Buyer process Step 2
Yep, it's time for the money part of this whole thing. It's so fun to look at homes online and dream how wonderful your new home will be. This step is so important, and the more thought and energy you put in at this stage, the easier your transaction will go. You'll be glad you did when it's all over!
Prequalifying
In today's market, an "affordable" home is not so much determined by sales price as it is by the financing which translates that price into the monthly payment. Once you have your own household budget set up, odds are you have an idea of how much payment you can afford.
Even though there are many ways to qualify to buy a home, make sure the monthly payment makes sense for you.
Be sure to shop around for lenders, and accept recommendations for a lender from your realtor. The lenders will prequalify you for a home based on a variety of factors, including things like (but are not limited to) credit history, size of the down payment, and the length of your employment. Everyone's circumstances are different, so it's important to pick a lender with which you can work with, and who understands what you're trying to do. If your finances aren't ready, your lender can tell you what steps you need to take in order to qualify for a home. They really will work with you to help you to achieve your goals.
In today's market, an "affordable" home is not so much determined by sales price as it is by the financing which translates that price into the monthly payment. Once you have your own household budget set up, odds are you have an idea of how much payment you can afford.
Even though there are many ways to qualify to buy a home, make sure the monthly payment makes sense for you.
Be sure to shop around for lenders, and accept recommendations for a lender from your realtor. The lenders will prequalify you for a home based on a variety of factors, including things like (but are not limited to) credit history, size of the down payment, and the length of your employment. Everyone's circumstances are different, so it's important to pick a lender with which you can work with, and who understands what you're trying to do. If your finances aren't ready, your lender can tell you what steps you need to take in order to qualify for a home. They really will work with you to help you to achieve your goals.
Downpayment
Let's have a word about your downpayment. You'll have to put something down, that's obvious right? But how much do you need?
You'll have to show proof of your downpayment to your lender. When you finally put an offer on a home, you'll have to give some of that as earnest money. But what if your lender requires more downpayment than you've saved? What are some other sources of funds that you could use as a downpayment?
Home Equity Loan: if you have parents that are willing, they may ne able to take out a home equity loan to be able to gift to your children. Often your lender will require a "gift letter" to verify that the parents don't expect repayment.
Life Insurance: If you have built up a cash value on your life insurance policy, you may be able to borrow from the insurance company up to the amount of the accumulated cash value. Often, they will even ask for more favorable interest rate than would be asked for other types of loans.
Stocks and bonds: If you feel the market doesn't favor selling your stocks or bonds now, you may be able to secure a bank loan using your portfolio as security.
Company Profit Sharing or Savings Plan: Look into the possibility of withdrawing what you have in your profit sharing or savings plan account or borrowing against it.
Let's have a word about your downpayment. You'll have to put something down, that's obvious right? But how much do you need?
You'll have to show proof of your downpayment to your lender. When you finally put an offer on a home, you'll have to give some of that as earnest money. But what if your lender requires more downpayment than you've saved? What are some other sources of funds that you could use as a downpayment?
Home Equity Loan: if you have parents that are willing, they may ne able to take out a home equity loan to be able to gift to your children. Often your lender will require a "gift letter" to verify that the parents don't expect repayment.
Life Insurance: If you have built up a cash value on your life insurance policy, you may be able to borrow from the insurance company up to the amount of the accumulated cash value. Often, they will even ask for more favorable interest rate than would be asked for other types of loans.
Stocks and bonds: If you feel the market doesn't favor selling your stocks or bonds now, you may be able to secure a bank loan using your portfolio as security.
Company Profit Sharing or Savings Plan: Look into the possibility of withdrawing what you have in your profit sharing or savings plan account or borrowing against it.
Below is a list of the information the lender will most likely require of you to provide them:
1. The amount of money you wish to borrow and the length of time you will need the money
2. Your current address and any other addresses covering the past 24 months
3. Your social security number
4. Your current employers name, address and phone number, and the same information on any other employers for the past 24 months
5. Your gross monthly income including documentation (like your most recent pay stub). You'll need to provide your last pay stub/W2 for any other employment you may have had.
6. Complete account statements for any bank, credit union, retirement or brokerage accounts.
7. Your assets (real estate, personal property, stocks and bonds, life insurance with cash value, etc)
8. A complete list of your debts including account numbers, balances and minimum payments
9. An account, in writing, or any problems concerning your application and any documentation of the circumstances of those problems.
Once your lender has this information, they will review your application, verify all the facts and they will pull your credit report. Initially, they will tell you if you are pre approved, and you can buy a home up to a certain amount
1. The amount of money you wish to borrow and the length of time you will need the money
2. Your current address and any other addresses covering the past 24 months
3. Your social security number
4. Your current employers name, address and phone number, and the same information on any other employers for the past 24 months
5. Your gross monthly income including documentation (like your most recent pay stub). You'll need to provide your last pay stub/W2 for any other employment you may have had.
6. Complete account statements for any bank, credit union, retirement or brokerage accounts.
7. Your assets (real estate, personal property, stocks and bonds, life insurance with cash value, etc)
8. A complete list of your debts including account numbers, balances and minimum payments
9. An account, in writing, or any problems concerning your application and any documentation of the circumstances of those problems.
Once your lender has this information, they will review your application, verify all the facts and they will pull your credit report. Initially, they will tell you if you are pre approved, and you can buy a home up to a certain amount
Once you find a home, your realtor will contact your lender and ask her for a letter saying you have been approved to buy the home you are bidding on.
Check out Susanne's preferred lender, Holly Hart with First Home Mortgage.
Check out Susanne's preferred lender, Holly Hart with First Home Mortgage.
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