market. Getting pre-approved should be your top priority.
Find out what your credit score is. Look into your credit history. You may be in better standing than you think. (Your lender will be able to help you navigate through this and give you tips on how to increase your score).
Important documents will be reviewed as part of your mortgage application. Be prepared to present income verification docs, bank statements showing your savings, W-9s, long-term debt details, tax returns, etc.
Find a lender
The most important thing to look for when shopping around for a lender is somebody who is willing to slow down and teach you about the process. A great lender will discuss your options and navigate you through things like common lingo, rates, finding your payment comfort level, and finally discussing the price of a home you could comfortably afford.
Research the mortgage company and their overall costs. They may be offering you the lowest rates but their closing fees may be much higher than other companies.
If you are already working with a real estate professional, they may have great recommendations for lenders in your area.
Speak to your lender about receiving a pre-approval letter. Submitting an offer with a pre-approval letter let’s sellers know you are serious about purchasing a home. An experienced real estate agent will guide you in making a suitable offer for the home you choose and help with negotiations.
Once your offer is accepted, both parties will sign a purchase contract that will be given to the lender. This begins the underwriting process at the mortgage company.
Ask questions to your lender and your realtor. Have things clarified in order to make the best decisions.
Remember to always do your own research.