Home financing and mortgage FAQs
April 24, 2018
Interest rates on home mortgages have increased over the record lows we saw not long ago. The housing market is rebounding, which mean home values are increasing, right along with the mortgage rates. With all these changes, more people are asking us at Ideal Homes about what these changes mean for them and their ability to buy a new home. Here are answers to the home financing and mortgage FAQs we’re receiving. What does my credit score need to be to secure a home loan? A low credit score doesn’t automatically rule you out of home loan approval. While a good FICO, you could still be approved for a conventional mortgage with a credit rating of 620. The Federal Housing Administration (FHA) home loan makes it possible for some homebuyers with a 500 credit score to be approved for a mortgage, but these loans require 10% down. If your score is 580 or higher, you only need a 3.5% down payment for an approved home loan. The best step is for you to talk to C Solutions. Ideal Homes’ customers have relied on C Solutions’ expertise to navigate the home financing process. They can give you the answers and insight you need to make the best decision. Do I need to be pre-approved in order to start searching for a new home? Mortgage pre-approval is not required but it’s highly recommended. For one thing, you’ll know how much of a loan you can expect to be qualified for. In addition, some sellers want to see your pre-approval letter before considering an offer. The pre-approval process is relatively simple and can often be handled over the phone or online. Normally, you need to provide proof of identification and income, your social security number so the lender can look at your credit report, a copy of your last two tax returns and recent bank statements. You can apply to several lenders for pre-approval, but keep in mind that every time a lender pulls your credit report, your score could drop a few points. How much out-of-pocket money should I be prepared to pay? You start with an earnest money deposit, which is an amount offered in good faith that you are going to purchase the property. This could be as little as $100, depending on the seller’s requirement, but $1,000 is a common figure for earnest money. Then, you’ll need your down payment, which will depend on the amount of the home you’re purchasing and the loan program you’ve chosen. VA loans, for example, require no money down. FHA loans could be 3.5% to 10%. In addition to the down payment, you’ll have closing costs, which are comprised of various fees, like loan origination, title services, appraisal, survey, title insurance, and property taxes. Your lender can provide a good faith estimate in advance so you’re prepared with the amount to bring to closing. The actual costs are detailed in a HUD Settlement Statement, and average about 2% to 5% of the purchase price. Ideal Homes pays $2,000 of your closing costs, giving you a little more money to use on your new home! And then there are moving costs. Depending on the distance of your move—local or long-distance, the cost of moving your possessions could be a few thousand dollars, or the price of a few pizzas and a six-pack to appease your heavy-lifting friends and family. How much will my monthly mortgage payment be? Your mortgage payment will be calculated by the amount you are financing and the interest rate you receive. For example, if you finance $250,000 at 4% over 30 years (fixed rate), your monthly payment would be $1,193.54. Use the mortgage calculator provided by Citywide Mortgage, Ideal Homes’ preferred lender, to see what you can expect. How do I choose my mortgage company? First of all, you need to consider more than the interest rates that a lender is offering. You need someone who is experienced and knowledgeable about a wide variety of loan programs, to ensure you get the best fit. Ask about their fees and requirements, like settlement fees, title insurance, attorney fees, and credit checks. Look at their website and check the lender’s Better Business Bureau rating, which will show you if they’ve had complaints filed against them by unhappy customers. It also helps when a mortgage company offers in-house underwriting, which is the in-depth process of reviewing all of your financials to finalize the loan approval. When working with a builder, ask if they have a preferred lender. This is a mortgage company that understands new home construction. The preferred lender’s knowledge and experience has proven to be more beneficial for a timely closing. Ideal Homes strives to make the homebuying process as enjoyable and stress-free as possible. From choosing your location and floor plan to making all the design selections, all the way to handing you the keys, we want you to be fully satisfied. Contact Ideal Homes to experience the joy of buying and owning a new home in the Oklahoma City area.