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Kali Cooper
Kali Cooper
REALTOR/Broker

Financing

Why Should A Buyer Get Pre-Approved First?

Though it's not uncommon for a buyer to be offended or taken aback by the fact that a Realtor won't show them houses without their being pre-approved by a lender for a mortgage, there are many reasons why they not only should NOT be offended, but why it benefits them!

1) Your lender will tell you how much you are approved for - and about what the payments will be at that price.  This will help you determine what your monthly budget will allow in terms of the purchase price of your next home.  Many times, lenders will approve buyers for more than they really feel comfortable spending.  So it's important to discuss your expected monthly payments with your lender.  Also, expect that these might increase as taxes increase!

2) If you are shopping for homes without a pre-approval, you might be looking at homes that you would never be able to afford, and thus will end up being disappointed no matter what you end up buying, because it won't match that "dream home" you saw that cost $50,000 more that you can afford!

3) Lenders will be able to tell you what financing programs might apply to you.  If you get an FHA loan, then they have strict guidelines on the habitability of a home - some foreclosed, bank owned, and short sale homes cannot meet these restrictions.  If you get a Conventional mortgage, then you have to make a larger down payment but you can get out of paying PMI (monthly mortgage insurance).  And in some areas, you can find no money down financing - which is great to know if this applies to you because it saves you some money upfront, which you could then put into updating a lower priced home, thereby saving you money in the long run.

4) When you find a home you love, you need to be ready to make an offer! Trust me, it's absolutely heartbreaking to find the perfect home only to have another offer being submitted by other buyers at the same time you find it - and you still need to get pre-approved!...

What About Down Payment Assistance?


This question is one I'm asked all the time - "What about down payment assistance programs?" 

Many people, especially first-time homebuyers, don't know what programs are available to them as they begin their home search.  Sometimes people don't realize that they'll need a down payment, or they don't know how much they'll need.  But with the Next Home program made available through Indiana Housing and Community Development Authority (IHCDA), you don't have to have a down payment if you qualify for certain income guidelines and you are purchasing a home within their limits.  For example, in Hancock County, a 1-2 person family can earn $66,000 and purchase up to $250,200.  But in Marion County, a 1-2 person family can earn up to $79,200 and purchase a home for $305,800 or less.  Click here for more information on these limits.

The income and purchase limits vary by county, but Next Home can give you up to 4% down payment assistance with an FHA loan, and 3% down for a conventional loan.  This assistance comes in the form of a second loan - with no interest and no payments - which is forgiven after two years of owning your home.  You cannot refinance or sell within those two years, but most people don't anyway.  If you do, the loan only has to be repaid when you refinance or sell.  Because of this, this is not a program that can be used by "flippers" or investors.  However, it is an excellent program for owner-occupants that either don't have a down payment or wish to keep the money they have for repairs or updates to the home.

Additionally, there is another special offer available for a short time from Fannie Mae for REO (Real Estate Owned...