If you are in the market for a home, you’ve probably done a little bit (or a lot!) of research on your own.
Being in the mortgage biz, we get a good number of questions about the process and what’s required. Let’s face it, buying a home is not quite as easy as it was prior to the housing market crash in ’08-’09, but we try to make it as easy and streamlined as possible.
Check out the info below for answers to some of our #mortgage #faqs here at Your NC Community Credit Union in Goldsboro, NC:
- What preliminary information is going to be required of me? Go ahead and dig out all those old bank statements from the boxes in the attic- just kidding! You probably don’t keep them, anyway! You will need to be prepared to provide some RECENT bank account information as well as your tax information from the prior 2 years. Here’s a quick checklist/rundown of the preliminaries that a lender will need from each borrower:
- Tax returns from the prior 2 years- make sure to wet (hand) sign and date the back/last page of your 1040’s, even if you e-filed.
- W2’s for ANY taxable jobs for the past 2 tax years. If you have a side job, but don’t have a W2 (or a paystub if it has been recent), there is a good chance that income cannot be used to qualify you for a mortgage.
- Bank statements from the last 60 days from any bank where you hold deposits. If you do all your banking with one bank, piece of cake. Most place make your statements available online, so just bring us the most recent two.
- Paystubs for the last 30 days. If you get paid bi-weekly, provide your most recent two. If you get paid monthly, your most recent paystub.
- Most recent monthly or quarterly statement for any investment accounts (401(k), IRA, stocks, bonds, etc.). You can typically claim a portion of these type of assets to assist with mortgage qualification.
- How much of a down payment do I need? Well, that depends on the type of mortgage you get and if you want to try to avoid paying PMI (private mortgage insurance). PMI, contrary to what the terminology might infer protects the lender in the event you default on your loan. Typically, when you finance more than 80% of the VALUE (based on appraisal) of a home you are purchasing, you will have a pay PMI. This is usually reflected as a monthly premium. So, to avoid PMI, you would need 20% down (that’s ALOT in some cases!). Don’t worry if you don’t have 20%- there are loans with as little as 0% down.
USDA (Rural Development) loans carry a $0 down payment, but there are other qualifiers like an income cap and geographic area ( a good portion of Wayne Co. is in the geographic area).
FHA (Federal Housing Administration) loans carry a 3.5% down payment (so, on a $100,000 house, $3,500 down).
VA (Veteran’s Administration)– VA loans are what we like to call “the best game in town.” For active duty service members and veterans that meet the eligibility requirements, a home can be purchased with $0 down. There is a funding fee that can be rolled into your loan so that you don’t have to pay out of pocket for it. The funding fee amount varies from 1.25% to 3.3% of your loan amount depending upon the type of veteran you are, if you are putting money down and if you are using your entitlement for the first time.
Conventional (Fannie Mae/Freddie Mac) – Conventional mortgage products are available with as little as 3% down (with qualifying factors) but the standard minimum down payment is 5% of your purchase price.
3. How much are closing costs AND will I have to pay them? Closing costs are all the costs associated with buying a home- they include things like your appraisal fee, the lender’s fee to create your mortgage, the attorney’s fee to research the property and close your mortgage as well as the pre-payment of your homeowner’s insurance (so your home is covered from the day you purchase it) and a portion of your property taxes (so that you have enough in escrows to pay for the year by the time taxes are due). Closing costs are typically around 3.5% of your purchase price, give or take. In our Wayne County and Goldsboro, NC market, it is very customary for the seller to pay all or part of your closing costs out of their proceeds so you don’t have to. This is not the case in all markets. In other cases, the seller will offer to cover part of your costs with you having to cover the remainder with cash on hand. Sometimes, the seller will increase their asking price in order to cover your closing costs; allowing you to finance all or part of them into your loan as long as the property appraises for AT LEAST as much as the seller is asking. At Your NC Community Credit Union, we work with each borrower to help you determine how much will be needed at closing.
4. Why do I need to get pre-qualified? Many realtors will request a pre-qualification letter or something similar before showing you homes. There are a couple of reasons for this. 1, your realtor wants to know that your credit and preliminary finances have been examined by a lender and based on the information at hand, that lender is prepared to offer you a mortgage loan. 2, your realtor wants to know how much of a home you are qualified to buy so that they help you work within your budget. Additionally, getting pre-qualified allows you to speak directly with a lender and get your questions answered one-on-one.
5. Do I need to have perfect credit to get a mortgage? No, and most people who are buying homes do not. For FHA, VA and Conventional mortgages, the minimum credit score required is 620; for USDA mortgages the minimum is 640. If you are concerned that your credit is not at the minimum threshold, there are things you can do to improve upon it. Attend one of our upcoming FREE seminars on building, repairing and maintaining credit.
Did you learn something you didn’t know about getting a mortgage?
NEXT STEPS:
- Do you want to learn more? Sign up to attend one of our FREE upcoming Home Buying 101 seminars to gain a more in-depth perspective of building or buying a home.
- Ready to get pre-qualified? Start HERE- it takes about 10 minutes. A member of our team will give you a call within 1 business day to setup an appointment.
- Questions? Contact Terry Wallace, Mortgage Development Manager at 919.736.5087 OR twallace@www.nccfcu.org.