How to Make Home Buying Easy on your Budget

Most people buy a home only once or twice in their lifetime, and it rarely makes sense to buy if you expect to move within two years. Most buyers live in their new homes an average of seven years or more. During a housing slump it may not seem like real estate values will ever go up, but it usually does. Homes appreciate about 4-5% per year as a fairly general rule. 

Financially, there’s a lot at stake when you buy or sell a home. Unfortunately, many of the factors involved are beyond your control. An inspector might discover a fault that you were unaware of, or interest rates could jump without warning. The first step is to hire a good real estate agent. Here’s how you can eliminate buyer’s remorse and purchase the home you love for a price you can afford:

* Bear the location in mind

What type of neighborhood would you like to live in? What school district would be suitable for your family? Where do you like to shop?

Do you own a vehicle, or would you have to take public transportation? Do you need a driveway? If you already have an area in mind, you can start by driving around and looking for “For Sale” signs.

* How much house can you afford?

Even if you’re short on funds, the home buying process will go smoothly if you get familiar with the real estate market and narrow down your choices to fit within your budget.

Speak to a lender to see how much you can get pre-approved for. You can use your pre-approval letter as leverage, especially if the seller receives another offer similar to yours.

* House size matters

You can start the process of finding a perfect home once you have a workable price range. List the things you want, like hardwood floors, skylights or a spacious living room, and the things you definitely need, like three bedrooms, a garden, a first-rate school district, etc. If you discover a house that comes close to having all your needs but doesn’t have all you want, give it another look.

During a housing slump, it’s possible to buy a large home at significantly less than its listing price. This is because so many people are desperate to sell. Remember to take into consideration the physically challenged family member who may need wheelchair access, or the heart patient who cannot climb too many stairs to get to her room.

* Find a way to finance your new home

There are a number of mortgage loans nowadays that suit many different people for different reasons. The three most common are fixed rate, where your payment is fixed for the life of the loan, adjustable rate, where the rate can go up or down after a few years, depending on the market, and interest only mortgages, where for a specified time you’re allowed to make payments that cover only the interest portion of your monthly mortgage payment.

The 5 Most Common Mistakes That Can Hurt Your Home Mortgage Approval

Recently, President Obama put into action the Homeowner Affordability and Stability Plan to help Americans on the brink of foreclosure to receive the loan modifications they need to be able to stay in their home.  This could be the closest we get to a consumer bailout, but the money won’t be available to just anyone who applies.

Most Americans know that they should pay their bills on time to help their credit score, but there are many other factors that can dramatically affect your ability to get a loan.  Let’s take a look at the 5 most common credit mistakes:

1.  Maxing out your credit cards

Repayment ability is the main factor that lenders are looking at, which is essentially your debt-to-income ratio.  If you have a small amount of debt compared to your income, you’re in a much better position to pay off what you owe (quickly).  Before you apply for a home loan, try to avoid charging a lot on your credt cards, so that your balance stays low.  If you carry a balance month-to-month, try to pay them down as much as possible.

2. Buying a car on borrowed money

One of the biggest mistakes many families make is financing a car or other major purchase right before they apply for a mortgage.  Sometimes is can mean the difference between approval and denial.  Wait until after your loan has closed - not just been ‘approved’ - before you take out another loan.

3.  Procrastinating

When you’re looking to refinance an adjustable rate mortgage (ARM), don’t wait until crunch time.  Start preparing at least a year in advance.  Most homeowners wait until just 2-3 months before the expiration of their initial rate, and this can really limit the number of available options. 

4.  Reconciling old bad debt

If you have old charge offs or collections on your credit history, it might seem like a responsible idea to pay down or completely pay off these debts.  Unfortunately, by paying into this debt, your credit report adjusts it to ‘current debt’ which makes your credit problems seem more recent than they were.

5. Reaching out for help

Credit counselors will often give advice that is relevant for getting you out of debt, but typically neglect your ability to get new financing, including home mortgages.  Many times, a counselor will recommend closing healthy credit accounts to stop you from using them, but canceling these accounts is bad for your credit score.  Additionally, lenders don’t like to see that you are having difficulties handing your own finances, and having credit repair services on your record can send up a red flag.

To qualify for a certain type of home loan under the Homeowner Stability Initiative, you might have to sign up for HUD-certified debt counseling program, but otherwise you should stay away from credit counseling before applying for a home loan.  If you really have a spending problem, a better strategy is to put your credit cards where they aren’t easily accessible to you (like a safe deposit box), or even cut them up.  Keep the accounts open, and continue to pay down your balances and make your payments on time.

By avoiding these mistakes, you can help boost your credit score enough to qualify for lower rates, bigger loans, or both!

If you’d like a free consultation to get the best mortgage for your current financial position, drop us a line and we’ll help you out.

Buying your First Home? Read these ESSENTIAL Borrowing Tips…

Matthew Sanz has brought us this excellent article on getting financing for you first home. There’s a lot to know, and a lot of people that will try to take advantage of your lack of expertise. The best way to prepare is to be informed.

The Essentials of First Time Home Mortgage Loan Borrower

Property ownership and buying a home for the first time can be an exciting yet mind-boggling experience. Before you make a decision, it is important, therefore, that you know your options as well as the basics of home mortgage loans.

What is a mortgage?

A mortgage is a loan you pull out to pay off your home. If you are a first time home mortgage loan borrower, you may be asked to deposit a down payment and pay for the rest (i.e. monthly) through a mortgage loan. Establishments that can offer mortgages are mortgage specialists, building societies and banks.

What are the types of mortgage?

-The repayment mortgage - monthly payments are made within an agreed term until loan and interest are paid off.

-The interest-only mortgage - monthly payments are made for a period of time as agreed in the contract, except payments cover only the loan’s interest within the initial term. Afterwards, you are asked to make interest payments in full every month.

-The fixed-rate mortgage - requires you to pay for a fixed interest rate over the whole term. Interest rates do not change and therefore offers a feeling of certainty for most borrowers.

-The adjustable rate mortgage - has rates that adjust after an initial term containing a fixed rate. Rates could adjust depending on the rise and fall of other economic rates. This could sound daunting for first time home mortgage loan borrowers, but those who want a lower initial rate can benefit from this type of mortgage.

What are the requirements?

1. Good credit report:

From your credit report, lenders will be able to determine whether they can grant your application or to increase the interest rates for your loan. Lenders especially want to make sure that a first time home mortgage loan borrower has the ability and willingness to make his or her payments.

2. Insurance:

Insurance can be used to pay off your mortgage if you have just been in an accident, lost your job or become sick. You might be required to use life insurance to pay off your mortgage should death occur. What are some tips I can use before purchasing property?

- Improve your credit report - Avoid applying for more credit and pay on time. - Review and correct credit information - Contact the credit bureau to correct inaccuracies - Get the best program - Choose a plan that is most suitable for your situation. - Research - Jot down your price range and find out how much you can borrow. - Do it online - Using the Internet could save you more time and money. Lenders now offer mortgage calculators online that you can use to predict which mortgage program is most suitable for you. - Choose the best mortgage specialist - Determine if the specialist works in a company that is likely to stay in business whenever rates fluctuate. - Ask for advice - Look for recommendations so you are familiar with what kind of mortgage plan you are getting into.

These are only recommendations, though, and should not be used in legal matters.

Read more data as a first time home mortgage loan borrower. Discover an online home equity mortgage calculator now.

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Those are some excellent tips for first times, Matthew! Thanks for sharing them with us!

If you’re a reader who would like more information and a chance to talk to an industry expert at absolutely no cost, simply get in touch with us and we’ll get you started on the right track.

Buying Your First Home? Don’t Miss These Vital Keys to Your First Mortgage!

One of the most important parts of manifest destiny and the American dream is home ownership. Owning your own home can be a very smart investment decision since prices tend to increase faster than the inflation rate, and now, with the recession dropping home prices and interest rates to their lowest in the last decade, there isn’t a better time to buy! Because of the current market timing and the fact that it’s a widely known as a smart investment, now is the time to start considering the idea. Before you rush out, call a realtor and start looking for a house, you should start by seeking out the perfect mortgage for your budget.

By first finding out how much house you can afford, you’re doing yourself and your realtor a huge favor since there won’t be the question of ‘can I afford it.’ If it’s not in your budget, don’t bother looking, and if it is in your budget, you can be confident that you can find financing for it. Since buying a home is the largest single investment most Americans make, it’s definitely not to be taken lightly. If you spend a short while to learn about mortgages before you get started, it will be worth it.

To begin your home mortgage search, talk to credit unions, banks, and brokers in your area. You’re looking for someone to hold your hand through the process, but you also want a decent rate with low fees, so make sure to shop around.

When you’re looking at rates, you will be shown two different types - variable/adjustable rate (ARM) and fixed rate. The ARM rate is usually shown as a promotion at a cheap rate, sometimes called a “teaser.” After the fixed period of the ARM is up, you can expect rates to rise significantly if you get into one of these adjustable rate mortgages.

ARMs have two specific things you look for to use in your analysis - when the rate adjusts (anywhere between one month to 10 years) and what the cap on the interest rate is. Usually, the rate will adjust to whatever the prime rate (the federal government chooses this number) is at the time of the adjustment, plus a certain percentage of ‘mark-up’ that pays the bank. When you discover the rate cap, use a mortgage payment calculator to find out how much your maximum monthly payment is, worst case. That’s not to say your mortgage will actually adjust to that rate, but it’s a prudent idea to plan for different scenarios - including worst case.

In the current economic environment, we have extremely low interest rates. By signing on an ARM right now, you would more than likely end up with higher payments later, as the economy rebounds and the rates increase again. However, if you plan to move into a new home before your interest rate is set to adjust, it isn’t a bad idea to capitalize on the low rate. If you feel that rates will continue to drop in the future, an ARM can put you in a great position to take advantage of that.

Fixed rate mortgages are less complicated than ARMs because you know exactly what your payment is for the life of the mortgage. The fixed rate, as it implies, locks in your interest rate for the entire duration of the loan, which is great for current economic times with low interest. This type of mortgage protects you if interest rates go up, and if interest rates fall, you’ll have the option to refinance at the lower rate.

The length of the term on your mortgage can greatly affect the total amount that you pay over the course of the loan term. A shorter, 15-year mortgage has much less compound interest tacked on, so the payments won’t actually double that of a 30-year mortgage. 15-year mortgages can be surprisingly affordable, but if your income can vary from month to month, and it might be a stretch, go for the longer term. With the 30-year mortgage, you can always make additional principal payments during good months to help pay off the loan quicker - effectively racking up less in interest.

Becoming a home owner is an important step in everyone’s life, and with the right home mortgage loan, it can be just as affordable as your rent payment. Start building equity and investing in you home today - you’ll look back on this moment and be glad you did.

5 Sizzling Ways To Finance A Home This Summer

Today we have Victor Benoun bringing us the best tips on financing a home in this turbulent market. Thanks for joining us, Victor, and we are anxious to hear your advice, so without further adieu…

5 Sizzling Ways To Finance A Home This Summer

by Victor Benoun

Despite the negative press we are pounded with daily concerning the aspect of the housing market, and the difficulties in the banking system, it is in fact a fair time to buying a home. Prices have not been this low in years, interest rates remain at historical lows, and buyers have tremendous bargaining power. Whether you are considering purchasing a house or refinancing an real property, here are a few helpful hints to make your transaction as even as a summer day!

1. Get pre-approved. Pre-approval differs from pre-qualification as pre-qualification is purely a thumbnail sketch of your financial background. A credit report frequently is not run and no financial documentation is reviewed. Pre-approval requires income tax returns, pay check stubs, bank statements, liabilities, anything that might be indispensable for a lender to make an adequate assessment of your ability to repay a mortgage. In addition, a credit report is requested and reviewed for your credit-worthiness.

2. Improve your credit score if necessary. A credit score is a numerical demigod of the likelihood of you repaying your debt. It is based on the amount of fly open credit trades you have, how near at hand you are to your available credit, as well as your paying habits. In the case of credit scores, your foregone does equal your future. You can improve your credit score by paying down your debts, closing credit cards you no longer use, and of course paying on time.

3. Inquire how much wherewithal is exigent for a down compensation and closing costs, and are there restrictions where the stock comes from. Often, assumptions are fabricated by the consumer that down payments can come from a credit card, a personal loan, cash on hand, or a little gift. It is wise to discuss this in move on in terms of what is allowable or not. Do not wait until you are under compromise to discover the source of your funds can not be used.

4. If you find a home that is right for you, do not wait for the market to drop. Believe it not sundry homes today still sell with multiple offers. According to an article in The Los Angeles Times, dated June 1, 2008, ‘Homes in service qualification that are listed at $300,000 or underADJ Expensiveness are drawing as in as 15 to 20 bids from home buyers and investors, looking for bargains.’ It is very toilsome to time the market as to when the supporting has been reached. Prices have already dropped by record amounts, and there is just no way to say how much lower they may go.

5. In financing a home, now is a benefit time to contemplate long-term. By that I mean to consider a 30 year fixed rate mortgage. Rates are still at low record levels so it is greater time to lock something in and not worry about it.

People oftentimes make life changing decisions based on beliefs which in reality no longer exist. Loan programs have transitional as well as the criteria for being approved. Before ever stepping foot into an yawn house meet with a lender what programs are available and what you qualify for.

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Victor Benoun is President of The Mortgage Source, Inc., and author of Your Castle No Hassle. He has 29 years experience in the mortgage industry and is available for keynote speaking and consulting. For free housing and mortgage reports, visit his website at http://www.yourcastlenohassle.com.

Thanks for that wonderful report, Victor! We are glad to have you as a resource to our readers!

Readers, if you’d like to speak with an industry expert like Victor, feel free to drop us a line today. Our consultations are always free for the Sacramento community!

How To Get a Home Mortgage If You’re Self-Employed

As the self-employed community grows, so does the need for lenders who tailor their services to the market. If you’re self employed, it’s very hard to get the loan you deserve unless you go to a specialist. This excellent article by David Miles sheds some light on the subject.

How To Get a Mortgage If You’re Self-Employed

If you are self-employed, work on a contract basis, or have an income that is irregular or comes from multiple sources, it will generally be harder for you to get a mortgage than it is for someone who is an employee and can easily prove their income.

A self-employed person is someone who runs their own business and works for themselves without an employer. Directors of small limited companies, although technically employed on a PAYE basis, will generally be classed as self employed when it comes to applying for a mortgage or remortgage.

With over three million self-employed individuals in the UK, the attitude of many mortgage lenders towards the self-employed population is a problem that can affect a large number of people, even though many self-employed people often earn more than a lot of salaried workers.

The problem stems from the fact that the majority of mainstream mortgage lenders require proof of income when assessing a mortgage or remortgage application. Employed people can use their payslips and P60 as proof of salary, but there is no such straightforward equivalent if you are self-employed.

In place of payslips, self-employed workers may be asked to provide audited accounts that show their income over the last three years. However, in many cases, these accounts will not give an accurate reflection of how much money a self-employed person is making. This is because if the accountant who prepared the accounts is doing his job properly, he will have offset as many allowable expenses as possible against tax. This has the effect of reducing the self-employed person’s net profit, upon which the lender will base the size of mortgage or remortgage they are prepared to offer.

The situation is even worse for the newly self-employed, as they may not yet have been trading long enough to have had three years’ worth of accounts prepared.

This is where mortgage lenders who specialise in self-certification mortgages and self-employed mortgages come into their own. These types of lenders appreciate the different and complex working patterns of the self-employed, contract workers, and people whose jobs are seasonal. They are prepared to look at each case individually and assess each mortgage application on its own merits, rather than just applying a series of one-size-fits-all income tests. In many cases, self-certification means that you do not need to supply any proof of income - you just declare what your income is without having to provide any supporting documentation.

In addition, specialist self-employed and self-certification lenders are more likely to offer flexible mortgage products that allow overpayments and underpayments. This is ideal for people whose income can fluctuate throughout the year, as it means you can overpay when times are good and underpay if you’re business is going through a quiet period.

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Copyright 2004 David Miles. David Miles is the editor of a number of mortgage websites including UK Mortgages & Remortgages where you can find further advice on mortgages or request a personalised mortgage quote or illustration.

Excellent write-up, David! I personally learned a lot and I know our readers did too!

If you enjoyed this article but want to know more about getting a home mortgage in your current situation, just drop us a line today and we’d be happy to provide you with a free consultation to get you headed in the right direction.