June 18, 2024
If you have never purchased a home and aren’t sure where to begin, you’ll find plenty of advice about what to do, but some steps are more important in the early stages of the process than others.
One common loan planning step is to compare multiple financial institutions to see who offers the most competitive rates and terms.
Some borrowers are tempted to skip this step or truncate it. But that’s not a good idea. The home loan process should always include comparing multiple lenders, but if you’ve never tried that before, here are some things you should know that may help you save valuable time in the planning process.
Choose The Right Loan For You
Decide early what type of home loan is best for your situatiuon. Remember that the FHA loan program doesn’t have a single loan type. There are different requirements for certain types of homes including condos, manufactured homes, and typical suburban houses.
Some ask why they should not compare lenders in a more generic way, based on interest rates and terms alone.
The answer is fairly simple, not all lenders offer all loans offered by the FHA Single Family home loan program. It pays to save time comparing lenders who you know offer the home loan you need.
Loan Term
Many borrowers decide early whether they want a 15-year FHA mortgage option with lower interest rates or the higher-rate but lower-monthly-payments option of a 30-year FHA loan term.
If you can’t decide before comparing lenders, here’s one instance where asking the lender to show you both options could be a valuable (but more time-intensive) move.
FHA Loan Limit Issues?
That headline is a bit disingenuous. You can’t choose a higher or lower loan limit than the FHA allows.
FHA loan limits are HIGHER for properties with multiple living units. Do you need a single-unit home or a larger one? You can apply for an FHA loan to purchase a primary residence with as many as four units.
Loan Features
Plenty of borrowers won’t compare FHA lenders exclusively. When you compare non-FHA options be sure to ask each lender about the features of FHA loans and how they compare to other mortgage options:
- 3.5% down payment or 10% down for lower FICO scores
- 580 FICO or higher for the lowest downpayment
- No early payoff penalty
- No forfeit of earnest money for walking away if the house appraises lower than the asking price
- 6% seller concessions possible for closing costs
When you compare lenders about these features, be sure to ask how they compare to the non-FHA options you might be offered.
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association. He was Managing editor for www.valoans.com for (8) years and is currently the Associate Editor for FHANewsblog.com.
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