The First Step
You should get pre-approved by a lender before you start looking for a home. Once you’re pre-approved, you’ll know exactly what you can afford. Then you can start to search to find the home you want and sellers are more comfortable accepting your offer.
What To Expect In Your First Conversation With A Lender?
A mortgage lender will evaluate four areas of your financial history to determine your ability to secure a loan:
- Credit history/credit scores
- The amount of monthly credit you currently have
- Income/employment history
- Your financial assets (money in the bank, investments, retirement accounts, and potential gift funds)
FHA Loans are government-insured loans that were instituted to assist buyers with minimal cash and first-time buyers to purchase a home. Usually you can secure an FHA loan with as little as a 3.5% down payment for a single family home. Although there are condominiums in Broward County that do fit within the guidelines for an FHA loan, typically 20% down is more the normal down payment for a condominium and most condominiums unfortunately do not qualify for an FHA loan. An FHA loan has more lenient guidelines for borrower credit history, allows for all or part of the funds needed by the borrower to be a gift, and has stricter requirements on the property’s condition for the protection of the borrower.
FHA loans do require inspections to ensure that the property meets the FHA guidelines.
VA Loans are entitlement loans that are earned based on the number of years served in the armed forces. If you were an active service member at one time in the past. It is recommended to talk to the United States Department of Veterans Affairs to get more information about your VA entitlement. Just like FHA loans, VA loans also require inspections to ensure that the property meets the VA guidelines on the property’s condition for the protection of the borrower.
Conventional Loans meet the standards of the ‘conventional’ secondary marketplace. There are two types of conventional loans, conforming and non-conforming. Based on credit history conventional loans can require as little as 5% down, however this is rarely the case with condominiums. A condominium needs to go through a documentation process in order to qualify for such a small down payment. Typically 20% down is what is required for most condominiums in Broward County.
Conforming Loans usually fit neatly into the box of rules and are under the prescribed maximum loan amount set each year. Both the borrower and the property fit the typical scenarios, and there is nothing unusual.
Loans over the ‘conforming’ loan amount or loans that have some facet outside the box either related to the borrower or the property are called non-conforming loans. A loan can be non-conforming if the borrower is unable to document their income or assets, if their credit scores are low, if the property is unusual for the area, or if the loan amount or program is designated non-conforming.
Which Mortgage Is Best?
There are literally dozens of loan products and hundreds of combinations of these products. A good loan consultant will listen to your needs, evaluate your situation, and recommend loan scenarios that fit your need. A home loan should fit into your overall financial plan, and help meet your long- and short-term financial goals with the desired monthly payment and equity position.
Just calling around for the best rates on a 30-year mortgage could cost you thousands of dollars over the life of your loan if you don’t get the loan that best fits your needs. There is so much more to the home loan process than just rates. A professional loan consultation is a vital first step in the process and is usually at no cost to you.