If purchasing a home is on your bucket list, there are six considerations to make that may improve your ability to obtain a mortgage.
In order to ensure that you can make your recurring home loan repayments, lenders will carefully examine your credit report. Therefore, if you're thinking about buying a house, it's crucial to make sure that you're paying all of your expenses on time and avoiding being late with any repayments.
Contrary to popular belief, reviewing your credit report won't actually harm your score as a whole.
Actually, there are two different ways that your credit score can be checked. A "soft" inquiry, such as checking your personal credit record, won't lower your score. Giving a lender your consent to examine your credit report, however, is regarded as a "hard" inquiry and does have an impact on your credit score.
Here are some tips to improve or maintain a good credit score:
Record all your financial transactions made using your credit and/or debit card, including any checks you’ve written using your ATM card. You can check your transactions online to keep track of your balances, confirm deposits, and see other activities. You should report any potential anomalies right once.
Your available credit, which is the amount of credit left on a line of credit or credit card after deducting any existing debt, is the credit limit. Verify that you are not using all of your credit limits or exceeding them, as this can hurt your credit score.
Pro Tip: Keeping your credit utilization rate below 30% may help you maximize your credit score.
Maintain a reserve of credit equivalent to at least 15% of your available credit for emergencies. Or even better, maintain a liquid, interest-bearing account with three to six months' worth of living expenses set aside as an emergency fund. In this manner, you avoid taking out more debt than you are comfortable repaying in case you lose your job or incur a big unforeseen expense.
Pro Tip: Setting up recurring payments into a savings account through your bank can help you with building an emergency fund.
Consistently make your minimum required monthly payment on time each month. You can lower your loan charges by paying more than the minimum each month—or, even better, the entire sum. Make sure you don't miss any payments.
Making on-time payments is a key step in raising your credit score because your payment history accounts for about 35% of your FICO® Credit score. When your payments are due, think about setting up alerts.
When you apply for a mortgage, the lender will ask you for certain information so they can fully assess your financial status. For this reason, it's a good idea to keep your most recent loan and credit card statements, savings account data, pay stubs, and tax returns close to hand to speed up the house loan application process.
Think about locating the ideal family-friendly dream home.
Finding the ideal lender to help realize this dream of house ownership is all that is required when the home inspection process is completed successfully. It might be challenging to choose the best mortgage lender from the many options accessible today, including local banks and internet mortgage lenders.
The house-buying process requires selecting the best mortgage provider, which can be a difficult task. Just keep in mind that there are several crucial qualities to look for when choosing the proper lender:
Although starting your own business after leaving the corporate sector can be an exciting career transition, it may have an impact on your ability to borrow money when applying for a home loan.
Starting a new business may result in uneven cash flow at the outset of the endeavor or a lack of standard documentation. Some lenders may evaluate your income and savings, among other things, throughout the application process.
Lenders want to see evidence of your ability to save money. Most people search for what they consider real savings. So it makes sense to transfer any extra money into a separate savings account and to continue making regular deposits.
These are just some of the things you need to consider when you apply for a mortgage loan. For more tips like this, check our website or follow our official social media accounts.
If you’re new to real estate, whether as a buyer or an agent, decoding the industry itself can be challenging.
It’s complex to learn the process of selling, buying, or investing alone, and so is learning all its jargon. However, it’s critical to know even just the basics before you dive into it to avoid further confusion.
In this post, we’ve listed some of the commonly used real estate terms to know.
In layman’s terms, it is a mortgage with a variable interest rate. During the initial period, the interest charged to the loan is fixed, but after that, the rate will adjust at monthly or yearly intervals.
To determine the approximate worth of the real estate, an appraisal is necessary. The mortgage lender sends a property appraiser to assess the asset's worth. This helps the lender determine if the amount that the borrower is asking is worth it.
If the appraised value of a home is less than the sale price, an appraisal contingency allows a buyer to cancel the purchase agreement.
To guarantee that the loan is secured by a suitable house value, the buyer's lender hires an appraiser to assess the worth of the property. Lenders want to make sure they aren't "overpaying" for a piece of real estate.
If the initial transaction fails, a buyer who is interested in buying a property that is already under contract with someone else has the option to make a "backup offer." To ensure that a backup offer is the next in line, it must still be negotiated and any funds, like earnest money, must be provided. Legally, there can only be one backup offer because a backup to the backup cannot exist.
Even when viewing the property as possible, a buyer making an offer on it without seeing it was deemed as a "blind offer." It is an approach frequently used in highly competitive situations.
A buyer's agent also referred to as a selling agent, is a qualified real estate agent whose responsibility is to find a buyer's next home and to represent that buyer's interests by negotiating on their behalf to secure the best possible deal.
A neighborhood association, a homeowner's association (HOA), a builder, or a developer will typically impose these rules and regulations on real estate to outline any requirements and restrictions on what a homeowner is permitted to do with the property. Additionally, it could include special, yearly, or monthly assessments.
The owner could sell their home when the said property is owned outright (has no outstanding debt on the mortgage) or the owner owes less on their mortgage than what the market suggests they may get for it.
When the home transaction closes, it is deemed complete. Typically, this occurs when all parties have signed the necessary paperwork, transferred all funds, and if a lender is involved, received full lender approval. The very last stage of closure for several marketplaces around the country is documenting the deed with the county clerk's office. Considered the new homeowner, once each of these requirements has been met, the buyer is granted entrance to the residence.
DOM for short is the period between the day a property is advertised for sale on the multiple listing service (MLS) of the neighborhood real estate brokers and the day the seller and buyer enter into a contract to sell the property.
A mortgage lender's debt-to-income ratio, or DTI, is calculated by dividing your monthly housing payment and all other debt payments by your gross monthly income and multiplying the result by 100. This enables lenders to estimate how much you can afford to pay monthly for a mortgage by using their available lending programs to calculate affordability.
When a seller accepts a buyer's offer, the buyer will be required to make an earnest money deposit (EMD), sometimes known as a "good faith deposit". It demonstrates the buyer's seriousness about the purchase as well as their willingness to back up their words with deeds.
The EMD might be between 1 and 5 percent of the sales price in amount. The EMD is frequently kept by an escrow business or by other provisions of the purchase and selling agreement (PSA).
This is the depositary (impartial third-party) and agent who gathers the funds, necessary documents, personal property, written instruments, and/or other items of value to be held until specific events or the performance of described conditions happen, usually outlined in mutual, written instructions from the parties.
Equity is the investment made by the homeowner in their house. Your home's equity is calculated as the amount that is left over. To get this, take the home's market worth and deduct any mortgages or liens from it.
A set of loans that are insured by the federal government includes FHA loans. In other words, the FHA insures banks and other private lenders against potential losses they might sustain if the borrower does not repay the loan in full or on time.
Known as a "fixer-upper," this combines a mortgage loan with a loan to help pay for improvements or repairs, like structural or energy-related changes. However, it can't be used for luxury improvements, such as adding tennis courts or swimming pools.
As the name suggests, the interest rate will not change during the term of a fixed-rate mortgage. They are frequently offered as 10, 15, 20, and 30-year loans.
Hard Money Loan
An alternative to using standard lenders is to take out hard money loans. Hard money lenders often demand a sizable down payment and a quick payback plan and base the loan's eligibility on the property in issue rather than the credit score.
A private organization called a homeowner's association oversees a condominium or planned community. You agree to adhere to the HOA's rules and pay monthly or yearly HOA dues when you purchase a property that is managed by an HOA. They frequently have the right to foreclose on the property if you don't pay and/or don't comply, and/or they can file a lien against the property.
Using a house sale contingency, a buyer might tell a seller that one of the requirements for buying their property is that they can successfully close on their existing home. This is frequently negotiated as part of a clause or addition to a contract. If a buyer needs to sell their home to have the down payment needed to buy the new home or would prefer to utilize the sale money rather than their savings to make the down payment, then such a contingency could be employed.
Inspection is a process wherein a potential home buyer hires a certified professional inspector to visit the house and create a report on its condition and any required repairs. The inspection frequently takes place during the period of due diligence so that buyers can decide for themselves whether they want to purchase a particular home as-is or ask the seller to make or pay for specific repairs.
The inspection contingency, sometimes known as a "due diligence contingency," is a provision occasionally included in a purchase agreement that gives buyers a certain period during escrow to do any required inspections.
Traditionally, when you buy a house, you become the owner of both the building and the land it is situated on. A land lease may be necessary in some situations, in which case you would own the house while paying the landowner's rent.
A loan contingency is a clause or addendum (also known as a mortgage contingency) in an offer contract that permits a buyer to back out of a purchase and keep their deposit if they are unable to get a mortgage with specific parameters within a set amount of time.
Property purchasers must obtain a mortgage pre-approval letter because it outlines their financial capabilities. After examining the buyer's debt-to-income ratios, cash on hand, and credit history, the lender issues a mortgage pre-approval letter outlining the terms, loan type, and loan amount the buyer qualifies for.
Real estate agents and broker members use a database that gives them access to modify or add information about properties that are available for sale in a specific area, and this is called Multiple Listing Service (MLS). The MLS is frequently checked by buyer's agents to see what properties are available and what they have recently sold for.
Most states require this report, and this discloses when a property is situated in an area where there is a higher risk of natural disasters. Typically, the seller pays for the study and provides it to the buyer during escrow.
In an NHD report, the following natural hazard zones are included:
Customers submit a formal offer for the house they wish to buy. Depending on what you and your agent believe to be the fair market value, the offer may be the full list price.
After getting your signature and putting the offer in writing, the buyer's representative sends it to the seller's agency for consideration. The seller has two options: either accept it right away, in which case it becomes the parties' purchase contract, or make a counteroffer. It is the art of negotiation that is documented in writing.
Homebuyers must complete an application to obtain pre-approval, which enables a lender to assess their financial condition, including their debt-to-income ratio, repayment capacity, and creditworthiness. Once this is obtained, the lender can provide a letter to the buyer indicating the precise loan amount for which they have been pre-approved as well as the total sales price for which they are approved.
Typically, the letter will state the projected interest rate as well as the buyer's anticipated down payment. The majority of sellers want to see a pre-approval letter along with an offer because it is far more detailed than a pre-qualification letter.
To deliver a clear title, the seller must take care of any title problems that are revealed by a preliminary assessment. The information provided includes easements, liens, and the history of ownership. By looking through the county recorder's office's database of past property transactions, the title business compiles this report.
Before a title insurance provider may provide title insurance coverage, they must receive this report. To safeguard their interest in a property, most lenders require borrowers to buy title insurance coverage. Even though it is a negotiating point, it is common practice in many places for a seller to cover the cost of this insurance.
The sum of money owed to the lender on a mortgage loan, excluding interest, is known as the principal balance. Take a loan of $300,000. That is the loan principal or the amount you borrowed to purchase the house. The interest, which is computed daily for the majority of loan types, is paid by buyers each month together with the principal. Almost always, interest is paid on payments before the principal is deducted. After all, the bank only agrees to provide the loan because of the interest.
When a homeowner passes away without creating a will or deciding to give a property to someone, a probate sale takes place. The probate court would then provide permission to an estate lawyer or other representative to engage a real estate agent to sell the house under such circumstances.
The entire process will typically be a little more difficult and time-consuming than a typical transaction.
The term "real estate owned" refers to homes that a lender now owns after an unsuccessful auction foreclosing on them.
REO homes occasionally offer a chance for a buyer to purchase a property for less than market value because the majority of banks would rather reinvest the proceeds than waste time promoting the property for a prolonged period.
Financing can be challenging because the bank frequently markets the property "as-is," meaning they are not willing to make any modifications to it.
Although the terms "REALTOR®" and "actively licensed real estate agent" are frequently used interchangeably, not all real estate agents are REALTORS®. A member of the National Association of REALTORS® is a REALTOR® (NAR).
A REALTOR® commits to maintaining the association's Code of Ethics and to keeping one another responsible for providing the public, customers, clients, and each other with high-quality service.
When a buyer, who is now the new homeowner, agrees to let the seller, who is now the tenant, remain in the home after escrow closes, this arrangement is referred to as a rent-back, sometimes known as a leaseback. In advance of the event, the terms are agreed upon, and they frequently include a leasing deposit, a daily rental charge, and a permissible time frame.
It is occasionally feasible to calculate the rate by taking into account the new homeowner's monthly mortgage out-of-pocket costs as well as any potential trouble this may cause them by postponing their move.
To get purchasers to buy the home or make the deal more appealing, sellers may make concessions.
Up to certain restrictions and with the lender's consent, concessions are most frequently considered as a contribution toward the buyer's closing costs, which, in the end, puts more money in the buyer's pocket.
A seller's disclosure is a statement made by the seller that, to the best of the seller's knowledge, contains facts about the property or that could influence a buyer's choice to buy the property.
In addition, a seller is required by law to disclose any information that may affect a buyer's enjoyment of the property but is not directly related to it, such as pest issues, boundary disputes, knowledge of significant construction projects nearby, military base-related noises or activities, association-related assessments or legal issues, unusual odors from a nearby factory, and even recent fatalities on the property.
When a property is sold short, the amount received for it does not cover the loan it is used to secure. Since the proceeds of a short sale will fall just "short" of the debt, the lender(s) of the seller will need to approve the transaction. Because most lenders' clearance procedures for short sales are drawn out and time-consuming, a short sale will take longer to finalize than a standard one.
The seller is not allowing the property to be examined before an accepted offer when they use the phrase "submit offers subject to inspection" or "submit offers subject to inspection". Tenants who are uncooperative or who have privacy concerns are two prominent causes of this.
You can take advantage of the typical buyer's apprehension regarding buying a house without seeing it because it will surely reduce interest in the market as a whole.
Additionally, it's not as bad as it first appears because, under the typical purchase agreement, there will be an inspection period during which you can end the deal without incurring any fees.
A sort of joint ownership of a property, whether it be a single-family home or a business building, is referred to as tenancy in common. The property is owned by all of the common renters, though in various proportions.
The simplicity or complexity of obtaining finance will depend on the type of property. Additionally, tenants in common do not have the right of survivorship, therefore the deceased tenant's ownership stake or percentage truly belongs to their estate, as determined by their will or the applicable law, rather than the remaining owners receiving a share of it.
Small, whitish, soft-bodied termites feed on wood and can cause a lot of damage. A diagram of the property and the locations of current and/or past WDI activity are included in the WDI report, often known as the termite report.
The report may also, and in some cases, mention what could be required to deal with such potential infestations, such as spraying or tenting. The cost of such products won't typically—if ever—be mentioned in the WDI report because it might be seen as a conflict of interest.
During a title search, the history of the property is analyzed from public documents, including sales, purchases, tax liens, and other types of liens.
To find out who is listed as the property's official owner, a title examiner will often search title plants and occasionally county records. The Preliminary Report will detail this information, along with any liens or encumbrances that are recorded against the property, for the parties to evaluate before the conclusion of escrow.
In a trustee sale, the seller is a trustee of a living trust rather than a private individual. Most frequently, this is due to the original homeowner's passing away or the placement of their assets in a living trust.
Since the trustee may choose to sell the property, they might accept a less desirable offer because they are not as emotionally invested in it as a regular owner would be.
A VA loan is a mortgage loan provided by the U.S. Department of Veterans Affairs.
Veterans, active duty personnel, and the surviving spouses of these individuals can obtain VA loans to buy homes with a small downpayment, no private mortgage insurance, and better interest rates.
These are just some of the real estate terms to know.
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A significant financial accomplishment and source of pride is owning a home. One important factor is that owning a property increases your equity, which significantly raises your net worth. The connection between owning a property and increasing your wealth is particularly crucial at this time of high inflation.
Here are some reasons why starting your path to homeownership now would be a good idea if you're wanting to improve your financial security.
According to a National Association of Realtors (NAR) survey, there is a sizable wealth gap between homeowners and renters, which is just one of several trends related to homeownership. It says: “the net worth of a typical homeowner is about 40 times the net worth of a renter.”
This difference indicates that acquiring a home is an essential step on the road to financial success.
The fact that homeowners accumulate equity contributes significantly to the wealth gap between owners and renters. When you own a home, your equity increases as the value of your home rises and you keep up with your monthly mortgage payments. You are not afforded the same opportunity if you rent.
One of the most dependable methods to build wealth is still to purchase a home. Making regular mortgage payments helps you increase the value of your house. Renting is not the same as paying off a mortgage, which is an investment in your financial future.
But on top of that, when your house increases in value over time, your equity in it grows even more. That significantly affects how much wealth you accumulate.
Over time, increasing your home's equity can help you become wealthier. One of the few assets with the potential to gain value as you make payments on it is a home.
This means that when you buy a property, you benefit from the fact that your mortgage payment serves as a contribution to a forced savings account that increases in value together with your home. Any equity you have accrued also goes back to you when you sell. Renters never get their money back from their monthly rent payments.
If that’s not enough, below are more benefits to owning a home.
Homeowners have a solid monthly payment structure thanks to the 30-year fixed-rate mortgage. The days of dreading receiving letters from your landlord increasing your rent are long gone.
A fixed-rate mortgage's principal and interest payments are fixed for the duration of the loan, however, you can reduce them by refinancing if interest rates decline over time. If you're okay with paying a higher monthly payment, you can even decide to pay off the loan sooner with a shorter term (like 15 years).
The longer you own a home, the more likely its value will rise. There’s this thing called “appreciation,” which simply refers to the likelihood that the value of your home will increase over time.
To estimate how much your home might be valued, you can use a home value estimator or browse online listings for homes for sale in your neighborhood. Additionally, you can increase the value of your house by making improvements, and many fixer-upper mortgage programs let you combine the price of those projects into a single new mortgage loan.
There are numerous ways to access equity in your house, and there are no limits or restrictions on how the money is used. This means you can utilize the fund to achieve a variety of financial objectives, such as debt consolidation, home upgrades, starting a business, or developing your real estate investment portfolio.
There are four ways to access equity in your home:
Refinancing
In a cash-out refinance, you take out a bigger loan than you presently owe and keep the cash difference. For this kind of refinance, the majority of lenders let you borrow up to 80% of the value of your house.
Mortgage Equity Loan
If you want to borrow money from the equity in your home without refinancing your current first mortgage, a home equity loan is a popular option. You would normally pay a fixed rate that is a little more than what you would with a cash-out refinance in exchange for a flat sum of money.
Home Equity Line Of Credit (HELOC)
A HELOC functions like a credit card that is backed by your house. You can pay off and re-use the credit line for a predetermined period, which typically lasts 10 years, and you only make payments on the amount you utilize.
Reverse Mortgage
With a reverse mortgage, homeowners who are 62 and beyond can transform their wealth into cash or even income. A bonus of this tailored senior program is that there is no mortgage payment due each month.
Tax Deductions
The deduction for mortgage interest is an important tax benefit of home ownership. Since home mortgage interest is tax deductible, your federal tax liability can be reduced. The most significant benefit happens early on in a 30-year fixed mortgage when the majority of your monthly payments are made to interest rather than principal.
The tax advantages of owning extend beyond the mortgage interest deduction, though. Added deductions include:
Homeowners who have better credit may also be able to avoid having issues making their monthly payments. Renters averaged 10 late payments on their credit reports compared to 6 for homeowners in the LendingTree study mentioned above.
Final Notes
These are just some benefits of owning a home, and surely it has more to offer. So the next time you think if you should rent a place or own a property, this might help you!
And if you need real estate expert tips right away, just give us a call or send us a message!
Choosing the right home for your family is a struggle; saving up for a home deposit is another.
On average, it takes roughly 4 years or 51 months for a first-time home buyer to save the 20% down payment.
That's quite long, and many potential homeowners are having a hard time getting beyond the deposit obstacle and becoming homeowners sooner.
As mentioned above, the average home down payment is 20%; however, some lenders will agree to a 5% or 10% home loan deposit.
It all depends on the lender and their requirements. The advantage of having at least 20% or more is the perks you'll get from the home loan provider, such as the competitive interest rate and payment terms.
Below is a more detailed explanation of why you should save a 20% deposit:
If the loan term stays the same, the loan amount would be lower if you made a larger down payment. In short, the monthly or fortnightly repayment is lesser.
Paying a bigger deposit means having a lower Loan-To-Value Ratio, resulting in a lower interest rate.
When the initial deposit is lower, the borrower has a limited choice of loan products. On the other hand, when the deposit is bigger, the borrowers get access to a wider range of loan products.
It depends.
Normally, you need to have a deposit on a property, unless you're refinancing. However, some lenders may provide mortgages starting with as low as a 5% deposit even without a downpayment.
Nonetheless, it's still better to save up a 10% or 20% average home down payment or more to have more lending possibilities.
The first steps in saving are to have discipline and clearly understand where your money is going each month. Below are some tips that you can consider when you want to save for your first home deposit.
The key is to keep track of your daily spending on a daily, monthly, and annual basis. This gives an idea of whether changes need to be made or if there are any opportunities where you can save. A budget might include expenses (variable, fixed, and discretionary) as well as your savings goal or the amount you need to save every month to fund something, let's say travel or a new bag.
One of the factors that affect the decision of a lender is the current debts under your name. For loan providers, it might suggest your ability to repay a house loan. Therefore, in addition to using your to cover interest rates, it can also influence your chances of getting a mortgage.
Some examples of these debts might include auto loans, student loans, credit cards, or other recurring expenses that you pay using your regular income.
Failing to repay a loan on time or defaulting on it can decrease your credit rating, making it more difficult for you to get a loan or better loan terms.
How committed are you to saving money? Can you fight the impulse to spend on unnecessary things?
Prioritizing to save money can help you reach your goals faster, although that doesn't necessarily mean removing unnecessary expenses in your budget.
What you can do is have a separate bank account intended for savings, and transfer funds to it regularly. This might help you avoid the urge to spend so much.
Doing so can also help you create a budget since you need to track down your incomings and outgoings more carefully if you only have a specific amount of money to spend each month to stay out of the red.
You can decide to go one step further and open up various savings accounts, each for a specific goal. For instance, you might have easy-access savings account that you can rapidly access for unanticipated expenses or emergencies and a higher-interest savings account for longer-term savings. This can help you not only have a better cash flow but also, support you in saving faster.
Re-assessing your fixed expenses, such as your rent or car loan, is another way you could try to save more money. Renters who want to save money for a down payment on a home may consider moving into a smaller, less expensive home, splitting the rent with a roommate, or even moving in with relatives.
While this may seem like a drastic lifestyle change, the total savings over six to twelve months might be enormous and could even do more than double the deposit needed for your house loan.
Let's say that you've done all the legwork and saved your down payment for your mortgage. So, all of it belongs to you, right? Well, some lenders might have a different perspective. It's crucial to understand where the savings came from and how some lenders could see them.
This is why it's important to know the difference between genuine savings and non-genuine savings.
Lenders have their own definitions of what makes genuine savings and non-genuine savings, but basically, these are the ones stated below:
Genuine savings can be two things -- it can be the amount held in the borrower's account for three months or more and it can be the regular transaction saved in the savings account.
It can also be the publicly traded shares under the borrower's name.
Bonuses, tax refunds, funds from a sale, or gifts are examples of non-genuine savings. It might be considered genuine savings if left in a savings account for three months or more; however, this might still depend on the lender if they will consider it as such.
These are just some of the things you might need to know when saving for your first home deposit.
If you need help with mortgages or how to acquire your dream home, our expert realtors can help you!
One of the most important measures of your financial health is a good credit score. A good credit score shows the lender how responsibly you use your credit. The better your score, the easier it is for you to qualify and be approved for better interest rates on new loans or lines of credit. A poor credit score, on the other hand, makes it harder to get qualified for a new loan or open a credit line. It also puts the borrower on the hook for higher interest rates. Thus, a good credit standing is very important in today’s society that has become increasingly dependent on credit to make purchases and financial decisions.
If you currently have a poor credit score, here are some of the steps you can take right now to improve it:
The tips mentioned above are just some of the ways you can improve your credit score. If improving your credit score is a goal you have, keep in mind that the sooner you begin working to improve your credit, the sooner you will see results.
2019 is quickly coming to a close, and it’s the time of the year to reflect and create goals for the new year. If purchasing your dream home is one of your goals this 2020, here are some New Year’s Resolutions you can implement into your lifestyle to keep your financial resume in tiptop shape and prepare you for your dream home.
Avoid Changing Careers
Employment history, alongside income, will be a major factor during your mortgage application evaluation. While a new job could be a good career move, most evaluators are looking for a steady job history with little to no gaps in your employment over the last few years.
Focus on Building Your Credit
--- Check Your Credit Score
Your Credit Score determines your creditworthiness; which banks and lenders use to determine if you qualify for a loan, at what interest rate, and what credit limit.
Be sure to monitor your credit closely. If you’re unsure of your credit score, there are numerous financial websites that offer credit score monitoring. Plus, most of these credit sites will tell you what impacts your credit most. Be wiser this coming new year and change your spending habits. If you have large debts negatively impacting your credit, get started on a payoff plan so your score can improve.
--- Build A Solid Credit History
The first thing that a lender will check is your credit history. Create a solid credit history by paying off debts and paying bills on time. Borrowers who have a history of paying off credit cards and other debts on time are preferred by lenders; as this signifies that you are less of a risk and a responsible borrower.
No credit yet? Don’t be disheartened. Securing a home loan can be more challenging and time-consuming, but not impossible. Your potential lender can look into your history of managing monthly payments and gauge if you are a responsible borrower through your on-time payment of rent and utilities, student loan debt or cell phone bills.
Cut Down Expenses. Create a Budget and Stick to it.
Is there a monthly expense you can possibly cut down? The monthly subscriptions that you don’t actually use for example? How about limiting dining out and only buying things that are necessary?
--- Cut Down on Monthly Subscriptions
Although convenient, monthly subscription services can add up and you could be dinged for high credit utilization if your credit report is pulled midcycle even if you pay off your credit card every month.
Limit your monthly subscription services to those you ACTUALLY NEED. Do you really need a cable subscription these days?
--- Spend Wisely
How many times do you eat out? According to Business Insider, people in Indiana spend an average of $2,241 on dining out (Business Insider (2019): Here's what the average person spends on dining out in every state). This amount can already be thrown towards your down payment fund. So instead of eating out, pack your lunch. Not only do you save money, but you can also prepare healthy meals.
--- Avoid Large Purchases
REMEMBER THE GOAL: BUY YOUR DREAM HOME! Don’t take on large amounts of debt- may it be a vacation or buying a car - before buying a house.
Your debt-to-income ratio plays a pivotal role in your loan approval. If you make large purchases, the ratio could sway in the wrong direction.
Just like anything worth having, preparing to buy your dream home won't be easy. You will have to make adjustments and sacrifices to achieve your goal. Luckily, there are many online tools and resources you can use to aid you in determining the factors necessary in buying a home, such as the Motto Mortgage Experts menu of home loan calculator that will give you an idea of how much home you can afford as well as provide custom down payment estimates based on home price and interest rates.
So, you’re ready to buy a home. You’re asking around and your family and friends have a lot of input, but you can’t help but to think...are they even remotely informed? And why are people who still rent apartments telling me how to buy a home? Shouldn’t I be talking to someone who does this for a living? Have no fear, your instincts are correct!
The Indy Home Pros Team has been ranked the #1 Real Estate Team in Indianapolis by The Indianapolis Business Journal for 4 years running, and we do not take this honor lightly. We specialize in ensuring your first time home buying process goes as smoothly and as magically as possible. Sure, there are hundreds of pieces of paper and documents that go into buying a home, and there should be; it’s the biggest purchase of your life! But we take care of that, that’s our job, not yours!
There can never be a complete guide to buying a home, because each home buying experience is unique to you. So below are some quality steps to take instead, and if followed, will get you through it!
1) Get Pre-Approved
All this means is that you call a mortgage broker (most likely your friend you see spamming your Facebook Feed that you have no idea what they do for a living, yes, that’s a mortgage broker) and give them some info about your life. i.e. how much money you make, how much debt you have, and they will come back to you, hopefully, with a money amount that you are able to safely spend on a home, say, $145,000.
2) Find and Hire a Realtor
Just because your Uncle Billy Bob is a realtor does not mean you have to use him. In fact, you likely shouldn’t. Didn’t he have one too many and fall off the porch last Christmas? Is that really who you want showing you houses? Plus how awkward will it be when you have to fire your own kin? Distance yourself slowly and pick an Indy Home Pro instead!
The market has changed since the 1990s and you need a realtor who is active and knows the current market and trends, knows all the relevant paperwork and how to execute it QUICKLY, has relationships in the industry with current title companies and so on and so forth, things you don’t need to think about because you are using a realtor!
That’s it! You’ve done your job, now let your Realtor do theirs! Just Kidding. Much more valuable info is below!
3) Don't eliminate homes that aren't up to par in your eyes as there are loans available to assist in renovating properties before you move in.
These are 203K loans that will allow for budgeting in renovations prior to close and can range from a simple bath or kitchen remodel to a full blown, top to bottom overhaul.
4) If financing is an issue, check with family to see if they can gift you funds for a down payment. This is allowed and can help new home buyers get things off the ground for your first time around.
5) Seek out lenders that can offer 0% down assistance to first time home buyers. Additionally, be aware that there are government loans that allow for the same type of financing as this in the form of a VA or USDA (rural) loan.
You’re setting out to buy a home and it’s likely one of the most exciting, and stressful, times of your life. And while it can be tempting to jump on a home search site that rhymes with pillow and go for it, you can now avoid the common pitfalls of first time homebuyers by naking sure you don’t commit any of these 5 mistakes that others have already made for you!
Like we said above, it can be tempting to get online and GO FOR IT! But then, you find it, the house of your dreams! BUT! By the time you find a realtor and try to set up a showing, someone else submitted an offer and it was accepted. But how? How were they so quick? They were Pre-Approved!
Getting Pre-Approved is the first, and arguably most important, step in the home buying process. Getting Pre-Approved is as simple as contacting a Mortgage Lender, filling out a form, and then seeing how much house you can afford based on things like your income, debt, savings, etc.!
Depending on where you are buying your home, your personal background, and various loan options; you could qualify for a first time home buyer program! This could mean a significantly lower down payment than the once standard 20%, lower monthly payments, and other saved costs!
Most new home buyers start their home search by looking at existing homes, and don’t ever consider building a new home because they think it’s too expensive. This is no longer the case these days! Companies like M/I homes offer SMART Options, meaning a brand new home in a community like Fisher’s can be yours for less than you think!
Checking your credit report to make sure it’s accurate. Lenders will go over your credit report with a fine tuned comb, so making sure everything on your report is correct is essential in getting the best loan rate and option for you. Pull your report from one of the major 3 companies, or use another credible site. Take it up with one of the 3 major companies if there is something on there you find incorrect.
Before your mortgage is final, do not mess with your credit! This means no applying for a new credit card, no booking that European vacation via credit, or anything else credit related. Applying for or adding new credit has the potential to lower your credit score, and this could in turn have an impact on your loan.
Deciding to sell your home is a huge undertaking, and there are numerous items to consider when doing so. From the simple thought of where to move next, to the complex details of accepting an offer, from negotiating with a buyer through inspections and repairs, to moving the process through title work so the home's deed is transferred correctly, the home selling process can become convoluted quickly.
In today's day and age of online marketing, online document sharing, digitization of media, and thousands of resources devoted to staging, design, inspections, and repair, it can be easy for families to lose site of where to start and how it will end. Choosing to sell a house on your own can be an undertaking many homeowners find overwhelming and time consuming, and most often end up changing their minds. But then there's the important decision they must make on who to hire to get the house sold.
Preparing to take on such a task of listing a home for sale entails some serious work and should begin with a Realtor. Interviewing agents is the best way to feel more comfortable about the decision to sell your home. And interviewing agents will allow you to, hopefully, garner a relationship with an agent you feel most confident in, and who will do what they're paid to do - sell your home. But what should you look for in an agent and why?
Today, as opposed to just a dozen years ago or so, online inquiries of homes for sale dominates the landscape. Over 90% of all home searches begin online, and where someone begins can have a bearing on how your own home sells. Did you know that the major sites, like Zillow and Trulia, don't list all homes that are for sale? Even some big brokerage listings aren't placed on these sites because of differences in agendas. So, be sure to inquire if your home will actually be listed on these sites. These sites are chalk full of inaccurate information as well, so be prepared to review them prior to listing to make sure specs are up to date.
Deciding on the price of your home is another major obstacle to overcome with an agent and, more importantly, yourself. Are you prepared to potentially learn your home isn't truly worth what you think it's worth? Always remember that it's not you or the agent that dictates what your home is worth, it’s the market. Any agent or online program can tell you what they think it's worth, but the true indicator is the price at which homes similar to yours in quality, age, and size have been selling for in your area.
Deciding on what agent or team to use to market and sell your home is no easy undertaking. While interviewing agents, find out what they do to market the home that's out of the norm. Everyone's home will be put online but, as stated earlier, not all major sites will be utilized. Verify how the agent will push your listing to market and via what platforms. Ask what their marketing budget is, where the most money is spent, why, and for how long. Our team, for instance, is one of the biggest spenders with Zillow and Trulia so that we capture more buyers for our listings. We additionally budget funds for advertising on Facebook, LinkedIn, and Instagram. These social sites create a buzz and we know how to get that started.
What kind of yard signs will be installed? Will the pictures be professional or taken on the agent's cell phone? Do you have an option for drone footage or 3D mapping and imaging? If so, who does this? The agent, or a professional services that does it on a daily basis? Once these images and videos are posted online, how do they track traffic and how do they focus on verified demographics to push these media types out? It’s complex...but in today's market, you need to be coupled with an agent or team that understands the digital age, not just someone who posts "I Just Sold This House" on Facebook.
The other main topic of selecting the right agent for the job, I believe, is contract negotiations. Many sellers feel that an agent that can get them the most money for the house is the best negotiator. But, how would you ever know if that's the case? Beyond the final sales price, what other pieces of the process can cause the final sales price to fluctuate? Typically, the inspection response and the appraisal. How well do you think your selected agent can manage a transaction with another agent at this critical moment in the process? Being able to understand all options available to a buyer and seller in regards to repairs is essential.
Inspection response and repairs can cause many deals to fall apart. I believe this to be the hardest part to navigate for most agents, but it doesn't have to be. Preparing the seller of what to expect during this point of the sale needs to take place in your initial interview. Have them walk the house and share with you what they see in the house that he/she believes needs to be addressed before listing. Do they know and understand the appraisal process to be able to call out items that need repaired before even showing a house? Do they know what is expected in an FHA appraisal as opposed to a conventional loan appraisal?
Negotiating through inspections is probably the most taxing part of the process (aside from packing boxes for the move) but an appraisal can be the most nerve racking. There's not much you can do but let the appraiser in and wait for his blessing. Or receive the bad news - your home didn't appraise. Now what?? Is your agent well versed in speaking to an appraiser and pleading your home's case for being worth more than they said? Can your agent even speak to them? Will it matter? What if it's an FHA loan, which will remain "attached" to the house for months, no matter who buys the home?
As you can see, getting through inspections and an appraisal takes some navigating, and it should be done by someone who understands the process and guidelines. Don't be afraid to ask the agents you interview what experience they have. How many homes have you sold? Where? For how long? What did you do before you got into this business? You may be surprised to find that some of the best agents in the industry haven't been doing it for dozens of years. They come from financial backgrounds, insurance, teaching, law enforcement etc. Just know that there is not necessarily a positive correlation between how long someone has been in the business and their ability to sell your house effectively or for the most money. So, just ask!
Selling a home can be one of the most stressful occurrences in anyone's life, but with the right agent, it doesn't have to be. Selecting the right agent who puts your mind at ease with their understanding, compassion, knowledge, and experience can make a huge difference during the process. Do your homework, ask questions, and don't rush if you don't have to. A good agent will tell you when a good time is to list but never push you to do so.
Best of luck in your decision to sell your home!
-Josh Latham | Realtor/Broker | Indy Home Pros Team
Congratulations! You are now about to take on the next chapter of your adult life. We know how exciting it can be to finally have a property under your name. But let’s face it, home buying is not all excitement, it’s nerve-wracking too. Most especially if you are a first time home buyer. So to make your first-time home buying journey a little less stressful, here are important factors to keep in mind and some tips from our seasoned agents to help you navigate the process more smoothly and save money.
Check your finances to make sure you are ready for this new responsibility. Play around home affordability calculators online to give you an idea of how much is within your price range. After knowing what you can safely afford to spend for a house, start saving money for down payment. ( Tip: Setting aside your tax refunds and bonuses is one of the best ways to save for down payment apart from setting aside a budget from your main income.)
In as much as we want to, not all of us can afford to pay in cash. So if you are planning to make a mortgage loan, make sure that your credit is in good standing. It is the key factor in whether you’re approved and will help determine your interest rate and possibly the loan terms. Look for opportunities to improve your credit and dispute any errors that could be dragging down your credit score.
Research and determine the housing loan package that best suits your paying capacity. Also, make sure to compare the mortgage rates. According to the Consumer Financial Protection Bureau, comparing mortgage rates from at least three lenders can save you more than $35,000 over the first five years of your loan.
Apart from saving for down payment, you also need to budget a significant amount for the money required to close your mortgage. Generally, closing costs can run between 2% and 5% of your loan amount. You can shop around and compare prices for certain closing expenses, such as homeowners insurance, home inspections, and title searches.
Don’t think that your expenses end with your down payment and closing costs. You also need to save a buffer for what will go inside the house. This includes furnishings, appliances, rugs, updated fixtures, new paint and other personal touches you want once you move in.
One concrete way to determine how much you can really afford for a home is to get pre-qualified. You’d be totally bummed if you found a perfect home only to learn that you can’t really afford the house right?
Now, getting pre-qualified is good. But as you get closer to buying a home, it’s smart to get a pre-approval where the lender thoroughly examines your finances and confirms in writing how much it’s willing to lend you and at what terms. Besides, having a preapproval letter in hand makes you look much more serious to a seller and can give you an upper hand over buyers who haven’t taken this step.
Is it a condo or a house? How many bedrooms would you want to have? Where do you want to live? What other specifics do you want in a home?
Home searching can be very overwhelming. Knowing exactly what you want would help you narrow down the search to save time and avoid stress.
You need someone to represent you and guide you through the process. Since you will be working closely with that agent, it’s essential that you find someone you get along with well. The right buyer’s agent should be highly skilled, motivated and knowledgeable about the area.
Take time for viewings with your agent and check out open houses. There are specific details that a photo simply cannot illustrate so it is important that you see the property. This will also give you the opportunity to have an overall feel of the interior and check the view of the surrounding area.
Which properties did you like best? Put them in a rank and take a second look at your top choices. (The photos are to help you remember while deciding.)
While viewing homes with your agent, look for properties that cost a little less than the amount you were preapproved for. Think of the maximum amount as the ceiling - it doesn’t account for a broken dryer or washer or any other expenses that arise during homeownership.Rather than maxing out that amount, set a lower purchase budget to leave yourself wiggle room for unexpected costs.
You can’t find a house that’s perfect in every way. So you need to think carefully about what you’re willing to compromise. Be ready to let go of the little things and details. Remember our number 5 tip? That what it’s for- the little things.
In tip number 6, we mentioned that having a pre-approval letter in hand will give you an upper hand over buyers who haven’t. However, in a competitive market with a limited inventory, it’s possible that you’ll be bidding on houses with multiple offers against buyers that are already pre-approved. Although it can be very tempting to make a high-priced offer that’s sure to win when you find a home you love, don’t let your emotions take over and stick to the budget you can afford. Your realtor can help you with tactics to win over the seller.
Your lender will require you to buy homeowners insurance before you close on a new house. Be sure to shop around and compare prices. Don’t forget to look closely at what’s covered in the policies.
Take note of the ff:
- A less expensive policy usually means fewer protections and more out-of-pocket expenses if you file a claim.
-The insurer can drop your property if the home condition isn’t up to snuff. It is advisable that you be prepared to find a new policy quickly if it sends someone out to look at the property and isn’t happy with what it finds.
-Flood damage isn’t covered by homeowners insurance, you may want to buy a separate flood insurance if your new home is in a flood-prone area.
If your offer is accepted, you’ll have to pay for a home inspection to examine the property’s condition. Take note that not all inspections test for things like radon, mold, or pests; so make it a point to know what’s included. Attend the inspection and pay close attention. Don’t be afraid to ask your inspector to take a closer look at something and ask questions.
The reason on why it is pivotal to have an agent in buying a house is because you need someone to guide you throughout the process. So don’t hesitate to ask if you have questions. Your agent’s job is to make sure that your questions are answered and feel comfortable with the whole process.
8313 W. 10th St
Indianapolis IN 46234
dennis@indyhomepros.com
317-316-8224