Hey everyone! So I'm planning to buy my first property towards the December area, give or take. I'm wondering if there's anything I should be doing now in regards to the loan process and whatnot. I plan to take the owner occupant route and only put down around 5%. I was wondering if the process takes a bit more time if your down payment is lower. I assumed there would be more hoops to jump through. Any steps anyone would reccomend taking now or in the near future? Thanks in advance! Also any reccomendations for lenders would be great too!
@Daniel Sabato There are so many other factors which impact the loan process not just down payment. Its always better to start the pre-approval so you know your eligibility.
@Harjeet Bhatti Thanks for the response! That’s basically what I was wondering so you pretty much answered my question. Getting the pre-approval process started is generally the first step I take it?
I would definitely tighten up your credit score and debts as much as possible. I think credit score reporting on pre-approvals only last a certain amount of time like 60 days...check me on that. If you have a credit card, they usually provide free credit scores. Other than that, my lender told me no big purchases, stay at my job (I have a W2) for 2 years. A pre approval might not be a bad idea to get a lay of the land.
As far as timelines, I put down 5% on my residence and it didn’t take any longer than any other conventional loan. Definitely start shopping lenders to understand you options. Best of luck!
I don’t think a lower downpayment loan takes any more time. Itll just be considered not as competitive as other offers since you’re putting down less and your DTI will matter more because you’ll have a larger payment.
Also try to do conventional as fha has more hurdles
Make sure your DTI ratio in where it should be. If you have any unnecessary debts, get rid of some stuff. Assuming you have a job, good credit, cash, DTI looks good, you should be good to go! Good luck!
Thanks for the tips folks! No credit card debt or any debt for that matter & my credit score is solid! Just finished college in May & I’ve got a solid & stable full time job without any student loan debt. Hoping the process goes painlessly, this would be my first time applying for any type of loan! Any recommendations as far as lenders or where to get the processs started? I’m in NJ if that makes any difference!
It’s great that you’re getting started in real estate investing! As a lender, the three main factors we look for are as follows:
Credit: Typically you’ll find most lenders require a minimum qualifying score of 620. The higher your score goes above that, typically the better your pricing and options will become.
Income: Lenders will also consider your debt-to-income (DTI) ratio as a factor for approving your application. Generally speaking, the DTI limit is going to be 50%. DTI is calculated by comparing what you currently earn to what your monthly recurring expenses are, plus your future expected housing payment.
Assets: This will be liquid assets such as checking/savings, 401k, IRA’s, stocks, etc. These funds will go toward your down payment and any associated closing costs.
I hope this helps!
@Tony Le Claire That helps a ton Tony! I don’t have any debt currently! Some minor monthly expenses but nothing high or out of the ordinary. I just finished college in May & I’ve got a stable full time job without any student loans. I’ve also built up a solid credit score making minor purchases throughout college.
The only worry I have is that my DTI will be an issue once the mortgage payment is factored in. In reality, I'll be able to rent out one of the two units, and I will live in the other unit with a few friends, so I'll actually be living for free & positively cash flowing, with a good cushion for potential issues/disasters, but I know that's not how it'll appear on paper unfortunately.
As for your lender question, you'll probably hear a lot of people suggesting small local banks. My suggestion would be if one lender tells you something that doesn't sound right, don't be afraid to try another. Terms will vary depending on the banks guidelines.
@Daniel Sabato You will get so many suggestion and answer but we all don't know your scenario. We will answer in general way. You have to talk with one lender at least so you know your eligibility.
Yes, clean your credit, but also keep saving v Remember that your lender will want to see six months of PITI (principal, interests, taxes, and insurance) in your reserves in addition to your down payment. Some lenders might accept accessible funds in retirement accounts for this, but your best bet is to have it there. You also want to keep your down payment in one account and don’t move it. Must lenders would want to see these monies seasoned for at least three months (to show that’s your money and it’s not being borrowed).
Also, depending on how competitive your market is, having enough funds to cover closing costs without asking for seller concessions might put you at a competitive advantage.