Before you start looking for a home, get PRE-APPROVED
You can do this by calling a Residential Mortgage Loan Originator, also referred to as a Loan Officer, or by completing a pre-approval application. If you do call, your Loan Originator can help you complete your pre-approval application, pull your credit and ultimately determine the max loan amount & sales price that you can be approved for.
If you have marginal or bad credit, don’t worry, a Loan Originator may be able to help!
You may be able to qualify for a loan depending on how long ago and what reason(s) caused the bad credit. Premier lenders like King Financial Group often have Buyer Development Programs that can help those with bad or sub par credit. Based on your credit analysis you will be put on financial plan that will help you get your credit where you need it to get the loan that is right for you.
You may need a down payment.
Down payment requirements vary depending on the type of loan and there are many down payment assistance programs that exist. These programs may loan or grant you the funds necessary for the down payment. Whereas, King Financial has several programs that do not require a down payment at all, provided you qualify for the program guidelines. Consult with a Loan Originator to help determine the programs that are available in your area.
You will need funds for closing costs.
Closing costs are charges for services related to the closing of your real estate transaction. They include, but are not limited to:
- Escrow fees charged by the title company handling the transaction.
- Owners Title policy fee charged by the title insurance company (seller pays sometimes on a purchase)
- Mortgage Insurance fees
- Homeowners Insurance (Start shopping for this service)
- County Recording fees for recording your deed
- Loan origination fees including, underwriting, processing, closing, compliance, etc.
Consult a Loan Originator for an actual estimate of these costs, as well as information about loan programs which can assist in financing your closing costs
Some loans have "Points" and others do not.
A point is equal to 1% of the loan amount. A loan origination fee equivalent to 1% of the loan amount and may be charged by the loan originator for their services. A bonafide discount point may be paid to BUY DOWN your interest rate, and is tax deductible (please consult your CPA).
The answer to this depends on whether mortgage rates are at a high or a low point when you purchase, and on how long you plan to live in the home. If rates are high, an adjustable rate might be attractive since subsequent rate drops could reduce your monthly payments. Additionally, lenders may offer a low rate during the first few years of an adjustable mortgage to make it appealing to you. If interest rates are low you might want to take advantage of a fixed rate to protect yourself against the possibility of rising interest rates.
There are two main types of loan categories:
- Conventional Loans - Conventional mortgage loans are available with fixed or adjustable interest rates. And some loans may require mortgage insurance.
- Government Loans - These include Federal Housing Administration (FHA) fixed and adjustable rate mortgage loans, and Veterans Administration (VA) fixed rate mortgage loan
If you are a low or moderate income home buyer, there are special programs designed to help you.
These loans are available through private lenders, as well as local and state housing agencies. Most lenders specializing in real estate mortgage loans are aware of these types of loan programs.
Why may I have to pay mortgage insurance?
Mortgage insurance protects the lender from potential loss if you should default on your mortgage loan payment. Generally, conventional loans that require larger down payments do not require mortgage insurance. Mortgage insurance is always required on FHA mortgage loans.
Many organizations offer home loan counseling to prospective homebuyers.
These organizations provide classes for homebuyers to cover the steps to homeownership. They will cover home selection, realtor services, lenders, loan programs, homeownership responsibilities, saving for a down payment, and other important pieces of information. Many first-time homebuyer programs require homebuyers to attend this type of class to be eligible for selected programs.
Here is a list of HUD Approved Texas Housing Counseling Agencies.