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Looking to Qualify for a Loan?
It May Be Easier Than You Think
As we enter the month of June, the home buying season is in full swing. Whether you're considering purchasing a new home, or even a vacation or investment property, now may be the perfect time to do so. Here are a few of the reasons why:
Let's take a closer look at these factors and see how they may benefit you.
Recent statistics indicate that the inventory of homes across the country has increased to a six-month supply. In other words, based on today's sales trends, it would take six months to sell all of the homes that are currently available. If you're looking to buy, this means you have a tremendous amount of negotiating power with home sellers.
Home prices have also begun to cool down a bit. While this may alarm you from an investment perspective, it shouldn't. Homes are still appreciating at a rate of nearly 5% annually. If you purchase a home and put 5% down, you'll obtain almost a 100% return on your cash investment within the first year!
Since market conditions are favoring homebuyers, lenders are becoming more and more competitive as they fight for your business. This is illustrated by the increasing number of inventive programs being offered to assist you with your home purchase.
No Money Down
That's all changed now as lenders have increased the number of loan programs available for cash-strapped consumers, as well as those who simply want to conserve their cash on hand. Many lenders have even made 100% financing a possibility for buyers with less than perfect credit.
If a seller is willing to contribute money to cover your closing costs and prepaid items, such as homeowners insurance and tax escrows, you could even buy a home with no money up front at all.
PMI Not Required
Lower Mortgage Payments
For credit-savvy buyers who want to minimize their monthly payments, an Option ARM could be just the ticket. Option ARMs are adjustable rate mortgages that offer the borrower one of three or four payment options each month. The first option is to make a payment that is less than the interest due. This is also referred to as negative amortization. The second option is to make an interest-only payment. The third and fourth options pay off the loan in fifteen or thirty years, respectively.
Interest Only mortgages are also available as fixed rate programs. While you may not be paying down principle on your mortgage, you can apply the difference towards other investments or the reduction of other higher interest rate, non-tax deductible debt.
When an ARM is not an ARM
These fixed periods lock the interest rate before the loan first adjusts, providing greater stability for the borrower. You can now have a loan that's locked for two, three, five, seven, or even ten years before you'll see the first payment and rate adjustment. The benefit of a loan like this is that it typically offers an interest rate that is lower than a fixed rate would be. However, in today's financial markets, some ARM rates can actually be higher than fixed rates.
Documentation Not Required
Now that many lenders are using automated underwriting, the mortgage application process has been streamlined. If you have reasonably good credit, you may only be required to provide your most recent pay stub and one bank statement. In some cases, these requirements may be waived completely.
In a situation where the borrower can't provide documentation at all, there are mortgages that offer stated income and stated asset processing styles. If the borrower is uncomfortable with stating their income and assets, a no documentation loan may be the program to pursue. All this loan requires is basic personal information, very good credit, and the required down payment. Some lenders even allow No Doc loans with as little as 5% down!
Granted, not all situations are perfect and this won't apply to all loan types. In some cases, more documentation will be required in order for you to get the best possible rate. Some examples include government loans, loans for credit-challenged borrowers, loans for self-employed borrowers, and loans with little to no money down.
Call your mortgage professional today and get your financing in place before you start shopping. By obtaining pre-approval, you'll have a much better chance of finding the home of your dreams!
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