Glenda Feeken - Come Live and Play on the Kenai

1. What kind of mortgage do you prefer? (fixed, variable, etc.)
2. How much money do you wish to borrow?
3. What length of time for payoff do you prefer (15 yr., 30 yr., etc.)
4. How much do you plan to put down?
5. What is the verifiable source of your down payment?
6. What is your current income and who is your employer(s)(provide company name, address and contact)? Previous employment history may also be required.
7. What are your current assets? (monthly income, checking/savings account balances, valuable possessions [car, boat, jewelry, other real property, investments, etc.
8. What liabilities have you? (car loan, credit cards, other debt—include account numbers)
9. What is your social security number?
10. A copy of your sales contract (offer)

So how much money should I put down on a house?

There are advantages and disadvantages to both large and small down payments. The decision is a matter of personal choice and financial circumstances.

A large down payment produces instant equity, potentially a smaller mortgage amount and or lower monthly payments and more leverage in negotiating for a lower interest rate or larger loan. Less money down, on the other hand, could mean more money for other costs such as improvements or immediate living expenses. Although payments will be higher on a larger mortgage, you will have the advantage of a greater tax deduction for mortgage interest cutting your tax bite.

A down payment of less than 20% (in other words financing 80% or more of the total home value) will result in the requirement that you pay for a mortgage insurance policy (MIP or PMI). This will also add to your monthly housing expense.

How do I come up with cash for a down payment?

Here are some options to consider if you dont have sufficient money in personal savings:

• Tax free gift—Often parents or others will be happy to make a gift of up to several thousand dollars to help a young individual or couple get started in a home of their own. Make sure the gift is accompanied by a gift letter stating that there is no obligation to repay.
• Borrow against equity in a life insurance policy. If you have equity in a company pension plan, you may often borrow against it with very favorable interest rates.
• Withdraw cash from a retirement savings plan such as an IRA. (This is not used often because of the penalties for early withdrawal.)
• Request a one-time cash bonus in lieu of a raise in pay from your employer
• Use your own business or other personal asset as collateral on a cash loan.
• Equity Sharing—Ask a friend, relative, business partner or other investor to provide cash for the down payment in return for a share in the equity in your home. (You can always buy them out later as your financial circumstances improve.)
• Be creative! Youll be surprised at how many people are willing to help. Ask and you shall receive!

Which comes first, the home or the loan?

Go for the money! There may be exceptions, but generally speaking, if youre serious about making a purchase, this works best. Entering the marketplace with your financing in line—at least to the extent of having a lender who will qualify you up to a specific amount—puts you in the drivers seat.

Otherwise, a seller faced with a choice between you and a pre-qualified buyer, will probably opt for the sure thing rather than wait for you to get your financing approved. Even if you make an offer first, your contingency offer could get bumped by an offer from a pre-approved, ready-to-roll buyer.

Your real estate agent can steer you to any number of sources for financing. Ask for a screening application with the prospective lender to determine the loan amount for which they will pre-qualify you.