Getting Financed

Before you connect with a lender, here’s some information you should know so there are no surprises.

Order a copy of your credit report. You can do this for free once a year to check on suspicious activity, file disputes, or pay down small debts that are adversely affecting your credit. After checking your credit, hold off on applying for any other loans or credit cards. *DO NOT pay down any large debts or close any accounts without talking to a lender, he/she will be able to tell you if the debt is hurting or helping your chances of prequalification.

A lender will need information from you in order to get you pre-approved and through the home buying process. Here are a few things to have ready for them:

• W-2 forms from the past two years
• Pay stubs from the past 30 days
• Federal tax returns from the past two years
• Proof of other sources of income
• Recent bank statements
• Details on long-term debts such as car or student loans
• ID and Social Security number

While there are some programs to help with down payment assistance, It’s still a good idea to have some money saved to go toward your deposit, inspection, appraisal, down payment and closing fees. A good rule of thumb is to have at least 10% of the sales price of your home available in liquid cash. Your lender will give you specifics and let you know exactly what you’ll need. In some cases it might be more than 10%, in most cases it’s at or below 10%.

Think about what you are spending now for housing and what you would feel comfortable paying monthly for your mortgage payment including taxes, and insurance. Allow yourself some cushion for home care and maintenance expenses too. Try to keep your housing expenses below 30% of your total expenses. For example, if your total monthly income is $5,000, budget your housing expenses to be below $1,500.

It’s highly recommended for buyers to be pre-qualified before looking at homes. One of the biggest reasons to get this letter is to find out exactly how much you can afford. There is no sense in looking at homes that are listed for $350,000 when you can realistically afford homes that are listed in the $150,000 ballpark. Also, having a pre qualification letter lets sellers know you are serious about buying and can help you stand out from the competition.

There are so many terms in the mortgage world that make things difficult to understand. Below is a quick list of mortgage terms to help you understand what your lender is saying:

• Conventional Mortgage:
A mortgage in which the interest rate remains the same throughout the entire life of the loan is a conventional fixed rate mortgage. These loans are the most popular ones, representing over 75% of all home loans. They usually come in terms of 30, 15, or 10 years, with the 30-year option being the most popular.

• FHA Mortgage:
An FHA Loan is a mortgage that's insured by the Federal Housing Administration. They allow borrowers to finance homes with down payments as low as 3.5% and are especially popular with first-time homebuyers.FHA loans are a good option for first-time homebuyers who may not have saved enough for a large down payment.

• VA Loan:
VA loans are guaranteed by the US Department of Veteran Affairs. They help veterans & active duty military members afford purchasing a home without requiring a down-payment by guaranteeing 20% of the loan's value up to the conforming loan limit.

• USDA Home Loan:
A USDA home loan is a zero down payment mortgage for eligible rural and suburban homebuyers. USDA loans are issued through the USDA loan program, also known as the USDA Rural Development Guaranteed Housing Loan Program, by the United States Department of Agriculture.

• What is mortgage underwriting?:
Mortgage underwriting is what lenders use to determine whether or not a certain borrower is eligible for a home loan. It is an in-depth analysis of your credit history and financial background that will determine the odds of you being capable of making regular mortgage payments on time and in full each month.

• Appraisal:
The bank or lender orders the appraisal which is used to determine an estimate of the value of the home you are buying. A qualified appraiser creates a report based on a visual inspection, using recent sales of similar properties, current market trends, and aspects of the home (e.g., amenities, floor plan, square footage) to determine the property's appraisal value.

Ready to meet a lender and begin the process? Click below to complete this form and I will share with one of my trusted lenders and introduce you to him/her to get you started on the road to home ownership.

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