March 10, 2017 – Top five tips for securing a low down payment mortgage, according to Anthony Powell, Vice President of Operations AAFMAA Mortgage Services. The low down payment market for home loans still comprises the majority of home purchases. According to Freddie Mac, in 2016 there were over 6 million home purchases, with the majority of home buyers opting for low down payment mortgages ($2 trillion in home sales in 2016).
Four financing options exist for home buyers in the low down payment market. Military home buyers should be aware that some lenders only offer one option (and the risks associated with limited options). A state licensed loan officer can explain all the mortgage options, whereas unlicensed loan officers may not have all the options available to the military home buyer.
According to Irene Higginson, Realtor for Allen Tate, Raleigh, North Carolina, “Home buyers are at a major disadvantage to sellers from just a few years ago. Home buyers must write checks up front for due diligence and earnest monies, as well as appraisal, inspection and other costs. These monies may be forfeited on each and every home investigated by the home buyer. A licensed professional Realtor can help mitigate these cost risks.”
The following five tips will help military families looking to secure a low down payment mortgage.
First, know which of the four mortgage options fit the military homebuyer best – VA, USDA, FHA or conventional. State licensed loan officers are the best resource for researching consumer options. A list of state licensed loan officers is available at http://www.nmlsconsumeraccess.com. A registration number is not a state license.
Second, know the military homebuyer’s credit score before house hunting. Military homebuyers may lose tens of thousands of dollars in due diligence, earnest monies and fees per home researched if mortgage financing is not secured. Additionally, military homebuyers may correct a poor credit score if simple issues are dragging the score down. A good credit score can result in a lower mortgage rate and save the homebuyer thousands of dollars in interest rate savings.
Third, shop around for a mortgage lender. According to the CFPB (Consumer Financial Protection Bureau) at least half of consumers simply pick the most convenient lender and do not shop. This may result in tens of thousands of dollars of excess fees. Consumers shop for cars, and should also shop for mortgages.
Fourth, know that FHA premiums (mortgage insurance) are non-cancellable and are for the life of the loan – potentially making FHA a very expensive method for home financing. Homebuyers with low credit scores or who expect to stay in a home for five years or less may benefit from an FHA mortgage.
Fifth, and most importantly, change the purchase and sales contract to benefit the home buyer. There is no law that requires that you purchase a home with a standard contract. Realtors don’t like to change contracts, but it is in the home buyers best interest to do so. Here are some changes that can benefit the home buyer: i) provide a “free put” by inspecting the property without making an offer – with seller consent if necessary; ii) extend the due diligence period- some Realtors extend as long as 21 days; iii) write the due diligence check out in two parts – one immediate and one after 10 days; iv) always have a contingency that enables the home buyer to walk if the appraisal comes in lower than the purchase price; v) don’t write a big deposit unless the home buyer is willing to lose it.
The process of purchasing a home favors the seller. Homebuyers may purchase a home once in the first fifty years of life. Without a state licensed loan officer, homebuyers stand to lose tens of thousands of dollars. At AAFMAA Mortgage Services, state licensed loan officers are ready to answer questions for current and former members of all branches of the U.S. Military, National Guard and Reserves.
Competitive, accurate, honest, transparent, and member-owned. Experience the difference at AAFMAA Mortgage Services. AAFMAA Mortgage Services LLC is licensed in the States of North Carolina, Florida, Virginia, Maryland and Connecticut (NMLS: 1423968).
The team operates from 639 Executive Place, Suite 203, Fayetteville, North Carolina 28305. Call 844-218-6926 (844-4-AAFMAA), email mortgage(at)aafmaa.com or visit the website at http://www.aafmaa.com/mortgage to reach AAFMAA Mortgage Services. Equal Opportunity Lender. Lender NMLS: 1423968. Anthony Powell, NMLS ID 78385.