How to Finance a Home or Property in Michigan?

How to Finance a Home or Property in Michigan?

How to Finance a Home or Property in Michigan?

Here are some basic steps to ensure successful financing when buying a property:

  • Get pre-approved.  This simple step could save you tons of time looking at houses out of your price range.  All you need is a written pre-approval certificate guaranteeing you a mortgage to a specified amount. It will also include a completed credit application.  Now you know exactly the amount you can spend on your dream home.
  • Carefully examine all of your finances.  Even though the lender has approved a mortgage price, you will need to figure out just how much of a mortgage payment you can afford.  Don’t forget all the costs like taxes, insurance, interest and principle.
  • Choose the loan best for you.  Fixed-rate or adjustable? Would you like a 30 year or a 15 year loan?
  • Know your credit score.  In order to be approved for a mortgage, your lender will run a credit report.  It’s better if you know what is on it ahead of time so you can clarify any discrepancies.
    • Not all loans (or lenders) are created equal.  When the time comes to get a loan, there are even more options to consider.  A direct lender (has the money but decides your final loan) or a mortgage broker (chooses from many lenders but takes a percentage of what you borrow)?
      • Also, when looking for the best loan, remember to weigh the options of interest rates, broker fees, points (each point is one percent of the amount you borrow), prepayment penalties, term application fees, credit report fees, and appraisal costs.
    • Ask for a written estimate from your lender.  Hidden costs can definitely add up quickly.
  • Apply for the loan that works for you.  You will need to show documents such as paycheck stubs, bank account statements, tax returns, as well as information on any loans, mortgages, credit card debt, household expenses and more.  Check with your lender or broker to find out what they would like to see.
  • Lock as much down as possible.  Try to set the lock on your interest rate when you apply rather than at loan approval.  This will protect you from interest rates that change daily and potentially could raise in between applying and approval.  A written lock guarantees you a rate and terms for a specified amount of time.  Also, ask how long it takes them to process a loan to make sure you lock-in period is long enough to include processing time.
  • Remember to ask about pre-payment.  Drastically reduce the length of your loan and save thousands in interest by paying a little more each month or making a lump payment toward the principle. However, pre-payment isn’t allowed on some loans or if you make a pre-payment it may include penalty fees.  If you want this option, make sure to say something to your lender or broker.