People too often that once they are ready to buy a home, they have to move immediately because of rising interest rates or out of fear that they could lose their home. It is true that in the last year, mortgage interest rates have been rising but bear in mind that historically they are extremely low. It’s important to keep things in perspective, especially when making the biggest financial decision of your life and there are a few helpful tips that you should keep in mind during the process of securing a home loan.
1. Don’t lose your nerve. Yes, it’s within the realm of possibility that the rates may increase at any time by a quarter of a percent or more, but that should never cause you to make a hasty decision about home loans. Like I said earlier, mortgage rates are extremely low in the grand scheme of things and the thought of those rates rising a little should never push anyone into feeling like they are making a decision that they are anything less than 100% comfortable with.
2. Consider your options. There are many different kinds of mortgage loans that can help you get into a home and match your particular situation. FHA loans are a great option for many first time home buyers who are not exactly swimming in the cash. FHA loans are backed by the federal government and specialized FHA approved borrowers are able to service loans for as little as 3.5% down as long as other loan requirements are met. This is a big difference from the traditional borrowing institutions that will typically require 10-25% down payment for the purchase of your home.
3. Do not allow yourself to feel pressure. Any lending institution you are dealing with who gives you the feeling that you are perhaps rushing this decision might not have your best interests in mind. Remember that you are the one who is going to have to live with this decision once it’s made and all of the paperwork is signed and you are locked into a loan, not them.
4. Keep closing costs in mind. It’s possible that you may have to come up with several thousand extra dollars on the day you close on your house and there could be many different reasons for this. If you are buying in a competitive home buying market where maybe there is a shortage of homes, the seller is in the driver’s seat and can make decisions with their realtor that turn into more money coming out of your pocket on the front end. There are certain loans that can help you avoid this scenario so it’s definitely important to do your research and if need be, ask specific questions about closing costs if it is of particular concern.
5. Know the general rules about specific loans. Although there are still a few ways to get into a home with a zero down payment option, they are very few and far between. For example, an FHA home loan requires a 3.5% down payment and there are no exceptions to this rule. These funds can be provided via gift from a donor for the entire amount and those sneaky, pesky closing costs that we discussed earlier can often be rolled into the loan.
6. Know if you live in a county with FHA loan limits if you are considering this type of loan. Generally speaking, FHA loans can be approved up to $625,000. However, if you live in a county where loan limits are set at the national floor like Phoenix, AZ you can only get approved for a loan for up to $271,050. This could work out completely fine or be an amount that you are not able to get anywhere near the amount of home you are looking for. So, when doing your own research regarding the matter it’s important to understand if you live in a county where there are loan floors you are subjected to for an FHA loan.
There are so many things to consider when buying a home that it can be very overwhelming, but understanding as much of the process as you can on a personal level can really relieve much of the anxiety about the matter. Trusting your realtor and them trusting your chosen lender is of serious importance because as long as everyone involved in the process has each others best interests in mind there won’t be any issues with making sure that you get into the best possible loan.