When the time comes to buy a house the next obvious step is financing. If you're like most people in America, you can't simply hand over several hundred thousand dollars so a home loan is typically the next step. Whether you have already found a home or just getting started in the process, applying for a home loan is a necessary step to finding out how much home you can afford and how much your monthly mortgage payment will be.Portland residential services

The difference between pre-qualification and pre-approval

These are actually two different terms; pre-qualification is simply determining how much money you make and how much of a mortgage payment you could comfortably afford without income. A pre-approval is the finite amount factoring in all of your assets, liabilities, debts and income to determine an exact price that your budget can afford. Pre-qualification is usually not done with a home loan advisor or loan officer but can be easily calculated on any mortgage calculator website. A pre-approval means you've actually done the homework with a loan adviser or home loan officer and provided them with the necessary documents and paperwork needed to make an informed decision. You may be pre-qualified but not pre-approved.

If you're considering purchasing a residential property there are some programs that are better suited for one home versus another. The USDA Rural home loan can offer a zero down option if necessary but there are restrictions as to the type of home you purchase and its location. FHA is one of the more common home loans for those just starting out because it requires a low down payment of just 3.5% (and there are additional programs that can even knock that down further to just .5%).

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A conventional loan is typically the most common but does require a 20% down payment minimum. If you've saved for several years this might be a great option. Conventional loans will offer a lower interest rate and typically better terms than an FHA. You can always convert an FHA into a conventional loan once the home has a lease and 80 to 20% loan to value ratio. This means that you owe less than 80% on the total value of the home. This is a great way to refinance to either shorter terms, a lower payment or both.

A VA loan is reserved for those that have served in the military. It is often times a zero down home loan and the seller is usually required to pay closing costs. This is a great way for military personnel to own a home with very little out-of-pocket costs.

If this is your first time purchasing a home you might consider going with the typical 30 year mortgage term. This means that you'll be paying on the loan for 30 years until it is completely paid off. Of course, if you sell the home and purchase another one you will restart those terms and cancel out the previous terms. Other terms include a 10 year or 15 year mortgage and if it is doable, can certainly help pay off the mortgage and gain equity at a much more rapid rate.

For more information on the specific residential mortgage loan that works for your financial situation please contact me today. I have excellent mortgage officers ready to help you find the best loan for your needs.