You have decided to purchase a home. Maybe a first-time buyer currently renting. Or a seasoned buyer upgrading or downsizing. Majority of home buyers start their home search online. Then it is off to the races Open Houses. You have visited weekly Open Houses. Great may have narrowed down a community where you would like to live. Home Buyers what about mortgage financing. In the back of many buyer’s mind, they know what mortgage loan amount they qualify for. People forget about the tremendous financial responsibility of purchasing a home at their peril.One tip before searching for a home get a mortgage pre-approval. Get pre-approved. By getting pre-approval as a buyer, you can save yourself the grief of looking at houses you can’t afford. You can also put yourself in the best position. Make a serious offer when you do find the right house. Unlike mortgage pre-qualification, which is based on a cursory review of your finances. Pre-approval from a lender is based on your actual income, debt and credit history. By doing a thorough analysis of your actual spending power, you’ll be less likely to get in over your head. The pre-approval shows the prospective home buyer exactly what they can afford. No buyer’s offers are submitted to a home seller without a pre-approval. Go to a direct mortgage lender. What Every Home Buyer Should Know About Financing.
What Every Home Buyer Should Know About Financing. Buyers wonder what the lender will require for a pre-approval. Read on to learn what is expected for mortgage pre-approval. Once you have pre-approval you will be in the BEST position as a home buyer.
What Every Home Buyer Should Know About Financing
Let Us Get Started:
The lender will request the completion of a loan application. This can be completed in person or online. The buyer gives contact information, address and social security number. Address of where have been living for last two years. If renting landlord of the property. Will give marital status. Below are additional item lender will require.
- Self-employed 2 years 1040’s (complete Federal Tax Returns)
- W2’s for last two years (if employed)
- 3 months recent check stubs
Assets Owned (3 months financial statements)
- Bank Statements
- Brokerage/Investment Accounts
- Mutual Funds
- Clear title real estate, automobile, motorcycle, boat
- Miscellaneous investment or assets
Credit Report Will Reflect Current Balance & Monthly Payments
- Credit Cards
- Automobile Loans
- Student Loan
- Child Support ( May or may not be reflected on the credit report. Disclose to lender child support obligations.)
- Judgments against you (Judgement accrue interest which is not reflected on the credit report.)
Miscellaneous Documents That Maybe Needed
- Social Security Income
- Assets that will be liquidated for the purchase of new property.
- Any recent debt that is not currently reflected on a credit report.
Credit Rating or FICO Score
Credit report supplies credit scores. Credit score or FICO. Credit score three-digit number analysis of past and current debts. Consideration is given accessible credit. FICO rating of “creditworthiness.” Credit score ranges from 300 to 850.
|549 or less||Bad|
Resources: In United States, there are only three major credit bureaus. They collect credit account information. Information sold to permissible businesses. What Every Home Buyer Should Know About Financing. Consumers contact information.
Home Buyer Tip Find A House You Can Afford.
There’s a general rule of thumb when it comes to buying a home There are also a number of tools and calculators online that can help you understand how your income, debt, and expenses affect what you can afford. Don’t forget, there are lots of considerations beyond the sticker price. Taxes, insurance, maintenance, energy costs, etc.
Choose your mortgage carefully. Home Buyers Dealing With Finance. Used to be the emphasis when it came to mortgages was on paying them off as soon as possible. Today, the debt the average person will accumulate due to credit cards, student loans, etc. It may be practical to opt for the 30-year mortgage instead of the 15-year. This way, you have a lower monthly payment, with the option of paying an additional principal when money is good. Additionally, when picking a mortgage, you usually have the option of paying additional points (a portion of the interest that you pay at closing) in exchange for a lower interest rate. If you plan to stay in the house for a long time—and given the current real estate market, taking the points may save you money. What Every Home Buyer Should Know About Financing.
- Loan Payments. Mortgage monthly principal and interest payments. These payments due for the life of the loan. Life of loan can be from 15 or 30 years. Fixed rate or adjustable mortgages are available. Fixed rate payment remain constant for the life of the loan. Adjustable-rate mortgage interest rate tied to an index. Monthly payments can vary based on index changes.
- Los Angeles property tax rate is 1.25% of property sales price. Taxes are due twice per year (Dec 10 and April 10) – the fiscal tax year runs from July 1 – June 30.
- Homeowners Insurance. It is mandatory to have homeowner’s insurance in California. The insurance covers potential catastrophic & events.The average homeowner’s insurance varies based on home’s appraised value. Earthquake is an additional policy. Not included in standard homeowner’s insurance. Check with your insurance company for quotes.
- Private Mortgage Insurance. If your down payment is less than 20% you will be required to pay private mortgage insurance (PMI). Insurance protects the lender from financial loss if the home is foreclosed or sold at discount to the existing mortgage amount. Generally, lenders allow PMI cancellation once homes value reaches 80%.
- Condominiums, Townhouses, Lofts (planned unit development) are subject to homeowners association monthly dues.
- Utilities. Homeowners are responsible for paying utilities, local services, cable, trash, the internet and etc.
- Maintenance. Homeowners are responsible for maintaining their home. This includes the interior and exterior. You’re responsible for all home maintenance and upkeep costs. Examples, appliances, roof, windows, flooring, painting, etc. Responsible for gardening expenses. A good rule is to expect 1% of home value per year for maintenance.
- Rents increase annually. Home purchase with fixed mortgage rate determines housing payments for next 15 to 30 years.
Searching for Lender
Prospective buyers are bombarded with lenders. There are ads online, television, newspaper, and radio. Be careful of any lender that initially request your credit card information. As a Realtor® I would be happy to refer ethical competitive lenders. They have served my clients with attention to their individual needs. What Every Home Buyer Should Know About Financing.
What Should Buyers Require in a Lender?
- Direct Lender
- Competitive interest rates, costs, appraisal cost and fees.
- The mortgage lending process should be explained clearly.
- Should be available throughout during total process.
- Buyer aware of different loan programs.
- Make sure lender has the best loan program for you.
- Make sure lender can product on escrow’s time frame. Example: purchase agreement may require appraisal within17 days and loan approval 25 days.
- Returns phone calls promptly.
What is the difference between a Mortgage Broker and Lender
A lender actually provides the funds for a mortgage loan. Mortgage broker or company works with several lenders to provide funds. Generally, a mortgage broker is paid a fee acting as broker or intermediary between borrower and lender.
Types of Loans
Fixed-rate loans. Fixed rate loans the interest rate remains the same during the life of the loan. Meaning the monthly payments are the same for the life of the loan. Typically the loan is from 15 to 30 years.
Adjustable Rate Mortgages (ARMs). ARM are mortgage loans. Monthly the interest rate can fluctuate. Period adjustment based on an index which reflects the cost to the lender. Indexes: Federal Funds Rate, Treasury Bill rate and other rates set by the government, and other regulatory agencies. Generally, monthly payments start at a lower interest rate. There is an interest cap on adjustable-rate mortgages. Buyers know your beginning rate and cap rate. With ARM mortgages owners monthly payments change periodically.
Annual Percentage Rate (APR)
Mortgage interest rate stated as a yearly rate.
Mortgage Lenders Costs & Fees
Lenders will charge about $50.00 to check your credit. During the course of the loan process, the lender will run credit reviews.
Application and Processing Fees
What lender charges to process your mortgage loan. Generally, a few hundred dollars.
Lenders hire professional appraisers. They evaluate property’s purchase price. Want to determine the subject property is not overvalued for the area. Appraisal has 3 recent sold properties and 3 active listing properties. All should be with a one-half mile from the subject. The appraisal gives lender confidence in case of default loan will be repaid. Leader’s appraisal costs vary.
Miscellaneous fees can include wiring charges, courier, county recording fees, and notary.
Home buyers always check if the loan has a prepayment penalty. If the loan is paid off prior to loan period borrower can be charged a prepayment period. Meaning if you refinance or sell home lender will charge penalty.
What Every Home Buyer Should Know About Financing
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