Getting financed for your home is one of the most important steps in buying your new home. Mortgage shopping can either save you or cost you thousands. It all depends on whether you find the right financing for your specific needs.
It's not easy, but there's help. If you are looking for a new home on Whidbey Island, our friendly group of real estate agents will be more than happy to discuss financing options that are currently available to you.
If we can explain any steps along the way, please ask. We’re always happy to help.
The steps to successful financing
Get pre-approved. Don't skip this step. Getting pre-approved is fast, easy, free, and very important. A written pre-approval includes a completed credit application and a certificate guaranteeing you a mortgage of a specified amount. With a pre-approval in your pocket, less time will be wasted considering property you can’t afford. Instead, you can invest your time shopping for the home of your dreams within your price range.
Examine your finances. How much can you afford to spend? While a lender will tell you how much you qualify for, it's up to you to figure out how much you can afford to fit in your budget. What monthly dollar amount do you feel comfortable committing to? Remember to consider related costs such as insurance and taxes, as well as interest and priority.
Consider what type of loan is best for you. Compare “fixed-rate” and “adjustable rate” mortgages. Consider what you want your future to look like. Where do you want be in 15 years? How about in 30 years? What obligations might you have? Take all of the above into consideration when you choose a loan. Typically, quality real estate professionals develop relationships with quality lenders in Whidbey Island. Ask your real estate agent for information on good lenders.
Check your Credit Report. A lender will run a credit report on you, but you should be ahead of the game by acquiring your own copy first. You'll know exactly what's on it, and you’ll be able to correct any inaccuracies before your lender does.
Shop Around. When you're ready to get a loan, you should explore your options. Consider buying a home or property somewhere on Whidbey Island! When you buy a house or any real estate, you can choose either a direct lender or a mortgage broker.
A direct lender has money to lend and makes the final decision on your loan. Brokers are intermediaries who choose from many lenders.
A broker may be able to help find you a loan if you have special financing needs, but he or she will also receive a percentage of what you borrow.
While you're shopping for a loan, also look for the best loan costs. These may include:
Be aware. Don't let hidden costs sneak up on you. Ask your lender for a written estimate.
Apply for a loan. Gather all the documents you'll need to verify your loan application. Lenders will want to know your job tenure, employment stability, income, assets (property, cars, bank accounts and investments) and your liabilities (auto loans, mortgages, installment loans, credit-card debt, household expenses and others).
You'll need to provide documents such as paycheck stubs, bank account statements and tax returns. Check with your lender or broker for more information.
Lock it down. With interest rates changing daily, locking down your rate can prove a big money saver. A rate lock - in writing - guarantees you a certain rate and terms for a specified period of time. Lock in all the costs you can, including interest rates and points. And try to set the lock at the time of application, not at approval. This will protect you from rising rates.
Your lock-in period should be long enough to allow for all processing time. Most lock periods range from 15 to 60 days. Make sure to check with your lender or broker about the average time it takes them to process a loan.
Ask about Prepayment. You can shave years off the length of your mortgage by restructuring the way you pay back your loan. Simply paying more frequently can save thousands in interest. So can making a lump payment toward the principle - or paying a little more each month. These methods are called pre-payment.
Not all loans allow for prepayment. If you want the option, discuss it with your lender or broker.
Clear up any financial problems. Do you have credit problems or owe money to the IRS? Buying a new home may still be a possibility. Contact a financial advisor or tax resolution service to find solutions.