What about Financing?

See Financing blog posts for the most up to date information... Thursday blog posts are always written by a mortgage lender.

Today’s financing offers a plan to fit everyone, so many options that it may be confusing. We would be happy to connect you with a lender to personally help you find what’s best for you.

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Pre-approval is essential

In today’s market you must arrange for your financing before you seriously look for a home. Most sellers won’t even look at an offer without a financing pre-approval letter. 

Lenders can provide written pre-approval for you at no cost and no obligation, and it can usually be done fairly easily and quickly. It involves a credit check and employment/income information, which some lenders may even do initially right over the phone. Actual financial underwriting approval involves written verification of the information supplied to your lender. CLICK HERE FOR A MORTGAGE CHECKLIST OF TYPICAL ITEMS REQUESTED

Down payment options

While traditional down payments are at least 20% of the value of your home, FHA financing only requires 3.5% down. You may qualify for 5% down with conventional financing for a house or town home. Condos may require 10% down. If you don’t have enough cash in the bank for your down payment, here are some other sources of cash you might consider.

• Tax-free gift from a family member or friend
• Borrow against a life insurance policy
• Cash in a retirement savings plan
• Borrow from a 401K, SEP or ESOP

Financing assistance

There are many financing assistance programs available, especially for first-time homebuyers. The state Minnesota Housing Finance Agency has programs offering both down payment and closing cost assistance through low interest rate loans and assistance programs. There are other assistance programs available as well, including special financing programs  your lender may offer.

Some mortgage lenders require borrowers to complete an approved homebuyer education course in order to qualify for certain mortgage loans. Home Stretch workshops and counseling sessions, sponsored by the Minnesota Housing Finance Agency and provided by local, non-profit, community based organizations, have been approved by many mortgage investors to meet this requirement. They are designed to take the mystery out of the home buying process and may also include credit repair and financial management.

Mortgage insurance

If your down payment is less than 20% or if you have FHA financing you should expect to pay monthly mortgage insurance. Your monthly payment depends upon the size of your down payment, but mortgage insurance (MI) is usually 1/2 - 1% of your loan amount. When you reach 20% equity in your home you are generally entitled to drop the mortgage insurance with a conventional loan. With FHA financing, mortgage insurance continues for the life of the loan.

Adjustable Rate Mortgage (ARM)

With interest rates so low, very few people are considering Adjustable Rate Mortgages at this time. People often considered them if they planned to stay in the home for only a few years. The interest rate may be lower, and the mortgage payment would not change for 5 years with a 5-year ARM, for instance.

Talking to a lender

We would be happy to recommend a lender at your request. Just tell us a little about your situation and where you are located, and we’ll connect you with lenders who seem to be a good fit for you and your needs.  EMAIL

Request a free Financing Handbook - with six chapters designed to answer your questions and take the mystery out of the financing process.