Getting Financed
Most people finance at least a portion of their
property purchase. Below is a general overview of the process.
INITIAL PRE-QUALIFICATION:
Ideally, you will have met with a lender prior to beginning
your search, and you will have a firm idea of what your price
range is. You lender will also have helped you identify the
most
appropriate type of financing based on your income and debts. If not, again
we can assist you in identifying a lender that will meet your needs.
A pre-qualification is just that. It is not a formal loan
commitment, that comes later. You will want to get a letter
from your chosen lender noting your pre-qualification amount.
These letters can be of great assistance in any offer situation,
particularly in a multiple offer situation.
Your lender will want to review the following things with
you:
-
How much of your savings do you
intend to use towards the down payment and closing costs.
-
Your annual gross income.
-
The length of time with your current
employer and previous employers, for the last two years.
-
Your monthly payments on long term
debts (such as car payments) and also the total of credit
card balances.
-
Child care expenses and/or alimony.
-
Whether or not there have been
any bankruptcy or credit problems.
There are several ways in which to finance real estate, the
following is a partial list of the types of products that your
bank/mortgage company may have.
Conventional
20% or more down payment
5% or 10% down payment (would require private mortgage insurance (PMI)
FHA - Federal Housing Authority
FHA-203b: FHA's fixed payment, low down payment
FHA-ARM: One year adjustable mortgage
FHA-203k: "Rehab loan" (converts to a regular 203b loan
upon completion of rehabilitation)
VA - Veteran's Administration
VA (GI) loan for military and ex-military personnel, fixed payment, no down
payment necessary
MSHA- Maine State Housing Authority
MSHA requires 3% down payment, seller pays 3 points (a
point is 1% of contract price), low interest rate, fixed
payment, recapture (10 years), loan maximum
If not financing, the seller's agent/seller may ask for a bank
letter stating that there are sufficient funds available.
If financing:
Once you have a home under contract you will need to show proof
of formal application for a loan. Your lender will generate
this letter for you. Once your application is submitted it
for-warded to your loan processor. With the opening of your
loan file, they will verify your
employment and funds on deposits, loans and other debts and
credit reports. They will have an appraisal done on the subject
property to verify its value.
As soon as your loan is fully processed it is forwarded to
the underwriter. It is the underwriter's job to see that your
loan package conforms to specific investor requirements.
The most common investors are the Federal National Mortgage
Association (FNMA or "Fannie Mae") and the Federal
Home Loan Mortgage Corporation (FHLMC, or "Freddie Mac").
Getting you a mortgage is the number one priority. When your
loan package meets the specific requirements of the investor,
your loan is approved.
Once your loan is approved, you will receive a mortgage commitment
letter stating the exact terms and conditions of your mortgage.
After acceptance of the commitment letter, your mortgage lender
will forward your loan to the assigned closing attorney, who
may or may not be part of a title company. Once the attorney
completes a legal portfolio on your property and all conditions
in your commitment letter are met - we are ready to schedule
the closing.
We will stay in close touch with you, your loan processor
and closing attorney throughout the entire process to ensure
proper scheduling of your loan.
TITLE INSURANCE
When property is sold or refinanced, the lender and/or buyer
needs a preliminary title report to see exactly what liens
and encumbrances may be against the property. Items that a
preliminary title report show include:
-
Easements of record
-
Restrictions, covenants and conditions
-
Liens and/or judgements
-
Exact vested owner of record
-
Legal description of the property
When the sale of the subject property is final and the title
company has recorded the necessary
documents, they will then issue a policy of title insurance
to the new lender and the buyer showing clear title to the
property. The lender will require a title insurance policy
to cover their mortgage.
HOMEOWNER'S (HAZARD) INSURANCE
You will be a required to bring a Homeowner's Insurance Policy
(or Binder) to the closing. There may be many variables to
consider in choosing which insurer and which policy best meets
your individual needs and preferences. These variables should
be carefully discussed with your
insurance agent before selecting the policy that you will purchase.
To ensure that your insurance process goes smoothly, please
talk to your insurance agent after you have the building inspection
done. This way, you will understand the cost and we will see
if there are any issues to resolved prior to closing. In general,
since 9/11, insurance companies have become more strict and
have increased their requirements.
HOME WARRANTY INSURANCE
Either the seller or the buyer MAY want to buy a home warranty
policy that will protect against any repairs or replacement
of certain appliances, heating, plumbing and electrical items.
As with most insurances, the coverage can vary and you would
want to consult with the warranty
insurance provider to determine exactly what is covered and
the cost of the policy.
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