This Q&A will answer any question you might have. We promise you that you will find it useful.
Lenders consider many factors when evaluating your loan application, but they usually focus on four areas:
- Income and debt. How much money you earn and what other bills you have to pay.
- The lender needs to make sure you have enough money to cover the costs of buying a home.
- Credit. Whether you’ve met other financial obligations helps the lender predict whether you will repay your mortgage.
- Property. The home you want to buy has to be worth enough to act as a securityl for the mortgage.
Getting pre-approved means you receive a loan commitment from your mortgage company before you have found a home, based on a review of your credit and finances. Having your credit pre-approved shows sellers that you’re a qualified buyer and helps you establish a clear price range. The process is the same as a typical mortgage application, except that your application doesn’t include property information.
If you’re ready to look for a home, take your first step now and apply for a credit pre-approval.
Your credit history is only one factor in qualifying for a loan, and having made some late payments doesn’t have to keep you from buying a home. Someone who has consistently made payments on time in the past may have more financing options than someone who has not, but that doesn’t mean a mortgage is off-limits if you’ve had credit problems. In fact, 123Loans offers a variety of mortgage options to help people with less-than-perfect credit become homeowners and leave credit problems behind.
There is generally no minimum down payment required for buying a home. Many first-time buyers believe they must be able to put down as much as 20% of a home’s purchase price in cash. That may have been true in the past, but many of the mortgage options available to today’s home-buyers require little or no deposit.
With housing prices as high as they are, homeownership would be impossible for many people if not for these low-deposit loan options.
123Loans has a number of loan programs that can help you buy a home with little or no cash — find out if one is right for you.
Lender Mortgage Insurance (LMI) provides your lender with a way to recoup its investment if you are unable to repay your loan. LMI is usually required when the mortgage amount is higher than 80% of the home’s value. That means that if you buy a home with a deposit of less than 20%, you will probably have to pay for LMI. One common way of bypassing LMI without making any down payment at all is to use an 80/20 program, which combines a first mortgage with home equity financing.
Closing costs vary based on a number of factors — including the lender, mortgage type, purchase contract, and location — but they usually include the following:
- Lender fees. Your mortgage company may charge for expenses related to settliing the loan, including legal fees,settlement fees and package fee if applicable.
- Third party fees. Charges for services not provided by your lender often include the settlement fee, title insurance, and attorney’s fees.
Locking your interest rate means your lender guarantees the rate on your loan even if market rates change before closing. Most lenders will allow you to lock your rate for 30 to 60 days, with the option to extend the rate-lock period for a fee. So how do you know whether to lock your interest rate? It depends on whether you expect rates to rise or fall before you settle your home. No one knows for sure which direction rates will go at a given time, so it’s difficult to make a reliable prediction. It helps to keep track of announcements from the Federal Reserve Board, whose monetary policies have an effect on mortgage rates, and to talk to you financial advisor about what may happen in the near term.
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