According to CoreLogic, from 2006 to 2014 “there were 7.3 million housing foreclosures and 1.9 million short sales.” The hesitation some Americans feel after experiencing a foreclosure brings to mind the old saying: “Fool me once- shame on you. Fool me twice- shame on me.”
According to the 2019 Home Buyer Report from NerdWallet,
“Thirteen percent of Americans have lost a home due to a financial event such as foreclosure in the past 10 years. More than 6 in 10 of them (61%) have not bought a home since, and 20% of those who haven’t repurchased say they never plan to again.”
This makes sense. They don’t want to go through the same pain again. As a cornerstone of the American dream, nobody wants to lose homeownership. But let’s illustrate this simply: Recall learning to ride your first bike during your childhood. Did you stop riding it because you fell on the ground and scraped your knees? Or did you get back on and try again until you were able to ride without falling?
Purchasing a home is not as simple as learning to ride a bike, but the concept is the same! There are many things necessary to learn that affect the ability to get the financing needed to purchase a home. Past occurrences can determine if there is a waiting period. In other words, you need to let your knees heal before you try again!
As we’ve mentioned in the past, homeownership has many financial and non-financial benefits. Each person needs to go over the pros and cons, taking the time to figure out what is best for their family. Should they continue renting, or should they try to buy again?
The good news is that some “boomerang buyers” are getting back into the market. They’re getting back on their bike!
“Of 2.8 million former homeowners whose foreclosures, short sales or bankruptcies dropped off their credit reports from January 2016 to November 2018, 11.5% have obtained a new mortgage, according to a study by credit rating agency Experian for USA Today.”
NerdWallet’s report also mentioned:
6% plan to buy a house this year.
39% intend to buy over the next 3 years.
58% say they will purchase within 5 years.
If you lost a home due to a financial event but would like to review your options, let’s get together to help you create a plan to obtain a home in the future!
When buying a home today, why is there so much paperwork mandated by the lenders for a mortgage loan application? It seems like they need to know everything about you. Furthermore, it requires three separate sources to validate each and every entry on the application form. Many buyers are being told by friends and family that the process was a hundred times easier when they bought their home ten to twenty years ago.
There are two very good reasons that the loan process is much more onerous on today’s buyer than perhaps any other time in history.
1. The government has set new guidelines that now demand that the bank proves beyond any doubt that you are indeed capable of paying the mortgage.
During the run-up to the housing crisis, many people ‘qualified’ for mortgages that they could never pay back. This led to millions of families losing their home. The government wants to make sure this can’t happen again.
2. The banks don’t want to be in the real estate business.
Over the last several years, banks were forced to take on the responsibility of liquidating millions of foreclosures and negotiating an additional million plus short sales. Just like the government, they don’t want more foreclosures. For that reason, they have to double (maybe even triple) check everything on the application.
However, there is some good news in this situation.
The housing crash that mandated that banks be extremely strict on paperwork requirements also allowed you to get a low mortgage interest rate.
The friends and family who bought homes ten or twenty years ago experienced a simpler mortgage application process, but also paid a higher interest rate (the average 30-year fixed rate mortgage was 8.12% in the 1990s and 6.29% in the 2000s).
If you went to the bank and offered to pay 7% instead of around 4%, they would probably bend over backward to make the process much easier.
Instead of concentrating on the additional paperwork required, let’s be thankful that we are able to buy a home at historically low rates.
A lot is happening in the world, and it’s having a direct impact on the housing market. The reality is this: some of it is positive and some of it may be negative. Some we just don’t know yet.
The following three areas of the housing market are critical to understand: interest rates, building materials, and the outlook for an economic slowdown.
1. Interest Rates
One of the most important things to consider when buying a home is the interest rate you will be charged to borrow the money. In our recent post we posed the question, “Are Low Interest Rates Here To Stay?” The latest information from Freddie Mac makes it appear they are. We are currently at a 21-month low in interest rates.
2. Building Materials
Talk of tariffs could also affect the housing market. According to a recent article, the National Association of Home Builders reports that as much as $10 billion in goods imported from China are used in homebuilding. Depending on the outcome of the tariff and trade discussions between several countries, there could be as much as a 25% boost in the cost of building materials.
3. Economic Slowdown
We began the year with many economic leaders thinking we could expect a recession in late 2019 or early 2020. As spring approached, economists had started to push that projection past 2020. Now, three leading surveys indicate that it may begin in the next eighteen months.
We are in a strong housing market. Wages are increasing, home prices are appreciating, and mortgage rates are the lowest they have been in 21 months. Whether you are thinking of buying or selling, it’s a great time to be in the market. However, it is vital to be familiar with and understand the data and closing comps in your local market, this is where I come in. Contact me and let me go through the latest market information with you so you can better understand your real estate options in this market.
In today’s housing market, home prices are increasing at a slower pace (3.7%) than they have over the last eight years (6-7%). However, they are still are above historical norms. Low supply of listed homes and high demand from buyers has pushed prices to rise rapidly.
In the mind of the homeowner, annual home price appreciation over 6% has become the new normal. This becomes a challenge when a homeowner looks to refinance or sell their home, as the expectation of what the homeowner believes the home should be worth does not always line up with the bank’s appraisal.
Every month, the Home Price Perception Index (HPPI) measures the disparity between what a homeowner seeking to refinance their home believes their house is worth and what an appraiser’s evaluation of that same home is.
Over the last five months, the gap between the homeowner’s opinion and the bank’s appraisal has widened to -0.78%. This is important for homeowners to note, as even a 0.78% difference in appraisal can mean thousands of dollars that a buyer or seller would have to come up with at closing (depending on the price of the home).
The chart below illustrates the changes in home price estimates over the last 12 months.
While the appraisal gap widens, another trend is also becoming more common.
According to realtor.com, “the share of homes which had their prices cut increased by 2% compared to last year”. Thirty-seven out of the 50 largest US housing markets saw an increase in overall price reductions.
In today’s market, you need an expert agent who can help price your house right from the start. Homeowners who make the mistake of overpricing their homes will eventually have to drop the price. This leaves buyers wondering if the price drop was caused by something wrong with the house. In reality, nothing is wrong- the price was just too high!
If you are planning on selling your house in today’s market, let’s get together to set your listing price properly from the start!
The spring housing market is off to the races! The inventory of homes for sale is increasing, buyers are out in force, and interest rates have remained low, piquing the interest of buyers and sellers previously on the fence about making a move.
New research from realtor.com shows that the first week of April is actually the best time to list your house for sale! The report used “trends in median listing prices, views per property on realtor.com, home price drops, median days on market, and number of listings on the market over the last three years,” to determine a ranking for every week of the year.
Listing your home in the first week of April contributes 14x more property views, 5% less competition from other home sellers, and results in the home being sold 6 days faster!
Below is a graph indicating the average score for each month of the year.
It should come as no surprise that April and May dominate as the top months to sell. The second quarter of the year (April, May, June) is referred to as the Spring Buyers Season, when competition is fierce to find a dream home, often leading to bidding wars.
However, there is one caveat worth mentioning. When broken down by metro, realtor.com noticed that while warmer climates share an overall trend, they have different top sales months. The best month to get the most exposure in Miami, FL, for instance, is August, while in Phoenix, AZ, June leads the charge.
If you’re thinking of selling your home this year, the time to list is NOW! According to the National Association of Realtors, 41% of homes sold last month were on the market for less than 30 days! If you list now, you’ll have a really good chance to sell in April or May, setting yourself up for the most exposure!
Let’s get together to discuss the market conditions in our area to get you the most exposure to the buyers ready and willing to make a move!
In today’s society, technology has become a crucial part of our everyday life. So big, that we tend to involve it in everything we do; home buying is no exception. Just like in any other industry, customer experience has become a key aspect and companies all over the world have finally started to step up in this area. And what better way to do so than digitizing everything in order to entertain better communication with clients and give them quick access to information?
Whether you’re a first-time home buyer, or you’re a real estate agent who’s looking to better advise clients, in this article we’ll help you by listing some of the best tools and resources to use for home buying.
First and foremost, you need to make sure that you are financially ready to take this step. After all, buying a home will probably be one of the biggest expenses that you’ll have in your entire lifetime. If the time is right indeed, you’ll need to figure out what you can actually afford to buy. This is where a budget worksheet could become extremely handy, especially when it comes to keeping things organized. Try to see a little bit into the future, and imagine your life in the next few years while having to pay the mortgage. Use the worksheet to figure out your budget, and then you’ll be ready to make a decision.
Like most people nowadays, you probably don’t have a huge amount of money available for buying an entire house, so you’re gonna end up going for a home loan. But there’s nothing wrong about this, as there are so many great calculators and financial tools out there, that can make the process ten times easier for you.
From working out how much you can actually borrow based on what you earn and what you owe to figuring out how much money will go to a mortgage payment for a certain property. All of these are readily available to you with only a few keystrokes. These tools help you take the first steps towards buying a house, without even having to leave your current one.
We live in an era where we practically have our smartphones glued to our hands. So why not take advantage of that and download some apps that can help you in the process of buying a new house?
If everything works out well with your home loan, now it’s time for house hunting! House hunting can be a very tiring process and also a very stressful one. What the modern home buyer can do about this, is to use real estate mobile apps that include map features, information about schools and other points of interest around properties, and maybe some other high-tech features, like virtual tours of the properties. At the end of the day, not only will you be able to save time, but you’ll also be less stressed when you’re able to go through multiple houses in a matter of minutes.
After you’ve narrowed your options down to a few houses, it’s time for you to go and visit them. This part of the process might be the key to a successful purchase, as you’ll need to talk to the real estate agent (in this case, call Norma!). And if you don’t know how to entertain one such conversation, you might want to do a little research beforehand. Be aware of the fact that a real estate agent can’t actually lie to you, but if you won’t ask the right questions, you probably won’t get the information that you need. You don’t want to end up buying a home that is not what you’ve thought it was in the first place.
And lastly, make sure that the house that you buy has the potential to become your actual home. You’ll never find your dream house while hunting for it, but you’re definitely able to find one that has the potential of becoming one.
The real estate business is adapting to our digitized world, a change that could bring nothing but profit and satisfied customers. Websites are still the standard for online house hunting, but mobile apps are so much more efficient! People take countless trips to the bank for home loans, while there are online tools that you can use from the comfort of your own bed. Buying a home is definitely a very time and energy consuming process, but fortunately, with the help of technology, it is gradually becoming easier to be a homeowner.
Congratulations! You’ve found a home to buy and have applied for a mortgage! You are undoubtedly excited about the opportunity to decorate your new home! But before you make any big purchases, move any money around, or make any big-time life changes, consult your loan officer. They will be able to tell you how your decision will impact your home loan.
Below is a list of 7 Things You Shouldn’t Do After Applying for a Mortgage! Some may seem obvious, but some may not!
1. Don’t change jobs or the way you are paid at your job! Your loan officer must be able to track the source and amount of your annual income. If possible, you’ll want to avoid changing from salary to commission or becoming self-employed during this time as well.
2. Don’t deposit cash into your bank accounts. Lenders need to source your money and cash is not really traceable. Before you deposit any amount of cash into your accounts, discuss the proper way to document your transactions with your loan officer.
3. Don’t make any large purchases like a new car or new furniture for your new home. New debt comes with it, including new monthly obligations. New obligations create new qualifications. People with new debt have higher debt to income ratios… higher ratios make for riskier loans… and sometimes qualified borrowers no longer qualify.
4. Don’t co-sign other loans for anyone. When you co-sign, you are obligated. As we mentioned, with that obligation comes higher ratios as well. Even if you swear you will not be the one making the payments, your lender will have to count the payment against you.
5. Don’t change bank accounts. Remember, lenders need to source and track assets. That task is significantly easier when there is consistency among your accounts. Before you even transfer money between accounts, talk to your loan officer.
6. Don’t apply for new credit. It doesn’t matter whether it’s a new credit card or a new car. When you have your credit report run by organizations in multiple financial channels (mortgage, credit card, auto, etc.), your FICO score will be affected. Lower credit scores can determine your interest rate and maybe even your eligibility for approval.
7. Don’t close any credit accounts. Many clients have erroneously believed that having less available credit makes them less risky and more likely to be approved. Wrong. A major component of your score is your length and depth of credit history (as opposed to just your payment history) and your total usage of credit as a percentage of available credit. Closing accounts has a negative impact on both those determinants of your score.
Any blip in income, assets, or credit should be reviewed and executed in a way that ensures your home loan can still be approved. The best advice is to fully disclose and discuss your plans with your loan officer before you do anything financial in nature. They are there to guide you through the process.
Just like our clocks this weekend, in the majority of the country, the housing market will soon “spring forward!” Similar to tension in a spring, the lack of inventory available for sale has been holding back the market.
Many potential sellers believe that waiting until Spring is in their best interest. Traditionally, they would have been right.
Buyer demand has seasonality to it. Usually, this falls off in the winter months, especially in areas of the country impacted by arctic conditions.
That hasn’t happened this year.
Demand for housing has remained strong as mortgage rates have remained near historic lows. Even with an increase in rates forecasted for 2019, buyers are still able to lock in an affordable monthly payment. Buyers are increasingly jumping off the fence and into the market to secure a lower rate.
The National Association of Realtors (NAR) recently reported that in 2018 the top 10 dates sellers listed their homes all fell in April, May, or June.
Those who act quickly and list now, before a flood of increased competition, will benefit from additional exposure to buyers.
If you are planning on selling your home in 2019, contact the Norma Langston Group to evaluate the opportunities in your market.
It’s the billion-dollar real estate question: What are the must-have home features that home buyers simply have to have in 2019?
The surprising—and extremely practical—answer: laundry rooms! An overwhelming 91% of home buyers said laundry rooms are an essential, or at least desirable, feature they want in their abodes, according to the National Association of Home Builders’ newly released 2019 home trends and buyer preferences report.
The report was based on a survey of about 4,000 home buyers. It was presented this week at the group’s annual convention, along with new research from design and remodeling site Houzz.
Having a room devoted to washing soiled clothes, as it turned out, outweighed some of the far sexier and trendier home features out there, including hardwood floors or a tricked-out, outdoor living space, according to the NAHB report.
“Laundry rooms have become so popular because most people no longer want to see or step over messy lumps of dirty clothes in the hall or in the kitchen,” says Rose Quint, who oversees survey research at NAHB. “Buyers want all that behind a door they can close and get to when they have time.”
Next up in popularity were Energy Star windows (officially certified to be energy-efficient); outdoor patios; Energy Star appliances; and ceiling fans.
Meanwhile, the least popular home feature was an elevator. Hey, stairs are cheaper and better for your figure!
Buyers also said they could live without wine cellars; day care centers; plant-covered green roofs; and trendy pet-washing stations. (Sorry, Fido.)
Buyers also have some strong preferences for the type of homes they want to live in and where they want those residences to be. The vast majority of shoppers, 77%, prefer detached, single-family homes, compared with 13% for townhouses, 4% for multifamily units such as condos, and 4% for manufactured (typically mobile) homes, according to the report.
When it comes to location, nearly two-thirds of buyers, 64%, want to be in the suburbs, while 11% pine for the big city and 24% prefer rural areas. But no matter where they live, they want to be near retail space where they can grab a bite or go shopping and walking or jogging trails.
“Suburbs are preferred locations since they offer a better possibility of getting a larger home—necessary for growing families,” says Robert Dietz, NAHB’s chief economist.
The hottest kitchen design trends right now
Buyers aren’t the only tastemakers out there. Homeowners undergoing remodels are also weighing in on the features and design trends they crave. And they’re focusing on the kitchen more than anything else, according to Houzz research presented at this week’s NAHB convention.
“Kitchens will continue to be the hub of the home, the place where homeowners invest the [bulk] of their savings,” says Nino Sitchinava, the chief economist at Houzz. “It’s becoming a showpiece.”
The transitional-style kitchen is the biggest trend, according to the research. The marriage of traditional and modern styles is signified by features such as Shaker cabinets, contemporary light fixtures, and more traditional marble countertops.
The second most popular style is contemporary, which features “a pop of slightly more industrial features,” says Sitchinava. The farmhouse style, popularized by HGTV shows like “Fixer Upper,” is also gaining in favor.
Homeowners are still clamoring for white-toned kitchen cabinets, but Houzz is seeing more creamy, off-white or oyster shades with a hint of yellow. Wood cabinets are the second most desired.
Remodelers also prefer stronger, engineered quartz over granite for countertops.
“It’s more expensive than granite,” says Sitchinava, “but it’s extremely durable. You don’t have to worry about chipping, heat, or cold.”
The most popular kitchen floors are ceramic or porcelain tiles, followed by engineered wood or laminate and hardwood. Resilient vinyl flooring is also growing in popularity, particularly with aging baby boomers who prefer a textured floor that’s more slip-resistant.
And homeowners are doing more to open their kitchens to the outdoors. That could be by turning a single door outside into double doors or installing a wall of windows.
The hottest master bathroom trends right now
Master bathrooms are another hot remodel, often paired with a master bedroom renovation, according to Houzz research.
“It’s becoming one larger, private retreat,” says Sitchinava, noting that folks are creating complementary spaces with similar color schemes, fixtures, and cabinetry. Some homeowners are even removing the doors to their bathrooms to create one continuous room. Yikes! But fear not: They usually create toilet rooms—with doors or walls—to create somemeasure of privacy.
The contemporary style reigns supreme in this space, followed by the traditional look, according to Houzz. The farmhouse style, which incorporates lots of wood and more rustic elements, came in third.
But Victorian-style bathrooms are also on the rise.
“It’s all about the details” with this style, says Sitchinava. “They are a reflection of a past century.”
This is the perfect time to start planning your garden for 2019. It’s too early in a year to actually do any yard work, but if you make a plan and prepare for it right now, there will be much fewer stressful and time pressing tasks in the spring.
When it comes to gardening trends, it’s perfectly fine to make your garden fashionable and to try to be innovative this year. However, have in mind that trends are often short-term and therefore fleeting. A neat and nicely managed garden looks good no matter what.
Asymmetrical patterns have been popular for a while now and they will really take the over suburban gardens in 2019. This is partly due to the fact that ordinary and well-kept symmetrical gardens have been around for decades. Suburban homes are now using this change to appear more interesting.
It’s best to use this fact to make your garden stand out. When patterns and plants aren’t designed symmetrically, you can also experiment with different materials, colors, and the overall aesthetic of the garden.
Low maintenance gardens
Usually gardens are seen as more of a hobby than just an aesthetic choice for your home design. It’s something to do when you have time to spare and something to plan for and organize around. However, this too is changing. There’s a growing trend of making low maintenance gardens that you can enjoy throughout the year.
The key to having a low maintenance garden is to choose the plants that don’t need that much work. For the most part, it’s about selecting plants that don’t need watering on regular bases. Equally important is choosing a suitable soil for such plants.
One of the biggest projects you could undertake with your garden is to try to merge the outside and the inside with a patio that’s an extension or even a part of your garden. Adding cantilever umbrellas and some lighting to create the atmosphere and make the patio useful is the biggest part of the job. What remains after that is just to design it as a part of the garden.
Patios can be a great place to entertain guests and they can really increase the value of your property. However, if they are set up with proper materials, they can also be easily pulled apart and you can use most of your yard.
Good fences make good neighbors! And the way you decide to distinguish your garden from your next-door neighbor could mean quite a lot. Installing green fences will make the transition from one yard to the other feel more natural. However, keep in mind that these type of fences mean a lot more work, especially when it comes to trimming and maintenance.
Planting edible plants in the back yard isn’t something that many suburban homeowners consider doing. However, there are a few reasons to try to get into it this year and to decide whether the operations could expand in the years to come.
It’s a way to make sure you have much less-expensive green and healthy food. In the end, many eco-aware homeowners should consider how their real estate could be used in a more productive way.
It’s fashionable to make your own garden decorations and you should dedicate a portion of your time to such creative projects in 2019. This is also less expensive and gives your garden a homey look. They don’t require that much artistic talent and can be made from all sorts of stuff, usually lying around the yard.
Old barrels just need to be painted over and used as a canvas, as long as they are wide enough and you know how to draw. Decorative bird feeders are also a good idea. They look nice and can be quite useful, especially during the winter.
In the end, 2019 should be the year to finally install and organize the supporting structures that will keep your garden maintained and clean. For the most part, you’ll need just one or two solar-powered small buildings. Taking the time to make these structures both well-organized and nice looking will make your future garden work much easier.
It might be possible to leave this part of the work to a professional contractor, but there’s no real need for it. A DYI project can be lots of fun!
The New Year is going to be great for gardening because there are a lot of new eclectic trends to try. Some of them are here to stay, like focusing on more eco-friendly gardening, while others are aesthetic choices and have an expiration date.
The largest obstacle renters face when planning to buy a home is saving for a down payment. This challenge is amplified by rising rents, which has eaten into the amount of money renters have leftover for savings each month after paying expenses.
In combination with higher rents, survey after survey has shown that non-homeowners (renters and those living rent-free with family or friends) believe they need to save upwards of 20% for their down payment!
According to the “Barriers to Accessing Homeownership” study commissioned in partnership between the Urban Institute, Down Payment Resource, and Freddie Mac,39% of non-homeowners and 30% of those who already own a home believe they need more than a 20% down payment.
The percentage of those who are aware of low down payment programs (those under 5%) is surprisingly low at 12% for non-homeowners and 13% for homeowners.
In a recent Convergys Analytics report, they found that 49% of renters believe they need at least a 20% down payment.
The median down payment on loans approved in 2018 was only 5%! Those waiting until they have over 20% may already have enough saved to buy now!
There are over 45 million millennials (33%) who are mortgage ready right now, meaning their income, debt, and credit scores would all allow them to qualify for a mortgage today!
If your five-year plan includes buying a home, let’s get together to determine what it will take to make that plan a reality. You may be closer to your dream than you realize!
Headlines spotlight the fact that buying a home is less affordable today than it was at any other time in more than a decade. Those headlines are accurate.
Understandably, buying a home is more expensive now than immediately following one of the worst housing crashes in American history. Over the past decade, the market was flooded with distressed properties (foreclosures and short sales) selling at 10-50% discounts. There were so many that this lowered the prices of non-distressed homes in the same neighborhoods. As a result, mortgage rates were kept low to help the economy.
Prices have since recovered. Mortgage rates have increased as the economy has gained strength. This has impacted housing affordability. However, it’s necessary to give historical context to the subject of affordability.
Two weeks ago, CoreLogicreported on what they call the “typical mortgage payment”. As they explain:
“One way to measure the impact of inflation, mortgage rates and home prices on affordability over time is to use what we call the ‘typical mortgage payment.’ It’s a mortgage-rate-adjusted monthly payment based on each month’s U.S. median home sale price. It is calculated using Freddie Mac’s average rate on a 30-year fixed-rate mortgage with a 20 percent down payment…
The typical mortgage payment is a good proxy for affordability because it shows the monthly amount that a borrower would have to qualify for to get a mortgage to buy the median-priced U.S. home…
When adjusted for inflation, the typical mortgage payment puts homebuyers’ current costs in the proper historical context.”
Here is a graph showing the results of CoreLogic’s research:
As the graph indicates, the most recent calculation remained 28% below the all-time peak of $1,275 in June 2006. That’s because the average mortgage rate at that time was 6.68%. As seen in the graph, both today’s typical payment and CoreLogic’s projection for the end of the year are less than it was in January 2000.
Even though home prices are appreciating at a slower rate, home affordability will likely continue to slide. However, this does not mean that buying a house is an unattainable goal in most markets. It is still less expensive today than it was prior to the housing bubble and crash.
Since 2011 home values have increased significantly throughout the country, with prices rising by 5.1% in 2018 alone. When surveyed, homeowners revealed the top four reasons why they felt their homes had increased in value.
Improved National Economy
Improved Local Economy
Low Home Inventory in My Area
As we can see, not only does the data show that the homes have appreciated, but homeowners also believe they know why. Many have taken advantage of the opportunity to use their newly found equity to sell their current house and move up to their dream home!
2019 will be a good year for the homeowners that still want to take advantage of their home equity! CoreLogicforecasts that home prices will increase by 4.8% by the end of the year.
If you are a homeowner who would like to find out your current home value, let’s get together to discuss the hidden opportunities in your home!
If you find yourself sitting in a strange hallway, waiting for a stranger in a suit to size you up and decide if you’re worthy as your palms sweat and your breath gets just a little bit harder to push out, you might be waiting for your appointment for your mortgage pre-approval. You’re one step closer to owning your own home, but this one is a doozy.
Let’s talk mortgage pre-approval step-by-step.
Step One: Mortgage Pre-Qualification Versus Pre-Approval
You probably already have a pre-qualification letter saying that you can probably buy a house in a particular price range, so why isn’t this enough? A lot of homebuyers find this part of the process confusing, and frankly, it can be. Your pre-qualification was probably done over the phone or on your first meeting with your lender. They asked you a bunch of questions about your income, your job and maybe even pulled a “soft” credit report to get some idea about your debts.
Based on this information, they gave you the details on the kinds of programs you’re eligible for and how much you can expect in buying power. You probably got a letter that you could show your Realtor to help guide the buying process. The difference between the pre-qualification and the pre-approval is simple: a pre-qualification is based largely on your word. If you give the lender incorrect information, they’ll give you a pre-qualification letter that’s not right.
A pre-approval, on the other hand, takes a harder look at your background, work history and requires a full credit report and FICO score to ensure that you can, in fact, pay back a note.
Step Two: Documentation
Your next meetup with the nice banker is going to be to deliver documents, provide consent to pull a full credit report and, if you’ve already found one, give them the information on the home you’ve put under contract (in some areas your Realtor can do this last bit for you).
Documentation you’ll be asked to bring will include pay stubs, bank statements and tax returns, along with other information that may be needed to verify your income source or sources. Self-employed people, for example, are sometimes required to prepare profit and loss statements (or just pony up more tax returns). If you have assets like a 401(k) or even a CD, you’ll want to bring the details on these, too.
Step Three: The Loan Estimate Form
You’re going to get a copy of something called the Loan Estimate Form, probably at the same meeting where your lender pulls that full credit report and takes all your papers away. This form explains exactly how much they expect you’ll need to bring to closing, along with itemized estimated fees to plan for at closing. If you’re shopping your loan, collect these and compare them side by side before you make your final choice.
But don’t spend too much time crunching the numbers. Just like your contract (and the National Association of Realtors) says, “Time is of the Essence.”
Step Four: Acceptance
Once you’ve had a few minutes to review the paperwork and you’ve made your final pass through the numbers, all that’s left is to call the lender you’ve chosen and let them know you need that pre-approval letter sent over to your Realtor.
Understand that a pre-approval is not a guarantee that you’re going to get the money you need to close. Several things can go wrong along the way through underwriting, including, but not limited to:
– Unverifiable income (this is often due to issues with overtime) – A change to your credit score. – An increase in your debt to income ratio – An undocumented change in employment – Assets that are unverifiable
The best plan is be totally honest with your lender when you get your pre-approval so that you don’t get a last minute call telling you that your loan has been denied (this actually happens, so pay everything on time and don’t take out new credit lines or add to old ones until you’ve got the keys in your hand).
When is the Best Time to Make an Offer?
Ideally, you should have a pre-approval letter in hand before you so much as set foot into the first house you’re considering for purchase. After all, the seller isn’t going to think you’re all that serious without one, nor will they be keen to want to negotiate under these circumstances.
Help your banker help you get the best deal on the house of your dreams, save everybody a lot of headaches and get that pre-approval first. Knowing how much your closing costs are going to be will also help your Realtor write your contract accordingly if they should need to be wrapped into your mortgage.
Basically, that document is the key to everything. So, no pressure.
When You Need a Loan for Your Home…
Finding the right loan officer doesn’t have to be difficult. I can put you in touch with one of my trusted banking pros that will get the job done and make sure you don’t get a big surprise a few days before closing. Call me so we can discuss personally – Norma – 469-450-2559.
If you’ve ever watched “The Price is Right,” you know that the only way to win is to be the one to correctly guess the price of the item you want without going over! That means your guess must be just slightly under the retail price.
In today’s shifting real estate market, where more inventory is coming to market and home values are projected to appreciate at lower rates, homeowners will not be able to price their homes as aggressively as they were able to just last year.
They will have to employ the same strategy: be the closest without going over!
As I explained last week, pricing your home at or slightly below market value actually increases the number of buyers who will see your home in their search!
Over the last six months, more inventory has come to market while the months’ supply of inventory available has dropped. This means that the demand for homes to buy is still very strong throughout the country!
Homeowners who make the mistake of overpricing their homes will eventually have to drop the price. This leaves buyers wondering if the price drop was caused by something wrong with the homes when in reality nothing was wrong, the price was just too high!
If you are thinking about listing your home for sale this year, let’s get together to properly price your home from the start!