Tag Archives: mortgage loan

7 Financial Habits That Will Make Buying A Home Easier

Buying a Home: Homebuyer FAQs re Mortgage Costs and Closing CostsGood credit is important in qualifying for a mortgage, but potential homebuyers with less-than-perfect credit can still get a mortgage. No matter what your score, these seven financial habits will make buying a home much easier:

  1. Paying your bills on time or early. This means paying all of your bills on time, not just the ones on your credit report. In addition to credit cards and loan payments, this means utility bills, rent and other regular payments that show you are a responsible adult. Ideally, pay your bills early. This is much easier now that we can access our credit card and loan accounts online.
  2. Pay more than the minimum balance due. If your minimum payment on your Target card is $50 a month, pay $75 or $100. This will reduce your total debt faster as well as the amount of total interest you are paying.
  3. Use less than 30 percent of your available credit. While it is helpful to have credit cards for emergencies, you want to keep your total balances under 30 percent of your total credit limit. For example, let’s say you have a Visa card with a $1,000 credit card limit. Don’t charge more than $300 on that card.
  4. Review your credit report for errors. This is a good habit to get into no matter how good your credit is. If you check your credit report annually, you’ll be able to identify mistakes and get them corrected before it is time to apply for a mortgage loan. See a mistake? Contact the original creditor right away and contact the credit bureau to dispute the information. It could take several months to clear a mistake, so staying on top of your credit report is helpful.
  5. Start building a credit history early. If you are in your early 20s, you ideally have established some credit already, whether it is an introductory credit card or a student loan. Start small by applying for a low limit credit card or getting a car loan with a parent as a co-signer.
  6. Keep paid off accounts open. The length of your credit history is important to a mortgage lender. Even if you don’t use that Visa card you got in 2010, and the balance is zero, keep the account open. It shows a seven-year credit history, and it will help lower your total debt-to-credt ratio (see #3 above).
  7. Set a budget and stick to it. With credit cards so readily accessible, it is easy to treat yourself with a nice dinner, a manicure/pedicure or furnishings for your man cave. But is this the best use of your money? Probably not – unless you budget for it. Set a monthly budget and only indulge in those little luxuries when you have the money to do so without charging it to a credit card.

These good money habits will help you position yourself to qualify for a mortgage loan when you are ready to buy your first – or next – home!

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!

 

 

 

4 Ways to Improve Your Chance of Getting a Mortgage

Mortgage talk is HOT on everyone’s minds right now –  especially in the midst of the spring and summer buying season. Homes rarely stay on the market for long if they’re a hot buy — so here’s how to jump start your likelihood of getting a mortgage, so you can get the home of your dreams faster!

  1. Financial Literacy: Shopping for a MortgageCheck your credit report. Make sure everything on your credit report is accurate, and dispute anything that’s incorrect. Make sure you pay down any debt you have, and don’t rush to close old accounts. According to Realtor.com, 15% of your credit score is due to overall account length. The longer you’ve had a certain credit account open, and as long as that account is intact, it’s wise to keep it open.
  2. Get pre-approved for a mortgage loan. Getting pre-approved may not guarantee you a home loan, but it will help you get an “in” with your lender to show that you are capable of being fiscally responsible and are serious about buying a home.
  3. Don’t apply for new credit shortly after applying for a mortgage. This could affect your score, and down the road, lead to rejection of getting a mortgage. Lenders will see every time that you have applied for credit, and your even searching for it can register a ding on your credit file.
  4. Decide on the right type of mortgage. According to Realtor.com, the type of home you want, as well as assistance you’ll need, will help decide what type of loan you’re eligible for. If you’re a veteran, you could consider a Department of Veterans Affairs loan.  If you’re a first-time homebuyer, the FHA could help you out, and provide you with a 3.5% down payment. Daily Finance recommends to get your paperwork together. Your lender will want to see proof of income, assets, credit documents, and any other important documents showing you make what you say you make, and that you are who you say you are.

Have questions? Reach out to a local mortgage lender or ask an experienced Realtor for referrals. Happy Hunting!

 

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.

 

10 New Year’s Resolutions for Buying or Selling a Home in 2015

New Year's Resolutions for buying or selling a home in 2015.The housing market is tougher in the winter, and with the New Year here, people may be scrambling to not only sell a house, but to buy one. Here are 10 tips to make buying or selling a home easier in 2015.

Selling a Home

  1. Declutter but don’t depersonalize. Get rid of unnecessary things that have accumulated, but remember to keep your home inviting. A generic-looking home will not do as well on the market compared to a more inviting home that has some personality – and potential!
  2. Freshen the paint. Neutral paint will help make your home seem lighter and bigger. It will be easier for potential buyers to consider moving in if the walls aren’t a bold shade, and it will give a good first impression with potential buyers.
  3. If you can, update kitchen appliances. This will add more value to the home, and it can make an older house look fresher. A kitchen can be the most valuable room in a house. If you can’t install new cabinets, try re-facing them. It’s often more cost-effective and can make them look like new.
  4. Eliminate bad smells. Clear disposals and drains, open windows, air out the house, etc. If you are a smoker, place bowls of vinegar around the house, and leave the bowls out for a few days. It will get rid of most of the stale cigarette smell when windows are opened.
  5. Make any adjustments that will make your home more appealing to a would-be buyer.

Buying a Home

  1. Get pre-approved by a lender before you house hunt. This will save a lot of stress from looking at houses you may not be able to afford, and you will feel a lot more comfortable making a serious offer when you find the house that’s right for you. Getting pre-approved will also give you a better idea of what you can afford, and it will give you time to shop around. (We’ll talk more about this later this month, so stay tuned!)
  2. Leave room to expand. While buying a two bedroom house might seem like a good idea, think about your future before you make an offer. Do you want more kids or maybe a guest room when your parents visit? See what bigger options fit into your budget before settling on a smaller home.
  3. Keep your money where it is. If you plan on buying a home in the next three to six months, it isn’t wise to make any large purchases, like a new car or boat. Lenders want to see that you’re reliable, and it can help you get a better loan. Don’t open new credit accounts or create new debt, or you’ll have trouble getting a loan.
  4. Think from a financial standpoint, not an emotional one. If you fall in love with a house that is out of your price range, you may make some poor decisions. Think more from a financial standpoint, like how much upkeep will cost you, along with potential heating and energy costs. A home purchase is an investment, and you don’t want to end up hating the house in three months because you didn’t trust your financial instincts.
  5. Hire a home inspector. While it seems costly upfront, it could save you thousands of dollars down the line. A home inspector’s job is to make sure you know everything about the house, and that will help you make a better decision. If there are issues with the house, this can also be used as a bargaining tool.

Still have questions? Thinking about buying or selling in 2015? Your real estate agent – we recommend you work with a REALTOR® – can answer all your questions and allay your fears.

6 tips for selecting a mortgage loan

mortgage 2Realtor.com, a resource offered by the National Association of Realtors®, has some great tips about home financing, ideal for helping buyers and sellers educate themselves on the ins and outs of mortgages, closing costs and more. Here are 6 tips for getting the right mortgage loan for you.

  1. Figure out what you can afford. After getting an idea of the cost of homes in your area, gather together this information: monthly income and debts, living expenses and down payment saved. Using an online mortgage calculator like the one on Realtor.com, you can estimate what your mortgage payments might be. Guideline: your mortgage payment should be no more than 43% of your monthly income.
  2. Choose a mortgage type. Consult with your lender or an experienced Realtor® to see if you qualify for a VA loan, first-time homebuyer loan, conventional loan or a jumbo loan.
  3. Select a mortgage broker or lender. You can go directly to a lender to apply for a mortgage or you can use a broker who will shop for a mortgage in exchange for a fee. With a lender, you will do the legwork to shop for the right loan, interest rates and terms. With a broker, the broker will do the research for you and offer you suitable options.
  4. Check your credit history. Every consumer can order one credit report for free each year. It is a good idea to do this before you apply for a mortgage to identify any errors or problems. Go to AnnualCreditReport.com to order a free report now. Not sure how to decipher the report? See errors on the report? Ask your Realtor® or lender for help. The sooner you do this, the sooner you can resolve any discrepancies that could prevent you from getting a mortgage.
  5. Gather your documents. When you apply for a home loan, the lender or broker will require a lot of documents including two forms of government identification, two years of tax returns, two years of income statements, and proof of assets. You may need to provide additional documentation such as bank statements.
  6. Get pre-approval. When you get pre-approved for a mortgage, the lender or broker will determine whether or not you qualify for a home loan and, if so, how much home you can afford. The pre-approval process does not guarantee you’ll get a loan, but it is a good step in that direction.

For additional information or questions about securing a mortgage, check with your Realtor® or a reputable lender.

Source: http://www.realtor.com/advice/6-smart-tips-securing-mortgage/