Navigating the Mortgage Maze
Understanding Different Loan Options for Home Buyers
The financing process can be overwhelming at times. I am sure you have all heard the horror stories of having your whole apartment packed up and finding out the day before closing that there is a problem with your loan.
Relax, you’re in good hands! 😊
Hi! I am Eddie Cohen and I have been a mortgage banker for almost 20 years. I have worked in processing, underwriting, sales, & management and have probably seen close to 100k mortgage loan transactions! I know I must be crazy, right?
The key here is preparation. Align yourself with a good team and find a mortgage banker that is going to spend time with you. The biggest red flag, in my opinion, is all communication via email/computer. Talk to someone! Make sure to ask any questions you may have – and get solid answers!
I will give you a breakdown of my process so you can know what to expect. The first call is brief. There’s not a ton we can discuss until I have the whole picture of your finances. I want to know your goal. Well, it’s to buy a house Eddie… Tell me about your budget, have you shopped around online? Do you have an idea of what you’d like to pay monthly? How about the amount you are expecting to bring to closing? Lastly, if you’ve looked around at houses online – give me an idea of the price.
The next thing for you to do is complete a credit application. The credit app is going to fill in all the variables I need to determine which loan programs will work best for you. The credit app will cover these main items: residence & residence history, employment and income history, current asset balances, debts you currently owe, any real estate you currently own, and a section of disclosures for government monitoring purposes.
All these factors play a part in determining which loan program is best suited for your situation.
Here are some examples of what I mean:
Let’s say you have excellent credit, income at or below 100% AMI (area median income), but you just started saving and don’t have a ton of cash for a down payment. We would want to look at some of the down payment assistance programs to help you get the cash you need to purchase a home. Ohio Housing offers some great programs in this realm.
Now, down payment assistance does traditionally come with higher interest rates than a standard conventional or government loan so let’s say you have strong income, you’ve saved up for a down payment, but your credit took a hit in college from putting your friends bar tab on your credit card one too many times. Don’t worry, we’ve all done it. In this situation – we would want to look at an FHA loan. Why? Well FHA will approve more marginal credit while still providing terms that are in line with the market.
Let’s do one more…
“Eddie, I have it all together – my income is great, my credit is 900 (the highest it can be is 850), and I have $1M saved for my down payment.”
(Don’t worry you can still qualify for this program with as little as 3% down)
For this overachiever we are going to look at conventional loan options. Conventional simply means backed by Freddie Mac or Fannie Mae and are your traditional fixed rate loan options. The main reasons you would prefer to get a conventional loan over an FHA loan are two reasons, better rates, and cheaper mortgage insurance, that’s it. And when I say better and cheaper – it’s not by a wide margin. However, this would be the best loan program you can qualify for.
I know, it’s a lot, and overwhelming is probably a good word. But don’t worry, everyone starts at this point! The conversation will continue and evolve and if you need someone in your corner, we are here for you and happy to help!
Feel free to give me a call, shoot me a text, or send me an email anytime if you have questions or would like to get the process started of seeing what you qualify for.
Talk soon!
Eddie Cohen