Buying a home is a significant milestone in people’s lives, a sign that they have moved onto the next chapter. This moment is exciting, but the home financing process that comes with it might seem overwhelming and stressful. Understanding the terminology and basics of home financing can help alleviate any strain that first-time homebuyers may experience.
Tips for first-time borrowers
There are a few things you can do in preparation for talking with your loan officer or bank about a mortgage loan and your financing options. First, it is important to know your credit score. Regardless of whether it is good or less than satisfactory, it can affect what kind of mortgage you pick.
The process of buying a home can entail a lot of paperwork and industry slang, so don’t be afraid to ask questions if you are confused. Chances are that the loan professionals you are working with will be happy to explain things in a clear and concise manner. After all, buying a house is a big deal, so you should go into it with a full understanding of all the details.
Even before you have a house in mind to buy, it will be extremely helpful to get pre-approved for your home mortgage. Having a pre-approval letter will inform you how much house you can afford. Here is some of the things you will need to provide in order to get a letter:
- Pay stubs
- Last years’ W-2
- Federal tax returns
- Recent bank statements
- Credit report
How to pick a mortgage option
A mortgage is a type of loan that is used to buy any kind of real estate. A variety of mortgage options are available to fit unique needs and circumstances, but it can be difficult to pick one without some knowledge of what each one is best used for. It is important to look at how much you can afford as a down payment and how much interest you can pay each month.
FHA loan
As the name suggests, this is a mortgage that is insured by the Federal Housing Administration (FHA). It is also helpful to have a good credit score with this loan because the better your FICO score, the lower your permissible down payment. Despite this, it may be easier to qualify for an FHA loan than a conventional mortgage.
VA loans
This type of loan was created with veterans and active-duty service members in mind. If you qualify, you won’t need to make a down payment, which is a huge leg up. As a veteran-owned bank, The Federal Savings Bank offers VA loans with competitive rates.
Conforming loan
The Federal Housing Finance Agency sets a dollar limit that must be met in order for the loan to qualify. It also has to meet the funding standard set by Fannie Mae and Freddie Mac. This type of loan may offer lower interest rates than most other mortgages.
The process of buying and financing a new house shouldn’t be complicated and unbearable, and having the right bank is key in making sure that you get the mortgage you need. Reach out to The Federal Savings Bank with questions about your mortgage options.
Subject to credit approval. Terms and conditions may apply. Property insurance is required for all loans secured by property.
This information is intended for educational purposes only. Products and interest rates subject to change without notice. Loan products are subject to credit approval and include terms and conditions, fees and other costs. Terms and conditions may apply. Property insurance is required on all loans secured by property. VA loan products are subject to VA eligibility requirements. Adjustable Rate Mortgage (ARM) interest rates and monthly payment are subject to adjustment. Upon submission of a full application, a mortgage banker will review and provide you with the terms, conditions, disclosures, and additional details on the interest rates that apply to you individual situation.
