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The easy guide to: Getting Financing For Your New Home

The easy guide to: Getting Financing For Your New Home
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Want to become a homeowner? You’re not alone. Choosing to own a home is life changing. It is the American dream for a majority of people and for many, getting financing is a challenge. The good news is that with interest rates at historically low levels, there has never been a better time to face this challenge. Here’s a go-to guide for borrowing money to buy your dream home.

Start By Getting Pre-Qualified. Getting pre-qualified is an extremely important factor and is where you should begin. It’s important to get pre-qualified so that you can start to talk seriously with a real estate agent or a builder. After all, you cannot sign a purchase agreement for a new home until the bank says they’ll lend you money to finalize the sale.

So how does pre-qualification work? When you receive a loan pre-qualification, you will get a letter that says you have been pre-approved for a certain loan amount. This letter will note your interest rate and how much money you have available to pay for a new home. Shop for a home under this amount to be safe. In order to become pre-qualified, the bank you have chosen will require several things:

A) You have to have a good credit history and a good credit score.

b) You have to have a job and proof of steady income.

c) You have to have money in the bank to use as a down payment on the house.

With a pre-qualification letter in hand, you can spend some serious time shopping for the perfect property. This is where the fun begins!

Basic Loan Steps For Getting A Mortgage

Getting pre-qualified is just the first step on the home ownership journey. There are many more steps you have to take in order to get the funding you need to own property, but we’ll walk you through them all so that you know in which direction to go.

A) Initial Stage: This is the stage during which you’ll get pre-qualified. Being pre-qualified will let you know how big a home you can buy and what features you can afford. Once pre-qualified, you are in a secure position to make an offer. Now you can shop and see what homes are available and within your budget. Factor in all the other homeownership costs to know what you can truly afford. Don’t use the amount you qualified for as your guide.

B) Application: Once you’ve selected your dream home, you will actually fill out a full mortgage application based on the price you’ve agreed on with the builder or seller. You will need to provide many documents to your lender, including things such as your government-issued photo ID; proof of bank account balances, retirement savings, property holdings, and investments; monthly debt payments; income verification (with W-2s, pay stubs, and IRS tax returns); and much more. Your bank will help you with the checklist.

C) Final Approval: At this stage, your bank will provide a firm approval for the loan you have requested. They will also offer you a set of terms that outline how many years your mortgage will cover, your monthly payments, your interest rate, and so on.

D) Move In: When you have everything done, you can close on your home and move in if your home is ready.

What About Financing A New Build?

But what if you want to have a builder construct something brand new instead of purchasing a pre-built home? In this case, the process is a little different. When building a new home, often you don’t need to complete a full mortgage approval before construction starts. This is because there’s no way to know the actual cost of a newly-built home before it is complete. Instead, you will likely need to obtain a short-term interim loan. This type of loan lets you borrow money from a lender to give to the home builder to cover costs such as materials and labor.

In most cases, you need to pay back your interim loan within 18 months of receiving it. Depending on the type of interim loan you get, (see below), your bank will either roll your interim loan into your permanent mortgage, or require that you go through two separate approval processes.

Sound easy enough? Start today by pre-qualifying for your mortgage. Most lenders offer this as a free service. Your dream home could be closer than you think!

TYPES OF INTERIM LOANS

One-time close construction loan

With this option, you only have to go through the loan approval process one time. Your interim loan gets converted into a permanent mortgage once construction is complete. This method will allow you to lock in your interest rate and reduce your closing costs. Call Thrive Mortgage for this program which has a 3.5% interest rate and accepts a credit score of 640.

Two-time close construction loan

This option means you must complete the interim loan approval process before construction begins. Then once construction is complete, you will go through another approval process in order to get a permanent mortgage. This is a great option if you have less than 20% as a down payment.

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