As a First Time Home Buyer, it can be intimidating, challenging, and confusing. There are…
1. “I need at least 5% Down to purchase a home”. Nope, FHA will allow as little as 3.50% down with some or all of it being gifted funds. There are Conventional Programs that allow a 3.00% down payment as well, however, the guidelines are much tighter and gifted funds require a minimum credit score of 740 for the lower down payment options. FHA guidelines are fairly liberal and the process is generally a smoother one. Also, FHA loans are for everyone, NOT just 1st time buyers.
2.”I’m underwater so I guess I’m stuck”. No again, HARP 2.0 allows many loans backed by Fannie & Freddie to refinance(not a modification) into a lower rate with NO appraisal. Your homes value is determined by Fannie or Freddie directly and most lenders will allow up to 125% LTV and others have no LTV restrictions at all. For those loans that are not sponsored by Fannie or Freddie you still have hope. HARP 3.0 may allow you to restructure your loan in the same way. 2014 will likely be the earliest those changes will go into effect if approved.
3. “I’ll get the best deal at my current bank”. I won’t say you can’t but with the ever-expanding market there are just too many options out there not to shop around. Most importantly, read reviews of potential lenders! They may offer the best looking deal on paper but their reviews from past customers might just turn you away and help you avoid a serious headache.
4. “My interest rate shows the true costs of financing”. Actually, you should be more concerned with the APR(Annual Percentage Rate). The APR combines the interest quoted along with fees charged by the lender expressed as a rate. When comparing rates it’ll let you know who is charging more for their services. Keep in mind the old adage “You get what you pay for” or more accurately “you don’t get what you don’t pay for”. The lowest possible APR isn’t always the best deal. Again, read reviews. You may just find yourself in an ugly situation that simply put, isn’t worth it. Find an experienced lender and Loan Officer with competitive rates & fees, one you feel you can trust.
5. “Rates only change once a day, if that”. Rates actually fluctuate throughout the day, sometimes in very dramatic ways. Know if your rate is locked and for how long. If your loan scenario is a tough one you may consider a longer rate lock or floating for a bit. The reality is there are a million and one scenarios and some take longer than others. Also, there are always third party interactions in every loan that can cause unforeseen delays that the lender or LO may have zero control over so in short delays can and do happen Choosing a slightly longer rate lock isn’t a terrible idea in many cases.