an appraisal, an expert evaluates your home and property and gives you an
estimate on how much it is worth. Appraisals are conducted by professionals who
are licensed by the state — they have to take courses and do an internship to
get licensed — to do evaluations of homes. Here’s what you need to know about
buying a home, your appraisal can play a role in determining if your lender
will approve your loan. All lenders order an appraisal during the mortgage
process in order to assess the home’s market value and make sure the
borrower is not attempting to borrow more money than the house is worth.
your appraisal comes in below the purchase price of your home, you may need to
pay the difference in cash, lower the purchase price, or get a second opinion.
home appraisal can also affect your home loan during a refinance. It can play a
big role in the interest rate that you get, since the appraisal helps determine
your LTV (loan-to-value) ratio. For example, if the LTV ratio is 75% or lower,
you could get a lower rate, because the loan is seen as less risky to the
lender. If the value of the home increases after you close on your home
purchase, you may be able to refinance to a lower interest rate.
lender will require you to get an appraisal on the home you
want to buy before they will lend you the money to buy it. This helps them
ensure the property could sell for the amount of money they are lending you.
So, if the asking price of the home is significantly higher than the appraisal
value, the lender might not lend you the money. If you are refinancing your
home, your lender will likely want an appraisal for the same reason. Also, you
may want to get an appraisal on your home if you’re thinking about selling it:
This can help you determine how much to ask for the home.
average appraisal costs about $400, but that figure varies depending on the
size and value of the home (appraisals typically cost more for larger and more
valuable homes). The cost will also vary depending on the type of appraisal —
if the appraiser has to go into the home (this is the most common type of
appraisal) rather than just drive by the property (this type of appraisal is
typically only done when the value of the home is pretty certain already), this
will cost more.
determine the value of the home, the appraiser will look at the size and type
of the home and property, the condition the home and property and the overall
real estate market in the area (what are similar homes selling for?). The
appraiser will note things including any flaws to the property (a leaky roof or
cracked foundation), the area around your home (is this home in a development?)
and even the estimated time it would take to sell the property. Basically, the
appraiser is trying to determine the fair market value for
your home, so most anything that would lower or increase the price someone is
willing to pay for your home may be considered.
condition of your home affects its appraised value. So, you can increase the
value of your home if you do repairs and improvements. Fix anything that’s
broken, and consider doing some improvements such as updating the kitchen or
bathroom. Also, make sure the home and yard are clean and uncluttered when the
appraiser comes by. If that doesn’t significantly improve the appraisal value
of the home, consider getting another appraisal.
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you’re in the market for a new home, it can be tempting to stretch your budget
in order to buy a place that has all the features you want. But doing so could
cause money trouble for you and your family.
Holbrook, director of personal markets at Northwestern Mutual, says homebuyers
can get into trouble by borrowing too much. “Some people have unrealistic
expectations about what they can afford,” she said. “They have a vision in
their heads of their dream home, and they don’t understand all the hidden costs
of homeownership that they need to factor into
believes it’s critical that buyers spend time figuring out what they can truly
afford to make sure that they don’t end up in over their heads. “When you
become cash strapped by borrowing too much, it can make people feel trapped
since they often have to cut back on hobbies, travel or other things that
matter to them.
are some things to consider before making an offer on your dream house:
to Determine the True Costs of Homeownership
Holbrook was shopping for her first home, she calculated the cost of her
mortgage and assumed that the expense of owning a home would be close to the
amount she was already paying in rent. But once she added in all the other
expenses involved in homeownership, the monthly cost nearly doubled.
homeowners don’t always understand the hidden costs that come along with owning
a home,” said Holbrook. “They don’t factor in things like home repairs,
maintenance, homeowners’ association or condo fees, utilities, property taxes,
private mortgage insurance, home insurance and all sorts of other costs.”
taking these costs into account meant that Holbrook might have taken on a
mortgage that would have significantly stretched her budget. That’s why she
believes it’s critical that you sit down with a calculator and add up all the
costs in order to get a true idea of how much homeownership will cost you.
Amount You’re Approved to Borrow May Not Be What You Can Afford
lot of people mistakenly believe that if they’re approved for a certain
mortgage amount, then they can afford to borrow it. But that’s not true, says
a bank may feel comfortable lending you might be very different from what you
can actually afford,” she said. “Lenders don’t know all of your expenses.
They’re looking only at the types of expenses that are going to show up in your
credit report. They don’t know what kind of daycare expenses you have, if
you’re paying private school tuition or whether you’re supporting aging
also don’t know about your other goals or financial priorities, like whether
you want to start a business in a few years or you’re saving to send your kids
to college. “You’re the one that has to make the mortgage payments,” Holbrook
said. “You have to make sure you feel comfortable with those payments.”
much you should borrow on your home is an individual choice. You might make the
same amount as your friend; but if you have different expenses, goals or
priorities, then the ideal amount to borrow could be completely different.
common advice, like spending no more than 25 to 30 percent of net income on
housing costs, might not apply to you if it doesn’t fit with your current and
future lifestyle and goals. Since buying a home is a long-term investment, make
sure that the costs will fit your financial situation in 10 or even 30 years’
you’re unsure how much you can afford, Holbrook suggests that you sit down with
a financial professional who can go over your financial situation and help
determine how much to spend.
Confident in Your Choice
for and buying a home is often a stressful and busy time, but taking the time
to think about mortgage affordability and ensuring that you don’t end up
borrowing too much will set your family up for future success.
house poor,” said Holbrook, “can lead to a great deal of conflict in the
household and the inability to do many things as a family that you enjoy.” But
when people borrow the right amount, they end up feeling confident rather than
stressed, according to Holbrook. “They feel assured that they can achieve all
their financial goals – not just their goal of homeownership,” she said.
The Northwestern MutualVoice Team is a group of
professionals who share insights and opinions from experts and industry leaders
across the enterprise. Our vision is to inspire others to take action and plan
for their financial future through topics ranging from financial planning,
retirement planning and distribution strategies, wealth accumulation and
preservation, to leadership, philanthropy and innovation.
view the original article click here
closing day, all parties will sign the papers officially sealing the deal, and
ownership of the property will be transferred to you. It's your opportunity to
make any last-minute changes to the transaction.
The day before closing, gather
all the paperwork you have received throughout the homebuying process: Loan Estimate,
contract, proof of title search and insurance if necessary, flood
certification, proof of homeowners insurance and mortgage insurance,
home appraisal, inspection reports and Closing Disclosure.
You might need to refer to these documents at closing.
Most home-sale contracts entitle
you to a walk-through inspection of the property 24 hours before closing. This
is to ensure that the seller has vacated the property and left it in the
condition specified in the sale contract.
At closing, your participation
will involve a couple of steps:
Closing procedures vary from
state to state and even county to county, but the following parties will
generally be present at the closing or settlement meeting:
The closing agent conducts the
settlement meeting and makes sure that all documents are signed and recorded
and that closing fees and escrow payments are paid and properly distributed.
You will receive the following
Once you've reviewed and signed
all closing documents, the house keys are yours and you will have successfully
bought your new home!
By Holden Lewis - To view the
original article click here
No matter which side of the transaction you're on, you don't
want to give up more than you have to.
months of searching for the perfect home, making some offers, and maybe even
competing with other buyers, you finally have a deal on your dream home. It
took some negotiations, but you and the seller have come to terms.
often, getting a signed contract and putting your money into escrow is the
beginning of what can become yet another round of negotiations. Here are five
things every home buyer and seller should know about last-minute negotiations
Buyers may ask for credits
based on property inspections.
a real estate contract either provides for a property inspection, or buyers inspect before
signing. Depending on the property and the issues, a buyer might also have a
particular type of inspection for the sewer line, septic, pool or roof.
inspections can bring to light issues that the buyer couldn’t possibly have
known about before making an offer. Once inspected, the buyer may still be
interested in pursuing the sale. But given the needed repairs they will
probably want to re-negotiate the price by asking for credits or a reduction
in the purchase price.
Sellers should consider having
a property inspection before listing.
goal is to avoid negotiations once you’re under contract, because they’re not
going to be in your favor. If you know the roof is near the end of its life or
the furnace breaks from time to time, let it be known upfront, because rarely
can you “sneak” something past the buyer.
might even go as far as having your property inspected before listing the home. This way,
you can address any issues, and make the inspection report available to buyers.
They can come up with their best offer upfront, knowing what they’re getting.
you have an inspection report or are otherwise assured your property is in
great shape, you could even ask for an “as-is” clause in the contract. Although
it’s not necessarily enforceable, it will send a strong message to the buyers
that you aren’t open to more negotiation.
Sellers may try to avoid giving
credits by having work done before escrow closes.
inspections, the seller might agree to have work done before the closing. Or
the seller may require that a payment is given directly to a contractor for the
purpose of performing the specific, required work and nothing else.
agreements help protect the seller, because buyers sometimes ask for credits
just to help offset the closing costs — and never intends to do the repair
also protects the seller if initial estimates for needed work turn out to have
Buyers who ask for credits just
to get the price down may be taking a chance.
the buyer concedes on the purchase price thinking they can come back after the
property inspection and ask for an additional concession.
buyer may even feel empowered now that they’ve completed a series of
inspections and are just weeks away from closing. The seller isn’t going to go
back to the drawing board with a new buyer over a few more dollars, right?
they might. If it’s a strong buyer’s market, there’s a good chance the buyer
can pull it off, but if it’s more of a neutral or a seller’s market, the seller
may call your bluff. They’re assuming that you’re the one who, having invested
all this time and money on inspections and an appraisal, isn’t going to walk
away over a few dollars.
Buyers nearly always ask for
credits, so sellers should give themselves some cushion.
should also leave some additional room for negotiation when you’re in escrow.
Always assume the buyer will ask for minor repair work — they nearly
always do, even if there are no major issues. If you leave some cushion for
yourself, you’ll feel better about the deal, and you’ll have protected yourself
against the inevitable.
the last thing you want is to be blindsided by a buyer asking for a few
thousand dollars credit — just when you think the deal is finally done.
Desimone - To view the original article click here
1. Your credit score doesn't
matter as long as you're approved
you don't need perfect credit to get a mortgage, the higher your score, the
more favorable a rate you'll snag. Unfortunately, some borrowers don't realize
that, if they apply for a mortgage when their credit isn't great, they'll get
stuck with a less-than-stellar rate for as long as they hang onto their loans.
Here's an example using today's
rates. If you were to take out a $300,000, 30-year fixed loan and had a credit
score of 760 or above, you'd snag a 3.608% annual percentage rate (APR), and an
associated monthly payment of $1,365. With a 650 credit score, on the other
hand, you'd qualify for a 4.651% APR, and that would come with a $1,547 monthly
All told, in this scenario,
you'll end up paying $65,520 extra for your mortgage if your credit isn't great
when you apply, so it often pays to wait until you're able to boost your score.
2. You're safe to get a mortgage where the
monthly payment is 30% of your income
Most financial experts agree that
your housing payment shouldn't exceed 30% of your income. So if you get a
mortgage where the payment equals 30% of your take-home pay, you might think
Not so fast, though. While your
actual mortgage payment might constitute the bulk of your monthly housing
expense, that 30% figure is actually meant to encompass your peripheral costs
of homeownership, like your property taxes and homeowner's insurance, as well.
Max out that threshold on your mortgage payment alone and you'll leave yourself
with dangerously little wiggle room in your monthly budget.
3. You don't need to put down 20%
Technically speaking, you don't
need to make a 20% down payment to buy a home. But if you fail to come up with
20% of your home's purchase price at the time you sign your mortgage, you'll
have to pay in the form of private mortgage insurance (PMI).
Private mortgage insurance is a
premium that's added to your monthly mortgage payment when you don't manage to
put 20% down. PMI will typically equal 0.5% to 1% of your loan's value, which
means that if you're looking at a $300,000 mortgage with 1% PMI, you'll be
charged an extra $250 a month. If you're already stretching your budget to
afford your home, those additional payments might push you over the edge --
which is why it often makes sense to hold off on buying until you've saved
enough to cover 20% of your home's cost.
4. A 30-year mortgage is best
Just because the 30-year fixed
mortgage is the most common option for financing a home purchase doesn't mean
it's the best choice for you. In fact, if you can afford a larger monthly
payment, getting a 15-year loan instead of a 30-year loan could shave thousands
of dollars off your total cost.
Imagine you're looking at a
$300,000 mortgage. A 15-year loan might come with a 4% APR based on your
credit, while a 30-year loan might come with a 5% APR. Your monthly payments
under that 30-year loan will be smaller, but if you can handle the larger
payments, you'll save $180,000 over the life of your loan, all thanks to your
lower interest rate coupled with a shorter repayment period.
Along these lines, if you're not
planning to stay in your home very long and are eligible for an extremely low
rate, it might pay to sign up for an adjustable-rate mortgage (ARM). Say you
expect to stay in your home for the next 6 to 7 years. Signing up for the
popular 5/1 ARM will allow you to lock in a competitive rate for the next five
years, after which time, you'll only be taking your chances for another year or
two as your rate resets. There are different mortgage options to consider
outside the classic 30-year fixed, so it pays to play around with different
financing scenarios and see which one makes the most sense for you.
By Maurie Backman - To view the original article click here
rigorous lending standards and lower down-payment requirements make FHA loans
popular with mortgage borrowers.
An FHA loan is a mortgage insured by the Federal Housing
Administration. Borrowers with FHA loans pay for mortgage insurance, which
protects the lender from a loss if the borrower defaults on the loan.
of that insurance, lenders can -- and do -- offer FHA loans at attractive
interest rates and with less stringent and more flexible qualification
requirements. The FHA is an agency within the U.S. Department of Housing and
are seven facts that borrowers should know about FHA loans.
credit scores for FHA loans depend on the type of loan the borrower needs. To
get a mortgage with a down payment as low as 3.5 percent, the borrower needs a
credit score of 580 or higher.
with credit scores between 500 and 579 must make down payments of at least 10
with credit scores under 500 generally are ineligible for FHA loans. The FHA
will make allowances under certain circumstances for applicants who have what
it calls "nontraditional credit history or insufficient credit" if
they meet requirements. Ask your FHA lender or an FHA loan specialist if you
Eric Audras/Getty Images
most borrowers, the FHA requires a down payment of just 3.5 percent of the
purchase price of the home. That's a "huge attraction," says Dennis
Geist, senior director of compliance and fair lending at Treliant Risk Advisors
and formerly a vice president of government programs for another lender. In
late 2014, Fannie Mae and Freddie Mac reduced minimum down payments to 3 percent
from 10 percent, but such loans have limited availability.
borrowers can use their own savings to make the down payment. But other allowed
sources of cash include a gift from a family member or a grant from a state or
local government down-payment assistance program.
FHA allows home sellers, builders and lenders to pay some of the borrower's
closing costs, such as an appraisal, credit report or title expenses. For
example, a builder might offer to pay closing costs as an incentive for the
borrower to buy a new home.
typically charge a higher interest rate on the loan if they agree to pay
closing costs. Borrowers can compare loan estimates from competing lenders to
figure out which option makes the most sense.
JGI/Jamie Grill/Getty Images
the FHA is not a lender, but rather an insurer, borrowers need to get their
loan through an FHA-approved lender (as opposed to directly from the FHA). Not
all FHA-approved lenders offer the same interest rate and costs -- even on the
same FHA loan.
services and underwriting standards will vary among lenders or mortgage
brokers, so it's important for borrowers to shop around.
Jakub Krechowicz / Fotolia
mortgage insurance premiums are required on all FHA loans: The upfront premium
is 1.75 percent of the loan amount -- $1,750 for a $100,000 loan. This upfront
premium is paid when the borrower gets the loan. It can be financed as part of
the loan amount.
second is called the annual premium, although it is paid monthly. It varies
based on the length of the loan, the loan amount and the initial loan-to-value
ratio, or LTV. The following premiums are for loans of $625,500 or less.
30-year loan, down payment (or equity) of less than 5 percent: 0.85
30-year loan, down payment (or equity) of 5 percent or more: 0.80
15-year loan, down payment (or equity) of less than 10 percent: 0.70
15-year loan, down payment (or equity) of 10 percent or more: 0.45
Image Source/Getty Images
FHA has a special loan product for borrowers who need extra cash to make
repairs to their homes. The chief advantage of this type of loan, called a
203(k), is that the loan amount is not based on the current appraised value of
the home, but on the projected value after the repairs are completed.
so-called "streamlined" 203(k) allows the borrower to finance up to
$35,000 for nonstructural repairs, such as painting and replacing cabinets or
mother image/redshorts/Getty Images
course, FHA insurance isn't supposed to be an easy out for borrowers who are
unhappy about their mortgage payments.
loan servicers can offer some relief to borrowers who have an FHA-insured loan,
have suffered a serious financial hardship or are struggling to make their
payments. That relief might be in the form of a temporary period of
forbearance, a loan modification that would lower the interest rate or extend
the payback period or a deferral of part of the loan balance at no interest.
By Marcie Geffner - To view the original article click here
it with rentals and roommates and think it's about time you took advantage of
low mortgage rates and became a first-time homebuyer? To make that happen, just
follow this simple step-by-step plan.
Do a quick search of actual
multiple listing service, or MLS, listings in your area on a number of
websites, including the National Association of Realtors.
Include taxes and home insurance
in your cost. In some areas, what you'll pay for your taxes and insurance
escrow can almost double your mortgage payment.
Compare mortgage rates now to find the right loan for you.
To get an idea of what insurance
will cost you, pick a property in the area where you want to live and make a
call to an insurance agent for an estimate. You won't be obligated to buy the
policy, but you'll have a good idea of what you'll pay if you decide to buy. To
estimate what you'll pay in taxes, check your property appraiser's website.
Just remember that exemptions and the intricacies of local tax law can create
differences between what a homeowner is currently paying and what you can
expect to pay as a new homeowner.
The upfront cost of settling on
your home shouldn't be overlooked. Closing costs include origination fees
charged by the lender, title and settlement fees, taxes and prepaid items like
homeowners insurance or homeowners association fees. Check out Bankrate.com's annual
closing cost survey to
see what closing costs average in your state.
Fannie Mae recommends that buyers
spend no more than 28 percent of their income on housing. Push past 30 percent
and you risk becoming house-poor.
Do they believe prices will continue
falling or do they think your area has hit bottom or will rise soon?
While buying a house is a great
way to build wealth, maintaining your investment can be labor-intensive and
expensive. When unexpected costs for new appliances, roof repairs and plumbing
problems crop up, there's no landlord to turn to, and these costs can quickly
drain your bank account.
the numbers make sense for you, making these additional moves at the very
beginning of the purchase process can save you time, money and aggravation.
credit or the inability to make a substantial down payment can put the kibosh
on your homeownership plans. That's why it pays to look at your
creditworthiness early in the homebuying process. Get your free annual credit
report and examine it for errors and unresolved issues. If you find mistakes,
contact the credit reporting bureau to make sure they are corrected. It's also
a good idea to get your FICO credit score, which will cost you a small fee.
pay stubs, bank account statements, W-2s, tax returns for the past two years,
statements from current loans and credit lines, and names and addresses of your
landlords for the past two years. Have all of that paperwork ready for the
lender. It may seem like a lot, but in this age of tight credit, don't be
surprised if your lender wants a lot of documentation.
preapproved for a mortgage helps you bargain from a position of strength when
you are house hunting. The institution where you bank and a local credit union
are good places to start your search.Use Bankrate's mortgage
rates tool to find
lenders offering the best rates in your area. Applying to multiple lenders in
the same month helps increase your chances of getting a loan approved at the
best rate possible without dinging your credit score too much.
you can't find a bank willing to lend to you — and in the current tight credit
market, it's possible you won't — consider getting an FHA loan. The Federal
Housing Administration has a program that insures the mortgages of many
first-time homebuyers. As a result of this guarantee, lenders who might
otherwise feel queasy about your qualifications will be more inclined to lend
to you. As a bonus, the FHA requires a down payment of only 3.5 percent from
Bell, CFA - To view the original article click here
Are you looking to take the plunge into
homeownership? Chances are, you've already crunched the numbers and gone over the pros and cons of
buying your own home.
Looking to add more things to your pros list? We're here to
help. We're talking about the journey of homeownership for an entire month. Below are five things that
should be at the top of everyone's list.
Courtesy of Freddie Mac -
To view the original article click here
refinancing their mortgages are taking cash out in the process at levels not
seen since the financial crisis.
half of borrowers who refinanced their homes in the first quarter chose the
cash-out option, according to data released this week by Freddie Mac. That is
the highest level since the fourth quarter of 2008.
cash-out level is still well below the almost 90% peak hit in the run-up to the
housing meltdown. But it is up sharply from the post-crisis nadir of 12% in the
second quarter of 2012.
In a cash-out refi, a borrower refinances an existing mortgage
with a new one, typically at a lower borrowing cost, that has a higher
principal balance than the existing one. This allows the homeowner to pay off
the old mortgage and still have cash left over for other uses.
growing popularity of cash-out refis has helped buoy refinance activity. After
booming for several years, demand for refinance mortgages had begun to slow as
the Federal Reserve began increasing short-term interest rates and longer-term
bond yields moved higher.
Mortgage rates remain low by historical standards, though. The
average rate for a fixed, 30-year mortgage was 3.95%, Freddie Mac reported this
rising home prices have helped increase the equity homeowners have in their
houses. This allows more people to refinance to capture the benefit of lower
borrowers whose homes are rising in value are often more likely to be
interested in refinancing for cash. For example, in Denver and Dallas, where
home prices have jumped, more than half of refinancers opted for cash last
year, according to Freddie Mac.
some housing-market observers, the fact that more homeowners are tapping their
homes for cash represents a healthy confidence in the economy. It comes against
a backdrop of continued gains in employment.
the same time, the increasing use of cash-out refis causes some concern since,
in the run-up to the financial crisis, borrowers used their homes like
Kiefer, Freddie Mac’s deputy chief economist, says this time has been
different. Borrowers now are subject to stricter standards when they get a loan
or refinance a mortgage. There is also less money at stake now than a decade
refis in the first quarter represented about $14 billion in net home equity
compared with more than $80 billion in each of three straight quarters in 2006.
On an annual basis, total home equity cashed out in 2016 was $61 billion,
according to Freddie Mac, versus $321 billion in 2006.
despite the recent increase in users, the proportion of refinancers opting for
cash is much lower than in pre-crisis days, when it peaked at nearly 90% in
more, consumer balance sheets are far stronger than they were a decade ago.
Mortgage debt-service payments as a percentage of disposable personal income
fell to 4.4% in the fourth quarter of 2016, according to Federal Reserve data.
That is the lowest level since early 1980.
have been using cash-out for years,” Mr. Kiefer said. “From a personal-finance
standpoint, it can make a lot of sense.”
One example is a borrower using
the cash from a refinance to consolidate credit-card debt that has far higher
yields. That in many cases can produce a big savings in debt-servicing costs by
replacing debt that has double-digit interest rates with a loan that has a rate
in the low single digits.
Stefanos Chen - To view the original article click here
So you're ready to take the leap from
renter to homeowner -- but where exactly do you start?
Many first-time homebuyers across
the country are facing brutally competitive markets that favor sellers. That
means buyers need to bring their A game to snag a pad of their own. Especially
if you're a newbie.
The road to homeownership can be
long and daunting, but here's where experts say you should start.
How much have you saved for a
down payment? Nothing? You might want to start there.
Lenders usually like to see a 20%
down payment before they'll give you a loan. But it's not a requirement. There
are also a bunch of low down payment loans available, including government-backed
FHA loans that only
require a 3.5% down payment.
Either way, you're gonna need
So now's the time to start
evaluating your spending habits and finding areas to cut back and sock that
Note that anything less than 20%
down means you'll pay more every month -- not only will you be borrowing more
money, but you'll also likely be charged private mortgage insurance fees on top
of your mortgage payments. Smaller down payments also make it tougher to
compete in a hot real estate market filled with all-cash buyers who often win
out in bidding wars.
Lenders use a three-digit number
called a credit score to decide whether to lend you money, so you need to know
what yours is before you start house-hunting.
The higher your score, the more
likely you are to get to get a loan and a lower interest rate.
There are three major credit
reporting companies, and federal
law mandates they each
give one free report, once a year. You can check your
reports for free here. You can also order your credit score while
you review your report, though there could be fees. Many credit card companies
offer free credit scores, so check with your bank first.
to review the reports carefully and get any mistakes fixed. If your score isn't
where you want it to be, start taking steps
to fix it.
Along with your credit score,
lenders also review your debt-to-income ratio (monthly debts divided by monthly
income). Many lenders want
to see this number no higher than 43%.
with your bank
House hunting is fun, but it
helps to know how much home you can afford before you start looking. If you're
not sure, asking the bank what they're willing to lend you is a good place to
"Too many first-time clients
will fall in love with a home before they are qualified and they try to back
into it," said Bob McLaughlin, senior vice president and director of
mortgage at Bryn Mawr Trust. "Get the qualification first."
To get pre-qualified, lenders
will take a quick look at your financial picture and come up with a ballpark
figure of how much you can afford to borrow.
Some buyers choose to go one step
further and get pre-approved for a loan to help them better compete against
other bidders. This review process is more involved and results in an approved
Be prepared to hand over a stack
of paperwork that will likely include at least one month of pay stubs, two
years of tax returns and two months of banks statements from all your accounts.
Just because you got approved for
a loan, doesn't mean you should
spend that much.
"On paper you might be able
to afford a $2,500 monthly payment," said McLaughlin. "But it might
be better to go with what you feel your budget can hold."
When figuring out what you can
afford, add up your mandatory expenses like student loan and car payments,
health care costs, groceries, cell phone and utility bills. But don't forget to
factor in the extra money you need for fun things like entertainment, shopping
Getting saddled with a huge
mortgage payment can leave you "house poor" -- or unable to spend
money on other things you enjoy because you're struggling to afford housing.
Now comes the fun part: house
First start looking at online
listings where you want to live to get an idea of what homes cost and figure out
what you can expect to get within your budget.
It helps to make a list of which
features you definitely want the home to have, and which ones would be nice,
but aren't deal breakers.
Now it's time to get up close and
personal with some actual homes. You don't have to have a real estate agent to visit
and make offers on a home, but having a professional in your cornercan help
make navigating the process easier. And since they're usually paid for by the
seller's commissions after a sale, you shouldn't have to pay for their
Experts recommend asking friends
and family members to recommend somebody they've worked with personally, and
then interviewing them.
Kathryn Vasel - To view the original article click here
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