Preparing Financially for the Mortgage Process

Purchasing a home is exciting and adventurous. Home buyers, particularly first-time home buyers, typically don’t know a lot about the process of financing a home. To avoid making mistakes, you need to know what you should expect. It is important to consider the state of your credit, the additional costs besides just the down payment, and the important questions dealing with the future.

 

The Credit Aspect

Your credit score is one of the first things a lender will look at when you apply for a mortgage. To cut through all that confusion, here are five tips you can act on right now:

  • Check your credit reports for free once a year through the three credit bureaus: Equifax, Experian, and TransUnion. Why all three? Because the information in each of the three bureaus’ reports can differ. If one or all of the reports include mistakes, your credit score may be negatively affected, and you may need to address the errors before going house shopping.
  • Be strategic with credit card use. The percentage of your credit limit that you use every month can affect your score. Make sure your balance doesn’t come too close to your limit.
  • The simplest and most important tip? Pay off your balance each month. To maintain a healthy score, pay off the balance before the due date. Anything after 30 days past the due date can spell very bad news for your score.
  • Be consistent. Good credit behavior over the long term will keep your score high.
  • Don’t take on more credit. If you apply for several different credit cards, you’re sending a message that you may have maxed out your other accounts

 

Save enough for the down payment and other additional fees

You should plan to make a down payment of 3.5% – 5% at the very least when you are determining affordability. It is important to consider that down payments are not the only costs associated with the purchase of a home. Your lender should be able to provide you with a breakdown of your costs that you will be paying upfront and on a monthly basis. Here are some basic tips to help you save for the costs associated with buying a home:

  • Start a budget: Making a budget allows you to see your expenses, how much money is coming in, and what is left over to save or pay off debts. When you have a savings goal it, helps prioritize your money by eliminating or cutting down on unnecessary expenses.
  • Automate: Once you have created a budget and figured out how much you can comfortably save each month or paycheck, set up a specific amount or percentage of your paycheck to go to savings automatically. For some, it helps to open up an entirely separate savings account for their home’s down payment and expenses. This method allows you to see how much you are saving specifically for the home buying process and keeps you from accidentally spending this money on something other than your new home.
  • Increase your income: If you are worried about cutting back expenses, or just want to save for your down payment faster, consider finding ways to increase your income. Some ideas include working overtime, getting a second job, or finding alternative ways to making money such as selling items online.
  • Save any unexpected money: When you get a large sum of money, such as a bonus or your tax refund, itis all too easy to take on the extra cash and purchase that one expensive thing you’ve had your eye on for months. Instead of going on a shopping spree, take that money and put it into your savings right away to help you achieve your dream of homeownership sooner.

 

Affordability now and in the future

Regardless of the level of income you have today, you need to figure out what the future may hold before you sign on the dotted line. For example, if you’re planning to have kids sometime down the road, how will these happy additions impact your family income? What effect will job changes have on your current income level? And have you planned for monthly payments into your rainy day savings account?

Everyone who looks to buy a home will have a payment amount that is affordable today, but in the face of your answers to the questions above, will that number still work for you down the road? These are some questions to consider as you think about homeownership.

 

Feel free to talk with a loan officer in your area to determine if homeownership is the right path for you!

More First Time Home Buyer Mistakes

More First Time Home Buyer Mistakes to Avoid
Last week we discussed some common first time home buyer mistakes.  To help you keep your sanity, cash, and to help you proceed through the home buying process as a more educated consumer  –  we have a few more to add to the list.

Mistake #4

Being ruled by the heart and not the head. Although, the decision to purchase a house often begins with your heart – don’t let you heart rule the process. For example, curb appeal can be a powerful force. If your heart is in love with the white picket fence or the expansive yard – make sure you are not overlooking other aspects of the home as a result.

Be objective and look at an assortment of homes. List the positives and the negatives of every home. Can you reduce or eliminate the negatives? Perhaps you could recruit a friend to view the home and give you objective feedback.  Think about how long you plan to own the home and if it will be difficult to resell.

Don’t exclude your heart from the process – just be sure your head is in charge.


Mistake #5
Buying into an unknown location. Don’t stop your inspection at the property line. Examine the surrounding area. Is it safe, well maintained, relatively quiet? Is is convenient to work, school, and shopping? Ask about zoning and that lovely forest of vacant land across the street. Could the highway be widened in a couple of years? If you are not familiar with the area, a real estate agent is essential. A licensed realtor will be able to help you with your questions and alleviate your concerns before you purchase.

Mistake #6
Signing without understanding the financing. Here is where it helps to do a quick study. First-time home owners contend with an assortment of mortgage types and the associated jargon. Pre-purchase counseling can help families prepare for homeownership. While your licensed mortgage loan officer is more than capable of explaining the process, many families find pre-purchase counseling classes to be extremely beneficial.  In the Milwaukee area, Housing Resources, Inc. offers a number of classes for first time home buyers.

 

Are you ready to become a new home buyer? Consult a licensed mortgage loan professional today!

 

Inlanta Mortgage offers Fannie Mae/Freddie Mac agency products, as well as a full suite of jumbo and portfolio programs. The company is fully delegated HUD-FHA including FHA 203K, VA, and USDA approved. Inlanta Mortgage also offers numerous state bond agency programsReview Inlanta’s mortgage loan programs here.

Inlanta Mortgage is a multi-state mortgage banker based out of Brookfield, Wisconsin. NMLS# 1016. Inlanta Mortgage is proud to be a recent recipient of a 2012 Top Workplace Award.

First Time Home Buyer Mistakes

Avoid These Common First Time Home Buyer Mistakes

Avoid These Common First Time Home Buyer Mistakes

It happens every day. First-time home buyers, partly due to enthusiasm or partly due to ignorance, make costly mistakes during the home buying process, like buying more house than you can reasonably afford. To help you keep your sanity and your cash, become an educated consumer and avoid the mistakes others have made before you. Here are a few common mistakes new home buyers should avoid:

Mistake #1

Not planning ahead. From the moment you think about buying a home, start planning. Start by requesting a copy of your credit report. Carefully examine it for errors and be prepared to answer questions about items on your credit report. Talk to your mortgage lender before you attempt to rectify errors on your report – in some cases your attempts to rectify credit report errors can cause a delay in the approval of your loan. An Inlanta Mortgage loan professional can provide you valuable guidance when it comes to improving your credit score or correcting errors.

Are you currently renting? Check your lease for an early release clause. If you’ll be subject to penalties, try to time your closing with the expiration of the lease.

During this planning phase, consider your life over the next five to seven years. Do you plan to start a family? Will an in-law eventually move in with you? Will you be working from home? The number and layout of the rooms you require will depend on your answers. If you qualify for financing based on a dual income, will you be able to survive on one salary in order to fulfill a long-range plan, such as one parent staying home to raise a child? Once you’ve answered these questions, establish a plan. Then direct the process with reference to the plan. Don’t let the process dictate to you.

Mistake #2

Failing to understand the home buying process. First-time homebuyers need to ask questions, lots of questions. Choose a real estate agent and mortgage professional who each have experience working with new home buyers. Experienced Realtors and financing professionals should be willing to explain the entire home buying process – from viewing homes, to negotiating, to financing, to escrow and closing in detail, and explain it again until you understand it.

Mistake # 3

Getting in too deep. It can happen when home buyers shop outside their budgets or over-extend themselves. What can you do to avoid getting hooked? Monitor your expenses for a couple of months. Then, based on your findings, develop a budget that truly reflects your lifestyle. Talk to a real estate agent who can provide insight into new home expenses and taxes. Then revise your budget.

Get pre-approved not pre-qualified. Pre-qualification only tells how much you can afford. Pre-approval goes a step further. Your lender will thoroughly evaluate your application, including verifying employment information and financial disposition, then clear you for a loan of a determined amount. Having your loan pre-approved makes you more attractive to the seller – a definite advantage when competing with investors for properties.

More to Come

Since this is obviously not an exhaustive list – next week we will provide a few more first time home buyer mistakes to avoid. Need more information now? Contact a licensed mortgage loan professional at Inlanta Mortgage. Our experienced team of loan officers can help you navigate through the home buying process and into the home of your dreams!

Inlanta Mortgage offers Fannie Mae/Freddie Mac agency products, as well as a full suite of jumbo and portfolio programs. The company is fully delegated HUD-FHA including FHA 203K, VA, and USDA approved. Inlanta Mortgage also offers numerous state bond agency programs. Review Inlanta’s mortgage loan programs here.