It’s time. You’re ready to move on from the apartment rental life and take the leap into homeownership. As exciting as it is to start this new chapter in your life, it is still a big step to take – one that you want to make sure you do right.
To help ease your concerns and make this process as simple as possible, it’s important to find the right mortgage for your needs. Here are a few home loan tips to keep in mind as you start your journey towards owning your dream home!
What Type of Loan Should I Get?
There are several different loan types out there, and any may be the correct choice for you. Let’s examine a few mortgage options and special considerations to make with each:
- Conventional Loans: Homebuyers may qualify for a conventional loan with as little as a 3% down payment. However, these loans typically require 5% or more depending on your financial situation or the type of property you want to finance.
- VA Loans: Insured by the Department of Veterans Affairs, a VA loan permits the purchase of a home with $0 down and typically lower interest rates than other loan types. However, there are requirements to consider. You must either be a veteran or in active military duty to qualify. There may also be a VA funding fee that’s rolled into the loan amount.
- FHA Loans: Insured by the Federal Housing Administration, FHA loans are ideal for anyone with credit scores as low as 580 and those who have higher debt-to-income ratios. This loan also may only require a down payment of 3.5%.
- Adjustable-Rate Loans: An adjustable-rate loan, or adjustable-rate mortgage (ARM), is a loan with varying interest rates depending upon prevailing market rates. The loan has a fixed rate for an agreed-upon period, typically 5, 7 or 10 years, but then the loan rate is adjusted up or down based on current market rates.
- Fixed-Rate Loans: As the name implies, the interest rate and payment on this loan continue throughout the life of the loan. Therefore, one advantage of a fixed-rate loan is the stable, expected monthly payment that helps with maintaining a budget.
Home Loan Tips
Each of the loans mentioned above have pros and cons that are unique to your situation. To help you figure out the best loan for you, be sure to:
- Check Credit Score: The first thing on your loan checklist is to check your credit score. Lenders will check your score as soon as you apply, so you should know your chances of getting a loan. Verify your credit report is correct and make sure your score is where you want it to be before applying for a loan. Your loan officer can help give you ideas on how to approve your score with tools they have available to them.
- Set A Realistic Budget: Make sure you can afford the typical 20% down payment and other possible mortgage expenses. Use a mortgage calculator to help you establish a practical price point. And know how much you want to spend out of pocket.
- Gather Documents: Determine what documents are required for a loan application and prepare them before meeting with a lender. Typical documents you should have ready include credit reports, tax returns, pay stubs and a couple of forms of ID.
- Get Pre-Approved: This process only takes a few minutes (at most a few hours). This will make the home-buying process more efficient, and it will give you insight into how much house you can feasibly buy.
Once you determine what loan will work best for you, your loan officer can prepare an estimate that will include the closing costs, down payment and monthly payment. This will bring you one step closer to moving into your dream home!
Thanks to Gary Athey with Eagle Bank for helping us with these great tips! Reach out to Gary at GAthey@eaglebankcorp.com for more information on how Eagle Bank can help you with your home loan needs.
At Craftmark Homes, we’re in the business of building forever homes. As you prepare to make the jump from renting to owning, Craftmark can help turn your dreams into a reality. Contact us to learn more about your options.