Summary: Navigating mortgage options is key when buying a home. Explore different mortgage types, get pre-qualified and pre-approved, compare offers from multiple lenders, and work with a skilled real estate professional to secure the best deal.
Main Points:
- Understand different mortgage options (FHA, VA, USDA, etc.).
- Obtain mortgage pre-qualification and pre-approval.
- Compare offers from multiple lenders to find the best terms.
- Partner with an experienced real estate professional for guidance.
It’s a well-known fact, but it’s worth repeating: Except in relatively rare situations where homebuyers can pay for the entirety of a new home with their savings, approval for a mortgage is crucial for purchasing residential real estate.
Mortgage pre-approval and pre-qualification are often key to purchasing a new home as well. Pre-qualification helps you better understand the limits of a likely home loan—how much home you can afford, in other words.
Pre-approval can mean the difference between a seller accepting or declining your offer. That’s especially true in very competitive, fast-paced real estate markets like Reston and Northern Virginia.
With how vital mortgages are to the homebuying process, and how much variation there can be in their costs, it’s always a good idea to review all of your mortgage options. A little effort now can pay off with a lower interest rate or other benefits that last for many years to come.
Here’s our advice for navigating the many different mortgage loan options that may be available to you.
Review Available Mortgage Options
If you’re planning to buy a home and haven’t learned about the different types of mortgage loans available, start looking into them.
Conventional mortgages are common, but there are plenty of other options for mortgages. As the Consumer Financial Protection Bureau (CFPB) explains, these mortgage options include:
- Federal Housing Administration (FHA) loans. These loans can help those with lower credit scores. They support lower minimum down payments and offer lower interest rates.
- Department of Veterans Affairs (VA) loans. The VA itself does not require down payments (although certain lenders may), and interest rates with these loans are low.
- US Department of Agriculture (USDA) loans. Limited to rural areas (which does include some parts of Northern Virginia), these loans feature no required down payments and competitive interest rates.
- Home loans from state and local programs. Benefits can vary, but often include lower interest rates and reduced down payment requirements. These programs are sometimes targeted toward first-time buyers and public service employees.
Not every homebuyer will qualify for all of these special loan programs. Each one has some restrictions in place, such as income limits, the need to be a veteran or surviving spouse, and limited availability based on location.
However, benefits like low or no down payments and reduced interest rates as compared to conventional loans can be incredibly valuable. Visit the CFPB page linked above to learn more about individual programs.
Take Advantage of Mortgage Pre-Qualification and Pre-Approval
Mortgage pre-qualification offers an estimate from your lender of what you can likely afford for a home loan, as Bank of America explains. It’s a relatively simple process that can help guide you toward homes that most likely fit into your budget.
Mortgage pre-approval is a more involved process, but it’s often vital for having your offer accepted. It’s based on a detailed financial review conducted by your lender and, if approved, ends with the lender issuing a letter that states they will offer a home loan.
For sellers, especially those in competitive markets like Northern Virginia, pre-approval has become an expectation in many cases. In other words, it’s always worth the time and effort to go through the pre-approval process to make your offer on a home more attractive.
Don’t Limit Yourself to a Single Lender
Interest rates and many other variables (like fees and closing costs) that influence the cost of a monthly mortgage payment can vary from one lender to the next. For that reason, it’s in your best interest to request and compare offers from several different lenders.
Because home loans represent hundreds of thousands of dollars and their term extends across many years, even small changes in interest rates can lead to substantial savings over time. As is so often the case, some time and effort invested early on in your homebuying journey can lead to significant benefits in the long term.
As Bankrate explains, even loan offers with identical interest rates can vary in terms of closing costs, private mortgage insurance premiums, and more. While savings in these areas are often across a shorter term than is seen with interest rates, it’s still an opportunity to save money.
Work with an Exceptional Real Estate Professional
Nikki Lagouros brings together in-depth data analysis, residential construction experience, deep industry connections, and a warm and personalized approach to each client for an exceptional experience. Let Nikki help you in your homebuying journey: Start Your Property Search Today!