|6. Get Funding
Steps to Home Ownership!
Often the cost of real estate financing is routinely greater
than the original purchase price of a home (after including
interest and closing costs). Because financing is so important,
buyers should have as much information as possible regarding
mortgage options and costs.
What kind of loan?
There are thousands of loans available out there from a variety
of lenders, but in general, the mortgage you choose will likely
be determined by at least several key factors:
- How much down? Loans with 5 percent down or less are now
widely available -- in fact, loans from major lenders with
no money down have appeared in recent years.
- If you place less than 20 percent down, lenders will
want the mortgage guaranteed by an outside third party such
as the Veterans Administration (VA), the Federal Housing
Administration (FHA) or a private mortgage insurer (PMI, or
private mortgage insurance, is required by lender to protect
against any mortgage defaults). More than 2.5 million VA,
FHA and PMI loans are generated each year.
- How's your credit? The best rates and terms are only
available to those with solid credit. To get the best loans,
make a point of paying credit cards, installment payments,
rent and mortgage bills in full and on time.
- Are you a first-time buyer? It might seem that
"first-time buyer" means someone who has never owned
property before, but under most state programs, the term
refers to those who have not owned property within the past
three years. State-backed first-timer programs often feature
smaller down payments and below-market interest rates.
How do you get a loan?
To obtain a loan you must complete a written loan application
and provide supporting documentation. Specific documents include
recent pay stubs, rental checks and tax returns for the past two
or three years if you are self-employed. During the
prequalification procedure, the loan officer will describe the
type of paperwork required.
Where do you get a loan?
Mortgage financing can be obtained from mortgage bankers,
mortgage brokers, savings and loan associations, mutual savings
banks, commercial banks, credit unions, and insurance companies.