In recent years, there have been a lot of changes to interest rates and home loans, which has led many to consider purchasing a new home or looking into new home communities. Read on for more!
What are the steps to securing a home loan?
Before considering a home loan, you’ll first need to assess your needs for a home and see how they stack up against your current assets. What sort of home are you looking for? How many bedrooms will you need? What features are essential, and which ones are negotiable? Check out our Home Match Quiz to help you narrow in on your dream space.
These questions will help you later on in the process as you evaluate the cost of your ideal home’s specifications.
You’ll also need to assess your financial status. Mortgage lenders will evaluate your finances to determine whether you’re eligible for a loan. Your financial health could influence your loan size and interest rate.
In particular, you’ll want to have at least three crucial pieces of data in hand:
- Your credit score
- Your monthly debts
- Your savings
Before you even begin looking at home options, you should take a look at your credit score from all three of the major credit bureaus (Equifax, Experian, and TransUnion). This is a good way to determine whether there are any errors on your report. Making any necessary corrections could make it easier to secure financing for your new home.
Learn About the Different Types of Loans
When you’re financing a new home, you’ll likely be using one of these common loan types. Not every homebuyer will qualify for every type of loan, so it’s important to match these loan programs with your current needs and financial situation.
For a growing number of American homebuyers, a 20% down payment can be an insurmountable challenge. If you have limited savings or a substandard credit history, you might consider a loan backed by the Federal Housing Administration (FHA).
FHA loans can help you with financing new home construction with as little as 3.5% down as long as your credit score is 580 or above. Even if your credit score is lower, you can still qualify for an FHA loan with a down payment of only 10%.
But when you put less than 20% down on a home, you’ll have to pay mortgage insurance. These monthly premiums are often rolled in with your mortgage payments themselves. These added costs can impact your new home construction finances.
Are you or your spouse active or retired members of the U.S. Military? If so, then a VA loan might allow you to purchase a new home with zero down payment. Unlike other loan programs, you won’t be asked to pay a monthly mortgage insurance premium.
Closing costs are also regulated for veterans, which makes this a highly affordable option for eligible military members and veterans.
If you have a strong savings account and a solid credit history, then financing a new home through a conventional loan could be a wise choice. Conventional loans typically offer the best interest rates compared to other loan programs, as long as you qualify.
To be eligible for a conventional loan, you’ll typically be expected to meet the following requirements:
- Have 5 to 20% for a down payment
- Have a credit score of 620 or above
- Have a stable income
- Have few other existing debts
If your credit score is 740 or above, you can expect to get some of the most competitive mortgage rates today.
Find Your Happy Place
At Woodside Homes, we believe that finding the best fit home for you and your family isn’t just about the design of your home; it’s also about meeting the needs of your budget. For more information about how we can help you to get into your ideal home, contact us today.