More Info on Getting Approved for that Home Loan

Filed under: Market Comentary

approvedIf you are seriously looking into purchasing a home, home ownership will likely mean getting approved for a home loan. Many would-be home buyers find this process quite stressful and confusing, so it is essential that you are prepared for what is in front of you. Looking carefully at your options and knowing the “mortgage math” can definitely benefit you in getting approved.

According to Alex Veiga, keeping up to date on mortgage-market changes is vital because the government, which backs 90% of the new home mortgages, keeps tweaking the guidelines for loans it will guarantee. Here are a few tips for making the “mortgage math” beneficial to you.

1. Build a Strong Credit Score

It is important to know that having a bad credit score will definitely be a negative. Carefully look to see if you have an late credit card payments or late loan payments. Also note that having a foreclosure and/or bankruptcy will hurt your score, as will carrying high balances on anything you owe.

The majority of banks sell home loans that they make to government-owned mortgage companies such as Fannie Mae and Freddie Mac. And due to this, lenders must follow specific lending criteria, including your credit score.

A stellar score is 720 or higher and will give you greater negotiating power over the terms of the mortgage and the total cost of the loan.

If you know your credit score is not up to par, give yourself time to improve your credit history.

2. Know Your Loan Options

It is important to know making a down payment of at least 20% of the sales price or appraised value of the home you want to buy will spare you from having to pay private mortgage insurance.

If you know you can’t afford that large of a down payment, you may qualify for an FHA-backed loan. On this type of loan, borrowers can put as little as 3.5% down of the purchase price.

3. Pay More Upfront

You may want to look into a loan not backed by FHA, which is sometimes known as a conforming loan. This loan only requires you to make a 5% down payment. And even though you will still have to pay private mortgage insurance, that mortgage insurance can be canceled automatically when the loan-to-value hits 78%.

4. Keep an Eye on Fees

In addition to your down payment, you will also have to set money aside for closing costs. Check with your lender about any of the fees which are negotiable. Also be aware that your bank may charge you to cover items such as credit reports, appraisals, documentation and administrative costs so again, talk carefully to your lender about these fees.

If you are looking to purchase a home and have any questions on the process, please give me a call and I can go over everything you need to know!


Franklin Loan Center | NMLS 237653
Licensed by the Department of Financial Protection and Innovation under the California Residential Mortgage Lending Act, 4131316
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