The big summer home buying months of June, July and August have arrived. But before you get serious and start searching in earnest, take time to do your financing homework.
While the internet is a wonderful tool for research, my years of experience and thousands of transactions have shown internet lenders are not the best place to get your home loan. Work with an experienced local loan originator who’s just across town, not around the world, and can help face to face when you run into a problem or have a serious question.
Depending on your stage in life, home buyers have different objectives. If you’re a downsizer who wants to get the home paid off as part of your retirement plan, then a 10 or 15-year note might just be the ticket for you. Don’t be swayed by the attraction of a lower payment and opt for a 30-year note when a future of having no house payments is within reach.
If a traditional 30-year mortgage is the best fit for your budget, then you need to decide which loan type is best for you. If you or your spouse have a history of military service, then a VA loan might be a good option. This type of loan will lend up to 100 percent of the purchase price and comes with an upfront funding fee, which can be added to loan amount, so there’s no monthly Private Mortgage Insurance (PMI) required.
So, if you’re a first-time home buyer and have limited down payment money saved, there are several options to consider.
If you live in Tennessee, then you might qualify for a THDA loan, or the “Georgia Dream” loan might be your ticket if you’re buying south of the state line.
Considering buying a home located in a more remote area? Then a Rural Development loan might be something to look into.
All of these loan programs will lend up to 100 percent of the purchase price, which means the buyer doesn’t have to bring any money to the table for a down payment. An experienced local lender can guide you through the specific requirements to qualify for these loans.
An FHA loan might be an option for a buyer with limited down payment money who doesn’t fit any of the loan types listed thus far. With this option, the minimum down payment required starts at 3.5 percent of the purchase price.
Still tight on cash? Your Realtor might be able to help you negotiate to have the seller pay all or part of your closing costs in the purchase agreement. Here again, a qualified local lender can give you all the costs of lending upfront so you know exactly what you need ask for.
The traditional conventional loan might be the best fit if you have adequate down payment monies and your focus is a lower interest rate/low cost to borrow.
By putting down 20 percent of the purchase price, you will avoid the PMI addressed above. Even though interest rates are very reasonable, in some cases you can still “buy down” the rate to achieve a lower cost of borrowing over time.
This list just begins to scratch the surface of the types of loans available today.
Ask your Realtor for some recommendations of local lenders you should consider. Once you know the type of loan you’re going with, you’re ready to get serious about buying this summer.
The Greater Chattanooga Association of REALTORS is The Voice of Real Estate in Greater Chattanooga. The Association is a regional organization with more than 1,700 members and is one of more than 1,400 local boards and associations of Realtors nationwide that comprise the National Association of Realtors. GCAR services Hamilton and Sequatchie counties in southeast Tennessee, and Catoosa, Dade and Walker counties in northwest Georgia. Go to www.GCAR.net for more information.