For those looking to buy a home, here are some tips to help facilitate the financing aspect of the sale:
- Conduct an informal analysis of your finances before approaching your lender. You may avoid surprises by taking the time to assess your current financial situation. Be sure to collect full documentation about your income, debt, and credit report for scrutiny by your lender.
- Get prequalified. Prequalification from an experienced lender is essential in the current real estate market: it demonstrates your seriousness. Consider seeking FHA-approved lending institutions.
- Do your homework if you’re seeking a high-cost loan. Jumbo loans require extensive documentation and generally carry a higher interest rate than conventional loans. Knowing the FHA loan limit in your locale can help you prescreen potential properties. The FHA provides this information at https://entp.hud.gov/idapp/html/hicostlook.cfm.
- Be prepared to move quickly after making an offer. Gather documentation and complete the loan application as soon as possible after an offer is accepted, to lock in the loan and rate. Loan prequalification letters may be dated for a short time period, so act quickly.
- Factor in potential time delays. The traditional timeline for underwriting and the response time from lenders has increased with tighter lending standards. It may take up to three weeks to finalize a loan application.
- Don’t forget about private mortgage insurance (PMI). Many lenders require borrowers to obtain PMI if the down payment on a house is less than 20% of the overall cost of the loan. Be sure to factor in the cost of PMI into your budget.
Although the real estate market may be uncertain, understanding the state of financing can help you better manage the purchase of your next home.