An assumable mortgage allows a buyer to take over a seller's home loan. This option…
Buying a new home is a huge milestone that comes with tons of excitement. But as you go through the process, it can become a bit overwhelming. When you look at all the moving parts of the home buying process⎯from being approved for a mortgage and finding your dream home to negotiating with sellers and realizing all the extra costs involved⎯confusion is sure to come up.
Therefore, it’s best to go into the process with as much knowledge as possible to avoid making mistakes and dealing with disappointment. Many steps are involved in purchasing a home and it’s typical, especially for first-time buyers, to have many questions.
Below are the most common homebuyer questions we hear from our clients at New Way Mortgage and our responses to help put you on the right path to purchasing your next home in the Sacramento area.
1. How do I get started?
Getting pre-approved for a mortgage is the crucial first step when you decide you’re ready to buy a home. A pre-approval serves many purposes but most importantly, it sets your budget so you can home shop with confidence. It allows you to look at houses you know you can afford and avoid falling in love with a property you would not be approved to purchase.
Additionally, when you submit an offer, you should always include a pre-approval letter from trusted mortgage professionals with local ties, like the team at New Way Mortgage. A pre-approval letter provides assurance to the seller that you’re a serious buyer who can follow through on the transaction. If the seller has multiple offers, a pre-approval can give your bid more weight over other buyers.
Keep in mind that a mortgage pre-approval and pre-qualification are not the same. Pre-qualification is an evaluation of your creditworthiness at a full glance, meaning that you could qualify for the loan. Whereas a pre-approval is when the lender verifies your information, sends it through underwriting, and officially acknowledges that you are approved for a loan in a specified amount.
2. What credit score do I need to qualify?
Conventional loans and government-backed loans have different credit score requirements. Still, for most loan programs, a 620 FICO score or higher is typically required, but that number can vary, and your credit score should never stop you from pursuing your homeownership dreams—call us today, we’d love to chat. If you have past credit challenges, our team will work with you to help improve your score before applying for a mortgage.
Our team will also provide you with tips on how to keep your credit score intact before, during, and after the mortgage process.
For example: as tempting as it may be to make big purchases for your new house or open a new line of credit to fund home improvements or furniture, these activities can lower your credit score significantly and could raise red flags during the mortgage process. To help your loan approval process go smoothly, you’ll want to keep up the same spending habits you displayed before preparing to buy a home.
3. How much money do I need for a down payment?
In most circumstances, a down payment of some amount is required. Down payment requirements vary and can be as low as 3% on FHA loans and conventional loans. VA loans are one of the only mortgage programs that have no down payment requirement and allow for 100% financing/
If the thought of a down payment is deterring you from buying a home, it’s important to know that conventional and FHA programs can be paired with down payment assistance programs, some of which will cover 100% of your down payment. Down payment assistance programs range from community programs to state and national down payment programs.
The California Housing Authority (CalHFA) offers down payment assistance programs for local home buyers. To obtain down payment assistance through this program, you must work with a CalHF-approved loan officer, which you can find here at New Way Mortgage!
4. What other fees will I need to pay?
Buying a home comes with paying closing costs. Home buyers should expect to pay between 1%-4% of the sale price in closing fees. Loan origination and discount fees are part of your closing costs and range from 0%-2% of your loan amount and are not required fees. These fees can be negotiated between you and your loan officer.
Some down payment assistance programs may cover closing costs for buyers who qualify. Additionally, home buyers can negotiate with the seller to cover a portion of their closing costs—your real estate agent can help with this process. It’s important to note that closing costs do not include your down payment. They are in addition to the amount of money you’ve agreed to put down.
At the beginning of your home buying journey, your mortgage broker (aka New Way Mortgage) will provide an estimate of your closing costs, which can include fees like the appraisal fee, underwriting and processing fees, homeowners insurance, title insurance, property taxes, and more. If any of these fees change throughout the mortgage process, your mortgage lender will provide an updated loan estimate disclosing any changes.
5. What’s the best advice for homebuyers?
No matter how much research you do, you’ll still have questions when it comes to buying your first home. That is why it is essential to work with an experienced real estate agent and local lending expert (that’s us) who can guide you through the process, answer all your questions, and stay connected with you through the homebuying journey.
If you’re considering buying a home in the greater Sacramento area, the strategic team at New Way Mortgage is here to help. Our team has access to all types of loan programs and local, state, and national down payment assistance programs. Let us match you with the mortgage that makes the most sense for your specific scenario.