Part 5 of a series on finding and buying your new home

Yes! You got the call with the good news; the sellers have accepted your offer, and that home you wanted will be yours.

 

If you are like most people, you’ll need to borrow money to buy that house. Now comes the part of the transaction when people sometimes don’t take the time they need to read and understand everything. Because financing is so important, you should have has much information as possible so you understand what the loan will cost and all the terms.

 

What kind of loan should you get?

The type of loan you choose will depend on several factors, including:

·        How much you can put down. Even with the recent concern about no-money-down loans, low-downpayment mortgages (5 percent or less down) can still be found.

·        How you will guarantee the mortgage if you place less than 20 percent down. Typical mortgage guarantee third parties include: the Veterans Administration (VA), the Federal Housing Administration (FHA) or private mortgage insurance (PMI) required by lender to protect against defaults. These loans are very common.

·        Your credit rating. We talked before about how important it is to have your credit in shape before you apply for a loan so you can get the best rate and terms.

·        Other programs you might qualify for. If you are a first-time buyer, your state may have a program to help. In Maryland, "first-time buyer" doesn’t mean you’ve never owned a home, only that you haven’t owned for a specific number of years. State-backed programs may offer smaller down payments and better interest rates. This is another area where your REALTOR® can help with information on current programs. 

 

When you are ready to apply for a mortgage, you can start to pull the paperwork together. At the least, you will need recent pay stubs and tax returns for the past couple of years. Once you decide on where to get the loan, your loan officer will give you a complete list of the needed documents.

 

Where should you get a loan?

Mortgage bankers, mortgage brokers, savings and loans, banks, credit unions, and insurance companies all can be sources of mortgage loans. Your REALTOR® may have suggestions, or you can find a source on your own. You will talk to your loan officer so that you understand what kind of loan you are applying for. Then you’ll be ready to assemble all the documents for the loan application, sit down, and fill out the paperwork. Since you got a preapproval letter before you started house hunting, you can be comfortable that you have a good chance of getting the loan you want.

 

Send off the loan application and take a deep breath. Next time we’ll talk about inspections and insurance. In the meantime, enjoy that feeling of having found your new home.

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