Determining your financing strategy is the first thing you should do when getting ready to buy a new home in Sparta. Make a plan before you start shopping. A bank or mortgage company should be your first stop. They will check on your credit history to see if you are eligible for financing. Your credit score needs to be 620 or higher. Most lending institutions won’t even look at you if you are below that. Your income to debt ratio, (the amount you make compared to the amount you owe) must be within their range. You will most likely need to show work history for the past 2 years. Schooling can sometimes count toward the 2 years. Those are just a few of the things that the lending institution will look at. You will not know for sure where you stand unless you go and have them check it out. These are the questions you will initially want answered:
- Is financing possible for me?
- If so, for how much can I get approved?
- How much can I afford? (Many times this figure is less than what the bank actually approves.)
Whatever you do, don’t get yourself in over your head. It is better to settle for a lesser house than to have one taken from you a year or so later when you can’t pay the bills. A new home should be something you are free to enjoy – not something that causes stress and headaches at the end of every month.
Once those decisions are made, you need to decide which bank or mortgage company you are going to use. You should ask about the different loans each company offers for which you qualify. Compare interest rates, closing costs, and other terms. I would be certain there is no prepayment penalty. I would try to get the loan set for 15 years if possible. This will save you thousands of dollars in interest but will increase your monthly payment. If you decide to go this route, it may affect which price point you are in for home shopping.
There are a few loans being used frequently these days. I will review the basics of these loans but encourage you to speak with a lender as he or she is the professional on these matters. Also keep in mind that these details can change rapidly so be sure to speak with your lender for clarification.
- The Conventional Loan – The conventional loan is usually the best loan you can find. It is can be a Freddie Mac or Fannie Mae loan, takes about 30-45 days to close, has your best interest rate available, requires little closing costs, but requires about 25% down. In other words, if you are buying a home priced at $100,000, you would need around $25,000 at closing (not including closing costs).
- The FHA Loan – The FHA loan takes about 30-45 days to close, has a competitive interest rate, and only requires 3.5% down. In other words, if you are buying a home priced at $100,000, you would need around $3,500 at closing (not including closing costs). Closing costs vary from one lending institution to another.
- The Rural Development Loan – The Rural Development loan also takes about 30-45 days to close, has a competitive interest rate, and requires no money down (yes, I said “no money down.”) The closing costs on this loan vary from one lending institution to another.
- The Construction Loan – The construction loan is what you will need if you own your own land and are wanting to finance the building of your home. You will most likely have to pay around 20-25% down. Some banks will allow you to use the land you are building on as part of your 20-25%. Other banks will not. At the end of the construction process, you will have to roll your loan into a conventional loan. There will be closing costs on this conventional loan as well as fees at the beginning of the construction loan.
Most recently there have been several lenders that I have worked with that seem to be able get the job done better than others. First National Bank of Sparta, Citizens Bank of Sparta, Mortgage Investors Group, and Seagrave Mortgage of Cookeville are all good lenders which provide great options for their clients.
Myra Phillips is the loan officer at First National Bank of Sparta. She can set you up with a conventional loan, a construction loan, a rural development loan. or an FHA loan. First National Bank of Sparta is pleasant to work with and offers great closing costs.
David Miller works at Citizens Bank of Sparta and has proven his ability to get people approved that have struggled elsewhere. They offer conventional loans, construction loans, Freddie Mac loans, Fannie Mae loans, and in-house loans. This is a local bank and David is a local so enjoy the small town feel here and reap the benefits.
Seagrave Mortgage is located in Cookeville, Tennessee. Patty Seagrave is an excellent loan officer who offers almost any type of loan available with the exception of construction loans. She is easy to work with, very professional and on the ball. She will work with you and for you to make your loan a reality. If she cannot get you approved for a loan, she will often tell you what you need to do to get approved.
Mortgage Investors Group is also located in Cookeville, Tennessee. You can find almost any loan here. We usually work with John Parrish who has years of experience as does Gail Wilson who will handle a lot of your paperwork. We have always enjoyed working with them as well.
Even though we have experienced the easiest and most successful transactions with the above lenders, we are eager to work with any lender. Banks and mortgage companies are constantly changing their lending policies which directly affects you, their client. We try to keep up with changes being made among the local banks so we can keep you informed. However, you need to speak directly with your lender to be certain nothing has changed. Please let us know if you have any questions about financing. We would love to help you in any way we can.