DOs and DON’Ts for Getting an Ideal Mortgage

As part of our continuing service to you, we’d like to offer some tips that may be helpful when you’re looking to purchase a new home or refinance your home loan.

Above all else, pay your bills and start saving.

It’s critically important to pay your bills on time. There’s no single element that dramatically affects the success of an application as much as your credit history. Another thing, of course, is savings. You should have a disciplined savings pattern, since that’s the kind of behavior that’s going to make you a successful homeowner.

Everybody comes into the real estate market with a different perspective and level of experience. The fact that online mortgage applications, new loan products and rising interest rates compete for attention these days makes it all the more difficult to give foolproof advice. But, some general rules apply to pretty much anybody when it comes to getting the money to buy a home.

Here are some DOs and DON’Ts you should consider when you seek to get an ideal mortgage:


Do’s

1. Make loan and other debt payments on time, especially over the months leading up to the filing of your mortgage application. It sounds simple, but every 30-, 60- or 90-day delinquency on a loan or credit card will reduce the credit score the lender ends up considering as part of the loan file. That score, in turn, will determine the interest rate you get on your home loan.

2. If something has to be missed, miss the credit card payment first, followed by the payment on any installment loan you might have, and finally, the payment of an existing mortgage. Because credit-scoring systems look at the performance of similar loans first when deciding what type of score to assign, it’s best to follow this order. This will give the most weight to the performance of another mortgage, for example, then the performance of something like an auto loan, which features fixed payments and a fixed rate the way many mortgages do. Payment performance of so-called “revolving” loans, like credit cards, which feature variable payments that fluctuate with the outstanding balance, is typically evaluated last.

3. Consider paying off more debt and putting down a smaller amount at closing. This move will leave you with a larger mortgage, but it allows you to replace non tax-deductible, high-interest rate debt with lower-rate mortgage debt that features deductible interest.

4. Get the mortgage first if multiple financial obligations 
are going to pop up in the near future. Numerous credit inquiries, such as credit card applications, can hurt your credit score, especially if they’re filed in the months prior to the home loan review process.

5. Increase the size of the down payment you’re able to make by saving as much as possible, as often as possible. Evaluate money market or other accounts that offer reasonable rates of return, automatic payroll deductions, or other financial incentives to save.

While these are all great steps to follow, you also have to consider what you shouldn’t do as well. Resisting the temptation to overspend is at the top of the list.

 

Dont’s

1. Don’t make any big purchases over the next couple of months. Besides the obvious fact that it makes less money available for the down payment, it might require you to get yet another loan. A significant debt such as a $15,000 auto loan will look bad to the mortgage lender as they review your credit-worthiness. Plus, this adds to your monthly expenses and may affect your ability to qualify for the mortgage loan you want.

2. Don’t try shooting for that six-bedroom house in the Hamptons 
if it’s going to be too much of a stretch in your current budget. Lenders consider what’s known in the industry as “payment shock” when approving loans. Someone who goes from a relatively small monthly housing payment to a large one either won’t qualify for a mortgage or will end up having to cover too much loan with too little money.

3. Don’t just get pre-qualified for a mortgage; get pre-approved. To get pre-qualified, you only need to submit credit and income/debt information voluntarily to a mortgage broker or lender. The lender then estimates the amount of home the borrower will qualify for. Before the borrower gains full pre-approval, the lender must pull your credit report, check your debt-to-income ratio, and perform other underwriting steps. Pre-approval gives the borrower more buying power and extra leverage when making an offer to purchase a home.

4. Don’t forget what kind of spending habits you have when getting a mortgage. By taking out a 30-year fixed rate loan rather than a 15-year mortgage, and investing the money saved on monthly payments, you might earn a higher return on your money in the long run. But, that approach won’t work if you enjoy dinner and a movie twice a week. If you’re a compulsive spender, the 15-year loan would force you to save your money and accumulate equity faster by going with the shorter term and higher payment.

I hope this information is valuable to you! Please feel free to contact me at any time with any questions or concerns!

The Benefits of Mortgage Pre-Approval

When you’re shopping for a new home, it’s important to leave as little to chance as possible. Mortgage loan pre-approval allows you to act quickly when you find the right property, and the seller will take your offer more seriously.

When you’re pre-approved, you can:

•    Make an offer with confidence, knowing the lender is already on your side.
•    Save time by looking at homes you can afford.
•    Negotiate a better price for the home you want to buy.

You don’t need to spend a lot of time researching finance options; that’s my job! I’d love to help you find the loan that’s best for you and complete the pre-approval process, so you’re one step closer to home ownership.

Everything is negotiable

Most people are prepared to negotiate when they go car shopping. But, what about when buying a home? Savvy homebuyers understand that everything is negotiable!

It’s a good idea to sharpen your negotiating skills, or work with a talented real estate professional that can help you negotiate the best deal. Here are some areas that have room for negotiation.

•    The purchase price
•    When you can move in
•    Painting: Part of the home or the whole thing
•    Repairs: Roof, plumbing, windows, etc.
•    Yard: Landscaping, removal of unwanted trees or bushes, etc.
•    Fixtures: Which lights, fans and appliances stay or go
•    Furniture: Whether the seller will leave certain pieces

I recommend working with an experienced professional who knows the market and is ready to negotiate on your behalf. Please let me know if you need a referral to one of the preferred real estate agents in my network.

My team and I are ready to help you secure the best loan program to meet your needs. Please contact me to schedule a consultation. Our goal is to provide you with such great service, that you will gladly refer your family and friends to us for assistance with their mortgage planning.

Are You Dreaming of Home Improvements?

 

Do you have home improvements in mind?

 

New kitchen, bath, deck, media room, home office, expansion, energy efficient upgrades…the possibilities are limited only by your imagination.

 

With home values once again on the rise in many areas, you may be able to access equity to make financing your dream projects a reality.

 

Reach out today, and we’ll be happy to discuss the options that may be available to you.

25 Tips for First-Time Home Buyers!

Often, new buyers don’t know where to start looking for homes. I’ve found a few resources below from Nerwallet to help you get on the path to home-ownership.

1. Start saving for a down payment early

It’s common to put 20% down, but many lenders now permit much less, and first-time home buyer programs allow as little as 3% down. But putting down less than 20% may mean higher costs and paying for private mortgage insurance, and even a small down payment can still be hefty. For example, a 5% down payment on a $200,000 home is $10,000.

Play around with a down payment calculator to help you land on a goal amount. Some tips for saving for a down payment include setting aside tax refunds and work bonuses, setting up an automatic savings plan and using an app to track your progress.

2. Determine how much home you can afford

Before you start looking for your dream home, you need to know what’s actually within your price range. Use a home affordability calculator to determine how much you can safely afford to spend.

3. Check your credit

When you’re taking out a mortgage loan, your credit will be one of the key factors in whether you’re approved, and it will help determine your interest rate and possibly the loan terms.

So check your credit before you begin the home buying process. Dispute any errors that could be dragging down your credit score and look for opportunities to improve your credit, such as making a dent in any outstanding debts.

4. Pause any new credit activity

Any time you open a new credit account, whether to take out an auto loan or get a new credit card, the lender runs a hard inquiry, which can temporarily ding your credit score. If you’re applying for a mortgage soon, avoid opening new credit accounts to keep your score from dipping.

Read more

Things to Avoid Before Buying a Home

Here are some common mistakes to avoid during the home buying process to make sure your transaction goes smoothly!

-Don’t Make an Expensive Purchase

It’s best to avoid making major purchases like furniture, cars, appliances, electronic equipment, jewelry, or vacations until after the closing. Financing large purchases with a credit card could bring your credit score down. Using cash to purchase high-ticket items can also create a problem, because many banks take your cash reserves into consideration when approving your mortgage.

-Don’t Get a New Job

Lenders like to see a consistent job history. Generally, changing jobs will not affect your ability to qualify for a mortgage loan if you’ll be making more money. But, lenders usually look for stability. Changing jobs during the loan approval process could raise some concern and affect your ability to gain loan approval.

-Don’t Switch Banks or Move Money Around

As your lender reviews your loan package, you will be asked to provide bank statements for the last two or three months on your checking accounts, savings accounts, money market funds and other liquid assets. To eliminate potential fraud, most loans require a thorough paper trail to document the source of all funds. Changing banks or transferring money to another account could make it difficult for the lender to document your funds.

-Don’t Disregard Your Lenders Requirements

Even if you have been pre-approved for the loan, your lender will still need copies of your bank statements, W2s and other paperwork. It is up to you to provide all necessary documentation as soon as possible. Failure to submit certain qualifying documents could cause you to lose your loan and the financing you need to buy your home.

I hope these tips are helpful. Please feel free to give me a call if there’s anything I can do for you.

Don’t Wait for an Emergency!

Is it time for a review?

We always prefer to take a proactive approach to meeting the needs of our most important clients. Experience shows that anticipating rather than reacting to needs can make the difference between meeting them easily or not.

Whether you’re interested in making rate or term changes; consolidating debts; or accessing equity for home improvement or tuition, it’s best to make sure all is as it should be before the need becomes critical.

Having time to prepare for these situations is a luxury that can only exist if the process starts when it should. Waiting will likely create more stress and could even keep us from meeting your requirements.

You are always welcome to contact us, of course. But in particular, if you foresee changes ahead that may involve your home, income or expenses, let’s talk now.

It’s always better to have an early conversation to discover there won’t be any problems than it is to discover there’s a problem you can’t do anything about.

Is No Credit Poor Credit?

Are you wondering if no credit is just as bad as poor credit?

 

 

It can be. You need to have at least a few established credit accounts to develop a score, and you need a score for most loan programs.

It’s great to keep your spending under control by only using cash, but if you ultimately need to finance the purchase of a home, the sooner you solidify a good payment history the better. Without using credit, there’s nothing for the bureaus to use as a basis for their scoring algorithms.

A good mix makes for the best start. For example, get a bank overdraft credit line, a credit card and an installment loan, such as an auto or personal loan.

Reach out today, and we’ll be happy to answer any questions you may have.