Let’s Talk Home Buying
Let’s Talk Home Buying
FCM Ag Consumer Lender
From house hunting to financing, navigating the road to homeownership can be overwhelming. But across the region, a strong housing market makes it a great time to consider taking the plunge. Whether it’s time for your first home or your dream home, Farm Credit Midsouth Ag Consumer Lender Mandy Beasley has some tips on making the process a little less daunting.
Start the conversation early. Before falling in love with a property, Beasley advises home buyers to assess their financial situations and explore mortgage options. Involving a lender early on helps determine a price range and pre-qualification can make a buyer more attractive. Pre-approvals can last up to six months.
Gather up-to-date financial records. To complete a loan application, you will need your past two to three years of tax returns, a most recent pay stub and an updated balance sheet. Beasley says it’s important for home buyers to account for all assets and liabilities when preparing their balance sheet. Understanding the basics of how to fill out a loan application can reveal how debt-to-income ratios impact a home buyer’s ability to borrow. Also, knowing your credit score ahead of time—and taking steps to improve it if necessary—can be helpful.
Avoid overextending finances. Beasley cautions home buyers against borrowing the maximum amount possible. As a general rule, she recommends the 28/36 standard, meaning a household should spend a maximum of 28 percent of its gross monthly income on total housing expenses and no more than 36 percent on total debt. This guideline is a way for home buyers to calculate what they can comfortably afford without crossing their borrowing limit. It’s also beneficial to know down payment requirements and how much you have to put down. While actual down payment requirements may vary, they are typically based on credit factors analyzed by the lender. Beasley says the industry standard for residential loans is 20 percent, and coming up with that amount of money can be an obstacle for many applicants. This is especially true for younger or first-time borrowers, or those who received home mortgages with small down payments in recent years and might have a difficult time transitioning to the industry standard. By contrast, ag loans often require 30 percent or more down, depending on the loan purpose and lending institution.
Consider the size of the property. According to Beasley, some lenders are hesitant to offer financing for farms and acreages they define as nonconforming properties. Farm Credit Midsouth, however, has a lot of flexibility and can finance any sized lot. Large properties over 40 acres sometimes require a higher down payment and shorter loan term, she notes. FCM treats a property under that threshold as a traditional home loan product.
While it all sounds a little stressful, buying a home is also one of life’s most exciting milestones. We feel privileged to be a part of that journey for our Members. For more information, and to get started with an online application, visit https://fcmidsouth.com/financing/home-loans.
HOME LOAN DOCUMENT CHECKLIST
While the list of specific documents may vary from lender to lender, consumer loan officers will likely ask you for the following information.
Application and current financial statement:
These forms will be provided by your lender. Separate financial statements will be needed for personal and related entities such as partnerships or corporations in which the applicant has an interest.
Past three years of completed tax returns:
Beasley notes the reason for three years of returns (which is standard for agricultural loans) is not to find good years or bad years, but to find trends in income.
Legal description of land offered as security:
This includes a deed or survey, accompanied by an aerial photo or a surveyor’s plat. If the offered security is a rural residence, a surveyor’s plat must be provided.
Savings and credit information:
The lender will want copies of all bank statements, certificates of deposit, mutual funds, stocks, bonds, etc., for each applicant.
This authorizes the lender to obtain credit reports; employment and income verifications; information related to assets, liabilities or insurance coverage; and any other information needed to complete the application.
An application for a construction loan must include a complete set of plans and specifications or a copy of the construction bid or contract signed by the applicant and the builder.