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| Getting Ready To Buy |
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Ready To Buy Before you begin searching for your new home, you need to know how much you can afford. You may be able to afford more, or even less than you think. By getting pre-qualified before you begin house hunting, you’ll save yourself time, energy and frustration because prequalification: Determines How Much Home You Can Afford – Pre qualification helps you avoid buying less home than you can afford, or being disappointed if you don’t qualify for as much as you had hoped. Shows You What Your Down Payment Will Be – You will know exactly how much money you will need for down payment and closing costs. Lets You Know What Your Monthly Payment Will Be – You will have a general idea of what your monthly principal, interest, taxes and insurance payment will be. Identifies the Loan Programs You Qualify For – There is a wide variety of loan programs being offered to buyers today. It is important to know which types you will qualify for and which will best suite your needs. Some of the options may include First Time Homebuyer Programs, Low Down Payment Programs, Co-Mortgagor Programs, Fixed Rate and Adjustable Rate Mortgages Items Your Lender Will Need - The days of “non qualifying” loans are long gone. In order to pre-qualify you for the perfect loan, Jaxzann will need to know the following: Your Employment History and Income Your Monthly Debts and Obligations The Amount and Source of Cash Available for Down Payment and Closing Costs Your Credit Scores and History To Avoid While You
Are House
Hunting Do Not Switch Banks or Move Your Money Around – It is best to leave your money right where it is until your loan is closed. Moving your money to a new bank or a new account can wreak havoc with the verification process. Do Not Pay Off Bills – Your loan officer will advise you if it is necessary to pay off bills to help you qualify for a loan. They will also show you the best way to pay off bills to make sure that they have the evidence that they need to prove that a bill has been paid. Do Not Make Any Major Purchases – Many borrowers make the mistake of buying a new car or furniture or other major purchases without realizing the impact it can have on their ability to buy a home. Income – Normally your income will qualify for a loan if you have been in your current position at least one year and in a similar type of work for 2 years. You should be prepared to provide at least 2 years of W-2 forms and your 2 most recent paystubs. If you are self-employed or receive bonus and/or commission income, the underwriter will be reviewing your federal tax returns for the previous 2 years to calculate Debt Ratios – You debt ratio is the percentage of your gross monthly income that is spent on your proposed house payment (principal, interest, taxes, homeowners insurance and mortgage insurance, if applicable plus all other monthly debt that you pay. Typically the underwriter is looking for a debt ratio at or below 45% of your monthly income. Assets for Closing – Most loans require a minimum down payment of 3.5% of the sales price and closing costs are typically another 2 to 2.5% of the loan amount. Many loan programs allow the down payment to be given to you as a “gift” from a family member and under certain circumstances it is possible for the seller to pay a portion or all of your closings costs. Typically the larger your down payment is, the better your interest rate will be. The underwriter will require you to verify the assets that you will be using for the purchase before approving your application. Credit History – Typically you will need to have a credit score of 620 or higher to qualify for your new home loan. The higher your credit score the better the terms and rate will be that are offered to you. Don’t despair If your score is below the 620 standard. Jaxzann will be able to counsel you in the best strategy to increase your score and often, just a few minor changes to your debt structure can improve your score dramatically. Property Value – After you have written an offer to purchase and it has been accepted we will be ordering an appraisal for your new home. The underwriter will review and “approve” the appraisal prior to issuing your loan approval. This process does not insure the “value” of the home that you are purchasing, but rather is used by Jaxzann to make sure that the value of the property is sufficient to secure your new home loan. How Does Purchase Price Translate to Monthly Payment? The answer to this question depends entirely on the type of loan you select, the amount of cash that you have available for down payment and your credit score at the time that you apply, but in general you can use a simple formula to estimate what your new payment will be. The formula looks like this: Sales Price Minus 5% Down Payment = Loan Amount Loan Amount multiplied by Interest Rate Factor = Monthly Principal and Interest Payment Interest Rate Factor Chart For a Thirty Year Loan Note Rate Dollars paid per month for each $1,000 borrowed 4.00% = $4.77 4.25% = $4.92 4.50% = $5.07 4.75% = $5.22 5.00% = $5.37 5.25% = $5.52 5.50% = $5.68 Example Assuming a 4.50% Note Rate Sales Price $250,000 Minus $12,500 Down Payment Equals $237,500 Loan Amount Each Thousand Dollars of Loan Amount will cost $5.07 per month $5.07 multiplied by 237.5 = $1,204 In addition to the principal and interest, one twelfth of the annual taxes and homeowners insurance will be included in the payment that you make each month and if you are putting less than 20% down, you will also be paying mortgage insurance. Your lender will be able to give you a very accurate estimate of your total monthly payment when you start the pre-qualification process. Unraveling The Credit Score Mystery
Until recently, the secrets of credit score calculation have been very closely guarded. We can now estimate how your score is put together: Payment History = 35% Do you pay your credit on time? Length of positive credit history Severity and quantity of delinquencies Amount Owed = 30% Quantity of credit accounts – too many credit cards with balances can lower your score Length of Credit History = 15% The longer the history, the better New Credit = 10% Research shows that opening several credit accounts in a short period of time does represent greater risk, especially for people who do not have an established credit history. Healthy Mix of Credit = 10% 2 Installment loans 3 Revolving accounts with balances below 30% of the credit limit No collection accounts No public records No foreclosures No late payments
The Scales In Your
Favor Pay all of your bills on time or early. Even a 30-day late on a small credit card can have a significantly negative impact on your scores. Don’t co-sign loans – their late payments are yours. Don’t close old revolving accounts that are no longer in use. Don’t open any new accounts unless instructed to by your lender. Report fraud immediately. If you find yourself a victim of fraud, immediately contact the credit bureaus, your credit card companies, banks, and the FTC at Monitor your credit. Order a free copy of your credit report once a year from Program information provided by Jaxzann Riggs • The Mortgage Network 303-394-2121 Off • 303-990-2992 Cell  |
