Buyer's Articles

Finding Home Financing

Finding the right method of financing your home is the key to being qualified to own one. Whether it be a loan from a lending company, cash from you bank account, or a property inherited from family you will likely need to pay a substantial amount to get in and you will need to look forward towards monthly payments and regular maintenance costs. The rewards come from having a place to hang your hat and a return in equity hopefully more than the investment. Most people will find themselves borrowing money to achieve their ownership dream.

IMPORTANCE - Ironically, a common reason real estate negotiations fall apart or escrows don't close is because of financing. Whether it be the home buyer being qualified or a loan officer who doesn't know that they are doing there is a strong possibility you will have some challenges with your financing. Be well prepared with your documentation as you proceed. Have your work stubs, bank statements, references, checkbook, etc. close at hand.

SELECTING the RIGHT LOAN OFFICER - If you select the right loan officer you are more than half way there. He/she will be essential in finding the right program, packaging the loan, and explaining the processes or setting up a plan to help you get your credit in line or your down payment. Ask around for referrals. It is typical for people to have a GREAT experience or a HORRIBLE experience with their loan officer. People who own homes will readily talk about the loan officer they used. Get the contact information for multiple and call them. Interview them over the phone or visit them and interview them in person. Determine what guarantees they may offer.

Determine EXACTLY what their fees are. There are all sorts of fees tucked in here and there and they are often negotiable. Keep in mind a qualified loan officer is worth his commission. However, don't get taken. You may end up paying for it for a long time.

Once the interview is over call him/her out of the clear blue to see if he/she returns a call every time. How long does it take to get a call back and how valuable is the information. Call them back again in a few minutes and see if they treat you well. The period of escrow is nearly always a high stress time. Make sure you have the right financing teammate. Consider a backup option. If you primary officer can't get it done and you are going to fall out of escrow having a backup may save a lot of time and perhaps money.

CREDIT - The number of today's home loans has established a need for lenders to have a scale to help them decide who gets money and who doesn't. Since they are often not the "home town banker" they don't know who they are lending money to so they require a history to judge upon. This is where the credit score and history come in to play. Most lenders set benchmarks. Individuals who have a score higher than those benchmarks are considered credit worthy. Since it costs money to borrow money, credit scores also determine how much individuals must pay over time for the use of the funds. Take steps to improve or maintain your credit. You will pay less in the long run. The government provides an annual view into your credit history.

CREDIT BUREAUS - There are three main credit bureaus.

CREDIT REPAIR COMPANIES

EARNEST MONEY - An earnest payment (sometimes called earnest money or simply earnest) is when a buyer gives something of value (money or otherwise) to a seller at the time an agreement is made and it is accepted by the seller as an indication that the agreement is complete. For the gift to be earnest it must be given outright by the buyer to the seller with no intention of ever getting it back.

Typically, if the offer is accepted, the earnest is kept by the seller and subtracted from the purchase price, or is kept in escrow until closing, when it is applied to the buyer's portion of the remaining costs. If the offer is rejected, the earnest money is usually returned. If the buyer retracts the offer, the earnest is forfeited. (Source)

DOWN PAYMENT - The down payment is typically independent of the Earnest Money Deposit. It is used to pay for the home so that a purchaser doesn't have to make payments on that portion of the value. The amount of required down payment depends on the lender requirements. A borrower's credit score and ability to pay, based on the lender's judgment, determines the amount that must be put down. This way, if the purchaser defaults on the loan the lender will have some equity to claim. There are loans at 100%, meaning a borrower doesn't put any money down accept for closing costs and the lender loans money equal to the purchase price. In this case the lender is confident in the borrower's ability to pay. Most home buyers will put down 5, 10, 15 or 20% to ease the burden of monthly payments and to keep the equity tied up in real estate. Most lenders require a down payment of 5-10% based on credit. The key is to work it out with a great lender.

NOTE: Information on this site is not guaranteed to be accurate. Some content is compiled from 3rd party sources. If you are aware of incorrect or outdated information, feel free to contact us.