The most important financial transaction you will make in your life might be buying a home. You may be considering a mortgage to help you finance your own home.
❖One of the most important financial transaction of your life is buying a home.
❖Mortgages are needed by many people to help them finance their home.
❖We asked advice from an expert on getting a home for first-time buyers.
Danny Gardner, Freddie Mac’s senior vice president of single-family affordable lending and access to credit was questioned by us for his best advice on mortgages for first-time home buyers.
According to Gardner, here are eight things that he thinks every home buyer should know about mortgages, from finding down-payment resources to understanding lender fees.
●A 20% downpayment is not a requirement- According to Gardner, having to put a 20% down payment in home purchasing is just one of the prevailing myth in mortgages. Even though you will get a lower interest rate if you have 20% down payment, he noted that is is not the threshold to achieve mortgage financing.
There is a secondary market that Freddie Mac provides to buy mortgages from lenders so they can write more mortgages. Even though you will not directly deal with Freddie Mac, it has many programs that are designed to help low-income borrowers and first-time home buyers that are qualified for loans even with only 3% down payment.
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●There are thousands of programs to help assists homebuyers make down payments- Down payments assistance programs are available in many cities and states to help you with financing. It is recommended by Gardner to check this listing of programs to know if there is one that you will be qualified. Gardner said that “Not all lenders participate in these programs.” additional to that is “it is challenging to find and match a lender to a program”
It is recommended getting a list of approved lenders from the agency if you want to take advantage of a down payment assistance program.
Down payment assistance can be substantial as Gardner pointed to San Francisco’s program that is offering up to $375,000 in a silent second mortgage. Don’t leave this money on the table.
●Your mortgage applications could hurt your credit score if you are not careful. – It can negatively affect your credit report if it is pulled many times.
The way to combat this according to Gardner’s suggestion is pulling your own credit report that you can do for free and bringing that to lenders to get informal rate quotes.
Your lender will need to pull your official credit report once you are ready to apply for a loan. But you can avoid having it pulled repeatedly, and you can also avoid lenders’ credit check fees by having to pull your own credit score.
●It can save you money by understanding lender fees and shopping around- Gardner recommends shopping around because not all lenders charge the same fees since most of the fees associated with buying a home are paid by the buyer.
“They are likely to save at least $1,500 if a buyer gets at least two quotes over the life of the mortgage,” he said and add to that, you could save $3000 if you get five quotes.
Look at their varying annual percentage rates to compare loans which incorporate the lender fees.
●You might not need approval- According to Gardner, an appraisal is not often necessary today because “we have so much better access data and information than in the past. In some cases, an appraisal can cost you up to $1000. He noted that an appraisal for the lender to determine the value of the property is different from a home inspection that is for the buyer.
●You could score a lower interest rate if you can close quickly.- The amount of online data available to lenders and the time to process mortgage application takes shorter time now than before. And it could save you money. But the longer it is, the higher the cost.
●You should still shop around even if you should pre-qualify for a mortgage- “You are still allowed to shop rate even if you have the contract in hand. “Shop your rate before you commit to a rate lock”. Do this quickly since you want to secure your loan for you not to lose the property.
●You should educate yourself about the home-buying process to increase your chances of getting your dream house- The more you know about buying a home, the better your chances of winning bid in a competitive housing market.
“It is a very difficult environment for the first time home buyer”. But if you have information, you can be a better partner to your real estate agent.
Gardner recommends a HUD-approved homebuyer application and Freddie Mac also offers online home buyer educational resources.
Cover Photo Credit: capecodmortagebroker