Loan Programs
The basic qualifications for any loan are:
- A decent credit score (Requirements vary from loan to loan, the higher your credit score is, the lower the rates and the better the terms).
- The ratio between your income and your debts (Varies between loans, with high enough credit scores, some lenders don’t even look at it)
- Your job history and stability (once again varies and can be eliminated with high enough credit scores.)
- Your assets. (same comments as 2 & 3)
So there are better interest rates available to people with higher credit scores! Now we come to the next step in our process which is interviewing lenders armed with our credit scores!
Talk to Several Lenders and take lots of notes. Each lender should be willing to give you a "Truth in Lending" statement which will detail out all of the expenses involved in getting the loan. Compare the different lenders fees and rates. Make sure that you are comparing apples to apples and that all of the fees are listed. Some lenders count appraisal, survey and credit report fees as closing costs and some don’t. Some have "junk fees" or brokerage fees to another lender or high rates on title insurance. Some will grossly underestimate property taxes or insurance and leave you with some unforeseen extra expenses at the closing table!
One important tip is make sure to talk to at least a couple lenders who are recommended by someone you trust. Realtors, closing attorneys, friends with real estate experience, know mortgage brokers who have delivered what they promised over and over. "No surprises" at the closing table turns out to be a valuable commodity. This business is full of stories of lenders who promised a rate lower than the market and didn’t deliver…but who were ready with a different loan that could close immediately at a higher than market rate. ( Usually they find some obscure reason….like a late payment on a cell phone bill 5 years ago. See "Predatory Lending"). In many cases people are stuck because they have given notice to move out of their apartment or just they sold their house and have to move on a certain day etc!
Compare the various loan programs.
Figure out how long you plan to own the house. Is this the last home you will ever purchase or just a stop gap home until your income goes up or your family gets bigger? Different loan programs are better suited for long and shorter term loans. A 30 year fixed rate loan works for people who know that this is the house they want to spend a long time in…or possibly for people who have unstable job security and worry that income or credit limitations may make it difficult to refinance in the future.
On the other hand, if you know that you are going to move as your income increases or when your new baby is ready for school etc. then you may be perfectly suited for a 5/1 adjustable rate mortgage. These loans stay fixed for five years and then they adjust. There are some that are interest only which would give you the option to have a lower monthly payment. At the end you will still owe what you paid initially for the house, but property appreciation may give you a decent profit anyway. The truth is in the first 5 years on a 30 year fixed rate loan you pay very very little principal.
Loan qualifications and interest rates change daily so rolling up your sleeves and doing some homework is important. I am offering these various options as a guide to the type of loans which are available today but may or may not be tomorrow.
There are many different loan programs out there from the 30 year fixed rate loans to the interest only adjustable rate loans. There are loans that require no down payment and loans that have no PMI (Private Mortgage Insurance). There are rehab loans which will lend you the money to renovate the new home. There are loans for credit challenged borrowers, and "stated asset loans" that do not verify income. There are different interest rates and different loan programs depending on your credit scores. There are loans that require higher income in order to qualify, than other loans for the same amount. What is meant by "closing costs" will vary from lender to lender,
Do you have money saved for a down payment? If you don’t, there are no down payment loans down payment are worth looking at. They are actually 2 mortgages written on one Purchase, one for 80% at the prevailing low fixed rate, and the other 20% home equity line at a little higher rate. You PM PMI (private mortgage insurance) and when you factor that in, they make sense. You can keep your cash for updating the house or repairs. It’s a little complicated but they actually do make sense. If you look over the different options with these considerations in mind you can start to find financing products that will really work for you!
Loan programs are always changing and I could not publish rates or even specific qualifying guidelines other than in general terms. No warranty of any of this material is offered. The best advice is to shop for lenders that offer programs that make sense for your particular situation.
RE/MAX of Buckhead
DAN Connolly
404-370-0050
O. 404-233-4633
Fax: 404-370-0377