Buying a home is an expensive purchase, and it’s one you’ll hopefully only make a couple of times in your life. But with the research that goes into buying a new home and finding an appropriate loan, homebuyers are often fretting over all the tasks and lingering anxieties.
Knowing how to approach your dream home and get the home loan pre-approval you’ll need to finance this purchase is a tall order. But there are simple ways to accomplish this goal.
Understanding your loans
For many homebuyers, financing the purchase with some type of loan is necessary. Not everyone can buy a home outright.
A conventional loan, or conventional mortgage as it’s sometimes called, is a homebuyer’s loan offered by a private lender rather than a government entity. This means that rather than dealing with a government body like the Federal Housing Administration (FHA), buyers would work directly with banks, mortgage companies, and credit unions.
But why would you choose to work with private vendors over the government? Depending on the situation, it might benefit the buyer to get a conventional loan. Borrowers with good credit and a large down payment at the ready would be better served by a conventional loan.
FHA loans are often desired due to their low down payments. However, there are also more monthly fees and interest involved. A conventional loan can circumvent that. Just don’t apply for too many loans, because the home loan pre-approval process could hurt your score. Although one loan inquiry will usually not harm your credit score, multiple inquiries could.
Know the damage
That being said, even though conventional loans work with private vendors, these companies often follow the guidelines set by the FHA. This often requires plumbing, electrical, and heating to be in order.
The roof and walls also need to be hole-free before a lender would feel secure in loaning money for a home. Nevertheless, things like water damage restoration can be quite pricey, and it might be a cost that a new buyer is unwilling to make. This is when you should talk to the seller.
Talk to the seller
If you’ve had the house inspected and numerous issues are noted by a professional, take this information to the seller prior to buying the house. You can always put in an offer before actually purchasing the house and rescind that offer if things don’t go exactly as planned.
Armed with this information, let the seller know that in order for the offer to go through, you need them to address the concerns noted in the inspection. Many sellers spruce up the home in cosmetic ways prior to selling, leaving more foundational aspects to falter. Make sure the seller knows how important this is and insist on them fixing it prior to you reaching out about a loan.
You may have to re-negotiate prices a bit, but adding a bit more to the overall price to ensure you get a quality loan is worth the hassle. If you don’t, you might end up with some sketchy third-party loan with a high interest rate.
Buying your first or even your second home can be stress-inducing, as the entire process is fraught with concerns, anxiety, and potential financial loss. You never want to leave yourself open to financial failure, so make sure you inspect a house for any needed repairs before firing the trigger. It’ll save you loads on your overall loan for the new house!