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Buying a home should be one of the most exciting milestones in your life. If you’re not properly informed about the home buying process ahead of time, however, this can turn into an overwhelming affair. Below, I have provided some useful tips on what to expect in the home buying process.

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First thing’s first…obtain pre-approval from a lender to determine the loan amount you are eligible for. Sometimes our eyes can be bigger than our belly when purchasing a home, so it is important that you know what price range you need to stay in so you don’t get your hopes up over something you possibly can’t afford. After you have an accepted offer on a property, your lender will begin to process your loan application. When you apply for a mortgage you will need to furnish information regarding your income, expenses and obligations. Check your credit report with free sites like CreditKarma.com or FreeCreditReport.com to make sure there are no errors. To save time, have the following items available for each borrower:

  1. Two most recent pay stubs
  2. W-2s for the last two years
  3. Federal tax returns for the last two years
  4. Last two months bank statements
  5. Long-term debt information (credit cards, child support, auto loans, etc)

A lender will only lend you money if your credit is strong and they are confident you have the ability to pay them back. If your credit report comes back good and you have the appropriate down payment, then you have an excellent chance of obtaining a mortgage. Below are the most common loan types to consider:

  1. VA Loan – Qualified veterans and their spouses who apply for a Certificate of Eligibility are eligible for this type of loan. The property must also qualify under VA guidelines. The veteran must also furnish proof of military service (DD214) in order to qualify for the no down payment mortgage that this type of loan offers.
  2. USDA Loan –  Not much of a city guy or gal? Ask your lender if they can provide this type of loan if you plan on moving to a rural area. Like a VA Loan, a USDA Loan offers 100% financing, which means no down payment is required.
  3. FHA Loan –  This type of loan is available to veterans and non-veterans with a minimum down payment of 3.5%. The main caveat to FHA Loans is the Mortgage Insurance Premium (MIP) in which the borrower pays 1.5% of the loan amount.
  4. Conventional Loan – This type of loan is not government insured or guaranteed and requires a down payment of 20%. Loan to value ratios higher than 80% require Private Mortgage Insurance (PMI) to cover the top percentage (ex. if you borrow 90% you have to have PMI for 10%).

If your credit report is tarnished and you are not approved for a mortgage, below are a few suggestions you can do to repair the damage:

  1. Pay your bills on time and in full
  2. Do not spend more than your budget on your credit cards (limit to one to two)
  3. Keep a separate checking and savings account
  4. Keep the same job for a few years (the longer you stay in one place the better)

If your loan is approved, you’ve gotten your inspection(s) completed, and all necessary paperwork has been provided by both sides, all you need to wait for is the closing! During the closing, settlement procedures take place. Money is exchanged, all paperwork and agreements are signed, and the title of property is transferred. This is the last step before you can call the property your own!

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