I recently read an excellent piece about five important things you should do if you're getting ready to buy a home:
1. Get you finances in order
2. Practice good credit behavior
3. Shop around for the best loan
4. Enter the market early
5. Find a real estate agent now.
Read the full article at www.NorthJerseyAbode.com.
If you're thinking about buying a home this year, give me a call and let's talk about how you can prepare for it. Start your search here:
So you've decided to take the plunge and buy a new house! How much can you afford?
Here's something to think about:
Your lender decides what you can borrow but you decide what you can afford.
Lenders are careful, but they make qualification decisions based on averages and formulas. They won't understand the nuances of your lifestyle and spending patterns quite as well as you do. So, leave a little room for the unexpected -- for all the new opportunities your home will give you to spend money, from furnishings, to landscaping, to repairs.
Historically, banks use a ratio called 28/36 to decide how much borrowers could borrow. An approved housing payment couldn't be more than 28 percent of the buyer's gross monthly income, and his or her total debt load, including car payments, student loans, and credit card payments, couldn't be more than 36 percent.
That's how much you can borrow. Deciding how much you can afford should involve some careful attention to how your financial profile will change in the upcoming years. In the long run, your own peace of mind and security will matter most.
The homebuying process can be exciting, but also stressful. When there are a large number of buyers in the market for real estate, the odds of being able to purchase your desired home can be low. However, getting a mortgage preapproval prior to home shopping can dramatically increase the odds of success.
Make Mortgage Preapproval Your First Step
A mortgage preapproval should be a homebuyer's first step when purchasing a home. A borrower can choose to meet with a lender or get an initial preapproval over the phone. The preapproval process is similar to the actual mortgage process and will, in fact, eliminate a lot of time after a home has been chosen.
When obtaining a mortgage preapproval, the borrower will complete a mortgage application and submit the necessary documentation to the lender. The lender will pull a credit report and examine the borrower's credit.
Based on all of this information, the lender will determine the amount of funds that the borrower qualifies for. The borrower will receive a preapproval, which states the amount of funds that the lender agrees to lend provided that certain conditions are met. While a preapproval is an important first step, it is not the final mortgage approval.
Impress Homesellers With Your Mortgage Preapproval
One of the advantages of having a preapproval is that this letter can be shown to real estate agents and sellers when looking for a home. By doing so, both the agent and the seller know that the borrower can qualify for a certain amount of funds. It is proof of the borrower's financial standing and ability to proceed with the home purchase.
Another advantage is that some of the work that is involved in obtaining a mortgage is already done. The lender has already examined the borrower's financial situation, including credit, income and assets. During the preapproval process, the lender will also discuss the most appropriate type of mortgage program that fits the borrower's needs, whether it is a conventional loan or a government loan.
This is significant because not all sellers will accept a buyer who is using a government loan. Knowing the details of what type of loan is appropriate for the borrower, the agent can then show them homes that will fit their preapproval both for cost and type of funding.
How Mortgage Preapproval is Determined
The preapproval is determined by putting the information given to the lender through automated underwriting. In most cases, the preliminary loan file goes through a preprocessing before the preapproval is given to the borrower. Since there is an actual examination of the borrower's documentation, the borrower will also receive a list of additional information that may be needed. The borrower can then submit this information while shopping for a home.
Once a home is found and the sales contract is signed, processing the loan is faster since most of the work for the credit file has been done. The final process involves income and identity verifications, ordering and receiving the appraisal, ordering title documents, obtaining insurance, etc. The final underwriting is the last step before the loan file is sent for closing.
The preapproval process is an important part of a home purchase. Since there is a lot of information involved in obtaining a mortgage, it eliminates many last minute problems that can arise. Obtaining a mortgage preapproval helps the home purchase process go smoothly.