What comes first: the property or the loan? - Legal Home Loans (2024)
It’s easy to get carried away with the fun part of buying a property – looking at houses – but delaying the less compelling task of arranging finance will weaken your negotiating position on both the property and the loan.
Looking for a property to purchase is an exciting time. Choices regarding location, size, number of rooms and local amenities often see house hunters carried away in a deluge of daydreams and anticipation.
But, before you get carried away, it’s important to check off the essentials first. Although organising your finances may seem drab in comparison to perusing sales listings, gaining pre-approval with a lender will give you confidence about how much you can afford to borrow.
“First and foremost you need to determine if you’re eligible to borrow money from a lender,” says LHL’s leading finance broker. “Your ability to repay the loan will need to be assessed – you don’t what to find out after you’ve [made an offer] that your credit history or deposit is not up to scratch.”
Arranging finance before finding the perfect property will put you in a good position when it comes time to make an offer. When you do find the house you have always wanted, you can present to the seller and estate agent as a prepared applicant who is serious and reliable.
“It shows you mean business, and gives them peace of mind that your financing will not fall through. Don’t be afraid to let the selling agent know you have conditional loan approval in place,” LHL’s finance broker says.
Sellers are most interested in completing their sale fuss-free and with steadfast funding, and showing that you are capable of both will help put you at the top of a potentially competitive list of applicants.
In the instance that you find and secure purchase of a home without having your loan pre-approved by a lender, there are a few pitfalls that you risk running into.
“If you don’t have financing to pay for your property, you run the risk of forfeiting your initial 10 per cent non-refundable deposit you need to put down to secure the property. This may differ depending on what state you live in, but the point is it always pays to be organised and have pre-approval in place,” Andrew says.
Saving home loan applications to the last minute also leaves less time to find the most suitable loan and have it approved ahead of settlement.
“Arranging financing as an afterthought also adds immense pressure to the process of shopping around for the right loan and gathering the paperwork to prove you can service the loan,” the finance broker explains.“You don’t want to rush this process.”
The first step towards finding your new home is speaking to a Legal Home Loans broker to sort out the finances.
The standard home buying process follows this formula: you find the right property, you go under contract to buy it, you get approved for a mortgage loan, the lender lends you enough money to buy the home, you sign papers, and you move into your new house.
Most people go through six distinct stages when they are looking for a new mortgage: pre-approval, house shopping, mortgage application, loan processing, underwriting, and closing.
The first step in getting a mortgage is applying for preapproval. Getting preapproved gives you a good idea of the loan principal you can receive, making it easier to shop for homes within your budget. Once you're preapproved, you can start viewing homes, and potentially enlist the help of a real estate agent.
Arranging finance before finding the perfect property will put you in a good position when it comes time to make an offer. When you do find the house you have always wanted, you can present to the seller and estate agent as a prepared applicant who is serious and reliable.
A first mortgage is a primary lien on a property. As the primary loan that pays for a property, it has priority over all other liens or claims on a property in the event of default. 1 A first mortgage is not the mortgage on a borrower's first home. Rather, it is the original mortgage taken on a property.
Assessment. All lenders will ask you to do an affordability assessment. ...
Valuation. Before a lender makes an official mortgage offer they will need to verify the property you wish to purchase is not worth less than the cost of your mortgage loan. ...
Most of your monthly payment is applied to the interest you owe, and the remainder is applied to paying off the principal. Over time, as you pay down the principal, you owe less interest each month, because your loan balance is lower.
How long does it take to get approved for a home loan in California? The timeline can vary due to a number of factors. As we've explained in a previous article, the overall escrow and closing process can take anywhere from 30 to 40 days on average. But it can also be completed faster than that, in some cases.
An FHA mortgage is usually the easiest home loan to get. You can qualify with a credit score as low as 580 (with a 3.5% down payment) or even 500 (with a 10% down payment). You can also usually qualify for an FHA mortgage with more debt than with a conforming mortgage.
Generally speaking, it usually takes two to six weeks to get a mortgage approved. The application process can be accelerated by going through a mortgage broker who can find you the best deals that suit your circ*mstances.
Certainly, you have the option to view houses without obtaining mortgage preapproval, but it's highly advisable to secure preapproval before diving deeper into the home buying process. Without preapproval, you may encounter challenges and uncertainties that could limit your ability to make competitive offers.
The minimum credit score needed for most mortgages is typically around 620. However, government-backed mortgages like Federal Housing Administration (FHA) loans typically have lower credit requirements than conventional fixed-rate loans and adjustable-rate mortgages (ARMs).
Since mortgages are paid in arrears and on the first of the month, your first mortgage payment typically comes at the start of the new month after you've lived in your new home for 30 days. This means that if you close on your house on May 25, your first payment is due July 1.
First Priority means, with respect to any Lien purported to be created in any Collateral pursuant to any Security Document, that such Lien is the only Lien to which such Collateral is subject, other than any Permitted Lien.
Introduction: My name is Arielle Torp, I am a comfortable, kind, zealous, lovely, jolly, colorful, adventurous person who loves writing and wants to share my knowledge and understanding with you.
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