Understanding Your Loan Options Mortgage Brokers Offer Tips for First-Time Buyers By Mary Ellen Cheatham
T
he bad economy might still have a strong grip, but buying a home is not impossible. Interest rates on mortgages are low, and financing options abound. There’s even hope for potential buyers with less-than-perfect credit.
We asked Kelly Hunt, branch manager of Homeowners Mortgage and Jacob Crowder, vice president of retail operations at 1st Choice Mortgage, for up-to-date tips on getting a mortgage these days. FT: There are several different mortgages a homebuyer can get, including mortgages through the Federal Housing Administration (FHA). How do they differ? Kelly Hunt: There are conventional mortgages and government-insured mortgages — FHA, VA (U.S. Department of Veterans Affairs), USDA (U.S. Department of Agriculture). Within those mortgage types there may be fixed rates, adjustable rates and buy-down programs. They vary by required down payment, source of the down payment, credit score requirements, debt-ratio requirements, property types and some other
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differences. Fixed rates give you an interest rate that will not change throughout the length of the loan. Adjustable rates can vary depending on the type of program and may adjust as often as every six months, year or longer. Buy-downs typically have a fixed rate, but the first year your rate is 2 percent below the permanent rate and the second year it is 1 percent below the perm rate. The third year you begin the permanent rate through the remainder of the loan. FT: How do I decide which one is right for me? Hunt: To determine the loan that is best for you, you should start by prioritizing the following: Out-of-pocket money, then monthly payment, and finally, long-term investment. Of course they are all extremely important, but only one can be most important. In discussing your situation and your priorities
with a knowledgeable and reputable lender, he or she can help you navigate the differences in programs and loan types to determine which loan best fits your needs. Knowing what is important to you — and being honest with your lender — will ensure you obtain a loan that best fits your needs. FT: What factors will affect interest rates? Hunt: While program types and down payment amounts are an important factor affecting interest rate, the biggest factor is your credit score. FT: What options are available if the buyer’s credit isn’t so good? Hunt: If your credit is unacceptable to obtain a mortgage currently, it is still advisable to speak with a lender to map out a plan to implement and get you on track to purchase a home in the future. Depending on your situation, it could be a one-month plan, sixmonth plan or even an 18-month plan. You always want a lender to review your credit for you to
the correct advice in obtaining a mortgage is to speak with a reputable lender about what they think is needed for you to reach the goal of homeownership. FT: There are companies who advertise that they can eliminate or reduce debt. Is there a good way to clean up credit quickly? Hunt: These are temporary fixes that usually will not get you the end result needed for a mortgage. Most of these companies can get items removed from your credit for a 30-day period, but mortgage lenders pull a credit report a few days before your loan closing and by then they will most likely reappear and will jeopardize your closing on the purchase of your home. FT: How much of a down payment will first-time buyers need to make? Hunt: Down payment requirements depend on the loan program, but there are some loans available with little or no money down. The USDA and the VA offer loans with no
“The USDA and the VA offer loans with no required down payment if you meet program requirements. There are down payment assistance programs available through Richland and Lexington counties, the South Carolina State Housing Authority and some lenders offer down payment assistance programs.” — Kelly Hunt, Homeowners Mortgage
know what aspects of it are and are not affecting your ability to obtain a mortgage. There is a lot of misinformation out there in regards to credit scoring. The best way to know you are getting
required down payment if you meet program requirements. There are down payment assistance programs available through Richland and Lexington counties, and the South Carolina