May 8, 2013 1:08 am
Sheldon says pre-approved buyers typically focus on purchase price, when in most cases, it’s the monthly payment over time relative to the purchase price that dictates whether or not that particular property can be identified as an opportunity.
Sheldon goes on to say that consumers are beginning to place more emphasis on sustainable payment over time considering they could be paying more for the property than anticipated. And today's real estate market conditions are causing many buyers to switch mortgage loan programs during the pre-approval phase and well into after they’ve gotten into contract.
While qualifying for the mortgage is the end result, to perform on a purchase contract, Sheldon says the appropriate loan program promoting long-term payment sustainability becomes the next critically important piece of the puzzle.
In his blog, Sheldon details the following borrowing options:
• Conventional loans represent the lowest cost combination of rate and payment over time. This type of financing represents the cream of the crop available in the market today. When it comes to conventional loans, twenty percent down to avoid monthly mortgage insurance, with the lowest possible payment being 3 percent is common.
• FHA loans—including first-time homebuyer options—are typically geared toward consumers entering the real estate market for the first time. This type of financing, however, is eligible for anyone and is not solely a first-time homebuyer program.
• Fannie Mae's Homepath.com program offers two main advantages: no appraisal requirement and no monthly mortgage insurance requirement. The cost of these two advantages comes in the form of a higher risk based pricing, an inherently higher cost loan.
• VA loans for military families through the U.S. Department of Veterans Affairs guarantees loans for veterans looking to purchase real estate. The program allows for 100 percent financing and no money down and does not contain any monthly mortgage insurance.
Published with permission from RISMedia.