This series grew from a post on our blog titled "First Time Home Buyer Guide: Steps to Buying a House."
Pre-Approval on Your First Mortgage
Did you know that in order to put in an offer, you need to have a pre-approval letter? This doesn’t cost anything, and having one helps the seller know that you are serious and able to afford the home. You may tour homes without it, but you risk having to scramble through the approval process if you happen to find the perfect fit and don’t have this piece in place. Rushing pre-approval can be stressful and end up costing more, so we recommend getting your pre-approval letter squared away as soon as possible. Some people are happy to go with the first lender they speak with and others choose to meet with a few different lenders before submitting their application. We interviewed mortgage brokers Ronica Aldrich and Michael Frieser to write up the below tips for you to keep in mind as you begin the process.
Find Your Lender
For shoppers looking to buy a home in or near Anchorage, we have a preferred lenders list we are glad to share with you. Keep in mind that different institutions offer various types of programs and eligibility will depend on your qualifications as a borrower. Some will have down payment assistance, facilitate VA loans, or even offer combinations of products to help you achieve the best deal possible. Make sure to ask about Homestart and NAHI programs. Many programs can be combined with Cook Inlet or other programs for maximum savings. To get the best mortgage rates, call a few lenders to compare their offerings.
Interest Rates: Of course you want to get a lower interest rate. Even a marginally lower rate can save you thousands over the years, but different programs offer different advantages. Rate lock windows can be particularly important during times when rates are more volatile.
Down Payment Requirement: The Alaska Housing Finance Corporation (AHFC) has a first time home buyer program for approved lenders. The down payment requirement through AHFC is 3.5% if choosing an FHA loan, 5% down for Conventional and 0 down if the buyer is eligible for a VA loan. But the institution you go with may have special programs for first time home buyers that go as low as 3% down payment.
Closing Costs: The larger share of closing costs are generally paid for by the seller in Alaska, but there may be closing costs you are responsible for which vary depending on the program chosen.
Different offices may offer shorter closing periods. That can be a big deal if your dream home has multiple offers because a faster deal can help your odds.
Personality is a factor, too - when speaking with lenders/brokers, check to see if their styles fit yours. Are you a direct, tell-me-while-I'm-thinking-about-it type, or do you prefer to mull and send email at 2am? Are you comfortable with the level of technicality the rep uses to answer your questions? Do they get back to you in a reasonable time-frame? Your lender should be comfortable communicating with you in the style that works best for you.
Tip: Run your own credit score through a free service like Credit Karma or Credit Sesame before your meeting(s) rather than having multiple lenders run your credit history. With this information they will be able to give you a ballpark idea of your pre-approval price range so you can start thinking about how much house you can afford.
Complete Your Application
You will probably go in to meet your lender in person. This is a great opportunity to get a sense of the process, moving forward. Make a list of questions and gather up your financial documents. Your lender will tell you what to bring.
Tip: If you’re wondering, “how much house can I afford?” check out this free mortgage calculator to see what different down payments, loan amounts, payment periods, and interest rates will do to your monthly payment.
Your pre-approval letter might take a couple days, and with it we can start seriously shopping.
We’d love to earn your business! Call us at (907) 242-9282 to get started! Learn more about the process at our post about the offer and negotiations phase.
Tip: Check out our "Staying Approved" post to make sure you follow steps to remain eligible.