Before looking at houses, you need to know what you can afford and, more importantly, how much financing you will qualify for. Starting this process and getting pre-approval before your home search will only save you from the heartache of losing the perfect home due to financing limits.
“It’s turned around quite a bit from a few years ago and it’s easier to get loans,” said Kristina Kowalski, Manager of Mohsin Mortgage in Bridgeville.
No matter what your income, there’s a loan to meet your needs. According to Kowalski, most people are choosing fixed-rate loans now because the interest rates are at a 50-year low, in the 4 to 5 percent range. Standard terms for fixed rate loans are either 30 or 15 years and interest rates don’t change over that time. Fifteen-year loans allow you to own your home in half the time and for less than half the total interest costs of the 30-year option.
Adjustable rate mortgages offer lower initial rates and increase over time. The future risk of higher rates is shared between borrower and lender. ARMs may be a good choice if you are entering into short-term ownership, have rising income expectations, or plan on significantly increasing the value of the home, according to Kowalski. Because payments and interest rates can increase, home buyers need to have the income to keep up with all possible rate and/or payment changes.
FHA Loans are government backed and are not just for low income families anymore. “That’s a common misconception, but the rates are really competitive and it’s a seamless process,” said Sara Mohsin, owner of Mohsin Mortgage, which has been offering wholesale loans for 6 years now.
FHA no longer requires a huge percent down. They offer a program only requiring 3 1/2 % down and may eliminate mortgage insurance if the buyer puts 10% or more down.
If you’d like to make some home improvements or pay off some debt, many homeowners have the option to refinance their original mortgage for a lower interest rate and even get cash back out with established equity.
If you find a home and need to sell yours first, there is the option of a bridge loan so you don’t lose your new house to another buyer in the interim.
Rates can fluctuate daily, so make sure you shop around before you lock in your rate. “Mortgage brokers and wholesalers can offer more competitive rates than banks, often ½ to ¾ of a percent lower, because we don’t have a middleman,” said Kowalski. Mohsin Mortgage works with 30 different lenders and has underwriters in house so the turnaround on approvals is much faster as well.
Whatever your needs, work with a qualified person to help you sort through the many options and see which will fit your situation and budget. With low rates and a variety of options, now is definitely the time to think about buying a home or upgrading.