that you have found the perfect home and negotiated the price and
terms with the sellers, you come to the most difficult part of the
transaction--finding the perfect loan.
You should do some comparison shopping among lenders. Your Realtor
can refer you to several reputable lending institutions which should
be able to complete the loan process before your proposed financial
approval date. The loan officer will take your application and have
you sign all the necessary papers to authorize credit and employment
verifications. You and the Realtor should get periodic progress
reports to make sure that all of the details are taken care of. Such
reports will help to ensure that any potential problems are
discovered and addressed before they can threaten the transaction.
Perhaps the most common deterrent to first-time
home buyers is the lack of a down payment. The home loan industry
has practically re-created itself in the last few years.
Some cities have sponsored down-payment assistance programs which allows buyers
to purchase a home with very little money down. A parent or other
relative can guarantee repayment of ten percent of the loan if the
buyer defaults. The only cash needed is for the closing costs, which
typically run about three percent of the loan.
Parents can also give their children down payment help through a
personal note or second trust deed. The terms could be set up for
monthly payments or annual payments amortized over a period of time.
You could pay the interest only, and have the payoff due when the
property is sold.
With so many alternatives, doesn't it make sense to call your
Realtor for a free consultation? You may be closer to the end of the
rent trap than you think.
There is no doubt about it--it could be more
difficult for you to get a mortgage loan if you are a free lance
viola player than if you are a government accountant. Traditionally
lenders have been more cautious when evaluating loan applications of
buyers who are self-employed than from those who work for a regular
If you are self-employed, there is no reason for you to shy away
from applying for a home mortgage loan, especially if your earnings
have been in the same field for a minimum of two years. Before you begin
your search for a house, it is a good idea to meet with your real
estate agent who will be happy to accompany you as you meet with one
or more loan officers. They will probably want to analyze your tax
returns for the past 2 or 3 years. Because people who are
self-employed can write-off many expenses that salaried individuals
cannot, it is possible that self-employed individuals may look
impoverished on paper.
What are Some of the Different Types of Mortgage Programs?
There are several types of adjustable rate and fixed rate mortgage loans. Here are some of the more common loans:
30-Year Fixed Rate Mortgage
This is a conventional mortgage which provides for a fixed interest rate and level payments for the 30-year life of the loan.
15-Year Fixed Rate Mortgage
The 15-year loan is a conventional mortgage in which the borrower will pay fixed monthly payments for the life of the loan. With a 15-year loan, payments are higher than a 30-year loan, but the loan is paid off much faster.
Conventional Loan Programs
Any loan that allows you to borrow within the amount set by the Federal National Mortgage Association.
Which Mortgage is Best?
There are several types of mortgage plans available that are appropriate for different needs. If you are more comfortable with a steady payment, then you will want to choose a fixed rate loan. You may select the common 30 year fixed rate mortgage. This type of loan is beneficial if you plan on living in your home for several years.
On the other hand, if you expect to keep the house for only a short period of time or prefer an adjustable rate mortgage, you will want to investigate other loan options. There are many mortgage programs available to fit your needs. Consult your real estate
mortgage professional for more information.
Remember to get a pre-approval from the lender, and
ask for a letter to that effect which the Realtor can attach to any
offer you submit on a home. This will make you look more attractive
to the sellers.