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Your home buying financing is the most critical decision.
It is the make-or-break point of it! Nowadays no offer is accepted without showing where the funds to pay will come from.
If you have saved enough and/or in some other ways have enough money set aside to buy your home outright, with no need to finance it: Congratulations!
My humble hat goes off to you! Ways off!
In that case, you probably do not need most of this page about the home buying financing process – except, perhaps the paragraph on mortgage interest deduction below.
However, if you are among the most of us that will be financing the purchase of your home, we have a lot of ground to cover.
It almost goes without saying, that to get a home loan, you must have an established credit. Some kind of purchase that you have made on credit with companies that report to credit bureaus.
There are three major credit bureaus: Equifax®, Transunion® and Experian®.
The Fair Credit Act
It gives you the right to obtain “Credit records” at least once a year – from each of the bureaus – for FREE! In Georgia you can attain you credit records twice a year! Please check around to see how it is in your State.
Please do not mistake “credit records” “ with “credit scores:”
Credit records: is a file with all entries about you on each of the credit bureaus. It can stay there for quite some time – so it is mighty important that you monitor it careful and diligently. It is of your highest interest.
There is more info on this topic waiting for you on this page "Free Reports"
FICO Credit Scores
It is the proprietary algorithm formula invented by Fair-Isaac Company = FICO®. It is a rather secretive endeavor. It is based on your credit record and several other factors on your financial situation in one given moment in time: It can go up or it can go down - sometime in a matter of a day or two.
It is “the pulse” of your home buying financing process – you need to “take it” when it is in the up swing.
Also, please be aware that each of the credit bureaus will give different weight to different factors and therefore they will always vary …translation: “Your credit” will always have a “different score” for each of the bureaus…
Confused? It beats me too! But that is how the system works, do not lose sleep over the different scores.
For now, however, here is what is an important rule to know: To be in the ball game of your home buying financing process you will need 620 Middle credit scores.
What exactly is middle credit scores?
Given that each of the bureaus will give you a different score, home lenders will not use the highest nor will they consider the lowest… Which one is the winner? You guessed the one that is still left: let the middle score step to the plate!
Since April / May of 2009 – the minimum middle credit scores required to attain home financing has been 620.
There are some mitigating factors – in extreme circumstances – that a lender might give you some “reprieve.”
But I would not count much on it – again, that is why I call home buying financing process the make-or-break side of it.
Your home buying financing quest will greatly benefit for the info on “Credit Scores” page. It can save you thousands of dollars: Please be sure to take a reading.
Unless you are a veteran using your DD 214, you will need to come up with a percentage of your purchase price up front. How much of the down payment will determined by the type of loan you will be using.
This is also mighty important in the home buying financing process – you most likely will need to have some reserve to put down – no less than 3.5 % of the purchase price, if both you and the property you intend to buy qualify for a FHA loan.
Please see more details on FHA loans entry below.
Seasoning: by and in large, the money you are using will be scrutinized on how long it has been in your possession: It is called “seasoning.”
Funds must be under your name, or it has to proceed from assets you own for a while, before it is converted into cash.
DPA – Down Payment Assistance
All fifty states, counties, municipalities and indeed, sometimes small area of a city / county, have some type of finance assistance to help you buy you home. It does vary a lot. Try to inform yourself on what is available in your area.
Your home buying financing process does require some homework, creativity and diligence: With the right blend of these elements along with the money you have saved, the good credit you have built, you will go long ways in making your home ownership a realty!
TYPES OF LOANS
FHA Loans – Federal Housing Authority: This institution backs loans that will fall under their guidelines.
If both you and the home you are buying qualify, you can by the property with as little as 3.5 % down.
You may, and most certainly will, be required to purchase mortgage insurance (MI) up to point that you have paid 20% of the purchase price.
These guidelines apply for any type of property: detached homes, condos and town home. These last two are put through additional scrutiny.
VA Loans – Veterans Administration
If you, or, your espouse, have served a certain length in any branch of the Armed Forces, you, most certainly, will qualify for a VA backed loan.
Under their guidelines they guarantee up to 25% of the purchase price. It is just fit that those brave men and women, who served our country are able to buy a home to call their own, with no money down and with no mortgage insurance!
Fannie Mae: They sell the cleanest foreclosed homes. Their homes can and will qualify for FHA and VA loans.
Conventional: If you and/or the home you select to buy will not qualify for an FHA backing loan, the other alternative will be a “conventional” loan. You will then have to put 20% down …In many, many cases it is a deal breaker.
Jumbo: A large property will, naturally, require a larger loan. Any amount above $417,000 is considered a “jumbo.”
It requires a lot more scrutiny.
Make sure that you have all home buying financing 'ducks' in a row – I mean “docs.” : - )
Mortgage Interest Deduction [MID]: Home ownership has a lot of advantages, along with its liability, of course. However, to my humble thinking, the best one is that of the interest payments that you make through the years, it is all, 100% deducted from your income tax.
Phew! Who said the home buying financing process was easy?!
And this is only the financial side of it! :-)
Now let’s move to other equally exciting stuff!
JC Fagundes, Head Broker
EQUAL SERVICE TO ALL.
Residential. Commercial. Investments.
Ph: 404 801 4141