Category Archives: Down Payment

9 Steps to Take Now to Buy a Home Next Year

9 steps to buying a home in 2018You and your family are thinking of buying a new home – or your next one – in 2018. There are things you can do now to prepare yourself. Here are seven steps to get you ready for this exciting move!

  1. Check your credit score. Target a credit score of 740 or higher to get the best mortgage rate. See mistakes on your credit report? Because this process can sometimes take months, you’ll want to start doing that now.
  2. Follow the real estate market and interest rates. What is the market doing in your area? Is inventory low? What about interest rates – are they inching up? You’ll want to lock in the lowest interest rate you can to lower your monthly mortgage payments and long-term financial outlay.
  3. Save, save, save. We can’t stress this enough. Make sure you have enough to cover a down payment, closing costs, moving expenses, etc. Read our article on closing costs to get a better idea of what those might run.
  4. Don’t use your credit cards or rack up more debt. Obviously, you don’t want to open any new credit cards before you apply for a mortgage, but it is just as important not to use the existing credit you already have. Banks will look at your debt to income ratio, so you want that debt figure to be as low as possible.
  5. Don’t overspend during the holidays. It can be tempting to spoil your loved ones during the holidays, but this could make it harder to get a mortgage – particularly if you use your credit cards for holiday shopping. Instead, get creative. Offer services (e.g., dog walking, babysitting, home organizing, handyman skills) or experiences (gourmet meals, outings, etc.)  instead of giving gifts.
  6. Meet with two to three potential Realtors. We say “Realtor” instead of “real estate agent” because “Realtors” have different and a code of ethics to abide by. Real estate agents are held to a lesser standard. Talk to friends, family and co-workers to get recommendations, and do your research before scheduling no obligation appointments to interview. In addition, check their online reviews on Facebook, Zillow, LinkedIn and other sites to see what they’re clients are saying about them.
  7. Shop for a lender. Just like you would shop for a Realtor, explore your mortgage lending options. Check with your bank, local credit unions and mortgage brokers to see where you can find the best deal and the best long-term relationship.
  8. Gather your documents. When you meet with a mortgage lender, you’ll need to provide tax returns and W-2s for the last two years, pay stubs for the last few months, proof of your current living expenses, a list of debts and other expenses, etc.
  9. Get pre-approved for a mortgage. Once you’ve selected a mortgage lender and have pulled together all of your documentation, it’s time to get pre-approved! This will help you determine what your interest rate will be and how much home you can afford. Read more about getting pre-approved here.

Not sure what’s next? Have questions? Call Team Marti  at 253-859-8500. We’d be happy to help you prepare to buy your next home in the New Year!

 

8 Ways to Save Money for a Down Payment on Your Dream Home

8 Ways to Save for a Down Payment on Your Dream HomeImagine never having to pay rent again. Instead of paying a landlord every month, your monthly housing budget could go toward owning your dream home. Unless you’ve got rich relatives or a trust fund though, coming up with a down payment of 3 percent to 20 percent can seem a bit overwhelming. It doesn’t have to be. Here are 8 ways you can start saving for a down payment today!

  1. Reduce your current housing expenses. Your monthly rent is your most costly expense each month. Cut that bill by getting a roommate, moving to a smaller or less expensive place, or moving in with a relative for the short-term, and save the difference in a dedicated account for your down payment.
  2. Get a part-time job or a freelance gig. Increase your income by getting a part-time job or doing freelance work on the side. You could get a traditional part-time job in fast food or retail, but think beyond that to earn some extra cash. Are you good with technology, pets, words or art? Become a consultant, dog walker, blog writer or Etsy artist.
  3. Cut daily living expenses. Do you get a $7 latte each morning? Are you paying for a gym membership you rarely use? Do you spend a lot on take-out? Those costs add up. If you cut non-essential expenses, you could yield a few hundred bucks each month.
  4. Shop for your new insurance. Car insurance can be pricey, particularly if you are young. If you work with an insurance agent, ask if there are discounts available, or if they can get you a better price. For example, you can usually get a discount by getting your car insurance and renter’s insurance from the same carrier. You can also shop online for different types of insurance at an online site like Esurance.com. Caution: Be sure you are comparing coverages, not just price.
  5. Set up automatic savings deductions. To help you discipline yourself, set up an automatic deduction into your savings account with each paycheck. This is an easy way to save your money before you get a chance to spend it.
  6. Get rid of unwanted stuff. Whether you’ve got college textbooks you don’t need or slightly outdated electronics you’ve already replaced, there is a market for your unwanted stuff. There are lots of online marketplaces – Facebook, OfferUp, Craigslist, etc. – where you can sell your items online. Just be careful and always transact business in a safe, public place.
  7. Save your tax refund and bonus checks. If you get a refund at tax time, bonus checks at work or a birthday check from your parents, put that money in the bank!
  8. Pay down debt. High interest rates on credit cards or paying interest on multiple student loans can eat into your budget. Pay down your credit cards with the highest interest rates first, and consider consolidating your student loans to reduce the total interest paid.

With good planning, budgeting and discipline, you’ll be ready to start home shopping before you know it.

 

Team Marti’s Top 10 Tips for First-Time Homebuyers

Team Marti's Top 10 Tips for First-Time HomebuyersA seller’s market can be a tough place for first-time homebuyers to purchase their first home, but don’t despair. It is certainly doable. Educate yourself on what’s needed to succeed in a seller’s market and work with an experienced Realtor who will give you world-class, 24/7 service. Here are our top 10 tips for first-time homebuyers. Good luck!

  1. Get pre-approved for a mortgage. We recommend doing this before you begin shopping a home, so you know how much home you can afford and what type of credit you have, which will ultimately impact your loan terms, including the interest rates.
  2. Begin your home search online to get an idea of what’s available. Check out Realtor.com, Zillow, Northwest MLS or your favorite Realtor’s website.
  3. Work with a Realtor early on in your process. A talented Realtor can help guide you through what can be a very complex process, and offer advice specific to your situation. Get recommendations from friends and colleagues, and be sure to check out the referrals online before you meet with them. Read their online reviews and testimonials and their LinkedIn profile to see how long they’ve been selling real estate. You might also interview a couple of different agents to see who might be a good fit for you.
  4. Know the difference between your wants and needs in a first home. List all the features you want in a home and categorize them as ‘must haves,’ ‘should haves,’ and ‘absolute wish list.’ Learn more here.
  5. Check out the neighborhood and schools. The features of your home will be very important to you, but the neighborhood where you want to buy should also play a factor. Are there similar homes in the neighborhood? Are they well maintained? What amenities are nearby (e.g., parks, restaurants, shopping)? If you have a school-age child, or will be starting a family, what schools will your child attend? Visit the neighborhood at different times of day, if possible.
  6. Attend open houses. This is a great way to tour homes on the market to see what’s available. Keep in mind though that in a HOT real estate market like this one, a new listing may receive multiple offers the day of the open house. If you fall in love with a house you are touring, you’ll want to act on it right away.
  7. Write a winning offer. In a seller’s market, you need to bring your best offer to the table with as few contingencies as possible. Work with your Realtor to offer a fair but attractive price.
  8. Understand that your offer might get rejected. Competition is tough these days, so you may not get the first home you put an offer in on. Be patient. It will happen.
  9. Be prepared to cover closing costs. In a seller’s market, the seller tends to have control, so prepare to cover your own closing costs which will be on top of your down payment. Here are some additional guidelines.
  10. Don’t expect any home to be perfect. Sure, you have your heart set on a dream home with all of the desired features, but that is unrealistic. Realtor.com suggests you focus on three main factors: price, size and location. If you get all three, great, but getting two is more likely.

Good luck, and let us know if Team Marti can help!

[Sources: Inman, Realtor.com and CNN Money]

5 Tips for Getting a Mortgage in 2017

Special Home Financing Programs: FHA, VA and USDA LoansUnless you’ve got a trust fund or buckets of cash lying around, if you want to buy a home this year, you’ll need a mortgage. Here are 5 tips to help you find a mortgage that meets your needs:

  1. Find out how much of a down payment you need to save. Down payments vary from 0 percent to 20 percent down, and everywhere in between. Talk to your mortgage lender – or an experienced Realtor – to find out how much you need to save.
  2. Check your credit score. To determine your credit worthiness, you’ll want to review your credit score with a mortgage lender. If you are going for an FHA loan, the average qualifying credit score in 2016 was about 686. The average credit score for a conventional homebuyer was about 753, according to Bankrate.com.
  3. Get pre-approved. While pre-qualification does not guarantee you will get a mortgage, getting pre-approved does. When you get pre-approved by a mortgage lender, it means that lender has checked your credit, verified your income and assets and agreed to lend you money to buy a home, assuming everything else lines up (value of the home, etc.). Learn more about pre-approval here.
  4. The 4 Cs. When seeking pre-approval, a mortgage lender will look at the 4 Cs – Capacity (your current and future ability to make mortgage payments), Capital or Cash Reserves – how much money, savings and investments you have, Collateral – the home you want to purchase, and Credit – your credit history. Learn more about the 4 Cs here.
  5. Decide what type of mortgage is right for you. Before you apply for a mortgage loan, you’ll want to know the different types available to you. For example, if you are a veteran, you might be able to get a VA loan. If you are a first-time homebuyer, an FHA loan might be right for you. Talk to your Realtor and your mortgage lender to see what type of mortgage best fits your situation.

Get Closer to Your Dream Home in 2017 with These 3 Steps

Is buying a home in 2017 one of your New Year’s resolutions? If so, then you’ve come to the right place. Here I will tell you the top 3 things you must do this year to make your dream a reality, adapted from Realtor.com.

  1. Automate your savings. Whether you plan to put 3 percent or 20 percent down, saving for a down payment requires discipline. I recommend that you automatically set aside savings, whether it is an automatic transfer from your checking to your savings each month or a payroll deduction that goes directly into your savings account. However you do it, make saving money automatic. If you don’t see the money, you won’t spend it, right?
  2. Establish credit and maintain a solid credit history. It can take time to build up credit, but if you do it right, it doesn’t have to be difficult. Start with a low interest rate credit card, or a department store card like Macy’s or Target. If you’re paying on a student loan, be sure that’s being reported in your name. Installment loans like car loans are also helpful in establishing credit. Now that you’ve got credit, keep it clean by paying on time every month and by not exceeding more than 30 percent of your total credit limit on each of your accounts. For example, if your Macy’s card has a $1,000 credit limit, don’t spend more than 30 percent of that limit. Make sure you check your credit periodically (once a year) to be sure there aren’t any discrepancies.
  3. Stick to a budget. Owning a home is a big investment, and along with it, come big bills – utilities, homeowner’s insurance, mortgage payments, property taxes and more. To get used to those higher bills, learn to develop and stick to a budget. This will make it easier to discipline yourself once you move into your dream house to be sure you can afford it.

As with any new habit, these behaviors will take time to become ingrained in you, but just think at the reward once you’ve mastered them – your very own home! Well worth the hard work.

 

 

Homebuyers, Have You Saved Enough for Closing Costs?

Many homebuyers and home sellers believe they need at least a 20% down payment in order to buy a home or to move on to their next home. There are many loan programs where you can put down as little as 3% – or even 0% with a VA loan.

If you have saved up your down payment and are ready to start your home search, one other piece of the puzzle is to make sure that you’ve saved enough for your closing costs which include everything from homeowner’s insurance and title insurance to appraisal and legal fees.

Freddie Mac defines closing costs as:

“Closing costs, also called settlement fees, will need to be paid when you obtain a mortgage.  These are fees charged by people representing your purchase, including your lender, real estate agent, and other third parties involved in the transaction. Closing costs are typically between 2 and 5% of your purchase price.”

Many first-time homebuyers say they wished that someone had told them closing costs could be so high. If you think about it, with a low down payment program, your closing costs could equal the amount that you saved for your down payment.

Here is a list of just some of the fees/costs that may be included in your closing costs, depending on where the home you wish to purchase is located:

  • Government recording costs
  • Appraisal fees
  • Credit report fees
  • Lender origination fees
  • Title services (insurance, search fees)
  • Tax service fees
  • Survey fees
  • Attorney fees
  • Underwriting fees

Is there any way to avoid paying closing costs?

Work with your lender and real estate agent to see if there are any ways to decrease or defer your closing costs. There are no-closing mortgages available, but they end up costing you more in the end with a higher interest rate, or by wrapping the closing costs into the total cost of the mortgage (meaning you’ll end up paying interest on your closing costs).

Home buyers can also negotiate with the seller over who pays these fees. Sometimes the seller will agree to assume the buyer’s closing fees in order to get the deal finalized.

Bottom Line

Speak with your lender and agent early and often to determine how much you’ll be responsible for at closing. Finding out you’ll need to come up with thousands of dollars right before closing is not a surprise anyone is ever looking forward to. Want some guidance? My team can help explain the closing costs you might have to pay on the homes you are considering.

The Mortgage Process: What You Need to Know

As we said in our Oct. 17 blog post, this is a seller’s market, so it is important that you get pre-qualified or pre-approved for a mortgage. Here’s what you’ll need to qualify in the current real estate market:

  • A down payment. This can range from 5% to 20% of the purchase price. According to Freddie Mac, 40% of buyers are putting down less than 10% with some as low as 3%.
  • Income verification, credit history and asset documentation
  • Third-party appraisal
  • Stable income
  • Good credit history

Freddie Mac recommends these 5 next steps.

The Mortgage Process: What You Need to Know

 

Have questions? Not sure what’s next? Team Marti can help. Contact us today to set up a no-obligation appointment!

 

Getting Pre-Approved for a Mortgage: the 4 Cs

Know the 4 Cs of Mortgage Pre-Qualification and Pre-ApprovalRight now we are in a seller’s real estate market, because the number of homebuyers exceeds the number of  homes for sale. This means that, to buy your dream home, you need to stand apart from other home buyers. Not only do you need to have professional representation from an experienced Realtor to make a solid offer, but you also need to get mortgage approval to ensure a smooth home purchase.

We recommend starting with pre-qualification or pre-approval from a qualified mortgage lender or broker. The pre-approval process will tell you how much you can afford to spend on a home. Freddie Mac recommends that you focus on the 4 Cs which determine the amount you will be qualified to borrow:

Capacity: Your current and future ability to make mortgage payments
Capital or Cash Reserves: The money, savings and investments you have that can be liquidated
Collateral: The home that you want to purchase
Credit: Your history of paying bills and other debts on time

Before you start shopping for a new home, get mortgage lender and broker recommendations from your local Realtor. Work with that lender or broker to find out what your credit score is, how much down payment you’ll need and how much you can afford to borrow. Then you can begin your search with the confidence that you’ll qualify to buy the home of your dreams. Happy House Hunting!

[To learn the difference between pre-qualification and pre-approval, see my June 6, 2016 blog post.]

Top 10 Home Buyer FAQs: Part 1

Top 10 Home Buyer FAQs: Part 1 from Kent Realtor Marti Reeder of John L. Scott

 

Prospective home buyers have a lot of questions about buying their first – or next – home. Here are some of the most frequently asked questions I hear from home buyers.

1.  How do I get started? What’s the first step?

Choose a Realtor®, not just a real estate agent, to help you from the very first steps through the closing of your home. An experienced Realtor® can tell you what’s first, next and last, and there will be many steps. Start by asking friends and family for referrals. Then interview a few Realtors to see which best meets your needs and that you feel really understands what you want in a home. Is she easy to talk to, responsive and available? Is she a solo agent or does she have a team? How many homes has she sold in the last year? How long has she been a Realtor? All good questions.

2.  How long does it take to buy a home?

It depends, but usually 30 to 60 days from the time a home buyer signs a contract to purchase a home, according to Homes.com. This does not include time to shop for a home, make an offer, get the offer accepted or to apply for mortgage pre-approval.

3.  What type of credit score do I need to qualify for a home loan?

Again, the answer depends on what type of loan you are applying for. For an FHA mortgage loan, FHA.com says a FICO score of 580 or higher will allow you to make a down payment of 3.5%. A credit score lower than 580 will require a 10% down payment. For a conventional loan, Credit Sesame says home buyers need a minimum score of 620. We recommend you ask your mortgage broker, mortgage lender or your Realtor for the latest requirements, which can change. Bottom line: the higher the score, the better your chances for mortgage approval and the lower your interest rate.

4.  How much of a down payment do I need?

A down payment on a home is a percentage of the home’s purchase price that you pay up front. Ideally, you should plan on a down payment of 20%, but depending on a variety of factors, you may qualify for a loan with as little as 3% down. For a conventional loan, if you are putting less than 20% down, your lender may require private mortgage insurance (PMI) which will increase your mortgage payments. The more you put down, the less your monthly mortgage will be. Also, remember that your down payment is not the only amount of up-front cash you’ll need to buy a home. There will be other expenses including closing costs to budget for.

5.  Are there other mortgage loan programs besides a conventional mortgage?

Yes! There are special home financing programs available including specialty, government-based financing programs like FHA, VA and USDA loans. Learn more about them here.

Next week, we’ll cover the next 5 top frequently asked questions by home buyers. Have your own questions? Type them in the comments below or reach out to an experienced Realtor you know and trust to answer your questions.

Thanks for reading!

 

 

 

Homebuyer FAQs: Mortgage and Closing Costs

What You Need to Know about Mortgage & Closing Costs

Whether you are a first-time homebuyer or a seasoned homeowner ready for your next home, it is important to understand mortgage and closing costs. Here are some frequently asked questions to help you better understand your options.

Buying a Home: Homebuyer FAQs re Mortgage Costs and Closing CostsQ:  What factors impact a mortgage interest rate?

A:  There are many factors involved when determining a homebuyer’s interest rate including credit score, loan type, home price, down payment and mortgage costs (for example, points, mortgage insurance and closing costs).

Q:  What other credit-related factors are important when financing a home?

A:  The better your credit, the lower your interest rate for a home loan is likely to be. Mortgage lenders consider your overall credit score, but they also consider your credit history with them, the amount of debt you already have, how much money you have in savings, your total assets and your current income. Learn more about credit reports and scores here.

Q:  What are points?

A:  Also called discount points, points lower your interest rate in exchange for a fee paid at closing. When you choose to pay points, you pay more at closing, but you lower your interest rate and pay less for the home over time. Points are related to the loan amount, and one point equals 1 percent of the loan amount. For example, on a $200,000 mortgage loan, 1 percent of the loan amount would be $2,000. Points are listed on your loan estimate and on the closing disclosure.

Q:  What is mortgage insurance?

A:  Many lenders require mortgage insurance for borrowers who put less than 20 percent down on the purchase of a home. The mortgage insurance lowers the risk to the lender, making it easier for you to qualify for a home loan. The cost of the mortgage insurance is included in your monthly mortgage payment, increasing your monthly mortgage payment. The cost of private mortgage rates varies depending on the borrower’s down payment and credit score.

Q:  What closing costs will I have to pay?

A:  Closings costs, the amount of money you’ll need to pay when you close on the purchase of your home, vary. Sometimes these costs are paid out of pocket, but some lenders will roll these costs into the total loan amount of your mortgage. Certain closing costs may also be negotiated with the home seller and the home seller’s agent. Common closing costs include appraisal fees, title insurance, government taxes, tax service provider fees, and prepaid expenses (for example, property taxes, homeowner’s insurance and interest between the time of closing and the time your first payment is due).

For more information on interest rates, credit, points, mortgage insurance, closing costs and more, download this free home loan toolkit offered by the Consumer Financial Protection Bureau. It has some great information and checklists to help you through the home buying process. An experienced Realtor® can also answer these questions and guide you as you make decisions about buying a home.

Good luck!

Sources: Consumer Financial Protection Bureau