Unless you are a professional in the real estate industry, you probably have many questions when it comes to buying a home. But having a list of questions is just the start—knowing the answers to your questions puts you ahead of the game.
To help ground you in this long and nuanced process, here are the answers to some of the most commonly asked questions in the home buying process.
There is a good reason why this question is at the top of the list. Your down payment is the first major financial investment in a piece of property. It determines monthly payments and the cost of the property over time.
In the past, a 20 percent down payment was common. These days, many loans will accept between 3-5 percent, and some require no down payment. For example:
The details of a loan differ from one borrower to the next, so consult with your Loan Officer to ensure you get the best loan for your situation.
Credit scores are an essential part of the home-buying process. The better your credit score, the more likely you are to receive a loan with a desirable interest rate:
As with most financial aspects of the home-buying process, there will be exceptions depending on other factors. Consider these factors when determining what credit score is needed to buy a house.
Getting pre-approved for a loan lets sellers know that you are serious about buying a home. This can be especially beneficial in competitive real estate markets.
Pre-approval requires a hard credit check and review of all your financial information by an underwriter. The relevant documents to prove income include:
Having the documents is one thing—ensuring they are readable is another. Rather than sending screenshots, scan your documents into PDFs to ensure they are presentable and readable.
Many borrowers walk into the home-buying process with enough money for a down payment but not enough for closing costs. These costs are often overlooked, so be sure to have funds for:
If you’re not sure you can afford these costs, use a payment calculator. Also, be sure to have additional savings after closing costs to account for the first few months of mortgage payments and any unexpected expenses.
The type of property you choose can affect the down payment, interest rate, and loan program. Manufactured homes, commercial-residential properties, and condos differ in the types of loans allowed and the stringency applied to lending approval. Additionally, if you’re interested in different property types, you will need to receive multiple pre-approvals.
If you are interested in different types of properties, keep in contact with your lender so they can better anticipate loans, down payments, and pre-approvals.
Anytime you are serious about a property, let your lender know so they can research the property and see if they can lend based on taxes, homeowner's association (HOA) fees, and other factors. This will also help them ensure that you qualify for a pre-approval letter specific to the property type.
Bottom line: The better prepared your Loan Officer is, the better chance you have of getting under contract.
In some scenarios, you won’t have a choice. If your down payment is less than 20 percent, mortgage insurance is required.
Although many people believe that mortgage insurance is an unneeded cost, it can be an excellent financial decision. For example:
When a mortgage is insured, the loan is less risky, making the interest rate lower.
Your lender will select the best mortgage for your circumstances based on your credit score, income level, property location, and more.
Here are some loans to consider:
To learn more about each loan, click the hyperlinks above.
You have questions, and radius has answers. If you didn’t find every answer in this article, reach out to one of our Loan Officers, and they will be happy to help you on your home-buying journey.