How to Find Financing
A very important part of purchasing a home is finding the right lender. Listed
below are some characteristics you should look for when choosing a lender.
Also, there are a few tips on what you should not do. I also explain the
differences between being "pre-qualified" and being "pre-approved". There
are also a few suggestions on sources of money for down payments that you
may not have thought about.
Questions to ask while shopping for your
lender...
- What is his/her reputation within the community?
- How many loans does s/he close a year?
- Is the company well known in the area?
- How long has the company been in the business?
- Does the lender have access to a wide variety of loan
packages?
- Can interest rates be locked in and for how long?
- What is his/her reputation within the community?
- How many loans does s/he close a year?
- Is the company well known in the area?
- How long has the company been in the business?
- Does the lender have access to a wide variety of loan
packages?
- Can interest rates be locked in and for how long?
What not to do when shopping for your lender...
Do NOT call around asking for interest rate quotes...
Quoted rates over the phone are rarely locked prices. This is one way the lender gets you to come to his office. Rates can be subject to changes unless they are predetermined for a specified period of time.
Interest rates can change daily. A quote you get today may not be available at the same price tomorrow.
The interest rate you are quoted over the phone may not be the program that will fit your needs or situation.
Do NOT call around asking for interest rate quotes...
Quoted rates over the phone are rarely locked prices. This is one way the lender gets you to come to his office. Rates can be subject to changes unless they are predetermined for a specified period of time.
Interest rates can change daily. A quote you get today may not be available at the same price tomorrow.
The interest rate you are quoted over the phone may not be the program that will fit your needs or situation.
Get Pre-Qualified or Pre-Approved?
People often confuse these two terms and it is very important to understand the difference. A lender or mortgage broker can Pre-Qualify you over the telephone based information you provide regarding income, assets (specifically, source of down payment) and debt. The lender will then determine the maximum purchase price that you qualify for. This qualification is subject to verification of the information you provided to the representative, a satisfactory credit report and the appraisal of the property being purchased. Pre-Approval means that you have submitted a full loan application, including a credit report and the lender has actually verified your financial information and has approved you as a borrower for a specified amount. All you need to do is to purchase a home. That home must appraise at the price that you and the seller have agreed upon.
Getting pre-qualified or pre-approved is important for several reasons. Pre-qualification helps to determine which loan program best fits your needs and which programs you qualify for. You will know exactly how much you are qualified for and this will allow you to start budgeting your money before you make this large investment. When you write an offer on a property, you will want to attach the pre-qualification/approval letter to the offer so that the seller is favorably impressed by your financial credentials. No seller wants to take their property off the market and waste time with an unqualified buyer. In a sellers' market having a pre-approval letter is your best bet. In multiple offer situations it is often the deciding factor.
What are the best sources of cash for a down payment?
- Receive a tax-free gift from your parents (or others).
- Borrow against a life insurance policy
- Borrow against a company pension plan
- Borrow against stock account
- Cash in a retirement savings plan
- Ask for a cash payment from your employer instead of next year’s raise
- Obtain an advance on a future inheritance
- Take advantage of any down payment assistance programs available in your area
People often confuse these two terms and it is very important to understand the difference. A lender or mortgage broker can Pre-Qualify you over the telephone based information you provide regarding income, assets (specifically, source of down payment) and debt. The lender will then determine the maximum purchase price that you qualify for. This qualification is subject to verification of the information you provided to the representative, a satisfactory credit report and the appraisal of the property being purchased. Pre-Approval means that you have submitted a full loan application, including a credit report and the lender has actually verified your financial information and has approved you as a borrower for a specified amount. All you need to do is to purchase a home. That home must appraise at the price that you and the seller have agreed upon.
Getting pre-qualified or pre-approved is important for several reasons. Pre-qualification helps to determine which loan program best fits your needs and which programs you qualify for. You will know exactly how much you are qualified for and this will allow you to start budgeting your money before you make this large investment. When you write an offer on a property, you will want to attach the pre-qualification/approval letter to the offer so that the seller is favorably impressed by your financial credentials. No seller wants to take their property off the market and waste time with an unqualified buyer. In a sellers' market having a pre-approval letter is your best bet. In multiple offer situations it is often the deciding factor.
What are the best sources of cash for a down payment?
- Receive a tax-free gift from your parents (or others).
- Borrow against a life insurance policy
- Borrow against a company pension plan
- Borrow against stock account
- Cash in a retirement savings plan
- Ask for a cash payment from your employer instead of next year’s raise
- Obtain an advance on a future inheritance
- Take advantage of any down payment assistance programs available in your area