Financing Your New Home
The very first step of the home buying process is to get a pre-approval letter from a mortgage lender stating how much you are qualified for as well as the loan program.
Your lender can make or break a deal, so working with a vetted, trusted lender is crucial for a successful transaction. Your lender works closely with your agent and the escrow officer throughout the home purchasing process, and is your resource for all financial questions: they will advise you on the different loan products and what will work best for you, help you with budget and long-term credit plan to get you ready for the home buying process, explain how your interest rate and other fees such as insurance and HOA fees will impact your monthly mortgage, and work with your agent on strategies for a successful offer.
Common Loan Types
Conventional loan: The most common type of home loan, which is offered through private lenders. These typically require at least 5% down (although some first-time homebuyer programs offer as little as 3%). There are options of a 15- or 30-year fixed rate or adjustable rates for 5, 7, 10 or 15 year terms.
FHA loan: Backed by the government, FHA loans are designed to help first-time homebuyers and those with lower credit scores. They often require a lower down payment and have more lenient qualification criteria. However, these loans require mortgage insurance (PMI), which is paid monthly and is a variable rate.
VA loan: Exclusively for eligible veterans, active-duty service members, and their families, VA loans offer competitive interest rates, no down payment requirements (in many cases), and no private mortgage insurance (PMI).
