Know What You Can Afford
Its fun to fantasize about a dream home with every imaginable bell and whistle, but you should really only purchase what you can reasonably afford.
Most analysts believe you should not spend more than 30 percent of your gross monthly income on home-related costs, says Katsiaryna Bardos, associate professor of finance at Fairfield University in Fairfield, Connecticut.
Bardos says one way to determine how much you can afford is to calculate your debt-to-income ratio . This is determined by summing up all of your monthly debt payments and dividing that by your gross monthly income.
Fannie Mae and Freddie Mac loans accept a maximum DTI ratio of 45 percent. If your ratio is higher than that, you might want to wait to buy a house until you reduce your debt, Bardos suggests.
Andrea Woroch, a Bakersfield, California-based finance expert, says its essential to take into account all your monthly expenses including food, healthcare and medical costs, childcare, transportation, vacation and entertainment expenses and other savings goals.
The last thing you want to do is get locked into a mortgage payment that limits your lifestyle flexibility and keeps you from accomplishing your goals, Woroch says.
You can determine what you can afford by using Bankrates calculator, which factors in your income, monthly obligations, estimated down payment, the details of your mortgage like the interest rate, and homeowners insurance and property taxes.
Im Actively Shopping For A New Home
If a move is in your near future, these are the two most important things you should do first. Theyll put you in the hands of experts who help people like you become a homeowner for the first time every day.
First, get approved for a loan. Doing this before looking at houses helps you a lot. Here are some of the benefits:
- Youll get an approval letter that shows real estate agents and sellers youre able to afford a house.
- Youll find out how much house you can afford.
- It makes the rest of the mortgage process smoother and easier.
Learn what happens when you apply.
Next, find a real estate agent. After you apply and get approved, choose a real estate agent. Theyre another great source of experience and knowledge when it comes to how to buy a home. You can expect your agent to do these things:
- Help you find the right house in the right place at the right price.
- Manage paperwork.
- Negotiate with sellers.
With an approval letter and listings from your agent, youll be ready to start hitting those open houses.
Give Yourself A Financial Checkup
Before you set off to get a mortgage, make sure youre financially prepared for homeownership. Do you have a lot of debt? Do you have enough saved for a down payment? What about closing costs?
A home is a major purchase maybe the biggest one you’ll ever make so it’s no surprise that lenders really dig into borrowers’ finances before handing out house loans. If you’ve got substantial debt or don’t have much of a credit history, you may want to improve your financial health before applying for a mortgage.
A thorough understanding of your income and debts will help you know exactly how much house you can afford.
» MORE:Getting your finances ready to buy a house
Additionally, know that lenders look closely at your when determining your eligibility for a mortgage. The interest rate you’ll be offered depends heavily on your credit score.
Check your credit score, and if it needs work, build up your credit before you begin applying for a home loan. That can include paying down outstanding debt, disputing errors on your credit reports and not opening any new accounts.
» MORE:How your credit score affects your mortgage rate
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Where Do I Get A Mortgage
Finding a good mortgage lender is a lot like finding a good marriage partner with one notable exception: the mortgage vows shouldnt last more than 30 years.
Otherwise, the process is largely the same. You have your pick from suitors that include local and national banks local and national credit unions mortgage brokers and online lenders. Each of them offer inviting promises and each has faults that you must accept for better or worse.
The most important rule in choosing a lender is look around. Apply in at least three places and compare costs. An astonishing 71% of homeowners only apply for a loan in one place. A 2016 study by J.D. Power found 27 percent of first-time homebuyers more than one out of four! regret the choice of lender they made for a mortgage.
Most of their dissatisfaction stemmed from lack of communication and unmet promises. That could be because buyers dont realize all that goes into a mortgage loan.
The list of questions you need answered goes far beyond: Whats my interest rate and is this a 30-year or 15-year mortgage? There is a long list of fees involved and each one has a cost.
Some of the fees you could be charged at closing include:
- Loan origination or application
- Title insurance
Ask the lender to give you a dollar-figure for each of the fees, or at least an educated estimate. You are allowed to bargain between lenders over fees. Thats how you find out who really wants you as a customer.
Consider Your Credit Score
Lenders will want to know your . As you gear up to start your mortgage application process, check your credit rating and make sure it’s in good shape. While each lender will typically have a minimum credit score in mind for prospective mortgage applicants, Experian estimates that the minimum FICO score needed to secure a conventional mortgage is in the 620 range.
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What Is A Home Builders Mortgage And How Do I Get One
Home \ Mortgage \ What is a Home Builderâs Mortgage and How Do I Get One?
Join millions of Canadians who have already trusted Loans Canada
When shopping for your dream home, you could spend months searching all over town for a house that suits you right, only to come up empty handed and disappointed. Maybe the housing costs in your area arent affordable, maybe its as simple as you being unhappy with the way each house looks. Some home buyers will purchase a house that looks amazing from the outside, only to find out later that the electrician did a bad job wiring the interior lights, the roof leaks, and theres a funny smell coming from the basement. However, its also some peoples ultimate goal in life to buy an empty lot and build their own house on it. As long and difficult as that process might be, it surely solves the problem of them being unhappy about the way the house looks, doesnt it?
Interested in investing in rural real-estate? Check out this article.
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How To Lock In Your Mortgage Rate
Locking in your mortgage rate with nesto is a simple process, from getting a quote to final approval. Heres a quick rundown of what you need to do to lock in your mortgage rate with us.
- Create an account: First, start by setting up your nesto account.
- Find the right mortgage rate for you: Then, check out the best rates available in your province, for both fixed and variable rate mortgages. Once youve found a rate you like, select it and continue to get a quote.
- Talk to an advisor: Once we have the details we need for your quote, well call you. One of our licensed mortgage advisors will help to understand more about your situation, and go through the steps needed to see whether or not you are likely to get approved for the rate you want to lock in.
- Lock-in your mortgage rate: After talking to an advisor who has confirmed your eligibility, you can lock in your rate for up to 150 days.
- Check your approval status: Periodically log in to your account to see whether or not youve been approved. It usually takes us around 2 to 5 days to confirm whether or not an application is successful.
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Close On Your New Home
Once youve been officially approved for a mortgage, youre nearing the finish line. All thats needed at that point is to complete the closing, which is when youll pay closing costs and receive the mortgage funds .
The closing process differs a bit from state to state, Ailion says. Mainly it involves confirming the seller has ownership and is authorized to transfer title, determining if there are other claims against the property that must be paid off, collecting the money from the buyer, and distributing it to the seller after deducting and paying other charges and fees.
The closing costs youre responsible for can include:
- Appraisal fee
- Origination and/or underwriting fee
- Title services fee
During your closing, the closing agent will provide a detailed statement to the parties of where the money came from and went. The agent will also enter the transaction into the public record and deliver the deed to the buyer.
Bringing It All To A Close
Youve made it to the final step in the home-buying process. All the planning, preparation and waiting are finally over. But before you get the keys to your new home, you have one more thing to do.
At your closing, you will meet with your closing agent to sign all your mortgage documents. Take your time, make sure you understand what youre signing and dont be afraid to ask questions. And voilà, once youve dotted all the Is and crossed all the Ts, youll officially be a homeowner!
The closing process doesnt have to be nerve-wracking if you know what to expect. We can help you prepare for this exciting step, so your big day is a success.
We understand how overwhelming the home-buying and mortgage process can be. You can count on us to help you through it. Buying a home can be one of the most exhilarating and stressful moments of your life. But finding a home you can call your own makes it all worthwhile.
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The Title May Not Be Clear
The lender should insist on securing the loan with a lien. If the borrower adds any additional mortgages, or if somebody puts a lien on the house, this ensures the lender will get paid first. However, youll also want to check for any issues before the sale. Traditional mortgage lenders insist on a title search, and the borrower or lender should ensure the property has a clear title. Consider title insurance, which provides extra protection.
Find A Mortgage Lender
Once you have your financial ducks in a row, its time to find a mortgage lender. Its important to shop around for multiple offers to make sure youre getting the best possible deal, not just the lowest interest rate. When youre looking around, make sure you pay attention to all the fees and other conditions of every offer.
To find the right lender, speak with friends, family members and your agent and ask for referrals, advises Guy Silas, branch manager for the Rockville, Maryland office of Embrace Home Loans. Also, look on rating sites, perform internet research and invest the time to truly read consumer reviews on lenders.
decision should be based on more than simply price and interest rate, says Silas. You will rely heavily on your lender for accurate preapproval information, assistance with your agent in contract negotiations and trusted advice.
Remember that interest rates, fees and terms can vary substantially from lender to lender.
Thats why its important to shop around carefully and ask questions, Woroch says.
For many borrowers, applying for a mortgage is overwhelming. If youre not sure exactly what to look for, you may want to work with a mortgage broker. A broker can help you navigate all the different loan options available to you and might be able to secure you more favorable loan terms than youd be able to get by applying on your own.
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Get Your Credit Score Where It Needs To Be
Check your credit report to make sure all the information it contains is accurate. If not, contact the credit bureau to correct it. If the information is accurate, find out your credit score.
You can get your score from the credit bureaus , for free from some websites, or from your bank. Your score will be between 300 and 850, and the higher, the better. Your credit score needs to be at least 620 for a conventional loan and could be as low as 500 for an FHA loan.
If you need to raise your score, you can most likely ignore those companies that say they can clean up your credit. Here are some examples of what it actually takes:
Types Of Reverse Mortgages
- Federally Insured Reverse Mortgages – Known as Home Equity Conversion Mortgages
- Proprietary Reverse Mortgages
- Single Purpose Reverse Mortgages
When finding a lender remember:
- Be suspicious of anyone claiming that you can own a home with no down payment
- Seek out your own reverse mortgage counselor
- Never sign anything you do not fully understand
- Make sure the loan is federally insured
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How To Get A Mortgage
Youre probably familiar with the term mortgage. It is a form of loan used to purchase a home.
Learning as much as possible about getting a mortgage is a good idea, and mortgage rates today should be done before you start looking for a house.
Knowing the players and the process is the most excellent approach to prevent wasting time. This entails collaborating with a lender to feasibly obtain the most acceptable 30-year mortgage rates.
Well go through what lenders search for in this article to get you ready to go mortgage shopping. Understand the papers that will be required.
Local Banks And Credit Unions
To find small home loans, you have to go to small institutions, and your first stop should be your local bank. If you have a relationship with a community bank or youre a credit union member, you might be able to negotiate a small home loan.
If you dont bank with a community institution or if you do but were denied a loan keep meeting with small mortgage lenders and representatives from local banks and credit unions to find what you need. Make sure you dont let them all run a credit check, though. Excessive inquiries will hurt your credit score.
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Is There Anything Better Than A Pre
These days, most buyers are already pre-approved for a mortgage. If you want a true competitive edge, becoming a Churchill Certified Homebuyer is a great option.
The difference between being a certified homebuyer and being pre-approved is simple. When youre certified, a mortgage underwriter has already reviewed your application, a step that usually happens much later in the process. Youll have a clear advantage over pre-approved buyers who have to wait until the middle of the homebuying process for an underwriter to review their application. Its like being a few steps ahead in a footrace. Youre that much closer to the finish line.
How Long Will It Take To Get Your Mortgage Approved
You’ve sent in copies of your last two paycheck stubs. You’ve provided a letter from your employer verifying your job status. You’ve made copies of your tax returns from the last two years.
Now how long will you have to wait before earning approval on your mortgage loan?
The answer? It depends.
Weve all seen commercials from mortgage lenders who promise to make the application process easier. But just because you can submit a loan application with the press of your computers Return key doesnt mean that your approval will be coming in any faster.
Ellie Mae, in its latest report, said that it all mortgage loans an average of 49 days to close during November. Ellie Mae reported that it took mortgage refinances an average of 51 days to close and purchase loans an average of 47 days.
What causes loans to take so long to close? There are plenty of factors.
The underwriting process — the process by which mortgage lenders determine if you are a good risk for a mortgage loan — can be delayed if you don’t provide all the necessary documents that lenders need to verify your income and savings. Marks on your credit report such as late or missed payments can delay the process, too.
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Get Preapproved For A Loan
Once you find lenders youre interested in, its a good idea to get preapproved for a mortgage. With a preapproval, a lender has determined that youre creditworthy based on your financial picture, and has issued a preapproval letter indicating its willing to lend you a particular amount for a mortgage.
Getting preapproved before shopping for a home is best because it means you can place an offer as soon as you find the right home, Griffin says. Many sellers wont entertain offers from someone who hasnt already secured a preapproval. Getting preapproved is also important because youll know exactly how much money youre approved to borrow.
Keep in mind: Preapproval is different from prequalification. Mortgage preapproval involves much more documentation and will get you a more serious loan offer. Prequalification is less formal and is essentially a way for banks to tell you that youd be a good applicant, but it doesnt guarantee any particular loan terms.