Welcome to Summary School
How to Finance your Alpharetta Home Purchase
Hello Everyone, thank you for joining me, today we are discussing FINANCING. This message is helpful for Owner Occupant Buyers.
I want to walk through financing basics for 1-4 unit properties, The five main points we will cover are: 1. Who needs Financing, 2. When you should arrange financing, 3. What types of financing are available, 4. Where can you arrange financing, 5. How do you evaluate the loan. So, let’s get started.
Who should arrange financing?
If your paying cash for a home, you can skip the rest of this message. Everyone else, keep going.
When Should Financing be arranged?
As soon as you move from browsing the internet at night to it’s time to buy. Talk to an agent and talk with a lender before you ever go look at the first home, because nothing else matters until you have the money lined up! This is the time to get all your documents in order, make sure there are no issues on your credit report, evaluate how much cash you have for the transaction and what monthly payment you are comfortable with.
What Types Of Financing are available?
Depending on the home location, price, type and condition it may qualify for one or more of the following types of financing:
USDA 100% financing on move in ready homes in rural areas
VA 100% financing up to a certain dollar amount based upon location and used for homes that are in move in ready condition
FHA loan with a 3.5% down payment up to a certain dollar amount that varies by location and used for homes that are generally in move in ready condition
Conventional Loans have down payment amounts of 3, 5, 10, & 20%, generally Conventional loans have lower costs than the other loan types but require higher borrower qualifications. There is a sliding scale on the home condition requirement based upon the amount of down payment.
Seller Financing might also be available depending on the position of the seller. Down payment, interest rate and terms are all negotiated between Buyer and Seller.
Where can you arrange financing?
There are many places to obtain owner-occupied financing. However, not all lenders are the same and it’s important to evaluate the best-case scenario to get an offer accepted and closed. When evaluating lenders, look at the transactional experience based upon the deal volume, communication, ability to handle issues, likelihood to close on time and likelihood to close at all.
An experienced real estate professional can guide you towards stronger lenders and away from weaker ones. My personal ranking from worst to first; Online Bank/Lender, Mega-National Bank, Local Bank, Local Credit Union, Local Mortgage Broker.
How do you Evaluate the Loan?
When evaluating one loan vs another, you need to compare the interest rate and the lender fees together. The interest rate is a function of the lender fees, you can get a lower rate by paying more in fees, but that might not result in a lower loan costs over the period you plan to own the home. Also, when comparing loan costs, be sure to exclude; taxes, insurance, attorney fees and title fees.
Alright, those are the 5 main points on Owner Occupied Financing. There are variations and intricacies with each of these loan types and situations. The most important point is this: Be sure you know and understand your loan commitments before you sign.