You’re thinking seriously about switching from renter to homeowner. It’s a big step, and you might feel intimidated by all the choices. Shopping for a home is the fun part, but the best way to get started is understanding how to finance a new home. Blue Fern Homes asked one of our lender partners, Absolute Mortgage, to provide some home financing tips for the first-time homebuyer.
Tip #1: Get off the fence about buying
Mortgage advisor Craig Walker says one of the best tips is to take advantage of current market conditions.
“Low rates may spur further home price growth as we move into 2020,” Craig offers. “If you’ve been waiting around to buy a home, thinking prices would start stabilizing or getting reduced, think again.”
A new CoreLogic House Price Index report predicts annual home-price growth will increase by 5.6% by May of 2020, representing a shift in the market. So, while you’re keeping your fingers crossed that the current low-interest rates for home mortgages will drop even more, you’ll end up paying more for the home by waiting to make the move.
Tip #2: Know what you can afford.
The time to look into your financial situation isn’t after you’ve fallen in love with a home. It’s heartbreaking when a prospective buyer discovers they don’t qualify for the mortgage to cover the purchase.
Start your new home search by getting pre-qualified for a mortgage. It’s an easy process and can be started over the phone in a matter of minutes. Your lender will need the following items to determine your mortgage eligibility:
Once you’ve completed this process, the lender will provide you with a pre-approval letter. This shows that you are able to finance your purchase and how much you’ve been qualified to borrow. Provide this letter with any offer you submit.
Tip #3: Review your mortgage options.
There are so many loan programs out there. A good lender will make the effort to understand your financial situation in order to guide you to the loan program that will best fit you, now and in the future. If you don’t have enough for a large down payment, don’t worry. The FHA home loan requires as little as 3.5% down payment if you have a minimum credit score of 580. You might qualify for an FHA loan with 10% down if your score is below 580.
Veterans may qualify for 100% financing with the VA home loan. It’s available to active and retired service members and their surviving spouses.
Talk to your lender about your options!
Tip #4. Understand how the process works.
“This is the time when the Internet doesn’t have all the answers,” explains Craig. “The process varies. There can be many little steps along the way. That’s why it pays to speak with a local expert early in the process.
Once you find the home you want, you submit a written offer that includes your pre-approval letter. There may be some negotiating until you come to terms.
Then, you have a home inspection to make sure there are no surprises that could cost your dearly in repairs. If the inspection comes back with good news, you sign the contract.
Next, submit your loan application. The pre-approval is not a guarantee of the loan. You must formally apply for it.
While your loan application is being processed, the lender has the property appraised. The objective is to make sure the amount of your loan does not exceed the appraised value of the home. The lender will only fund the appraised value.
When everything falls into place, you schedule the closing, which is when you officially purchase the home! You walk away with the keys and the excitement of homeownership.
Ready to get started?
Blue Fern Homes is developing new homes in Seattle. Check out our move-in ready Seattle townhomes. We’ve got more under construction off Rainier Avenue near the Othello Light Rail Station. Make your first new home a lasting one. Contact us at Blue Fern Homes to start your new home search in the right place.