1. Get Pre-Approved
    The first step to complete when you have decided to purchase a home is to should speak with a lender. The lender can help you determine what type of loans you qualify for and how much you can afford. The loan type may also determine how much, if any, down payment you will need. The lender can also check your credit score and credit report. The lender may suggest you pay down some of your bills or make extra payments on credit cards to improve your credit score and come back in six months to re-apply. The better credit history you have, the better mortgage rate you qualify for. Most importantly, the lender determine the amount you qualify for. This amount can be used by the REALTOR to help you find a home in your price range.

    Common loan types are:
     
    1. Adjustable Rate Mortgage (ARM)
      This type of loan has a changing interest rate - hence the name. The rate changes based on the the changing market rates. The interest rate may go up or down. As the rate changes so do you monthly payments. This type of loan is commonly used when interest rates are high but rates are expected to drop.
       
    2. Convertible ARM
      Similar to the ARM, this type of loan offers an option for the borrower to change the mortgage to a fixed-rate mortgage during an early interest rate adjustment period.
       
    3. Balloon
      This type of loan is similar to fixed-rate mortgage loans, however, the payments are based on a much longer term. This allows your payments to be much lower than normal. For example, if you have a 15 year balloon mortgage, your payments may be based on a 30 year mortgage. Your payments may pay only interest and virtually no principal. At the end of the loan term the balance is due in full.
       
    4. Fixed Rate
      This is the traditional mortgage loan in which the buyer contracts for a specified interest rate over a specified period of time - such as 15 or 30 years. The terms of these loans are generally longer than with other types of mortgages, which enable a lower monthly payment. This allows for lower payment-to-income ratios, which means more people are able to afford to buy a house, particularly buyers with low-to-moderate income levels.
       
    5. FHA
      These loans are government-backed by the Federal Housing Administration. They are available to buyers with little savings for down-payments and to those who have been deemed too risky by conventional lenders.
       
    6. Interest Only
      These loans require no principal reductions, making the monthly payments significantly less than a traditional fixed rate or ARM program. This type of loan is generally great for anyone planning to flip a home in a short period of time.

    7. VA
      This loan is for qualified veterans and requires only limited financial resources for down payment. These loans are backed by the US Department of Affairs.

    8. USDA
      This loan is for qualified buyers and properties. It allows the purchase of a home with zero down. Homes must be in a qualified rural area and meet other criteria.

    9. Jumbo Loan
      This loan type generally exceeds $333,700. This loan typically carries slightly higher interest rates. Consumers who are close to a jumbo loan limit may want to increase their down payment or use a piggyback loan to reduce their loan amount.
       
    10. Piggyback Loan
      Piggyback, or combo, loans, combine a standard mortgage loan with a second mortgage or home equity line of credit. Each loan has its own note, including repayment term, interest rate and monthly payment.

       
  2. Find A REALTOR
    Find a REALTOR you trust and are comfortable with. If you don't know a REALTOR, ask your friends or family for a recommendation. Tell the REALTOR you have already spoken with a mortgage lender and have been pre-qualified. Use this REALTOR as your "buyer representative". This means the REALTOR will assist you in finding a home and assist you in negotiating a low price. The REALTOR will have many questions for you, such as...
     
    1. the price range you have been pre-qualified for. This allows the REALTOR to narrow the recommendation of homes.
       
    2. the home specifics. This includes the number of bedrooms, baths, garage, color, etc..
       
    3. the home location. The neighborhood one lives in is very important to many people. If you have a preference, let the REALTOR know the specific community or neighborhood you'd like to live in.
       
  3. Go Home Shopping
    When viewing homes don't be afraid to ask tough questions. The purchase of a home is one of the most important purchases you'll ever make. Your home is an item that will take several years to pay for and you will live in for many years. Use the REALTOR to help you in the search process.
     
  4. Place an Offer on the Home
    Once you have found the home you want, the REALTOR can help you negotiate a low price. Allow the REALTOR to write an offer for the home. The REALTOR can write the offer while keeping financing, home inspections and fixtures in mind. A home inspection may be recommended to find defects not visible to the average home buyer. If the seller accepts the offer, it becomes a contract. The REALTOR will notify you immediately once he/she has been notified of the acceptance or rejection.
     
  5. The Closing
    The closing is the result of all your hard work. This is when you formally take over ownership of the home. The closing will typically bring together an attorney, the REALTORs involved, the current homeowner and, of course, you. The attorney will guide you and the seller through all the paperwork and ensure everyone signs and dates in the proper locations. Read the paperwork and ensure it reflects the details of your loan and the home itself. Remember something you were taught in elementary school - "There are no stupid questions".
     

* Some content courtesy of Tennessee Homes, April-May 2007

 
Copyright 2007-2016
Bill Dunn, REALTOR Elite Realty Group
Paducah, KY All Rights Reserved
Equal Housing Opportunity