Tag Archives: mortgage lender

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!

 

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.

Mortgage Rates Are Slowly Rising

According to Freddie Mac, mortgage rates are on the rise with rates inching up over the last two weeks. In fact, the week of November 23, the 30-year mortgage rate hit above 4 percent for the first time this year. Here are the latest average rates, per to Freddie Mac.

Average mortgage interest rates November & December 2016

 

While interest rates are currently higher than they’ve been all year, they still remain historically low if you look a the last 40 years.

historic-rates-by-decade

That said, any time the interest rates increase, this impacts your monthly mortgage outlay when you buy a home. The higher the rate, the higher your monthly payment. However, despite the slight increase in interest rates, historically, rates are still quite low and the minor uptick will not have a significant impact.

If you have questions about where interest rates may go in 2017, or have questions about whether this is a good time to buy a home, contact your mortgage lender. I can also answer your questions. Just give me a call at 206-391-0388. I’m happy to help!

 

7 Reasons Your Credit Score May Have Dropped

7 Reasons Your Credit Score May Have DroppedA good credit history is needed to buy a home, but what constitutes a “good” credit score varies by lender and loan type. For example, to qualify for an FHA loan with a 3.5% down payment, you need a FICO score of 580 or higher. Conventional loans backed by Freddie Mae or Freddie Mac require a minimum credit score of 620.

With that in mind, it is important to monitor your credit score at least annually. If you have seen your score drop since you last ran your credit report, here are some possible reasons for the change:

  1. Using too much of your available credit. You shouldn’t use more than one-third of your available credit. This can also become a problem if any of your creditors reduce your credit line, throwing the total balance versus total available credit ratio out of balance.
  2. Missing payments
  3. Accounts in collection, tax liens and bankruptcies will all lower your credit score.
  4. Average length of time with open credit lines. The longer, the better.
  5. Limited types of credit – a mix of different credit types is better than just credit card accounts, for example.
  6. Too many credit inquiries for credit cards and loans
  7. Inaccurate information on your credit report

Correcting these problems can take time and a concerted effort on your part to reverse the trend and boost your credit score, but it is possible. Talk to your mortgage lender for advice on what your credit score is, what it needs to be and how to improve it if you are falling short.

 

 

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!

 

 

 

Financial Literacy: Shopping for a Mortgage

This is our second blog post to celebrate National Financial Literacy Month and to help put (or keep) you on the road to financial success.

Shopping for a new home is such an exciting process – touring other homes, imagining yourself and your family living in them, having choices of different styles and vintages, etc. Shopping for a mortgage, however, isn’t as much fun, but it is important that you know what’s out there and what your rights are.

The Federal Trade Commission (FTC) offers these tips:

  1. Financial Literacy: Shopping for a MortgageCompare lenders and brokers. You can get a mortgage through a broker who represents multiple lenders or you can get a mortgage directly through a financial institution like a commercial bank, mortgage company or credit union. According to the FTC, some lenders are both lenders and brokers, and you want to know which you are dealing with because brokers usually get paid a fee for their services in addition to a loan origination fee and other fees. Compare several lenders and brokers and the various loan options and fees before choosing who you want to work with. Referrals from friends, family and your Realtor® are a good place to start.
  2. Get all relevant costs from your broker or lender, including
    • Current mortgage interest rates. Ask if the rates quoted are the lowest rates of the week.
    • Fixed or adjustable rates. If the rates are adjustable, ask about the terms of the loan, including the index the rate is tied to, how often the rate can be adjusted, and if there is a cap on how high it can go.
    • The loan’s annual percentage rate (APR). The APR factors in the interest rate, points, broker fees and other charges, expressed as a yearly rate.
    • Ask the lender or broker to quote current points as a dollar figure. Usually, the more points you pay, the lower your interest rate.
    • Ask the lender what fees you’ll have to pay including loan origination fees, underwriting, broker fees and closing costs.
    • Down payment and private mortgage insurance. Ask what percentage of a down payment is required and if you’ll be required to pay private mortgage insurance for down payments less than 20%.
  3. Negotiate the best deal. Mortgage lenders and brokers often have latitude in rates and fees, so you want to negotiate the best deal possible for your home loan. Ask each to provide you with a written quote, and once you’ve selected the best home loan for your situation, ask if you can lock in that deal, assuming you are in that stage of the home buying process. An experienced Realtor® can explain these steps to you if you have questions or need support.
  4. Fair Lending is required. The Equality Credit Opportunity Act prohibits lenders from discriminating against credit applications in any aspect of a credit transaction on the basis of race, color, religion, national origin, sex, marital status, age, whether or all or part of the applicant’s income comes from a public assistance program, or whether the applicant has in good faith exercised a right under the Consumer Credit Protection Act. In addition, the Fair Housing Act prohibits discrimination in residential real estate transactions on the basis of race, color, religion, sex, handicap, familial status or national origin. A consumer cannot be refused a loan based on these characteristics, charged more for a loan, or offered less favorable terms based on such characteristics.
  5. Shop, Compare and Negotiate, even if you have credit problems. Even if you have minor credit problems or have extenuating circumstances, you are in a position to negotiate loan terms, including interest rate and fees. Explain your situation and any credit history problems up front. It is also a good idea to get a copy of your credit report before shopping for a home. You can get a free copy annually at AnnualCreditReport.com.

You can find more information about shopping for a mortgage, including a glossary of terms, on the FTC website.

 

What’s in a Mortgage Payment?

money managementIf you are a first-time homebuyer, the prospect of buying a home is an exciting one. You are finally ready to say good-bye to your landlord and to have your monthly payment go to something you can call your own. But that monthly check covers more than just paying for your new abode. Here’s what’s included in your monthly mortgage payment:

Principal: This part of your mortgage payment goes toward paying down the balance of your home. If you have a fixed rate loan, this amount won’t change over time, but the percentage of the payment that goes toward principal instead of interest will increase over time. In the early years of your mortgage, you’ll pay a lot toward interest, but on the back end of the loan, the reverse is true.

Interest: Each monthly payment includes interest, or the cost of borrowing money. In a fixed rate loan, you will pay the same interest rate over the life of your loan. In an adjustable rate mortgage, that interest rate will fluctuate based on the market and according to the terms of your loan.

Taxes: In many cases, your lender will collect money toward your annual property tax bill and hold that amount in escrow until your taxes come due. Each monthly payment will include 1/12 of your annual property tax bill.

Homeowner’s Insurance: Your mortgage lender will collect 1/12 of your annual homeowner’s insurance premium with each monthly mortgage payment. Not all mortgage lenders will require this, but many do so they can ensure your interests – and theirs – are protected should something happen to your home.

Mortgage insurance: If you are making a down payment that is less than 20%, your lender may require you to have mortgage insurance to protect them should you default on your loan.

Have questions? An experienced Realtor® or mortgage lender can help!

Source: Realtor.com

 

 

 

 

 

 

Getting Pre-Approved for a Mortgage: What You Need to Know

Pre-approved mortgageGetting pre-approved for a mortgage will tell you up front what you can afford when shopping for your next home. This will save you a lot of time and stress. A pre-approval letter also helps let real estate agents know that you are a credible buyer, and you’re able to act quickly when you find your dream house. Here’s what you need to know to get pre-approved.

  • Know what documents are needed: proof of income (W-2 statements from the past two years, recent pay stubs, proof of any additional income, two most recent years of tax returns, etc.), proof of assets, employment verification and additional documentation such as your driver’s license and social security number.
  • Get your credit score in check. If your score is more than 740, you may be able to get a lower interest rate, because most lenders reserve the lowest interest rates for buyers who have the best credit scores. Most buyers need a credit score of at least 620 to get approved for a home loan.
  • Know what to expect from your mortgage lender, and what they should expect from you. The best lenders are more collaborative and explain all options available to you. When they check your credit report, they should be able to give you sound advice on how to improve your credit profile.
  • A good lender should also be able to give you info. on how to handle your money between your loan application and closing day. Lenders expect you to be prepared with documents they may need, and they also need you to be honest about your finances. Even if it doesn’t seem important to you, you still need to comply with their requests in order for them to be able to help you.

Not sure where to get started? Ask your real estate agent for referrals to experienced, reputable lenders in the area, including mortgage lenders for specific banks or institutions as well as mortgage brokers who represent multiple lenders. Good luck and happy house hunting!