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What NOT to do when applying for a Real Estate Loan

June 27, 2012 11 comments

As you start to think about buying a home, you must first get pre-approved before many agents will physically show you properties. Remember, getting pre-approved or pre-qualified is not a guarantee or commitment of getting a loan, and your credit gets checked twice, once when you get pre approved and then again once you are qualifying for a loan, so don’t think you’re on the home stretch after you get pre approved. the biggest mistake people do is make these 7 mistakes in between the time you get pre-approved and the time from actually buying a house:

1. DO NOT change jobs. – Banks enjoy stability so they usually require at least 3 months of employment.

2. DO NOT use your credit cards to rack up debt or let your accounts fall behind. – Banks qualify you based on your ‘debt to income’ ratio, and raising your debt alters how much buying power you have by decreasing your income to debt.

3. DO NOT  buy furniture. – This is the biggest mistake of all! Especially after you have a house under contract and want to start buying furniture for the house. Making big purchases decreasing cash on hand or increases your debt, altering your approval limit.

4. DO NOT spend money you have set aside for closing – you’ve gone this far, make sure you can buy the house once it happens.

 5. DO NOT leave out debts or liabilities from your loan application. – Has anybody told you not to lie? It’s called mortgage fraud… not fun.

6.  DO NOT buy a car. – Big purchases will alter either your cash on hand or your debt, depending if you get a loan, and will affect your income.

7. DO NOT co-sign a loan for anyone – this will show up on your credit report as more debt and alter how much banks can loan you.

I hope this helps! If you have more questions about getting pre approved or finding an Accredited Buyer Agent such as me, contact me anytime.

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First Time Home Buyer? Read This!

September 28, 2011 Leave a comment

Hi everyone!

I’ve recently noticed that a lot of my buyer clients are first time home buyers. Every time I help them, I show them this great website called KC Home Programs, and I figured I should tell everyone about it!

If it’s your first time buying a home, you are at a great advantage, because there are lenders, grants, and other programs that offer to help you.

KC home programs, in my opinion, it is the most complete and coherent website that gives you information and links guiding you through the entire process of buying a home, from getting prequalified to closing. They offer articles about finding a home, getting prequalified, the closing process, types of mortgages, and other helpful steps and education to learn before jumping into purchasing your new home.

Here are a few examples of what the programs help with:

Closing cost assistance (typically 1-3% of the sales price)

–Down payment assistance (depending on your mortgage, down payment ranges from 3.5-20%)

–Additional loans for houses that need improvements.

–Special discounts if you are a teacher, firefighter, police officer, or EMT.

If you are thinking about purchasing a home soon, and are a first time home buyer, I encourage you to look at this website. Even if you are well versed in real estate, I guarantee you will learn something new!

http://kchomeprograms.com/program/index.php

How do I get Prequalified?

August 16, 2011 Leave a comment

         So you’ve made the decision to purchase a home! Although some people start looking at houses without knowing what they can afford, the first step if you are serious about buying a home is getting prequalified. You don’t want to waste your own time looking at houses you can’t afford, so here are some steps in your home buying procedure:

1. Find a buyer’s agent that fits you well. Agents are all different, specializing in different areas or different expertise. It all depends what type of house you are buying, and where. You don’t want an agent who specializes in short sale / foreclosed houses in the urban core to help you find a house in Johnson County, they just don’t know the inventory of houses.

2. Ask your agent which lender they use to get their clients prequalified. (If they don’t have one, find another agent.) I have two lenders which I refer my clients to, depending on my their condition. All lenders have different loan programs, and some offer credit repair if they need it. Knowing which lender to use for each client will help the process move much quicker.

3. Work with the lender to find your credit score and your debt – to – income ratio. These two factors determine how much you can afford.

4. Determine how much down payment you can afford. Conventional loans have a lower interest rate, but have a higher down payment, typically 10-20%. An FHA loan has a higher interest rate, but much lower down payment, about 3.5%. Also ask your lender and agent if there are any special programs that help with down payment assistance, and if they qualify for it. In Missouri, there is the MHDC down payment assistant program that helps pay for your down payment, and puts it into your loan, making you only pay for closing costs.

5. Thats it! Getting prequalified takes about an hour. Once you are prequalified, your agent can quickly narrow down your search with the price and other criteria you are looking for such as number of bedrooms and bathrooms, area, school district, square footage…etc.

                   If you are looking for a home and would like to get prequalified, please contact me, and I can refer you to one of the quickest  and prudent lenders in the Kansas City area!

Is It Better to Rent Or Buy?

June 16, 2011 2 comments

I know that men and women my age feel more comfortable renting. It’s easy, little commitment, and a lease is less stressful to read than a real estate contract. What you may not know is owning a house is usually always cheaper than renting. If renting was cheaper, then how would so many landlords make money off you month after month?

Here are some facts about renting versus owning:

  • Renting is a dead investment, you’re paying the landlords mortgage every month so he/she can eventually sell it and make even more money on their house.
  • Renting offers no equity, you don’t own anything.

 

  • Renting offers no tax benefit, while  Interest on your mortgage is tax deductible.

 

  • Houses, when taken care of and properly maintained, appreciate. A great mindset to have is that every mortgage payment will eventually be repaid to you, plus some extra.

Here is payment plan based on a $100,000 house with a 30-year fixed rate loan with 5% interest rate and a $90,000 loan balance.* Typical rent for this price would be about $1,000.

Rent          vs.            Own

Monthly Payment $1,000 Monthly Payment $   483
Insurance $     30 Insurance $     50
Taxes $       0 Taxes $   60
       
Total Payment $1,030                                      Total Payment $593
       

Savings

Interest Deduction $       0 Interest Deduction $ 100
Tax Deduction $       0 Tax Deduction $   60
    After Tax  
Net Monthly Payment $1,030                                  Net Monthly Payment $ 433
 
Also, check out this link if you want to calculate your own rent vs. own scenario.
 

*Determining how much of your tax and interest is deductible is a very complex process that is different for everyone. Some factors include the amount of your loan, how long you have owned your house, and how much you make, but there are many more factors to determine your deduction.  

Do I need 20% down to buy a house?

A common myth about buying a home is that you need 20% down to buy a home. This scares some people away from ever buying a home. The simple answer is NO, you don’t need a 20% down payment in order to get a home loan.  In this post, I will clarify the 3 different types of loans and how little ‘cash to close’ you actually need.

1. Conventional Loan – A conventional loan is usually 80% of the price, meaning you have to put down 20%, but it’s not the only way. Conventional loans range from 80% – 90% of the sales price of the home. That percentage is also known as the LTV, or the ‘loan to value’ ratio. If your loan is a 80% loan, then you have a 80% LTV.

2.  Federal Housing Administration (FHA) loan – The federally insured FHA loan has a range of 95% – 97.5% LTV, which means your down payment ranges from 3.5% –  5%! A FHA loan is very popular choice. Besides the obvious lower down payment, even people with bad credit or lower-income qualify.  Check out there site and learn how good this deal really is!

3. Veterans Loan – If you’re a United States Veteran, Then you qualify for a VA loan. The Department of Veteran Affairs has a 100% LTV ratio, which means there is no down payment. Yes you read that correctly, this is one of the greatest perks of fighting for our country, come home safely and you’re qualified for a home loan with no down payment!

Check this link out. It has various mortgage calculators, amortization charts, and a ‘rent vs. buy’ calculator. It’s a great resource, and is easy to plug in the numbers before you jump into your big purchase!

What is a Shared Appreciation Mortgage?

April 25, 2011 Leave a comment

A Shared Appreciation Mortgage (SAM) is a rare type of mortgage. Check with you local lender to see if they are willing to participate. a SAM allows you to have a lower interest rate on your loan and payments, but once you sell your house, the bank splits the profit you make off your house, thus the appreciation is shared between you and the bank. This is a rare loan, because not all houses qualify for a SAM. This loan is mostly for NEW houses, because it allows for appropriate appreciation. If your house is too old, it may not appreciate in value if costly repairs are needed in the end.  Also, not all neighborhoods appreciate due to a number of variables such as high crime or an unattractive area.

What is a Reverse Annuity Mortgage?

April 23, 2011 Leave a comment

               A Reverse Annuity Mortgage (RAM) is an interesting type of mortgage that can be obtained once you pay off your original mortgage. This mortgage allows the bank to pay you monthly payments! Sounds interesting (and a bit confusing). Let me clear somethings up. If you pay off your mortgage, you are said to be “free & clear”. You know have a tangible asset (your house) that you are free to sell or hold. The bank realizes you have that ability to liquidate your assets (sell your house) and retreive that money at a later date, so they give you money up front. Once you sell your house, you own them that amount off your house.

Here’s an example:
Your house is worth $100,000.
Your house is free & clear, which means you havepaid off your mortgage.
You decide you get a RAM, allowing the bank to pay YOU.
The bank pays you $300 a month.
After five years, you decide to sell your home.
The amount the bank paid you over those five years was $18,000.
But over those 5 years, your house appreciated to being worth $120,000!
Once you sell your house for $120,000. you pay the bank the $18,000 that they gave you, and your off your way!