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Things To Consider
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> Things To Consider
Planning to move out of the area in a couple of
years? If so you may be better off not buying a home
now. The cost of selling a house generally falls in a range of 7%
- 8% of the sale price which may be more than the appreciation of
the house.
- Check out the rent vs. buying web site to compare the advantages
of each.
- Thinking about changing jobs? It might be best to wait until
after your purchase.
- Look at your work history. Is it sporadic or did you just start
a new job? Lenders like to see someone with a steady work history
and with job changes in the same line of work.
- Lenders will require your work history along with past tax
returns.
 Look
at your credit report before you go to a lender. It is not uncommon
to find problems with reports, especially if you have a common last
name. If you find a problem, start with the reporting agency to
clear it up. It is common to have a late payment at some time or
another. These problems can usually be taken care of with a letter
of explanation from you to the lender.
- Find out what FICO scores are and why they are important
- Get copies of your credit report, start at: Experian –
My FICO scores
- Banks/Savings and Loans vs. Loan Brokers
- Loan officers at a bank work for the bank.
- Loan brokers work for you and have a fiduciary relationship.
- Most banks cooperate with loan brokers.
- You can go to a broker and obtain a loan through a bank.
- Most banks will offer you a menu of programs while a loan broker
will offer a
menu of lenders. Banks and loan brokers are under different government
controls.
- A complaint regarding a bank would go to the State Department
of Banking.
- A complaint regarding a loan broker would go to the State Department
of Real Estate.
- Contact someone from each source to see what special programs
they have to offer.
Loan Pre-Approval
- Before shopping for a home, get pre-approved for a loan first.
- Getting pre-approved for a loan is a necessary step when buying
real estate.
- If you are pre-approved first you will save considerable time
looking for a property.
- You will know how much a lender will commit so you won't waste
time looking at
property you can't qualify for.
- You will have a better chance of having an offer accepted if
it is accompanied with
a pre-approval letter. The best agents won't work with buyers
until they are pre-approved.
- A lender will let you know your maximum loan amount after providing
them:
- Income from all sources.
- Funds available for a down payment and closing costs.
- Your monthly obligations (auto loans, credit card payments,
alimony, child support)
- Price range of homes where you want to locate.
Selecting a Lender
You should pick a lender based on experience, customer service and
recommendations. Work with a lender who is experienced in the business,
knows the availability of the different type loans and how to handle
the demands of processing. Don't make the decision based solely
on which lender is offering the lowest rates. If a company is offering
a mortgage package that is well below market rates, you should beware.
- All mortgage companies generally choose from the same pool
of investors.
- A company offering abnormally low rates might make up the difference
by increasing closing costs or tacking on additional settlement
fees.
- Determine how long you expect to live in the new home. This
decision will not only affect the houses you look at, but also
will determine the type and term of loan you choose.
- Get everything in writing and a copy of everything you sign.
- Ask your lender at application what fees typically are included
in the finance charge computation, and what fees may be charged
separately at closing.
How Much Can I Qualify For?
- Most lenders require your housing payments not to exceed 25-33%
(depending on your down payment) of your gross monthly income
called "housing expense ratio".
- Your total debt payments should not exceed 33-38%, figured
on a monthly basis.
- This figure is called your "total debt ratio".
- Use a mortgage calculator to find out how much you can afford.
How Much Do I Need?
- Besides setting aside money for a down payment, you will need
money for closing costs.
- Those costs can range from $3,000 to $10,000, depending on the
type of loan, the loan fees and the community the property is
located in.
- Check the buyers closing cost to help determine costs.
- The smartest and most time efficient thing to do is get pre-approved
up front,
before you start looking for a home.
- Next, find an agent familiar with the area you want to live
and you are comfortable with.
- Educate your self about local property values and the current
market trend.
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