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How to Get Pre-Approved for a Mortgage

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How to Get Pre-Approved for a Mortgage

In the previous blog posts in our “Top 10 First-Time Homebuyer Tips” series, we discussed Determining your Ideal Budget and Saving for Home Buying Expenses. Step Three in our Home Buying Series is to “Get Pre-approved for a Mortgage”.

Once you determine your ideal budget, the next crucial step in buying a house is to get pre-approved for a mortgage loan. It sets the tone for your home search, helps you narrow down your options, and demonstrates to sellers that you’re serious about buying. 

The process of getting pre-approved for a mortgage may seem daunting, but it doesn’t have to be. By following these simple steps, you can obtain a pre-approval letter and get one step closer to buying your dream home in no time.

1) Know Your Credit Score 

One of the first things you’ll need to do is pull your FICO credit score. This will give you an idea of where you stand financially and what kind of interest rate you can expect to pay on a loan. If your credit score needs some improvement, there are steps you can take to raise it before you apply for a mortgage. 

How to get your FICO credit score?

The interest rate is one of the most important factors to consider when taking out a loan. The interest rate on your mortgage has a direct impact on your monthly payment. The higher the rate the higher your payment will be.

A. Check Your Credit Card Statement- If you have a credit card, there’s a good chance that your lender is already giving you your score for free. Capital One and Discover are two examples of issuers that show borrowers their FICO scores on monthly statements.

B. If you are unable to get your FICO credit score from your credit card company, you can use myfico.com. However , it’s not a free service.

Are you wondering why I didn’t mention using apps such as Credit Karma and Credit Sesame? When applying for a mortgage preapproval, the lender will review your FICO score. Majority of the credit apps we use today provide a Vantage score. Although, those apps are great for determining your credit history. The score it provides would not be an accurate representation of what the mortgage lender would see on your credit report.

2) Gather Documentation 

Once you know your credit score, it’s time to start gathering the documentation that the lenders will need to approve your loan. This could includes tax returns, pay stubs, bank statements and investment statements. Having all of these documents ready will speed up the process and help your loan officers do their job more efficiently. 

A best practice is to have these files saved to your computer, not print them. When applying for a mortgage approval, majority of the applications are completed online. The files can easily be uploaded to the lenders secure portal.

3) Shop Around for Mortgage Lenders 

After you’ve gathered all of your documentation, it’s time to apply with your chosen lenders. In the next section, we will discuss some important terms to keep in mind. Not all lenders are created equal. It’s important to shop around and compare rates, fees, and customer service before settling on a lender.

Talk to your local bank or credit union, get quotes from online lenders, and compare rates and fees. And remember, just because one lender offers you a great deal doesn’t mean you have to use them—you can always shop around for better rates.

Important Mortgage Terms:

Interest Rates: One of the most important things to compare when shopping for a loan is the interest rate. The interest rate will determine how much your loan will cost you over time. It’s important to pay attention to the Annual Percentage Rate (APR), which includes the interest rate plus any fees charged by the lender. The lower the APR, the better.

Repayment Terms: Another thing to consider is the repayment term. This is the amount of time you have to repay your loan. Loan terms can range from a few months to several years. Choose a repayment term that you’re comfortable with and that fits your budget.

Fees: Some lenders charge origination fees, which are usually a percentage of the loan amount. These fees can add up, so be sure to take them into account when comparing loans. Other lenders may charge prepayment penalties if you pay off your loan early. Again, this is something to keep in mind when shopping around for a loan.

7 Questions a to ask the Mortgage Lender

Conclusion

This process doesn’t have to be a daunting task. Following these simple steps will help ease the process of getting pre-approved for a mortgage immensely. By knowing your credit score, shopping around for lenders, gathering documentation, getting pre-approved, locking in your rate, and following up with your realtor, you can take control of the situation and increase the chances of having a successful home purchase experience overall.

If you have any questions or would like more information, please contact me at [email protected]. I would be happy to help you with all your real estate needs.

Thank you for reading! I hope this was helpful.

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ADDITIONAL BUYER’S TIPS

How to Save for Homebuying Expenses

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Tip 2: Save for Homebuying Expenses

In the previous blog posts in our “Top 10 First-Time Homebuyer Tips” series, we discussed Determining your Ideal Budget. Tip two in our Home Buying Series is to “Save for Homebuying expenses”. Some of the expenses when purchasing a house includes the following: down-payment, closing cost, home inspections, appraisal, and earnest money.

Homebuying Expenses:

  • DOWNPAYMENT: A down payment is typically between 3-20% of the purchase price of the home. If you can put down more it would decrease your monthly mortgage payment. I work with a lot of First Time Home Buyers and I understand that oftentimes you don’t have the entire 3.5% to put down on your home. There are down-payment assistance programs that can help, keep in mind that it may increase your monthly mortgage payment.
  • CLOSING COST: Closing cost is the fees associated with finalizing your home purchase. This includes the lender’s fees, title insurance, and other miscellaneous fees.
  • HOME INSPECTION: A home inspection is a visual examination of the overall condition of a property. You should always get a home inspection even if you are purchasing a brand-new home! The cost of the inspection is the responsibility of the buyer and is not refundable. Outside of traditional home inspections, some buyers also have termite and radon inspections.
  • APPRAISAL FEES: The appraiser will visit the property to confirm the value of the home.
  • EARNEST MONEY: This is a deposit that shows you are serious about purchasing a home. It is typically 1-2% of the purchase price and is held in escrow until closing.

Saving for these expenses can be difficult, but there are a few ways to help make it easier. Here are some initial steps you can take to save for your dream home.

Tips to save for a home

1. Determine How Much You Need to Save 

The first step is to figure out how much money you need to save for your home expenses. As mentioned earlier, the standard down payment is 20 percent of the home’s value. However, there are programs available that allow for a lower down payment, such as 3 percent or 5 percent. 

Once you know how much you need to save, you can start creating a budget and looking for ways to cut costs so that you can divert more money toward your savings goal. 

2. Open a Dedicated Savings Account 

Once you know how much you need to save, open up a dedicated savings account that will be used solely for your down payment fund. This will help you keep track of your progress and resist the temptation of dipping into the account for other purposes.  

3. Automate Your Savings 

One of the best ways to make sure that you stay on track with your savings goals is to automate your savings. This means setting up automatic transfers from your paycheck or checking account into your dedicated savings account. This way, you’ll never even see the money and will be less likely to spend it on other things. 

4. Make Extra Payments When Possible 

If you get a bonus at work or come into some extra money somehow, resist the urge to spend it all immediately. Instead, put as much of it as possible towards your homebuying fund so that you can reach your goal even faster. 

Avoid excess spending in general and put any extra money you have towards your savings so that you can reach your goal more quickly. 

Saving for a home doesn’t have to be impossible. By following these tips, you can make the process a lot easier and less stressful. And, before you know it, you’ll have saved up enough for your dream home. 

Complete Home Buying Guide

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ADDITIONAL BUYER’S TIPS

5 Factors When Determining How Much House You Can Afford

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5 Factors When Determining How Much House You Can Afford 

Trying to figure out how much house you can afford can be a difficult task for a First Time Homebuyer. There are so many factors to consider, and it’s easy to get caught up in the excitement of finally owning your own home. However, it’s important to take a step back and make sure you’re considering all the factors that will affect your ability to comfortably make your mortgage payments each month before you start house hunting. Here are 5 factors when determining how much house you can comfortably afford.

1. Your Income

Your income is going to be a major factor in determining how much house you can afford. You’ll need to take a close look at your household income and figure out how much of it you can realistically expect to use for your mortgage payment each month. Keep in mind that your mortgage payment will likely be just one of several other monthly expenses you’ll have, so you’ll need to make sure you have enough income left over each month to cover those other expenses comfortably. Only include consistent income, such as a full-time job, regular child support payments, and income from a side hustle that you do regularly.

2. Your Current Debt Load

Another important factor to consider when trying to determine how much house you can afford is your current debt load. Take a close look at all the debts you’re currently carrying and calculate what your monthly debt payments are. This will give you a good idea of how much additional debt you’ll be able to comfortably handle each month. Debts can include things like credit card payments, car loans, student loans, and any other monthly payments you might have.

3. Your Debt-To-Income Ratio

Your debt-to-income ratio is a key factor lender will look at when considering whether or not to approve your mortgage loan. This ratio compares your gross monthly income with your monthly debts (including your estimated mortgage payment). Lenders typically like to see a debt-to-income ratio of 36% or less, although some programs may allow for a higher ratio if you have strong credit. 

4. Your Lifestyle

Your lifestyle is another important factor you’ll need to take into account when trying to determine how much house you can afford. If you have a lot of hobbies or regularly participate in activities that require expensive equipment or memberships, you’ll need to make sure you have enough income left over each month to cover those costs. Similarly, if you have kids, you’ll need to factor in the costs of things like childcare, extracurricular activities, and schooling.

5. Your Savings

Your savings are also an important factor to consider when trying to determine how much house you can afford. A larger down payment would reduce your monthly mortgage payment and allow you to afford a more expensive home. In addition, having a healthy savings account would help with things like unexpected repairs and maintenance on your home.

In Conclusion:

When you’re trying to determine how much house you can afford, it’s important to consider all the factors that will affect your ability to make your monthly mortgage payments. Make sure you take a close look at your income, current debt load, debt-to-income ratio, lifestyle, and savings before you start house hunting. By taking all these factors into account, you’ll be in a much better position to find a home that you can comfortably afford.

If you have any questions or would like more information, please contact me at [email protected]. I would be happy to help you with all your real estate needs.

Thank you for reading! I hope this was helpful.

Complete Home Buying Guide

Download your free Home Buying Guide

Click Here

ADDITIONAL BUYER’S TIPS

7 Questions a to ask the Mortgage Lender

7 Questions a to ask the Mortgage Lender | Shameka Britton, Realtor.

7 Questions a First-Time Home Buyer should ask the Mortgage Lender when buying a house

When buying a new home, there are many things to consider. One of the most important steps is working with a mortgage lender to get the best loan possible. Here are seven questions every first-time home buyer should ask their mortgage lender when buying a house.

What type of mortgage loan should I get? 

There are many different types of loans available, and not all of them are right for every borrower. You’ll need to sit down with your mortgage lender and figure out which type of loan makes the most sense for your unique circumstances. Some common types of loans include conventional loans, FHA loans, USDA, and VA loans. 

Mortgage Loan Types

  • Mortgage loans can be classified into different types according to the requirements for obtaining them. The most common mortgage loans are FHA, USDA, conventional, and VA loans. 
  • FHA loans are mortgages that are insured by the Federal Housing Administration. This means that if the borrower defaults on the loan, the government will step in and pay the lender back. To obtain an FHA loan, borrowers must meet certain eligibility requirements, such as a minimum credit score and down payment amount. 
  • USDA loans are mortgages that are offered by the United States Department of Agriculture. These loans are designed to help rural homeowners buy homes in rural areas. To be eligible for a USDA loan, borrowers must meet certain income requirements and have a decent credit score. 
  • Conventional mortgages are the most popular type of mortgage and are available through banks, credit unions, and other lenders. Conventional mortgages also have stricter credit requirements than FHA or USDA loans.
  • VA loans are mortgages that are offered by the Department of Veterans Affairs. These loans are designed to help military veterans buy homes. To be eligible for a VA loan, borrowers must have served in the military for at least 90 days during wartime or 6 months during peacetime.

What is the interest rate?

The interest rate is one of the most important factors to consider when taking out a loan. The interest rate on your mortgage has a direct impact on your monthly payment. The higher the rate the higher your payment will be.

Interest rates are affected by many factors, including the well-being of the economy, inflation, monetary policy set by the Federal Reserve, and global events. All these factors work together to create the current interest rate environment. 

Keep in mind that the interest rate is not locked until you have an accepted bound contract on a home. Until then, the rate can change. If the interest rate increases, it could decrease your purchasing power. Be sure to communicate with your lender often regarding your interest rates.

Questions to ask for a loan approval. Shameka Britton, Realtor

What are the fees associated with the loan?

The current interest rate is not the only factor you should consider when taking out a loan. You should also look at the fees associated with the loan. These fees typically show up as a part of your closing cost. Some loans have origination fees, application fees, and closing costs. These fees can add up, so it’s important to ask your lender about them upfront.

Here is a list of possible lender fees.

  • Application Fee
  • Origination Fee
  • Discount Points
  • Processing Fees
  • Underwriting Fees

What is the term of the loan?

There are many different types of mortgages, and the terms can vary significantly from one loan to another. The most prevalent kind of mortgage is the 30-year fixed-rate mortgage, which guarantees a set interest rate for the duration of the loan. Another popular option is the 15-year fixed-rate mortgage, which typically has a lower interest rate than the 30-year loan but requires larger monthly payments. Adjustable-rate mortgages (ARMs) are another option, and these loans offer a lower interest rate for an initial period before the rate adjusts based on market conditions.

The term of the loan affects your monthly payment. A shorter loan term will have a higher monthly payment, but you will pay less in interest over the life of the loan. A longer loan term will have a lower monthly payment, but you will pay more in interest over the life of the loan.

How much money do I need to put down?

The answer to this question depends on several factors, including the type of loan you’re applying for and the lender’s requirements. For conventional loans, most lenders require at least 5% of the purchase price as a down payment, although some may go as low as 3%. If you’re applying for an FHA loan, however, you’ll only need 3.5% of the purchase price for your down payment. And if you’re a veteran or active member of the military, you may be eligible for a VA loan, which doesn’t require any down payment at all.  For FHA and conventional loans, if the downpayment is less than 20%, you would be required to pay mortgage insurance as a part of your monthly mortgage payment.

Mortgage Insurance (PMI)

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Mortgage insurance is a type of insurance that helps to protect lenders if a borrower defaults on their home loan. In most cases, mortgage insurance or private mortgage insurance is required when the borrower has less than 20% equity in their home. It protects the lender by covering a portion of the loan amount in the event of a default. Mortgage insurance is typically paid for by the borrower as part of their monthly payment. It is important to note that mortgage insurance does not protect the borrower; it only protects the lender in the event of a default.

Down payment Assistance Programs

If you are utilizing down payment assistance programs, be sure to inquire about the repayment terms of the program. These programs provide funding that can be used towards a down payment and closing costs, making it possible to purchase a home with little or no money out of pocket. However, the majority of the programs are loans that may require a monthly payment. So be sure to ask the lender about the repayment terms if utilizing a down payment assistance program.

How much will my monthly payments be?

A mortgage payment typically includes four different items: principal, interest, taxes, and insurance. The principal is the amount of money that you borrowed to purchase your home. The interest is the fee charged by the lender for borrowing the money. In most cases, the interest portion of your payment will be higher during the early years of your loan and will gradually decrease over time. The taxes portion of your payment goes towards property taxes owed on your home. The insurance portion of your payment covers the cost of homeowner’s insurance. In addition, as we’ve mentioned above, the monthly mortgage payment could also include the down payment assistance repayment and mortgage insurance payment. Understanding these components can help you budget for your long-term homeownership costs.

What documents do I need to provide to get approved for the

loan?

Be sure to ask your lender what kinds of documents they’ll need for your application to be approved—this way, you can get started on gathering everything together right away instead of being blindsided later on in the process. Most lenders will require documents like tax returns, pay stubs, bank statements, and proof of employment/income. 

In Conclusion:

Asking these 7 questions to your mortgage lender will help you better understand what you’re getting into financially when you buy your first house. It’s also a good idea to compare lenders to see who offers the best terms for your situation. Buying a house is a big financial decision, so you want to make sure you’re getting the best deal possible.

If you have any questions or would like more information, please contact me at [email protected]. I would be happy to help you with all your real estate needs.

Thank you for reading! I hope this was helpful.

Complete Home Buying Guide

Download your free Home Buying Guide

Click Here

ADDITIONAL BUYER’S TIPS

10 Important Factors to Consider to Find the Perfect House for You

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Follow these 10 important factors to find the perfect house for you.

Searching for a home can be both exciting and daunting. In this video, I share 10 important factors to consider when looking for the perfect house for you. A lot of people make the mistake of not thinking things through and they end up paying more for their home than they should or worse, they don’t end up getting the house that meets their needs.

1. Location

One of the most important factors to consider when buying a house is its location. The old real estate adage “location, location, location” is trite but true. The location of your home will have a big impact on its resale value, as well as your quality of life. You’ll want to think about things like the commute to your workplace, the school district the house is in, and the safety of the neighborhood. 

2. Size of the House

Another important factor to consider is the size of the property. How much space do you need in your home? How many bedrooms and bathrooms you would like to have? Do you have a growing family that will need additional space in the future? Or are you planning on downsizing now that your children have moved out of the house? Consider your future plans when determining what size home you need. Also, ensure it aligns with your finances and budget.

3. Age and Condition of the House

You’ll also want to think about the age and condition of the property. I recommend determining the level of home improvements you are willing to make early in the process. No property will be perfect, there will always be something you would like to change or update. However, are you comfortable with a fixer-upper or do you prefer a move-in-ready house that needs only minimum repairs? Be sure to factor in the cost of any necessary repairs when deciding whether or not to buy a particular house. 

4. Homeowner’s Association Rules/Cost

Does the neighborhood have an HOA? If so, what kind of rules and regulations do they have? Are there any special assessments being collected right now? Be sure to find out as much as you can about an HOA before buying a house in one of their neighborhoods. 

5. Size of the Lot/Property

The size of the lot or property can also be an important factor to consider. How much outdoor space do you need? Is there room for a garden or pool? 

6. Neighborhood:

The neighborhood is another important factor to consider. Do you feel safe there? Are the neighbors friendly? Is it well-maintained? I recommend driving a community during different times of day to get a feel of how it truly is.

7. Schools in the Area

If you have children, or plan to have children, the schools in the area will be an important factor to consider. What is the quality of the public schools? Are they close by? Search websites such as Greatschools.org for ratings and insights into schools in the area.

8. Commute Time to Workplace:

The commute to your workplace is another important factor to consider. How long will it take you to get to work? Is public transportation available? You’ll want to make sure the commute is something you’re comfortable with before buying a house.

9. Price

Probably the most important factor to consider when buying a house is price. You need to make sure that you can afford the monthly mortgage payment as well as all of the other housing costs that come with owning a home (i.e., property taxes, homeowners insurance, interest. etc.). Don’t stretch yourself too thin financially just to purchase a particular home; you may end up regretting it later down the road. 

10. Overall Feel

Finally, go with your gut. After considering all of these factors, you should have a good sense of whether or not a particular house is the right one for you. Trust your instincts and go with the house that feels like home.

Conclusion:

So there you have it! These are just some of the things you should keep in mind when searching for your perfect home. With careful consideration of all these factors (and working with a qualified real estate agent), you’re sure to find just what you’re looking for in no time! Thanks for reading!

Complete Home Buying Guide

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