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Home Buyer tips-quick points

Below are some homebuying basics to help you understand the process of qualifying.  Please reach out to me at any time with questions or if you need more details.


Getting preapproved should be your first step which involves a lender pulling and reviewing your credit report and analyzing your documents to ascertain provable monthly income and evidence of funds for a down payment and closing costs.  We can have a conversation without pulling your credit report if you prefer.  When you are ready to take that step -a credit pull typically has very little temporary effect on your credit score—and the report is usually good for several months.  Nearly all the preapproval process can be done online with a loan application link available on my website below in my email signature line.  If documents are needed from you –based on our discussion, they can be uploaded securely thru my upload portal link found on the secure loan application site.


Preapprovals are usually good for several months—keep in mind every situation is different and your scenario may require more updating of the information you initially provide to maintain a loan preapproval in the future.


A quick way to guestimate what a monthly mortgage payment would be on a loan with a small or no down payment —including property taxes and home insurance in the payment --is to take the sales price—let’s use $300k and multiply $8 for every $1000 of that sales price.  Example-- $8 times 300 --would result in a rough monthly payment of about $2400.  I’m using a conventional rate of 6.79% for a 30 year fixed rate with an APR of 7.131%  for this calculation here.  Please keep in mind rates change several times a day and can be higher or lower than what I am using here-- once you are ready to buy.  That monthly payment can also vary based on a home insurance annual premium quote (home insurance premiums vary widely based on home location & characteristics).  I’m using $1200 a year in annual home insurance premium here but I’ve seen double and even 3-4 times that number in some areas.  Home insurance is something you shop for with your insurance agent of choice.


As a rough rule of thumb your provable monthly income must be roughly 3 times the mortgage payment.  So, for a $300k sales price your monthly gross income for all buyers listed on the loan app combined should be about $7200 (3 X $2400).  This of course depends on your consumer credit monthly payment obligations are as they appear on a credit report—as well as any other financial obligations like family support or deferred student loan payments—if applicable to your situation.  The higher your monthly debt payments-- the more monthly income is needed to qualify—while little to no debt can reduce the amount of monthly income needed to qualify.


Government backed loan programs like the zero down payment USDA and VA loans and small down FHA can be useful if your credit score is on the lower end of the scale or you lack the traditional down payment funds needed for conventional loans.  USDA and VA for example are zero down payment- but typical buyer’s share of closing costs is roughly 2-3% of the sales price.  These closing costs can often be paid by the seller or even the lender depending on housing market conditionsThe USDA loan program does have income restrictions for maximum annual household income, but many people can qualify.  The VA loan requires VA eligibility via military service—and has no income limits.  FHA requires 3.5% down and also has no income limits.


Conventional loans--minimum 3% down payment.  Funds required from you on a conventional purchase would typically be a minimum of 3% downpayment and 2-3% in closing costs for the buyer's share of title fees, first year's home insurance policy premium paid in full and the required impound account deposit for the lender to collect and then pay -on your behalf when due-- property taxes and home insurance.  Impound accounts are only required on most government backed and small down payment conventional loans.


The great thing about working with me is I own my mortgage company ---with no quotas or whip cracking managers the banks and big lender loan officers have.  These big lender loan officers  “helpful info” is more misinformation—or lack of information-- that is designed to sell you on using them ---like how a high-sales pressure car dealership operates.


I do what’s right for clients like yourself with straight forward advice that HELPS you make smart decisions—and never with any sales pressure!


Reach out with any/all questions.  Happy to help ya!

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