When obtaining a home loan, you’ll receive two important documents from your lender: a loan estimate and a closing disclosure. On the surface, these documents are very similar, but they both serve different purposes. Here’s what you need to know about the differences between these two forms and what each means for you:
Missouri First Time Homebuyers: Dos and Don’ts
Getting pre-approved for a loan and having the money to close the deal are always huge concerns for first time homebuyers. Missouri is currently one of the most affordable places to live in the U.S. With that being said, it’s no surprise that recent college graduates are flocking to St. Louis to settle down. There are many dos and don’ts when becoming a homebuyer. Mortgage lenders are abundant so it’s important to research and make an educated decision when choosing a realtor and lender. Here are a few dos and don’ts to make the home purchasing process a breeze and help you avoid common mistakes.
DO: Get pre-approved before looking for your new home.
Prequalifying for a loan before searching for listings is crucial. It allows you to know your price range and saves time, eliminating houses you cannot afford. Understanding your monthly budget prior to purchasing a home is vital. Evaluating monthly and annual expenses will give you an idea of what you can spend on your home. Realtors will generally take you more seriously if you are already pre-approved. Pre-approval can also supply negotiation power with the seller, helping save money for first time homebuyers. Missouri and the rest of the country are experiencing the inventory shortage in the real estate industry. This type of situation can create bidding wars on available properties. No matter how much you may love a particular house, stick firmly to your financial plan. Avoid making decisions based on your emotional connection to the house.
DON’T: Buy a home if you plan to move soon.
If you will be moving soon or plan on staying in your home for a limited time, do not buy a house. Some people have the misconception their home will automatically sell whenever they are ready to move. This is not true in most cases. There is no guarantee you will find a buyer or renter for your property. Consider renting until you have decided on a permanent location.
DO: Seek down payment assistance.
Sometimes even a low down payment may be out of the question for first time homebuyers. Missouri has a number of groups statewide which provides down payment assistance to approved buyers. If you are struggling to come up with a down payment, contact one of your local organizations to see what kind of funding is offered. Keep in mind, most assistance programs do not require you to pay back the money they have given to you.
DON’T: Make large deposits or change bank accounts.
The underwriting process can be time consuming. Moving assets, changing bank accounts or making large deposits can make the situation more complicated for both parties. Monetary sources must be documented for each new account. It is better to have your lender verify funds before rearranging accounts. Monetary changes during the approval process may affect eligibility for a loan.
DO: Hold off on buying or leasing a new vehicle.
Purchasing a new car while trying to qualify for a loan can cause a great deal of trouble for first time homebuyers. Missouri buyers can expect to negatively affect their debt-to-income ratio if they purchase a new vehicle in the midst of the approval process. Underwriting will look at your willingness and ability to pay off debts. Lenders will be weary to hand out a loan if you have recently taken on new debt.
DON’T: Overlook additional costs.
Closing costs are not the only extra expenses associated with buying a home. In fact, many sellers now consider it standard and acceptable to pay some, if not all of the closing fees for the buyer. FHA financing allows the seller to pay up to 6% of the closing costs for the buyer. This is fantastic but there are also other costs which can increase your monthly dues. Homeowner’s insurance, mortgage insurance, and increased utility bills can all play a factor in your monthly allowance. After calculating all expenses, you may find that the home you wanted is financially out of reach.
Cornerstone Mortgage, Inc. will happily help you with all your home mortgage needs. If you would like to speak to a representative, call us toll free at: 800-965-9910 or visit our contact page located on our website.
Missouri First Time Homebuyers: Dos and Don’tsThe above information is for educational purposes only. All information, loan programs and interest rates are subject to change without notice. All loans subject to underwriter approval. Terms and conditions apply. Always consult an accountant or tax advisor for full eligibility requirements on tax deduction.