Well, pride of ownership and having something that is yours to do with what you want. A home is also a long-term investment for your future. Don’t let all of the exploding market talk scare you. Real Estate prices go up and down, but just like investing in stocks, you buy low and sell high based on when you enter the market. If you put yourself in a position where you have to sell within a very short period of time you had better make a sound investment or you will fail as many are now failing because they relied on an implied return without realizing preparing for a long-term goal. In addition to the equity investment, a home is also a valuable tax incentive. You can deduct your mortgage costs and property tax costs from your income taxes that you file each year whereas your rent is simply paid and gone forever rather than reinvested.
You can follow our guidelines laid out here: Documents for any documents needed to apply for a loan. A quick synopsis would be: 2 years W2s, 1 month of pay stubs, 2 months of banks statements, 401k, Retirement savings statements, driver’s license and social security card.
A loan officer should never quote you an interest rate before they take all of your pertinent information. Beware of loan officers that do this, because they have no reason to keep their promise and all the reasons in the world to change it before closing. For more info read this blog: Deciphering Interest Rates. Once you have given all of your information, and a loan program can be chosen, you should then demand some type of rate lock agreement. Even if it is in your best interest to float at the time of application, it is something that should be discussed with your loan officer as to when you will be locked in.
Any loan officer worth their salt and offering the truth to you, will offer a Good Faith Estimate of all closing costs. In fact they are legally required to, but the oversight of such practices is pretty light so many just don’t even bother.
There will always be the possibility of something going wrong after a pre-approval. If you are smart you will ask to be approved through AU before you actually make an offer on a property. AU or Automated Underwriting will render a pretty solid decision on your loan, and will give you added security but most loan officers will not offer this service to you because of the cost to them. If you have a less than perfect situation, it will be worth your time to find a loan officer that will offer you an AU decision before you get too far into the process only to be let down. AU is not the end all though because it will not be able to make any decisions about the property such as the title situation, the value of the home, or the validity of the collateral at all; but AU will ask all of the questions needed to close your loan in regards to your credit and ability to qualify for the loan.
Lots of options still exist to this day even though there has been a major credit crunch. The three main options that every loan officer should discuss with you regardless of any other factors are Conforming- though they require more down payment, it may be worth it to get the drastically smaller interest rates; FHA which has lower down payment requirements and greater qualification flexibility and is available in all areas; and RD (Rural Development) which is not available everywhere but requires even less down payment than FHA and has no monthly mortgage insurance. If a loan officer does not offer you all three of these options and describes the differences in detail, they are not the loan officer for you because they are either unaware or uneducated in all loan types available, or are simply steering you away from a loan that they can not offer. ALWAYS beware of a loan officer that says something like, “Oh that isn’t even worth talking about.” That is just a way for them to deflect a question about a loan they are uneducated about. If they say that, THEY aren’t even worth talking about as an option for your financing. You can read more about each loan program.
The simple answer is 30 days from the time a signed purchase agreement is delivered to your loan officer. Any longer than that and you are probably doing something wrong, however there are certain situations that will take longer. Discuss this with your loan officer before you apply and if things are taking longer without a decent explanation, it may be time to switch.
Whew, unlike anything you will ever do. Basically it is 30 minutes of signing your name. You will be seated with your loan officer, real estate agent, and a closing agent and going through many important documents. It is a good idea to go through and read each document, and consult your loan officer and real estate agent for any questions you may have.
What if I have trouble paying my mortgage payment?
A: I always tell my clients to contact me directly if this happens so that we may point them to the proper channels, however you may not get that answer from everyone. If not, there is always help available.
People love to give advice and share opinions we all know this. Generally when people talk about something that they are not trained in providing, they are only offering opinion and not fact. Once you have found your mortgage professional, it is important to listen carefully to what they tell you and look for some of the warning signs I point out in my various blogs. But once you feel comfortable with that person, you should be aware that many many people will offer random opinions based on their own experiences that may of may not have anything relevant to your situation. Bring these up to your loan officer but I do caution you against taking too seriously what someone that does not work in the business says about your mortgage. Take in into consideration, but listen to professionals that you choose to serve you for the answers. If the answers they give make you feel uncomfortable, then you can make your choice accordingly.
We talk to hundreds of First-Time Home Buyers year after year and there are hundreds that don’t qualify by just a bit. They are so close but can’t get it done. We explain to them how close they are and offer direct advice on how just a month or two of fixing their issues will get them where they want.
So if you are just dipping your feet in the water and thinking about buying in the near future, let us help you prepare now to never have to feel the sting of denial.
We know a lot of you work jobs where you get tips, or you are just now getting raises, or are new on the job. If you are in any type of training period you will not be able to get a mortgage, but don’t worry as soon are that’s done, you are qualified. If you have gotten tips and never claimed much of them, it is essential that you spend 6 months claiming even more than you are actually earning. Even though it will mean less money in your pocket during this time, it will do wonders to raise the 2-year average of your income and increase your ability to qualify.
If you don’t have any, get some immediately. We know you may think that not having any debt may be good, but you are wrong. The bank needs something to judge you on and credit cards are essential. They show your ability to repay a mortgage while not adding a lot of monthly payments to your debt ratio. If you have a boyfriend/girlfriend, mom/dad, sister/brother that are willing to add you on their current credit card accounts do so immediately. Try to get one on your own too. This is the type of thing that if your score is slightly low just a month of obtaining credit can make the difference of qualifying or not.
If you are on the edge of qualifying or not, the best thing you can do is to add any type of factors that can compensate for the areas you lack. If you pay rent in cash, get a checking account and start writing checks. Showing 6 rent payments made on time will do wonders at improving your qualifications, but cash just doesn’t count. Money orders may work if you pay to an apartment complex, but if you are renting a house, only checks will do it.
Start saving money. People always feel like it does not count, but even $500 will definitely increase your chances of qualifying.