Getting Your First Mortgage
If you are a first-time homebuyer or buying your first Wichita, KS area home, you may not be familiar with the process. Below is a general timeline of how we'll go from Start to End. As you click on each section, you'll learn more about how each step of the process can work. If you have a question about any step or how it applies to you, feel free to Email Me your question!
Why You Should Find a Loan FIRST
Down Payments, Payments, PI, PITI, PMI - HUH?
Calculators and Worksheets to Help
Why You Should Find a Loan FIRST 
To some, it may seem backwards to find your financing before you've found a house. But you'll find that it's actually quite the reverse! Here's some very good reasons to find your loan first:
- By Applying first, you'll know whether the bank will even give you a loan before getting your heart set on a home, saving you frustration, heart-ache, and possibly money!
- You'll be able to decide up front what types of loans you're willing to use and since some loans will not cover certain types of homes, that helps you decide what homes to even look at.
- Obviously price range really is big in deciding what homes you want to see, so by finding out what a bank is willing to loan you and at what rate (hence your payment) so you can decide on the price of homes you really want to see.
- Being Pre-Approved or Pre-Qualified means that once you find a house, you can make a bid. Otherwise you could find the perfect home and watch someone else snag it while you THEN go apply for a loan.
- Plus having already been approved means a lot to the sellers. While you may not see this as a benefit to you, an offer with a very solid loan approval behind it will carry much more weight, and many sellers will not even consider an offer without at the least a pre-qualification.
So as you can see, there's a ton of ways in which this benefits you directly. Many of us hardly look at our credit scores, especially if it's the first time you're making a purchase of this size, so this is often the first time you've ever come face to face with your FICO score. Getting this out of the way up front can smooth the path to an easier closing. If there are any blemishes, we can often work on getting them fixed up-front and before you find a home, versus finding these out mid-closing and losing a house.
You're a first-time homebuyer, so you should go with an FHA loan right? WRONG. Don't let anyone steer you into a particular product JUST because you fit a stereotype. Sometimes an FHA isn't the best option, sometimes it is. Learn about loan programs, and see what works best for YOU. Find a good loan officer (recommendations below!) that won't just pigeon-hole you into a product but will help you figure out what works better for the length of time you plan to be in the home, your particular investing style, etc.
The most common loan types are as follows. In the past we've seen exotic versions of about every one of these, but these are the core products (There's a couple more available for folks who have a house to sell first, but that's not your gig!)
- FHA - This is a loan backed by the Federal Housing Administration and the one you probably hear the most about for first-time borrowers. It's not required that you be a first-timer to use this loan, but the appeal it has for first-time borrowers is less stringent credit requirements and a low down payment. Rates are usually fairly low, though you do have to pay Private Mortgage Insurance, which has a risk based premium up front and monthly payments until you've reached a certain Loan-to-Value on your home. Most of us sell our house before we ever make it to that point. Currently, the Down Payment requirements are 3.5% for FHA. So you need to have in the bank at least $3500 on a $100,000 home purchase. An FHA loan does require the home to pass an FHA inspection that checks the safety, security, and stability of the home. Homes must be in pretty good shape to pass this, although there is a specific FHA loan product called an FHA 203k that can handle some renovations.
- Conventional - This loan is the most versatile as far as your buying power. It's the preferred loan for all sellers because there are no lender inspections and the credit requirements for a conventional loan generally mean that the buyer is pretty stable. This loan does require a lot more down in general, ranging from 5% to 20%, depending on your credit, Debt-to-Income ratios, etc. This loan can be used on anything from a New-Build to a total dump. Most bank-owned homes and short sales ONLY offer their home through conventional financing due to the lender inspection issues with other loans.
- USDA - Rural Development loan - Yes, you read right - The United States Department of Agriculture does back loans to help spur development in what they consider to be less populated areas. The loans sometimes are a little smidgen higher rate but the big draw is that they require NO down payment and have no monthly PMI. They do require an up-front PMI payment which is actually put on top of the loan amount. So in essence this is a 102% loan product. My advice is to be cautious with these - just as in the old days of 100% loans, they leave you essentially upside down on your home. If you plan to be in the home at least 5 years, this usually evens out. It can be a great product for those without a large down payment, who want to be out in the rural areas, know they can afford the payments and aren't planning to move in a while.
- VA - Veteran's Administration loan - These loans are made by the lender but are guaranteed by the Veteran's Administration. The credit requirements are up to the lender. There's no down payment requirement, but there is a VA funding fee that is financed into the loan. This can be reduced if you do have a down payment of at least 5% or have other compensating factors (disabled veteran, etc). The closing costs are similar or less than a normal Conventional or FHA loan, funding fee aside, and there's no PMI. You must have your Certificate of Eligibility!
Obviously there are other loan products out there - Adjustable Rate Mortgages, 15 year loans, etc. The 4 listed above are the most common types used here in our market. That isn't to say that these are the best or only ones that will work for you. Talk with a trusted lender, get your options, talk to the lender about long-term goals, and make a decision. Obviously, finances will have a large part in what loans you can choose from and that will most likely narrow you down to 1 or 2 options.
Before you meet with your lender, you need to take stock of your finances and figure out how much you have or can have in savings or an IRA for consideration of down payment and closing costs. Also try to look down the road and see where your job or other interests may lead you in 5 years or so.
Down Payments, Payments, PI, PITI, PMI - HUH?
Why do I need a Down Payment? 
While a lender does make money off of your loan, they don't like to be stuck holding the whole shebang in their hand. They want to minimize the money they have into the house, and they want to make sure that you have a vested interest in the home. Another line of thought for the bank is that if you don't have money for a down payment, do you have the reserves to handle homeownership should a bump in your road occur.
For you - a good reason to have a down payment is to keep yourself from being upside down on the home. Your down payment, while not a liquid asset at this point, becomes your equity. You still HAVE your down payment, it's just sitting in the form of drywall and shingles on a property!
What the heck is PI, PITI?
These terms refer to your payment amount. PI stands for Principal and Interest - this is the part of your payment that is paying back the original amount of the loan and paying that month's interest for borrowing the money in the first place. This is usually the payment you see on Website ads, sidebars, and those annoying popups touting that you too can own a $500,000 home for JUST $600/month!
PITI refers to Principal, Interest, Taxes, and Insurance payment. This is the best way to figure your payments as it takes into account that you need to budget/pay for property taxes and homeowners insurance every month. This is the most accurate figure of your payment and the one you see most on a lender's estimate sheets.
What's this PMI I have to pay?
PMI is also called MIP and is Private Mortgage Insurance. The purpose of PMI is to protect your lending institution from a default. This enables them to lend to folks without a large down payment, thereby opening home-ownership up to more. PMI is generally required as either an upfront premium payment, monthly premium, or a combination of both (most common). If you have 20% down, you will not need to pay this, but if you have less, figure on having to pay it.
Calculators and Worksheets to Help 
One large reason for our most recent housing crisis is over-borrowing. I have never had a buyer go into foreclosure and I don't want to ever have a buyer go through that. Please make sure that you can afford the payment that the bank is throwing out there. I've included a few tools to help you out. The first is a Mortgage Calculator to help you get a rough idea on price range and payment. The second is a Budget Worksheet where you can plug in what you pay in other bills, other payments, savings, etc, and make sure that the proposed mortgage payment does indeed leave you money to have pizza every now and then!
Okay, here's where I get to play the part of super-conservative scolding mother. I have seen at least one deal fall through because of the reasons below, whether my own or within the office, and I don't want you to lose the home you want over something easily avoidable. They may sound common sense, but in the excitement of home-buying, common sense often vanishes!
The reason these are big NO-NO's is because when you apply for a home loan, the bank takes a snapshot of your finances and that's what they base your loan on. They do not want that to change over the course of the transaction. The final snapshot before closing needs to be very close to the initial application snapshot. So on that note, here are some things that you should NOT do or else you could jeopardize your home loan:
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Do NOT change jobs - if you are considering it, talk to your lender FIRST and try to stay in the same line of work, where it might possibly, could, maybe be okay. Switching careers right now could destroy your chances of your home! Do this before or after, but not during!
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Do NOT make any large credit purchases - In fact, try not to use your credit at all right now. But most definitely do NOT buy a vehicle, get another loan, etc. The car purchase is the most frequent offense and I HAVE had buyers not get their home due to this.
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Do NOT spend your savings - What you present to the bank as your liquid assets (savings, money market, etc) needs to still be there at closing. They will check to see. This is no time to loan your brother some bucks. New furniture is nice, but buy it AFTER you close or you might not be closing!
I promise we're not trying to be mean! We're really looking out for you! What good is all that furniture going to be if you don't get the house because of it. I'm not asking you to put your life on hold forever, just long enough to get through escrow and make the home yours!
The following loan officers are some that I have worked with in the past and my clients were very happy with. This is by no means an exhaustive list of loan officers in our area, and not even a list of all the ones I have worked with. Check with more than one bank, loan officer, credit union, or mortgage broker, to compare notes and be sure you're getting a fair deal on rates and costs!
Jan Wetta - Legacy Bank - 316-260-3755 - jwetta@legacy-bank.com - Jan works for Legacy Bank, a local brick and mortar bank. They do all sorts of loans, including conventional, FHA, VA, and USDA, and generally have moderate credit requirements, not loose, but not ultra tight. You can apply online at her website below:
Jenn Williams - Loan on Top - 316-304-2247 - jenn@loanontop.com - Jenn works for Top Mortgage, a local mortgage broker who has been around for years. They have more avenues to shop loans around, so are able to tolerate a little more blemished credit.
Janet McElroy - Capitol Federal - 316-689-3131 - jmcelroy@capfed.com - Janet works for Capitol Federal, often called Cap Fed around here. They are a conservative and strong local bank. They only loan Conventional and have stringent credit requirements, though they often have the lowest and best rates because of this. You can apply online with Janet at:
Brian Sandberg - Fidelity Bank - 316-291-5602 - bsandberg@fidelitybank.com - Brian works at Fidelity, which has many local branches here. One of Brian's strong suits is the FHA 203 product, which allows buyers to buy a rougher home than FHA normally allows and roll the fix-up costs into the loan. You can apply with Brian here:
Keep in mind that while I recommend you check with a couple of different lenders, to compare rates and costs, try not to go crazy on having your credit report pulled everywhere. According to FICO, having it pulled for the same purpose (obtaining a mortgage) within a couple of days time won't hurt, however if you apply at various places over the course of a couple of months, it looks like you're trying to take on tons of debt and hits your score.
