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Step 6:
Get Funding
Often the cost of
real estate financing is routinely greater than the original
purchase price of a home (after including interest and closing
costs). Because financing is so important, buyers should have as
much information as possible regarding mortgage options and costs.
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Buyer's Guide
Step 6: Get Funding
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Local REALTORS® can
provide mortgage information, discuss financing options and recommend loan
sources. In addition, some REALTORS® also originate loans.
What kind of loan?
There are thousands of loans available out there from a variety of
lenders, but in general, the mortgage you choose will likely be determined
by at least several key factors:
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How much down? Loans
with 5 percent down or less are now widely available -- in fact, loans
from major lenders with no money down have appeared in recent years.
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If you place less than
20 percent down, lenders will want the mortgage guaranteed by an outside
third party such as the Veterans Administration (VA), the Federal
Housing Administration (FHA) or a private mortgage insurer (PMI, or
private mortgage insurance, is required by lender to protect against any
mortgage defaults). More than 2.5 million VA, FHA and PMI loans are
generated each year.
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How's your credit? The
best rates and terms are only available to those with solid credit. To
get the best loans, make a point of paying credit cards, installment
payments, rent and mortgage bills in full and on time.
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Are you a first-time
buyer? It might seem that "first-time buyer" means someone who has never
owned property before, but under most state programs, the term refers to
those who have not owned property within the past three years.
State-backed first-timer programs often feature smaller down payments
and below-market interest rates. For details, speak with your local
REALTOR®.
How do you get a loan?
To obtain a loan you must complete a written loan application and provide
supporting documentation. Specific documents include recent pay stubs,
rental checks and tax returns for the past two or three years if you are
self-employed. During the prequalification procedure, the loan officer
will describe the type of paperwork required.
Where do you get a
loan?
Mortgage financing can be obtained from mortgage bankers, mortgage
brokers, savings and loan associations, mutual savings banks, commercial
banks, credit unions, and insurance companies. A growing number of
REALTORS® can also arrange financing.
NEXT STEP:
Make An Offer
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