Know Your Financing Options When Buying A New Home

Written by Posted On Tuesday, 16 January 2018 04:01

Buying a new home is a significant investment. Before taking the leap, check if you are ready to take this project on. If you have good credit scores and your finances are in order then start searching for deals early or better yet, hire a seasoned realtor especially if you are looking for new homes in Texas, other locations in the state or targeting areas with a competitive market. However, if you have not secured a pre-approved bank loan or mortgage from a lender here are some financing options to consider.

Conventional loans

This type of loan is ideal if you have funds more than 10 percent or 20 percent to pay as down payment however expect higher cost because underwriting rules are stricter so banks may require additional fees for loans. If you have high private mortgage insurance premiums, it may be possible to negotiate down payments below 10 percent.

Bridge Financing

These are short-term loans usually from six to nine months and is an important alternative when you are buying a new house and have yet to sell your current home and trying to secure additional funds. Like any other loan, it comes with risks. Typically, the lender is a local bank or a subsidiary of your builder and they advance you the funds you require taking the equity of your current home as collateral. Note that these come with higher rates than regular mortgages and may put you in a bind if your current home does not sell right away.

FHA Loans

If your credit history isn’t exactly perfect and you only have minimal cash for a down payment, you can opt for a loan from the Federal Housing Administration (FHA). To qualify for this loan, you must be of legal age to sign a mortgage, have lawful residency in the US and a valid Social Security number. It is necessary to have stable employment status or at least be employed with the same employer for a minimum of two years. A minimum down payment of 3.5 percent must be paid and there are other FHA loan requirements to fulfill.

New construction loan

Unlike standard mortgages, new home construction loans are not as widely available but are sometimes offered by community banks, thrift institutions, savings banks and online brokers. This is a short-term loan and may be best if you are working with a custom builder or building a home yourself as a general contractor.

VA loan

A VA loan requires no down payment so if you are a veteran, you might want to consider this option as well.

Builder Financing

The majority of medium to large-scale builders offer this type of loan to qualified buyers. These builders usually own mortgage subsidiaries or have affiliations with mortgage companies allowing them to offer more finance options for their clients. Generally, since the application is done in-house, this may shorten the processing time however the interest rates and other mortgage terms might not be the most favorable. Make sure to shop around and compare total packages offered by other lenders before making a final decision on how to get a loan for a house.

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James Stevenson

Hi, My name is James and I've been involved in the property and real estate industry for 10 years now. I hope people will like to read about my thoughts and experiences in the industry and please contact me if you want to discuss my articles further!

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