Posted in Home Buying

What is a Mortgage Pre-Approval? Get an Edge When Home Shopping

If you want to stand out from the sea of other home buyers in a competitive housing market, one surefire way to do that is to get pre-approved for a mortgage. That means a lender has guaranteed to give you a loan before you’ve even made an offer—or even before you’ve seen a home you like! Granted, this may seem like a whole lot of prep work, but here’s why mortgage pre-approval matters, and how it can give you an edge whenshopping for a home.

What is a mortgage pre-approval?

Mortgage pre-approval is a commitment from a lender to provide you with home financing up to a certain loan amount—basically the stamp of approval that you have the money, credit history, and other credentials to buy a home up to that price.

“Lenders will do a full review of income, assets, and credit in order to issue a pre-approval,” says Sarah Valentini, president and co-founder of Radius Financial Group.

How to get pre-approved: The paperwork you need

Be prepared to offer up a pile of paperwork to earn your pre-approval. In general, the paperwork you’ll need to assemble for your lender includes the following:

  • Pay stubs from the past 30 days showing your year-to-date income
  • Two years of federal tax returns
  • Two years of W2 forms from your employer
  • 60 days or a quarterly statement of all of your asset accounts, which include your checking and savings, as well as any investment accounts such as CDs, IRAs, and other stocks or bonds
  • Any other current real estate holdings
  • Residential history for the past two years, including landlord contact information if you rented

Pre-approval vs. pre-qualification: What’s the difference?

Mortgage pre-qualification should not be confused with pre-approval. Pre-qualification is based solely on verbal information you tell a lender about your income and savings, says Valentini. So, it shows how much you could theoretically borrow, but it’s no guarantee—which means these buyers will have to get officially approved for a loan later on and cross their fingers it works out.

Pre-approval, on the other hand, means the lender has already done its due diligence and is willing to loan you the money. Plus, you’ve got an official letter from your lender saying so that will speak volumes to a seller.

How pre-approval helps you buy a home

When sellers accept an offer, they want the deal to go through. However, if the buyer isn’t pre-approved for a loan, this can put the whole deal in jeopardy—because if the loan doesn’t get approved, the buyer will likely be unable to follow through, says Chantay Bridges with TruLine Realty in Los Angeles.

A pre-approval provides that extra measure of security to a seller that you are both willing and able to buy the house. As a result, sellers will likely pick you as a buyer over someone without pre-approval since you’re a sure thing, and they won’t have to hold their breath that the deal might not go through.

Bottom line: While pre-approval is a pain, you’ll have to pony up all that paperwork sooner or later anyway. Why not do it on the early side and get a head start on the competition and shop for your dream home with confidence?

SOURCE: REALTOR.COM

Posted in Home Buying

The Reality of Being a Home Owner: It Costs How Much?!

Many people who pay hundreds or even thousands of dollars each month on their rental home dream of becoming home owners. Using the rental money to pay for a mortgage is a much better alternative. In some cases, your monthly mortgage payments will be the same as your rental payment, but many home buyers fail to understand that there are many other costs associated with home ownership besides t

Mortgage and down payment

he mortgage payment. In reality, owning a home will usually cost more than renting, but it also has its advantages.

Especially when prices and interest rates are low, most people tend to overlook the majority of costs associated with owning a home, only looking at the monthly payment. The temptation to become a home owner can be very strong, especially for those who have been living in a rental for a while and have gotten married or are ready to start a family with children. In this article, we will take a look at how much it actually costs to be a home owner and which factors will influence these costs.

One Time Costs

Unlike renting, buying a home can have a very high initial cost. Unless you qualify for a no down payment mortgage loan, here are the costs associated with buying a home:

  • The down payment. Most conventional mortgage loans require a 20 percent down payment, or you will be forced to purchase private mortgage insurance, which can be very expensive. The higher the down payment, the lower your interest rate and loan value will be, meaning that your monthly payment will also be lower.
  • Closing costs. Closing costs can be as high as a few thousand dollars, and must never be overlooked when applying for a mortgage loan. Some lenders allow you to finance the closing costs into the loan, but that will make you monthly payments larger and require you to pay interest for the closing costs.

Monthly and Annual Costs

The largest cost of owning a home will be your monthly mortgage payment, which will be higher or lower depending on several factors. Besides the obvious monthly mortgage payment, there are several other costs that you should be aware of when trying to find out how much home ownership will cost you.

  • The Homeowners Association (HOA) fee. Depending on what type of home you purchase, you might have to pay a monthly HOA fee. This fee generally covers insurance, maintenance and garbage services, but can also cover higher-end amenities, such as pools or fitness centers.
  • Property taxes. Property taxes are based on how much your property is worth and its location, and are generally paid annually. Property taxes are paid to the municipality or town in which you reside, and are due even after you have paid off your mortgage.
  • Homeowner’s insurance. This type of insurance is also based on the location of your home, its size and value. Other factors which may have an influence on how much you will be paying in homeowner’s insurance are your home’s age and if it’s located in an area where floods or hurricanes are common.
  • Utilities. Gas, water, heating, electricity are some of the utilities that may have been included in your rental payment. When owning a home, you will have to pay all utilities each month, and that can prove to be a burden, depending mostly on your home’s size. For example, heating a small apartment can be very cheap compared to heating a two-story house.
  • Maintenance. Keeping your property in good shape will also be your job, as opposed to a rental, where this is usually the landlord’s job. Trimming the hedges and cleaning gutters can be time consuming, or expensive, if you hire someone to do it for you.
  • Repairs. When you were renting and had a problem, such as a leaky faucet or a broken appliance, you would just call the landlord and had it repaired or replaced. When owning a home, you will have to do these repairs on your own, or hire someone and suffer the cost. Damages to your roof or electrical and plumbing systems can be very costly, especially if they are not resolved in time.

As you can see in this article, owning a home won’t necessarily be a better choice over renting. There are more costs and risks associated with home ownership vs. renting, but the benefits of owning your own home certainly exceed the downsides. It is up to you to research what owning your own home involves, how much it will cost, and decide if it’s a step that you can take without suffering financially and ending up regretting your decision.

SOURCE:MORTGAGE RATES TODAY

Posted in Home Buying

Buyers Use Larger Down Payments To Offset Rising Rates

To keep monthly mortgage payments more affordable, more home buyers are reaching deeper into their pockets to make larger down payments, according to a new survey by LendingTree of 600 home buyers.

Mortgage and down paymentSixty-four percent of prospective home buyers say they expect mortgage rates to rise, and 68 percent say they expect home prices to rise in the next 12 months, according the LendingTree survey. That has prompted 57 percent of respondents to say they plan to make a down payment of 15 percent or more on their home purchase. Meanwhile, 44 percent say they will have a down payment of less than 15 percent.

Also for affordability, the majority of home buyers surveyed said they prefer fixed-rate mortgages, particularly 30-year fixed-rate mortgages (45%), compared to 15-year fixed-rate mortgages (36%) and adjustable rate mortgages (7%).

“The housing market is stabilizing and financing is becoming more available for potential home buyers,” says Doug Lebda, founder and CEO of LendingTree.com. “Increasing home prices are providing would-be sellers with the confidence needed to take action, while rising interest rates are placing a sense of urgency on potential home buyers. Together this creates a unique window of opportunity for buyers and sellers to take advantage of the market while home prices and rates are still reasonably affordable.”

SOURCE: REALTY TIMES