Loan programs have been changing rapidly over the past few weeks. I don't think this is a cause for concern, as the banks are still lending money, just want to ensure they are lending to families and individuals that are truly ready for home ownership. In the banks case this means you will have to provide a bit more documentation that in years past :). As you know I am on the real estate side of the business, but in helping buyers find the Long Beach real estate that is right for them I am often required to review the loans that people are using. Here are some items you need to be aware of in today's climate to be insured you have a great loan in place.
- Pre-Approval - Take the time to get pre-approved instead of just pre-qualified. Pre-approved means you submit your tax returns, pay stubs, bank statements, FICO scores etc. This helps the lender have a complete package that they can have an underwriter evaluate to ensure there is a good loan for you. The old days of having your credit checked and telling them your annual income is no longer a good idea to ensure you have a loan.
- Money Down - I know it's crazy to think that 100% financing may be gone. Don't worry it is still available although the loan programs are different. Make sure you lender explains to you how they are putting together your 100% loan (hint it's not going to involve an 80/20 option anymore)
- Reserves - You used to be able to purchase a property with $500 in your account. Now many lenders want 3-6 months of reserve (money you would have available to pay your mortgage). Never fear as they can use a % of your 401k to satisfy the requirement. Check with your lender.
Knowing what type of loan you will have (in addition to your payments and rate) is essential to a good home buying experience. It is the practice of myself and my team to not even take a buyer out until they know what their loan is. That way there isn't any confusion on anyone's part. Even if you are sure that you can "afford it" take the time to speak with a lender so you can know the type of loan you are getting.
