Prequalification begins when you speak with a loan originator who calculates your debt ratios to find out how much money you can afford to borrow and repay. Before you make your call to a loan originator, you’ll need to be ready to answer the following questions:
How much money do you make every month?
How’s your credit?
How much money do you have available for a down payment and closing costs?
Calculating Debt Ratios
Prequalification is first determined by calculating a debt ratio. To do so, the loan originator will take your gross monthly income, estimate a mortgage payment then add any other regular credit obligations such as a car loan, credit card payments, or student loan payments.
Your loan originator will ask about your credit and how much money you have available to buy a home and give then you a general range of how much house you can qualify for.
The Preapproval Process
A mortgage loan prequalification is simply an estimate of how much house you can afford and how much money a lender would be willing to loan you. When you spoke with a loan originator over the phone and they ran your numbers, you probably came away with a general idea of what you are able to afford. However, you didn’t find out if a lender would actually approve a loan for you. That’s because loan originators need more than just verbal confirmation that your credit is good and that you have a steady income. They’ll want to verify that information by reviewing your credit report, paystubs and tax returns.
In a sense, the preapproval process begins the process of getting everything in order so that all you need to do next is find a home to buy. The first step is to complete a loan application. This can be done, over the phone, in person, or most often today, online. Once complete, the lender will review the information and verify the income and assets. Your credit report will be reviewed as well and merged into your loan application.
Experienced loan originators should know in advance whether or not the loan will receive preapproval. Some tipping points would most likely be a high debt ratio, or a low credit score. Most loan originators will be able to give you a fairly accurate idea even before you complete the loan application.
Once approved, you should receive a preapproval letter that you can present to a seller with your offer to let them know that you have the financial capability to purchase their home.
Wednesday, April 16, 2014
Tuesday, April 8, 2014
Get a Copy of Your Credit Report
Most people have a pretty good idea of their credit standing and whether or not they have good or, credit issues. But the only way to really find out about your credit is to get your hands on your credit report. This will enable you to see the same information a lender will.
Many privacy or fraud protection services offer ways for you to get a copy of your report online. For a small fee, you can enroll in a program with a company who will monitor your year-to-date credit activity.
If anything suspicious comes up, you’ll be notified of the possible breach. In exchange for subscribing to the service, you’ll typically be offered a copy of your credit report for no additional charge. However, if credit monitoring and fraud protection, while certainly important, aren’t really part of your home buying plan, there is a free alternative. The website www.annualcreditreport.com is sponsored by the three main credit repositories: Equifax, Experian and TransUnion. These three credit bureaus hold the credit information for almost every consumer credit transaction in the U.S. Each year, you can access the website, answer a few questions and get a copy of the same report that displays the same information a mortgage lender will review.
There are two main reasons to get a copy of your report before you shop for a home. The first is to find out if there is any fraudulent activity on your report. Is there a credit card listed that you didn’t know about? Identity theft is becoming more and more common. In fact, according to the U.S. Department of Justice, 7% of U.S. households reported some type of identity fraud. It is entirely possible that someone has used your identity to open up credit accounts under your name without your knowledge. In fact, identity theft is so rampant these days that even if you’re not looking to buy a home, you should regularly review your credit report.
The second reason to get a copy of your report is to check it for any errors. For example, say you paid off your car several months ago but the balance is not only shown as outstanding on your report, but that payment is also months past due. You know that’s an obvious error as the car is paid off and you have a copy of the title stating so. Or, maybe there’s a late payment on a credit card, but you know the late payment report is false because you’ve set up auto-payment on that card each month. Getting your hands on your credit report will help you catch and correct these mistakes.
Many privacy or fraud protection services offer ways for you to get a copy of your report online. For a small fee, you can enroll in a program with a company who will monitor your year-to-date credit activity.
If anything suspicious comes up, you’ll be notified of the possible breach. In exchange for subscribing to the service, you’ll typically be offered a copy of your credit report for no additional charge. However, if credit monitoring and fraud protection, while certainly important, aren’t really part of your home buying plan, there is a free alternative. The website www.annualcreditreport.com is sponsored by the three main credit repositories: Equifax, Experian and TransUnion. These three credit bureaus hold the credit information for almost every consumer credit transaction in the U.S. Each year, you can access the website, answer a few questions and get a copy of the same report that displays the same information a mortgage lender will review.
There are two main reasons to get a copy of your report before you shop for a home. The first is to find out if there is any fraudulent activity on your report. Is there a credit card listed that you didn’t know about? Identity theft is becoming more and more common. In fact, according to the U.S. Department of Justice, 7% of U.S. households reported some type of identity fraud. It is entirely possible that someone has used your identity to open up credit accounts under your name without your knowledge. In fact, identity theft is so rampant these days that even if you’re not looking to buy a home, you should regularly review your credit report.
The second reason to get a copy of your report is to check it for any errors. For example, say you paid off your car several months ago but the balance is not only shown as outstanding on your report, but that payment is also months past due. You know that’s an obvious error as the car is paid off and you have a copy of the title stating so. Or, maybe there’s a late payment on a credit card, but you know the late payment report is false because you’ve set up auto-payment on that card each month. Getting your hands on your credit report will help you catch and correct these mistakes.
Tuesday, April 1, 2014
Finding the Right Agent
Now that you’re ready to start house hunting, you’re probably wondering if you really need a real estate agent or if you can just do all the work yourself. Well, you can look all you want on the internet and go to open houses every weekend but you really don’t know the real estate market like an agent does. Just as you know your job inside and out, a good agent knows the ins and outs of finding a home. Your best bet for finding the right home is finding the right agent.
To clarify, you should know that the agent representing you is called the buyer’s agent and the agent representing the seller is called the selling or listing agent. You’ll be working with your agent during one of the most exciting times in your life, so it’s important to find not only the best agent you can but someone that you connect with and trust. While you can certainly shop for a home and make an offer to a listing agent on your own, understand that the seller’s agent’s loyalty lies with the seller, not with you. The listing agent may be very kind and provide advice as to the condition of the property as well as the sales price, but do you want the seller’s agent giving you advice? No. You want your own agent.
Okay, you’re convinced that you need an agent. But how do you find the best one when all agents claim they’re the best? When you are online you find that not one agent claims, I’m Sam Real Estate and I’m good at what I do and don’t make very many mistakes! Or I really don’t sell that many houses! But most agents will say they provide superior service or are power negotiators that belong to the Million Dollar Club. In other words, it can be a challenge to find an agent that’s right for you simply by finding a website or receiving a postcard in the mail.
Here are the qualities you should look for in an agent:
Experience - The first thing you want to look for is experience. This is not to say that a newly licensed agent wouldn’t do a good job, but because you don’t buy a new home every day, you want someone who knows their job inside and out from years of experience. A real estate agent that has several years of first-hand experience has been there, done that before and understands the industry in a way that no beginner understands it. You want to get the best deal possible so you want someone who will pull out all the stops.
A Full-time Professional - An experienced agent is also a full-time professional. There are many real estate agents who work part-time and can’t truly give real estate their all. A full-time agent focuses on one thing: buying and selling houses. For example, does your father-in-law have his real estate license but works as a full time automobile mechanic? Would you use him as your agent? Don’t even entertain the thought. Not only is he not completely focused on real estate, he’s related to you. Buying a home will not only be a decision with long-term effects, but one of the biggest financial decisions you will ever make so keep personal and professional relationships separate, and stick with a full-time professional agent.
Has Good References from People You Know - You’ve searched the internet and found hundreds of so-called perfect agents, but there’s nothing like getting a good referral for a real estate agent from a friend or colleague. Start asking around. You’ll always get an honest answer when someone truly appreciated the job their agent did for them. You also might learn who you don’t want as an agent. Good or bad, get referrals from someone you know and trust. You might even ask your lender because most lenders have experience working with agents on a regular basis.
Responsive to Your Initial Query - Once you have some good referrals, you can call a few agents to let them know you’re on the hunt for an agent to help find you a new home. If you make phone calls to five different agents and two of the agents don’t respond until the day after tomorrow, you have a good indication that they won’t be very responsive agents on your behalf. You want an agent who responds promptly, stays in touch and communicates with you clearly.
Feels Like a Good Fit for You - At this stage, you’ve probably got two or three possible agents that will all do a good job. But now it’s a matter of compatibility. Face it, there are some professionals that you might encounter that are decent enough, but they simply rub you the wrong way. They may not have done anything offensive to you but you just didn’t hit it off. A good buyer’s agent will spend some time with you to understand your needs and your goals. Take some time to visit with more than one agent. You want someone you’re comfortable working with, and who compliments your personality.
To clarify, you should know that the agent representing you is called the buyer’s agent and the agent representing the seller is called the selling or listing agent. You’ll be working with your agent during one of the most exciting times in your life, so it’s important to find not only the best agent you can but someone that you connect with and trust. While you can certainly shop for a home and make an offer to a listing agent on your own, understand that the seller’s agent’s loyalty lies with the seller, not with you. The listing agent may be very kind and provide advice as to the condition of the property as well as the sales price, but do you want the seller’s agent giving you advice? No. You want your own agent.
Okay, you’re convinced that you need an agent. But how do you find the best one when all agents claim they’re the best? When you are online you find that not one agent claims, I’m Sam Real Estate and I’m good at what I do and don’t make very many mistakes! Or I really don’t sell that many houses! But most agents will say they provide superior service or are power negotiators that belong to the Million Dollar Club. In other words, it can be a challenge to find an agent that’s right for you simply by finding a website or receiving a postcard in the mail.
Here are the qualities you should look for in an agent:
Experience - The first thing you want to look for is experience. This is not to say that a newly licensed agent wouldn’t do a good job, but because you don’t buy a new home every day, you want someone who knows their job inside and out from years of experience. A real estate agent that has several years of first-hand experience has been there, done that before and understands the industry in a way that no beginner understands it. You want to get the best deal possible so you want someone who will pull out all the stops.
A Full-time Professional - An experienced agent is also a full-time professional. There are many real estate agents who work part-time and can’t truly give real estate their all. A full-time agent focuses on one thing: buying and selling houses. For example, does your father-in-law have his real estate license but works as a full time automobile mechanic? Would you use him as your agent? Don’t even entertain the thought. Not only is he not completely focused on real estate, he’s related to you. Buying a home will not only be a decision with long-term effects, but one of the biggest financial decisions you will ever make so keep personal and professional relationships separate, and stick with a full-time professional agent.
Has Good References from People You Know - You’ve searched the internet and found hundreds of so-called perfect agents, but there’s nothing like getting a good referral for a real estate agent from a friend or colleague. Start asking around. You’ll always get an honest answer when someone truly appreciated the job their agent did for them. You also might learn who you don’t want as an agent. Good or bad, get referrals from someone you know and trust. You might even ask your lender because most lenders have experience working with agents on a regular basis.
Responsive to Your Initial Query - Once you have some good referrals, you can call a few agents to let them know you’re on the hunt for an agent to help find you a new home. If you make phone calls to five different agents and two of the agents don’t respond until the day after tomorrow, you have a good indication that they won’t be very responsive agents on your behalf. You want an agent who responds promptly, stays in touch and communicates with you clearly.
Feels Like a Good Fit for You - At this stage, you’ve probably got two or three possible agents that will all do a good job. But now it’s a matter of compatibility. Face it, there are some professionals that you might encounter that are decent enough, but they simply rub you the wrong way. They may not have done anything offensive to you but you just didn’t hit it off. A good buyer’s agent will spend some time with you to understand your needs and your goals. Take some time to visit with more than one agent. You want someone you’re comfortable working with, and who compliments your personality.
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