Know what you can afford is the first rule of home buying, and that depends on how much income and how much debt you have. In general, lenders don’t want borrowers to spend more than 45 percent of their gross income per month on a mortgage payment and debts. It pays to check with a lender before you start searching for a home. I will be happy to assist you in calculating what you can afford and pre-qualify you for a loan.
The sooner you start talking to a lender, the better your chance of getting a good rate or even getting the loan. There are many things that can be done even 6 months in advance to make a big difference!
Did you know that closing accounts can hurt your credit? This and many other factors go into your credit rating. It is also a good idea to not do anything financial until you speak to a Loan Officer.
The price you can afford to pay for a home will depend on six factors: * Gross income.
* Your outstanding debts
* Your credit history
* The type of mortgage you select
* Current interest rates
* The amount of cash you have available for the down payment, closing costs and cash reserves required by the lender
Another number lenders use to evaluate how much you can afford is the housing expense-to-income ratio. It is determined by calculating your projected monthly housing expense, which consists of the principal and interest payment on your new home, property taxes and hazard insurance (or PITI as it is known). If you have to pay monthly homeowners association dues and/or private mortgage insurance, this also will be added to your PITI.
What do I do if I get turned down for a loan ?
Increasing numbers of loan applicants are finding ways to buy their own home despite past credit problems, a lack of a credit history or debt-to-income ratios that fall outside of traditionally acceptable ranges. Ask the lender for a full explanation, then appeal the decision in writing.
What is the first step when looking for a home loan? Most experts recommend that you should get pre-qualified for a loan first. By being pre-qualified, you will know exactly how much house you can afford. Almost all mortgage lenders now pre-qualify people, and many of them can even do it on the internet.
You can also do your own affordability calculations; most recent consumer books on home buying include steps to doing so, as do various real estate Internet sites.
How do you qualify as a first time buyer? In general, lenders define first time home buyer as someone who has not owned any real estate – whether a personal residence, vacation home or investment property – during the past three years. Lenders verify an applicant’s status by examining their income tax returns, checking to see that the individual did not take any deductions for mortgage interest or property taxes.
Appraisals & Market Value Q & A
How is the value of my home determined? You have several ways to determine the value of a home. An appraisal is a professional estimate of a property’s market value, based on recent sales of comparable properties, location, square footage and construction quality. This service varies in cost depending on the price of the home. On average, an appraisal costs about $350 for a $250,000 house.
A comparative market analysis is an informal estimate of market value performed by a real estate agent based on similar sales and property attributes. Most agents offer free analysis in the hopes of winning your business.
You can also get a comparable sales report for free from private companies that specialize in real estate data. You also can find comparable sales information available on various real estate Internet sites.
What exactly is bad credit? There are numerous types of credit report problems that would cause a lender to reject your application for a loan. Such problems include: missing a credit card payment, defaulting on a prior loan, filing for bankruptcy in the past seven years or not paying your taxes. Other black marks on a credit report include having a judgment filed against you (perhaps for non-payment of spousal or child support) or collection activity.
If you feel that your credit report is wrong, experts say it’s best to take it up with the organization or company claiming you owe them money. But if you’ve been late paying your bills regroup by paying in full and on time for six months to a year to prove to the lender that the late payments were an aberration. You can order a copy of your own credit report by calling the three major agencies: Experian at (800) 392-392-1122, Equifax at (800) 685-1111 and Trans Union at (312) 408-1050. You can also go to Annualcreditreport.com. This is the only truly FREE website where you can get your report once a year.
Please call me to start the process and work together as a team to find the home of your dreams.
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