When one decides to purchase their dream house, the first thing that usually comes to mind when searching for interesting and prospective homes for sale are online listings of homes for sale and adverts in newspapers and magazines. Other would-be homeowners study the intricacies and nuances of the house buying process. They read references and articles like this one in order to learn the basics of home buying. Before you make your next move involving talking to your realtor and shopping for the mortgage that provide the best terms, it is necessary that you look at one important component of your financial profile – your savings.
Why is it important that you consider your savings when planning to purchase your dream home?
It’s essential you know how much money is available for your down payment and closing costs. In actuality, your savings is one of the essential bases in determining your budget range in as far as the type of home property you can afford to purchase. Additionally, it will help you decide how to make your purchase offer, decide the loan programs that are appropriate to your current financial position and the best rates and deals that you can get from lending companies.
If your savings is just enough to cover the minimum down payment, then your assortment of choices of mortgage will also be limited. In precisely the same manner, if you are receiving a gift to cover a portion or the entire amount of deposit, then your choices are also restricted. On the other hand, if you have enough funds to cover the down payment, but still require financing for the closing costs, your options will still be limited. In the end, you will follow a different set of guidelines if you’re planning to borrow a portion or the whole amount of your deposit together with your 401K or retirement plan.
However, if you have sufficient funds for the down payment and closing costs, you’ll also have better options.
Your assortment of choices will include mortgage programs such as the traditional fixed rate loans, buy-downs, adjustable rate loans, Daytona Beach FL Rat Removal, graduated payment loans, FHA, VA and variants of each of these significant loan types. One of the main reasons why you will need to work on your numbers in as much as your savings is concerned is because this will have a substantial influence on the rates which will be offered to you by lending firms.
As a rule of thumb, lending companies will charge higher rates for loans that require lower down payment. In addition to this, different rates are applied for different loan programs. If you don’t have a general idea which type of loan program is most suitable for your requirement and current financial position, then it’s best that you consult with the loan officer of the lending company.
Your savings will also affect how you’re going to make your buy offer. Aside from the amount of down payment that you need to indicate in your offer, different loan programs have their various guidelines and rules concerning home purchase offers. This is particularly important when dealing with VA and FHA loans.
If you are planning to negotiate with your vendor to assume all or some of the final costs, be sure this is permitted from the loan program. Lastly, the amount of down payment that you can increase will also affect your chances of getting a loan. Lending companies are fairly strict with applications for loans that require a minimal down payment. Most lending companies are open to concessions and special deals for loans with larger down payments.