Mortgage Process and Types of Loans in South Carolina
Looking for a house? Thrilling! PAY for a house? Scary, right ?! Not necessarily! If you have a lender you trust, navigating the mortgage process can be smooth and reinforce your decision to invest in a home. In this guest article by real estate agent Elizabeth Faulkner and mortgage lender Andrew Evans, you will learn about the mortgage process and the types of loans available to homeowners.
Everything about the mortgage
So, you have decided to buy a house! Fantastic! No matter what stage of your life you are in, most home buyers have several things in common. Whether you’ve just graduated from school and are planning to buy your first home or downsize after more than 30 years in the house where you raised your children, you are probably considering taking out a mortgage to make the big bucks. purchase. While this might not be the most exciting part of the home buying process (my apologies, lender friends), it’s important to do your homework on the mortgage side. So important that most real estate agents ask a new buyer very quickly if they have spoken with a lender before. Plus, your real estate agent most likely has a speed dial lender and can help get you started with the loan process. Because after all, you wouldn’t go shopping without your wallet. Why go looking for a home without knowing what you can afford to buy and, better yet, your prequalification letter in hand?
A little bit about the mortgage process
I’ve seen it a million times. Home buyers don’t want to make that initial call to a lender because they think it will take a long time. Or they assume they’ll spend their next weekend collecting three years of W2 and rent statements and utility bills. Not the case! This initial call to a lender is very preliminary, takes around 15 minutes, and is one of the most important steps to take before going out to look for a home! With just a little bit of information from you, your lender can identify the type of loan that’s best for you and give you a good idea of where your spending limit should be. Looks like super relevant information to have eh!
Once you’ve tackled that initial (NOT super scary) conversation with a lender and have your prequalification letter in hand (or at least know what you can spend), it’s time to start the real fun! You are now ready to go looking for a home! When you find your dream home, it’s time to call that lender back on the phone and move on to the mortgage. Being “on contract” is exciting, but it also means that you are officially on time. The short window between contract ratification and closing day is where all the magic happens. While you and your agent work together on home inspections, your lender will be hard at work to make sure your loan is ready to close when the big day arrives!
What type of loan is right for me?
Four of the most common types of home loans that my clients tend to use are conventional loans and several government insured home loans, especially VA loans, FHA loans, and USDA loans.
A conventional loan may be exactly what you are looking for if you have good credit and at least a 5% down payment saved. Additionally, in this market, a home buyer will most likely have to pay their own closing costs. This means that, for a conventional loan, a buyer will need to have enough cash to cover closing costs and a minimum down payment of 5%. The main benefit of a conventional loan is lower closing costs, excellent interest rates, lower monthly PMI, and less paperwork than some of the other types of loans. As a side note, a gift from a family member is acceptable for the down payment and closing costs as long as the home purchased is for a primary or secondary residence. Gifts are not permitted when purchasing investment property (i.e. rental property).
This loan is arguably one of the best loans on the planet, however, you can only get this loan if you have served in the military long enough to receive your VA eligibility status. This loan does not require any down payment, minor credit issues are acceptable, and the interest rates are excellent. But due to the current market, a buyer will most likely still have to pay their own closing costs. So, if a buyer is considering a VA loan, they should have enough money to pay for their own closing costs. A gift from a family member is acceptable for closing costs.
If you want to buy a home and have lower credit scores, a higher debt-to-income ratio, or bad credit, the best loan for you will almost always be an FHA loan. With an FHA loan, you will get a great interest rate and the underwriting is a bit more forgiving with credit problems. A gift from a family member is acceptable for the deposit and closing costs.
This loan does not require any down payment, which is music to some buyers’ ears! A gift from a family member is acceptable for closing costs. With a USDA loan, there are two limitations. One is an income limit and the other is an area limit. USDA is the abbreviation for United States Department of Agriculture. The limitation of the area is that the subject property purchased must be in a rural area as determined by the USDA. The best way to determine if you qualify is to contact your local mortgage lender. A local mortgage lender can simplify this tricky loan for you. A gift from a family member is acceptable for closing costs
Phew, you made it through all the mortgage information. Good work! What? Wasn’t that as bad as you thought it was? Other than “I told you”, what else can I say?!?
Now that you have a wealth of knowledge about the mortgage process, the types of loans to consider, and your team of experts in your area, it’s time to finally find your dream home.
Ready to learn more about getting the right home loan for you and your family? Contact real estate agent Elizabeth Faulkner or mortgage lender Andrew Evans. You can also read more from Elizabeth Faulkner on Kidding Around.