One of the big misconceptions with home buyers, especially first time home buyers, is that you need at least 20% down. That’s often not the case with lenders offering FHA loans with as little as 3.5% down and traditional lenders funding loans with as little at 5%. The lower amount is much easier if it’s a single family home but there are options:
There are a number of things a buyer needs to do to get a mortgage and the earlier these are done in the process the less stressful the process. Knowing about your financing abilities eliminates many challenges and stresses that may come up in the home buyer process in Torrance and the loan process for any Southern California home. Also see how a change in your rate can greatly impact how much of a home you qualify for. Here are 5 essential steps to successfully navigating the mortgage process:
- Get pre-approved: In a highly competitive housing market, it’s imperative to be pre-approved to give yourself the best chance of an offer being considered. Most realtors and sellers won’t even consider an offer with financing if a preapproval letter isn’t included.
- Choose a realtor that can help mitigate appraisal problems. A good realtor will meet the appraiser with the most current information in hand. As a local real estate expert often knows more than the appraiser, the realtor may have insight and information not readily available to the appraiser.
- Know your credit score: It’s not only important to have good credit and know your credit score, but equally important that your credit score stays the same throughout the escrow process. No big purchases, no opening numerous new credit lines and no late or missed payments.
- Review the closing disclosure forms or CD. Due to regulations, lenders must provide you with a closing disclosure at least 3 days before closing in order to see fees, details, etc.
- Make it through underwriting: Before you get loan clearance and final approval, your mortgage has to go through the underwriting process. Be ready and supply the underwriters with all requested documents quickly to avoid the stress of needing to ask the seller for extra time. Most loan contingency periods are 21 days or shorter so time is of the essence in the loan process.
Many prospective home buyers are concerned with rising interest rates. While the Torrance interest rates in 2018 are still historically very low, the concern is justified. Higher interest rates mean reduced buying power. With every slight rise in interest rates, the monthly payment increases reducing the price of a home that a buyer can qualify for. See the chart below for an idea of how different interest rates impact monthly payment and what a buyer’s income needs to be to qualify.