Before you get started in the home buying process we strongly encourage meeting for a free consultation. We'll provide advice on your next steps, help you evaluate your lender options, and educate you on the home buying process. This consult is also your opportunity to interview us and make sure we would be a good fit for you!
I recommend interviewing and getting estimates from 2-3 lenders. They will vary in what they can offer as well as their costs, interest rates, etc. I would be more than happy to provide some recommendations if you would like!
As you start shopping for a home loan, your first question of each lender will probably be "What's your interest rate? How much are you charging?" Interest rates are usually expressed as an annual percentage of the amount borrowed. If you borrowed $120,000 at 10% interest, you'd owe interest of $12,000 for the first year. With most mortgage plans you'd pay it at the rate of $1,000 a month. You would also send in something each month to reduce the principal debt you owe - and the next month you'd owe a bit less interest.
When your grandparents bought their home (putting at least half the purchase price down, by the way), their interest rate was probably around 4 or 5%. Rates stayed the same for years at a time. Then in the years following World War II, things became more turbulent. As economic changes speeded up, rates began to change several times a year. By the l980s, lenders were setting new rates on mortgage loans as often as once a week - and they still do today. When inflation hit a high in the '80s, some mortgage loans carried interest rates as high as 17% - and those who absolutely needed to buy, paid that much.
Rates dropped gradually through the 1990s, and by 2000 had reached their lowest rates in decades. Continuing into the millennium, home buyers appear to have the most favorable conditions for mortgage borrowing since their grandparents' days - and without 50% down payments either.
When you submit your offer on a home it can include a home inspection contingency. This means that during this period of time - usually 5-10 days after the offer is accepted, you can do a home inspection and cancel the sale if there is something of major concern to you. The home inspection contingency also gives you a little room to negotiate should the home inspection turn up issues on the property.
After your offer is accepted your lender will schedule an appraisal. This usually occurs 2-3 weeks after the offer is accepted. The purpose of the appraisal is to determine the home value, so that if you become delinquent on your mortgage and the lender has to foreclose they can recoup their money.
It will be important that the appraisal come in close to the sale value of the purchase agreement. If not you might need to bring extra funds to make the deal happen, or the seller might have to reduce the sale price. It's important that your realtor help estimate the home value before you enter into a purchase agreement.
A few days before closing your lender will provide you with a closing disclosure. This will detail all of the costs and the final amount you need to bring to closing.
A title company will coordinate the closing. You'll come to their office to sign all the paperwork and they will take care of all the transaction details.