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Bridget Alves                of Valencia

Blog - Full Service Real Estate Group, Inc

Preapproval and how to mess it up

Bridget Alves - Monday, March 21, 2016


Being preapproved for a home loan can reduce a ton of the stress associated with home buying. After all, shopping can be a blast, but trying to get all your ducks in a row financially after you’ve found your dream home can sometimes be a nightmare. Unfortunately, even if you’re preapproved, you can still mess up your finances enough to reduce the amount you’re preapproved for, or tank the deal altogether.

 

  • Do not apply for new credit or create new debt after being preapproved. Credit inquiries, like the ones that are used when applying for credit cards, can lower your credit rating. Also, buying something using lines of credit you already have will offset your debt:income ratio and can ruin your preapproval.
  • Keep most of your money where it is. If you’re the type of person who sees to their finances by shuffling around large sums of money, try to hold off for now. Mortgage lenders want to be able to track all of your finances, and the more you move things around, the harder that will be. If they have trouble acking funds, it will raise suspicion that there are funds you didn’t claim when you applied for a mortgage.
  • Pay your bills on time. Payment history is 30% of your credit score, and making late payments after being preapproved for a mortgage can alter your score and change the lender’s opinion about whether or not you can actually pay.

 

Ultimately, lenders want to see stability; stability in your income history, your payment history, where your money is, etc. If things start going haywire, or your credit rating drops too much, too quickly, the lender is likely to get skittish and either approve you for less than you originally planned on or flat-out deny the application.

Improve your chances of being approved for a mortgage

Bridget Alves - Monday, March 14, 2016


When you’re in the market for a home, the search is often the most fun. You get to attend open houses (and, hopefully, get some free refreshments), check out all sorts of interesting styles and types of architecture, and eventually settle on the home that’s right for you. Unfortunately, once you’ve decided on a home, the stressful part of home buying begins: applying for a mortgage. There’s nothing worse than having your heart set on a beautiful new home in a wonderful location only to be turned down for a mortgage. Here are a few things you can do beforehand to help improve your chances of being approved for a mortgage:

 

  • Get your credit reports early. There are 3 major credit bureaus, and you’ll want to get a report from each one to make sure there are no errors. If you have late payments or collections, ask the creditor to remove them. Additionally, if your credit score is lower than you’d like, work with a credit counselor to come up with ways to improve it.
  • Know your income. Lenders like to see at least 2-years of continuous employment in the same job in their applicants. Sometimes, if you’ve changed companies but still do the same job, lenders will still count your income from your previous employer as well as your current one. However, when an applicant has changed fields in the past 2-years, lenders are often apprehensive about approving the application.
  • Pay off as much of your debt as possible before you even apply. If you have too much debt in relation to your income, regardless of whether or not you’re making payments on time, a lender might not approve your application. Typically, they don’t like to see a debt:income ratio above 43%.
  • Make sure you can show where your funds come from. If you’ve been gifted a down payment, make sure you’ve got a paper trail showing where that money came from. Additionally, make sure that the person (or people) who gifted you the down payment can show where the money came from and that they can actually afford to gift you the payment. They’ll likely need a good deal of their financial information ready, so ask them to get it available ahead of time.

Unless you’re fabulously wealthy, or choose to live way, way below your means, there’s really no sure-fire way to ensure 100% that a lender will grant you a mortgage. However, taking these 4 tips to heart before you apply can increase your chances and help reduce some of the stress.

Common pitfalls of first-time buyers

Bridget Alves - Monday, March 07, 2016


Maybe you’ve just gotten married, or finally gotten that good-paying position you’ve worked so hard to achieve. Either way, you’re ready to buy your first home. This is truly an exciting time and one that should be savored. However, first-timers need to be extra careful not to make some all-too-common mistakes when shopping for that first home.

 

Mistake #1: You don’t know what you can afford
Whether you’re a couple living on two incomes or a single person making some serious money, how much you can borrow and how much you should borrow are two very different things. Mortgage qualifications can be tricky, and sometimes a person will qualify for a mortgage that they can’t realistically keep up with. Just ask the people who lost their homes when the housing bubble popped a few years ago to tell you just how disastrous it can be when this happens.

 

How much you should borrow will depend greatly on the kind of life you choose to live. If you’re the type of person who likes to stay at home and takes a thrifty approach to their expenses, then odds are you’ll be okay with a pricier mortgage. However, if you love the night life, spending money on things and experiences, like to travel, etc. then you may want to take a very close look at just how much of your monthly income is going to be eaten up by your house payment.

 

Mistake #2: Focusing too much on your mortgage

While your monthly mortgage payments will definitely be the longest running payments you’ll be making, they aren’t the only ones. Make sure you take into account the closing costs associating with home buying, as well as moving costs and any repairs you may need to make. You’ll want to leave several thousand dollars in your budget allocated to these costs.

 

Mistake #3: No down payment

Just because you can qualify for, and afford to keep up with, a mortgage doesn’t mean you’re ready to buy a house. If you can’t put down at least 20% of the closing cost as a down payment, then you’ll need to purchase private mortgage insurance. This will increase the cost of your monthly mortgage as well as the amount of money you’ll need to borrow to buy the house.

 

These mistakes are not meant to scare you, but to show you that buying a home can be more complicated than it seems. Provided you take the time to inform yourself of what you need to do, and where you need to be financially, buying your first home should remain the exciting experience it should be.

The hidden costs of home buying

Bridget Alves - Monday, January 04, 2016


When shopping for a home, many would-be buyers make the all-too-easy mistake of looking at the asking price of the home and thinking that’s all they’ll have to pay. Unfortunately, that’s not the case. Whether you give the buyer what they’re asking for the home, or luckily end up getting a lower offer accepted, there are a number of costs and fees that are going to drive up the total cost of the home.

 

The first cost you’ll likely come across is for that of a home inspection. Before a sale closes, some mortgage insurers will require that the home be inspected – a service which usually costs several hundred dollars. If an inspection isn’t required, it might just be worth it to have one done anyway. The hundreds you spend on an inspection can sometimes save you tens of thousands on repairs down the road.

 

According to Benjamin Franklin, the only certainties in life are death and taxes. Nowhere is this more true than when buying a home. Not only will you need to pay taxes on your purchase, but the government would like you to pay those up front – so be prepared to include taxes in the amount of your home loan. Actually, while you’re at it, make sure to include any survey fees and escrow costs into your loan, too, as these are usually required to be paid up front as well.

 

There are a number of fees that will need to be paid at closing, aside from the costs listed above. These fees include government recording charges, appraisal fees, credit report fees, title services, tax service fees, and lenders origination fees. If you’re starting to get worried that the closing costs and fees will price you out of the market – don’t be. Lenders are well-aware of the costs associated with buying a home and will help ensure that your mortgage covers what needs to be covered. However, paying what you can out-of-pocket isn’t always the worst idea, as you can save a significant amount of money over time via paying interest on a smaller loan.

How to help your kids buy their first homes

Bridget Alves - Monday, December 21, 2015


With the holiday spirit in the air this time of year, it’s hard not to think of what you can do for people – especially when it’s your own family. Whether it’s a wedding gift or a Christmas present, parents with the funds available are often using them to assist their children with buying their first home. If you yourself have been thinking about doing so, here’s a few ways you can do it.

 

Family loans
Those who have sufficient assets can loan money to relatives for the purchase of a home in lieu of traditional mortgages. Situations like this can be profitable for the lenders because they’ll typically get a better interest rate than they would on a typical investment vehicle from the bank like a CD. On the side of the borrowers, the fact that they answer to mom and dad instead of a financial institution might help should financial difficulties arise. When someone loses a job, the mortgage is still due. If the lender is in the family, though, they might be more willing to negotiate something that will help their relatives out.

 

Though it’s coming from family, the loan will still follow the IRS’s proscribed interest rates based on the term of the loan. If the loan isn’t intended to be an investment, and the lender isn’t interested in earning interest, up to $14,000 in interest can be forgiven each year under gift tax exclusions (or up to $28,000 if gifted as a couple). Any interest earned above this must be reported to the IRS as taxable income.

 

Co-signing the mortgage

If your child or relative’s income is too low to qualify for a mortgage, co-signing can help. When co-signing, the parents’ income will be under just as much scrutiny as their kids’, and in order for a co-signing to be successful the parents must be able to show that they can take on the burden of home payments if the children are unable to. Also, the loan will show up on the credit report of the co-signers as an outstanding debt, making refinancing difficult down the road.

 

The holiday season can bring out the generosity in us all, but before assisting your children or relatives with the purchase of a home, make sure you consult a financial adviser.

Helpful tips & hints

 

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