Financing Buying your first house can be very exciting. But financing your home purchase can be a daunting experience. In both cases, do your research and shop carefully to ensure you find exactly what you want and need. According to the National Association of REALTORS® (NAR), nearly nine out of ten buyers finance their home purchase, which means that virtually all buyers, especially first time home buyers require a loan. That's why when purchasing a home, buyers should have as much information as possible regarding mortgage options and costs. Our agents will assist you with the financing process including but not limited to providing you with mortgage information, discuss financing options and recommend local lenders.   We suggest our clients start the mortgage process well before making an offer on a home and getting ‘pre-approved’. "Pre-approval" means you have met with a loan officer, your credit files have been reviewed and the loan officer believes you can readily qualify for a given loan amount with one or more specific mortgage programs that best suit your needs. Based on this information, the lender will provide a pre-approval letter, which shows your borrowing power. Getting pre-approved for a mortgage is recommended since the state mandated purchase agreement requires buyers to apply for financing within a given time period, usually three to five days. Meeting with a lender in advance takes the pressure off and you'll avoid making a hasty financing decision that may not be your best option.   Deciding how much to spend on your home and which type of mortgage will work best for you as well as understanding the settlement process can be confusing. Fortunately we have included some resources that can help you get prepared well before you step foot into a sales office, model home or open house.   •     Get familiar with the lingo. Tholco Real Estate Group home buyer dictionary can help you.    •     Figure out what you can actually afford to pay on a monthly basis. When determining the monthly payment you can afford, remember that, in addition to the monthly principal and interest, you will also be paying into escrows for property taxes, hazard insurance and possibly a homeowners or condominium association assessment. You have more knowledge about your living expenses than a lender. Hold firm with that number and don’t be tempted to agree to an amount higher than what you are comfortable spending. Mortgage calculators are a great way to figure out what your monthly payments would be based on interest rates and down payment amounts. Calculators can be found on most real-estate-focused websites.  •     Pay down your debts. Debt that you carry on your credit cards will limit what you qualify for from a lender. Lenders want to see a total debt service ratio that is less than 40 percent of your monthly income.    •     HUD also has a handy booklet on its site called “Buying Your Home: Settlement Costs and Helpful Information". It describes the home buying and settlement process and explains most of the expenses you will encounter. It is free and most lenders are required to provide their loan applicants with a copy of this document under the Real Estate Settlement Procedures Act (RESPA). However, you will be able to shop more wisely for settlement services if you have read the pamphlet before you visit a lender.   •     When you have done your research and are ready to move on to the next step, visit a lender, understand the loan choices that would be available to you, and, once you’ve determined the most suitable loan, get pre-approved for that loan. Since you will already know how much money you can borrow, you will know what price range you should be looking at and can move quickly if you are bidding on a house that has several interested buyers. A lender’s pre-approval would still be subject to a final verification of your credit and a satisfactory appraisal, but it’s a big step toward becoming a home owner.   What are your mortgage options? With the many types of loans available from a variety of lenders, the mortgage you choose will likely be determined by several key factors:   How much do you have to put down?  Loans with 5 percent down or less may be available. If you have less than 20 percent down, lenders will want the mortgage guaranteed buy 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). Millions of VA, FHA and PMI loans are generated each year.   Rates and terms?  The best rates and terms are only available to those with solid credit ratings. To achieve or maintain a good credit rating, make a point of paying credit cards, installment payments, rent and mortgage bills in full and on time.   First-time buyer?  It might seem that "first-time buyer" means someone who has never owned property before, but under many mortgage programs, the term refers to those who have not owned property within the past three years. To find out about available first-time buyer programs please talk to one of our highly skilled agents.   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.   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.   The idea is to get the loan that's right for you -- the mortgage with the lowest cost and best terms.