The easiest way to eliminate the stress of buying a new home is to have a clear understanding of your buying power - or how much home you can comfortably afford. When you know what you can afford, you can focus on looking for homes that are right for you - and within your budget. Try using our How Much Can I Afford? mortgage calculator to get an idea of how much you can afford, and to learn more about calculating your buying power. Two Key Factors in Qualifying for a Home Loan When we review your application for a home loan, we consider two key factors: 1. Your ability to repay the loan2. Your willingness to repay the loan We determine your ability to repay a loan by verifying your current employment and total income. Generally, mortgage companies like to see that you've been employed at the same place for at least two years or that you have been in the same line of work for a few years. We determine your willingness to repay a loan by examining how you will use the property you're planning to buy. For instance, we'll ask if you plan on living there or if you want to rent it. We can also determine your willingness to repay a loan by looking at your previous financial commitments and how you've handled them. We can gain this information by looking at your credit report or utility bills. Despite our standard methods for determining ability and willingness to repay a loan, we want to emphasize that we approach every loan application on an individual basis. We'll look at all of your circumstances before making a decision, so your stronger points can outweigh your weaker ones. Remember, we want to assist as many buyers as possible, so we'll do our best to review all aspects of your application before making our decision. TIP: Have your financing pre-qualified before shopping for your new home Once you have an idea of what you can afford, you're ready to apply for a home loan. Remember, you don't have to wait until you find the right home to apply for a loan. In fact, we recommend that you apply before you begin shopping. If you're pre-qualified for a home loan before you start looking, you'll have a better idea of which areas you can afford, and as a pre-qualified shopper, sellers will know you're serious about buying. To help you begin, we've created What You Need to Apply Checklist to let you know what information you'll need to apply for a loan, and an online application. Your loan approval process generally begins with an initial meeting. During this meeting, you'll discuss the potential loan, and also have the opportunity to ask questions about any aspect of the home buying process. If you haven't completed our online application, please review the information found in our What You Need to Apply Checklists. You'll need to bring the following to your initial meeting: 1. Purchase contract (if you have one) 2. Checking and savings account statements for the last two - three months 3. Pay stubs for each borrower and co-borrower(s) - reflecting earnings for the last 30 days, and year-to-date earnings (these must be computer-generated or typed originals that identify the employer and the employee's name) 4. Last year's W2 (and 1099 if applicable) for each borrower and co-borrower(s), plus federal tax returns for the last two years (or other proof of income and employment verification) 5. Divorce settlement papers (if applicable) 6. A gift letter if you are using a gift from a parent, relative, or organization to help with your down payment and/or closing costs. If you are using a gift, check with me. Your application can be processed much faster by bringing the documents listed above with you when we meet. After our initial meeting, you'll have a good idea whether you qualify for the type and amount of loan you want. Within a few days, I will let you know if you're approved. If your loan application is denied, I will explain why, and discuss any alternative lending options with you. After processing the information from your application, I will explain the various loan programs for which you qualify. After you've discussed and determined your loan program, I will provide you with several disclosure documents, including: Good Faith Estimate: this document details your closing costs and your monthly payment (principal and interest). Truth in Lending statement: this document details the cost of finance charges and the total amount you'll pay for credit. You may also receive additional disclosures, including any required by your state and/or loan program. Depending on market conditions, you may prefer to "lock in" your interest rate immediately while you shop for a home, or wait until you're almost ready to close on your loan. Be sure to ask how far in advance you can lock a guaranteed rate - a longer lock period may affect your costs. As always, if you have any questions, contact me, and I will be happy to help you with this and all other stages of the home buying process. Even if you're not a "shop-a-holic," finding a home can be a fun, exciting experience! You might choose to begin by looking at homes listed on the Internet. Perhaps you prefer to actually drive around your favorite neighborhood and look at the houses for sale, or you might prefer to work with a real estate professional. However, you may be very industrious and do all of the above! (Use the following information as a general guide, as many states have different requirements and laws pertaining to home sales.) The Internet has definitely helped prospective homeowners like yourself quickly and efficiently find homes that are right for you! With just a few simple searches, you can easily find hundreds of houses in your area or across the country that are for sale. Most Web sites that list homes provide maps, tax information for specific areas, school district information and school locations, crime statistics, and some even provide a virtual tour or photos of the home to view from the convenience of your desk. If you prefer to look for homes the old-fashioned way, simply hop in your car and start driving around your favorite neighborhoods to look for available homes. You might be surprised at what you drive by every day that you may not have noticed prior, and at what new areas you'll discover when you slow down and really start looking. Contacting a Real Estate Professional If you haven't contacted a real estate professional in your area, you might consider looking for one. Real estate agents are licensed professionals who can help you save both time and money, and can provide a list of homes with the features you can't live without - whether it's a fireplace, double garage, or a swimming pool. An agent can save you time by only showing you homes within your budget and that have the features you want, and/or need. Some may ask you to sign contracts stating that they can represent you exclusively for a certain number of days or months. Remember, you're trying to make a business transaction, potentially the largest one you've ever made, so you want to be comfortable with the real estate professional you're working with. Learn more about selecting a Real Estate agent TIP: Earnest Money is usually less than 2% of the home's sale price, although a higher amount may impress a seller whose home is in high demand. You've applied for a home loan, obtained a pre-qualification, and found your dream home. Now it's time to make an offer! Congratulations! You've closed the deal on your new home. The shopping and buying process is over, time for the moving process to begin! If you are lucky, you've already lined up some friends who are willing to help you move, in exchange for pizza and a chance to see your new place. Or, you might want to hire a moving company to do some or all of the work for you. |