Buying a home is an important life milestone, and one of the most exciting ventures you and your family will experience. Along with that excitement comes the task of financing a mortgage. Mortgage financiers are diverse. Credit unions, banks, mortgage brokers, and even online services offer mortgages. At Windermere Group One, our agents are highly qualified to guide you through the process and help you find a lender who will fit your personality and needs.
A key element in your success with a lender, regardless of which type, will be your credit report. Typically the higher your credit score, the more leverage you will have when securing the best rates on your mortgage. However, there are options for all circumstances and your lender of choice will walk you through what’s available to you.
Once you have narrowed down which lenders will offer the best rates, an excellent first step is to seek pre-approval, as this will facilitate a smooth purchasing process. Additionally, you can request a Cost Analysis Worksheet (CAW) for your review from each lender. This form will reveal all of the fees and costs associated with closing your loan. From these documents, you can truly compare the cost of your mortgage options. Not only will you be responsible for the monthly mortgage, but there are costs associated with the loan that, while they can be rolled into your mortgage, can range widely. You will want to compare a few CAWs before deciding on the lender.
In order to acquire a CAW, you will need to determine how much money you can put down on the home. This is known as the down payment and is among the most critical factors in the interest rate you will receive. The more money you can put down, the better. Your representative will work with you to find a down payment that makes the most sense for you. We spoke with Bryan Jarrett, Branch Manager of Cornerstone Home Lending, one of our trusted lending partners.
According to Bryan, “Loans come in a variety of different sizes and down payment requirements. For example, paying 20% of the home’s purchase price upfront is ideal, as it allows you to avoid purchasing Private Mortgage Insurance (PMI) and usually offers lower interest rates and fees. If you cannot afford a 20% or more down payment, you will be required to pay PMI, usually inside your monthly mortgage payment. PMI amounts are mainly determined by how much your down payment is, your FICO Score, and your Geographic Location of the Home. Mortgage Companies do offer lower down payment options, for instance, as little as 3% of the purchase price down at closing. Typically, VA and USDA loans offer a $0 down payment loan to qualified candidates. Our Washington, Oregon, and Idaho markets also offer Down Payment Assistance Programs to qualified buyers that can lower the amount of down payment needed to close to $0 for all loan types.”
Mortgage loans themselves come in various models. You can request a fixed rate or an adjustable rate, and determine the length of the loan. There are four parts to a mortgage—the principal, the interest, the taxes, and the insurance. At the beginning of the loan agreement, most of your payment will go to the interest owed and very little to the principal. With the help of our mortgage calculator, you can get an idea of your estimated monthly payment. The included amortization table will give you an exact breakdown of how your payments are reducing your outstanding loan amount. If possible, it is always a good idea to pay extra principal payments, thus reducing the amount of the total number of payments required and saving you money in the long run. However, a good rule of thumb is that the monthly payments should be no more than 25% of your household take-home pay.
Ultimately, you should ask yourself, “how much will I need to purchase a home?” A great place to get started is our mortgage calculator for an estimate of your payment. You will also want to find a lender you can trust and feel comfortable with to walk you through all your mortgage payment options. Windermere Group One Realtors® work closely with many brokers, banks, and credit unions, and take pride in guiding you to lenders that can assess your specific situation and who can offer a mortgage loan for your new home that fits your needs.
If you have questions about purchasing a home feel free to reach out to our trusted mortgage partner here or give us a call at 509.946.1188.