The up-front costs associated with buying a home can be frightening. These beginning costs are often the reason that most people don’t achieve their dreams of owning Fidalgo Island Real Estate.Harsh economic times have made lenders wary, which means qualifying for a mortgage is a lot more difficult. As our economy is gaining it’s health back, more and more lending programs are coming back. Many buyers were previously unable to come up with 20 % on top of the closing costs. That down payment can be quite a sizeable chunk of money to save. With the cost of Fidalgo Island real estate being on the rise that figure keeps going up.
These large onset fees are making homeownership less and less attainable for many. New lending programs are on the market that offer smaller down payments. Some with as little as 3% down and even zero down loans. With these loans comes a higher cost to obtain them. When the lender takes a larger risk it in turn will cost the consumer something more as compensation. Sometimes that cost is in a higher interest rate or higher loan fees, or both.
Down Payment Gift Explained
Many buyers think they can get a gift from their relatives for the fees or down payment. Strangely enough, most lenders don’t like gifted funds due to you have “no skin in the game”. If your lender does allow them they will want documentation as to where the funds came from. Your lender will also want those funds to sit in your bank account for a while before closing. Some lenders will require up to a three-month aging process of the funds. Unfortunately, gifted funds are rarely used these days. A good Fidalgo Island Realtor with great lender resources can direct you to a lender. A lender that will provide many options and coach you as to what steps you need to take in order to secure the right financing option that best suits your needs.
Lending Options with Small or Zero Down Payments
Some of the lending options that come with little to zero down would be FHA, VA, and USDA. There is even a present day 30-year conventional financing that only requiring 3% down. As you can see there are many financing options available! Your Fidalgo Island Real Estate Agent will want you to get the very best results such as:
- Save you money
- Receive the best possible loan
- Expedited Closing
Your Realtor doesn’t receive any kind of kickback for their referring a specific lender or any other service provider involved in the transaction. Receiving a kickback in this manner would be against the laws that govern Realtors. Your Realtor should be a wealth of information to you for services you need, a well-established Fidalgo agent will have a great referral base to every trade and business you need, before, during and after your transaction is closed.
Building Closing Costs In To Keep Down Payments Lower
Even with these low to zero down loans now available, as mentioned earlier, they come with higher fees and costs associated with the loan. In order to cover the loan fees and other costs involved, a buyer can build in closing costs when they place an offer. In your offer you would ask the seller to cover your fees at closing. Keep in mind, when making your offer you have to subtract your fees out of what you are offering, you are only building them into your offer so that you can build them into your financing. Your seller will be subtracting them out of your offering amount in order to get at the figure you are really offering. This is a difficult concept for many to grasp but your Fidalgo Island real estate agent can guide you through it.
Understanding How the Appraisal Effects the Loan
In an up-swinging seller’s market, there is usually not much room for negotiating the price. Once you get your fees built into your offer you could likely find your offering price is over list price. This is fine, as long as the home appraises for the higher amount. Your lender will lend either the agreed upon purchase price or the appraised value whichever is lowest. That being said, you always want your appraised value to be the same or higher than your purchase price. The appraisal is the review your lender will do in order to make sure you are not overpaying for the home. Damage or needed repair could significantly impact the value. Some examples are:
- Failing roof
- Rotten boards in Deck/porch
- Busted Furnace
- Faulty Water Heater
- Peeling paint on exterior
- Cracked foundation
All lenders have limitations as to the amount of funds they can allow the seller to contribute towards closing. Each program is slightly different on their guidelines and these guidelines are everchanging. In order to make the best decision, find a good agent to get you to the correct lending resource. Many people think that the best lender is their own bank. This is not always true, there are a lot of lending institutions out there that do not specialize in home loans. Not all banks are not up to date on all the programs available.
Mortgage Insurance-Will You Have to Pay it? How Much?
Most loans, other than a government insured loan, will require mortgage insurance if you have less than 20% equity in your home. The amount of insurance will vary depending on the amount of equity you do have in the home. With a rising market, your equity will build quickly and soon you will be able to refinance. By showing you have 20% equity in the home you will be able to drop the mortgage insurance. Mortgage insurance is in place to ensure your lender that the mortgage will get paid off in the case you were to default. Lenders believe and history has proved that homeowners with less than 20% equity in their home are more likely to default than homeowners with more acquired equity.
You’ll Need An Expert To Help Once You Find Your Fidalgo Island Real Estate
Working with an expert when contemplating a Fidalgo Island real estate investment will serve you well. A well-versed Realtor will guide you through the many purchase forms and ensure that the correct language is inserted in order to get the seller contributions you need for your financing. They will direct you to reliable resources and make sure your offer is contingent upon a successful appraisal and many other things in order to protect you and your best interest. Consulting with an expert should resolve any doubts that may stop you from purchasing and will better pave the path to the closing table.
