One of my primary jobs as a realtor® is not to be a sales person but an educator. I think it is very important for every person who is even considering buying a home now or in the future know exactly what it takes to reach their goal! Below are some frequently asked questions that will provide knowledge about home ownership.
Q. What is a first time home buyer loan?
A. The FHA loan program is commonly referred to as the first time home buyer loan. Below are the basic requirements for the program, however some lenders will add additional requirements or overlays.
FHA Loan Requirements
FICO® score at least 580 = 3.5% down payment.
FICO® score between 500 and 579 = 10% down payment.
MIP (Mortgage Insurance Premium ) is required.
Debt-to-Income Ratio < 43%.
The home must be the borrower’s primary residence.
Borrower must have steady income and proof of
Q. Are there any loans that will require no money down?
A. Yes, there are several options for little to no money down. UDSA loans are offer 100% financing however property has to be located in a county i.e Bedford, Campbell, Amherst.
USDA Loan Requirements
FICO® score at least 620.
Borrow must have steady income, typically 2 consecutive years.
Acceptable Debt-to-Income Ratio.
The home must be the borrower’s primary residence.
Q. What is a conventional loan?
A. Conventional loans often require higher credit scores but have fewer guidelines. Conventional loans can require anywhere from 3 to 20% down and can be used for everything from land and property to new constructions and investments.
Q. How long does the loan process take?
A. The loan process can one average can take anywhere from 30-45 days after purchase price and terms have been agreed upon by buyers and sellers. It is very important that you get the lender any and all information as quickly as possible to avoid delays.
Q. Do’s and don’t during the loan process.
A. Once you have been issued a pre-approval you must remain credit worthy throughout the remainder of the loan process. Continue to pay all bills on time and go to work! DO NOT change jobs. DO NOT apply for any new credit. DO NOT make any significant cash deposits into your bank accounts. DO NOT use/max out credit cards unless it is necessary during loan process. Your credit will be check again toward the end of the lending process to obtain your final approval (the deal is not done until the final approval is issued) so you do not want to do anything that will cause your scores to decrease. Hold off on any large purchased until after closing date.
Q. What is a home inspection and is it required that I have one?
A. A home inspection is performed by a licensed inspector who inspects all of the homes essential systems. This includes the structure itself, all plumbing, electrical, HVAC, and roof. The inspector will make sure that everything in the home is in working order. Upon completion of the home inspection a report will be completed and issued with any recommendations for maintenance or repair. From this report all repair requests are made.
You are NOT required to have a home inspection. I recommend that anyone purchasing a home have a home inspection. This inspection makes sure that buyers are fully aware of the condition of the home and there will be no surprised about the condition of the systems in the home that the buyer may be unaware of.
Q. What is an appraisal?
A. An appraisal is ordered by the lender to insure that the current value of the home is equal to or greater than the purchase price. The bank will not lend you more money then the home is worth. Each lender has a different policy about who pays for the appraisal. Some lenders will pay for the appraisal and some lenders will require that buyer pay for the appraisal. You will want to check with the lender to see how they handle the appraisal.
Q. What documents will lender need for loan process?
A. This will vary depending on the lender and loan type. The essential documents to have are as follow: Pay stubs for the last 60 day, bank statements for the last 60 days, explanations of any significant cash deposits or withdrawals, tax returns and W2’s for the last 2 years, proof of and court ordered child support or alimony, driver’s license, and social security card. You will want to get these documents to your lender as soon as possible.
Q. When choosing a lender should I use my current bank or a mortgage lender?
A. As a realtor I recommend using a mortgage lender since that specialize in home loans. It has been my experience that mortgage lenders are able to get higher pre-approval amounts are able to get the loan closed a lot sooner.
Q. How do student loans effect the lending process?
A. If you are making payments on your student loans and they are current and up to date, they will have no effect on the lending process.
If your student loans are in deferment, the lender will allow for a 1% payment monthly. Example, if have 50,00 in student loan debt the lender will allow for a $500 monthly payment even if you are not making that payment as of yet.
If you have signed up and are on active student forgiveness program, in many cases the you can show paper work that includes you currently monthly payment and all the terms including the date that the loans will be completely forgiven and adjustments can be made based on this documentation.