Your first item of business, even before you look at any homes, is to get your purchase money in order. If you aren’t paying cash, you’ll need home financing.
The lender and/or loan officer you choose to work with is entirely up to you. Need a place to start? Think of your bank or credit union since you already have relationship with them. Feeling uncomfortable? Ask family, friends and colleagues for referrals. Don’t want to involve them? Call me. I can provide referrals to mortgage professionals who are outstanding in their field.
Once you have names and contact information for loan officers - make the calls. Home financing is often the hardest step for home buyers. You needn’t feel intimidated or that you may be wasting anyone's time. Lenders get paid
when they originate loans. The person with whom you will speak is compensated for their time and effort when your loan funds which is at close of escrow. No one is doing you any favor to take or return your call. You will become a paying customer.
After speaking with a lender and providing the requested documents, the will provide a Pre-Qualification Form. This form is absolutely necessary when submitting an offer to the Seller.
Okay – a quick list and brief explanation for types of home financing:
FHA – Available to most consumers as it is fairly lenient with debt to income ratios and credit criteria. It currently requires a 3.5% down payment plus closing costs paid by either you or negotiated to be paid by the Seller. FHA charges both upfront and monthly MIP (Mortgage Insurance Premiums) to insure the lender against default. There are also loan limits which are (both) based upon location and subject to annual changes. For 2019, the FHA loan limit for a single residence home in Maricopa County is $314,827. This limit increases for duplexes, triplexes and homes containing 4 units (quad-plex).
VA – Available exclusively to active or honorably discharged military personnel. It's true. No down payment is required on VA loans! No monthly Mortgage Insurance Premium! Closing costs can be rolled into the loan amount or negotiated to be paid by the Seller! VA has certain costs that cannot be paid by Veterans, and (VA) eligibility can be restored and used more than once.
USDA – Primarily used to purchase homes in rural areas. The term “rural” is quite subjective and this type of loan may be available exactly where you want to live! No down payment with closing costs rolled into the loan or paid by Seller if negotiated.
Conventional – Requires high credit scores and down payment amounts of no less than 3%. Monthly mortgage insurance premium if down payment is less than 20% of purchase. Closing costs paid by you or the Seller.
Hard Money – DON”T DO IT unless you're an Investor who will "hold" short term.
Seller Financing – Generally requires a large down payment and interest rates that are at least “market.” Must adhere to Dodd-Frank Act: fully amortizing, rules for balloon payments, fixed interest rate for a minimum 5 years, adjustable after 5 years with “lifetime” caps if the Seller has three or more transaction withing a 12 month period. Other rules apply.
For more information, please read:
Portfolio Loans – These loans are held by the lender and not sold on the secondary market. Underwriting requirements (e.g. credit, down payment, cash reserves, employment history, etc) will vary.
As you can see there are many options! I have only touched upon those most widely known. Your lender will know more and offer "the best" after considering your income, credit, and debt.