Documents Needed for Financing a House

canstockphoto14286963When preparing to buy a home, there are a few items to tackle before you start shopping around such as getting pre-qualified with a lender. You can prepare a file of the following documents to aid in the pre-qualifying process.

Income information

  • Pay stubs from the last 30 days for each applicant
  • Bank account statement including savings for the last three to six months
  • W2’s from current and former employers
  • Tax return documents for the past two years
  • Gift letter if using gift funds for a down payment
  • Proof of any and all additional income

Lenders typically use this information and documents to verify your income. They are ensuring that you can financially afford the purchase.

Investment and asset information

  • 401K statements
  • Stocks
  • Bonds
  • Profit and loss statements
  • Life insurance documents
  • Mutual account information

Lenders request information on assets and investments to get a better idea of your financial security. They are wanting to see that your finances will still be stable even after a large home purchase.

Debt information

  • Credit card balances and total monthly payments
  • Auto loan balances and monthly payments
  • Other loan balances and monthly payment amounts including personal, secured, unsecured and student loans
  • Bankruptcy paperwork if needed
  • Divorce decree if applicable

Along with your income, your debt information is used to calculate your debt-to-income ratio. Lenders use this number to determine how much you can afford. Most lenders like to see a 40 percent DTI ration.

  • Credit information
  • Credit report
  • Credit score

We also recommend checking your credit report and score. This single score will have an impact on the type of property you can purchase and what price you can afford. Although, the lender doesn’t require you to produce your own copy of your credit report, they will research and check your credit ratings from the three credit reporting agencies (Equifax, Experian and Trans Union). We would be happy to recommend knowledgeable and experienced lenders to help you with your purchasing needs.

10 Items that Side Track and even Derail Closing

Purchasing a home can be both exciting and nerve-racking. Prospective homeowners face tremendous amounts of waiting as the home buying process ensues. Here is a list of everything that can go wrong during the closing of your new dream home.canstockphoto14463396

Low Appraisals

The majority, roughly 66 percent, of buyers get financial assistance when purchasing a home. Mortgage lenders often require appraisals of the property to determine their worth even if the buyer and seller have already agreed on a price. In the case of a low appraisal, the borrower can make up the difference, find financing elsewhere, pay for an additional appraisal or back out of the transaction completely.

Financing Challenges

Unfortunately, pre-approval doesn’t always ensure financing. Last minute problems may arise if the borrower loses a job, gets divorced, makes major financial purchases or experiences any other change in circumstances. Delays can occur as new financing is obtained.

Property Liens

Before closing, a title search will be conducted on the property. If there is any unpaid debt that lists the house as collateral, the sale can’t move forward until all liens are cleared up.

Pesky Pests

An infestation is reason enough for a lender to back out of the deal, even if both parties want to continue with the transaction. Before closing, the buyer needs to have the home inspected for termites and other pests. In the case of a manageable infestation, treatment should be complete before closing.

Needed Repairs

An inspection will be conducted to assess the integrity of the house. The inspectors will look for insect infestations, damaged roofs, leaky pipes and more that can lead to delays. If repairs are needed, both parties decide whether the seller will make repairs before closing or compensate the buyer for making the repairs at a later date.

Inspection Delays

Often, many buyers ask to do a walk-through of the home after the sellers have moved out. The closing may be delated as both parties decide how to handle any issues that may have occurred since the last showing. Issues include furniture or rugs concealing damage, movers putting holes in the wall and more. The initial purchase contract typically outlines how delays should be handled.

Changing Terms

In October 2015, three standard forms were replaced with the Loan Estimate form. Mortgage lenders must send one of these with the terms of the actual loan off at least three business days prior to closing for the borrowers to review. If the terms needed to be changed during this time, the three-day window resets and thus extends closing.

Unprepared Buyers

A buyer is expected to show up at closing with certain documents including copies of the homeowner’s insurance policy, proof of insurance payment, photo ID and certified funds for the closing costs. Failure to bring any of the above mentioned items will post pone the closing.

Insufficient Paperwork

Typically title companies and attorneys prepare the forms and documents for signing after all inspections, appraisals and other paperwork has been submitted. But even professionals can make mistakes and incorrect or incomplete paperwork can be a headache.  Although typos and missing documents don’t usually squash a deal, errors can delay the closing process.

Cold Feet

Although rare, sometimes a buy or seller just simply changes their mind. No longer wishing to continue with the transaction midstream can have its consequences. For instance, the buyer would forfeit their earnest money if they back out. If the seller backs out, they could be required to pay costs incurred by the buyer for inspections, appraisals and lender fees.

Debunking Real Estate Myths

In the world of real estate, there are a lot of terms and other information being throw at you, which can make it difficult to debunk the myths. Your realtor can help you navigate the home buying and/or selling easier, but the whole process can be intimidating (even with an agent).house-1045018_640

To give you a head start on the homeownership process, here are 3 myths worth debunking:

  1. You don’t need to get pre-approved until after you’ve found your dream home. This is not true. Before searching for your new home, or even talking with an agent, getting pre-approved is critical. Hunting for a home can be stressful and time consuming, so it is best to go into the whole thing knowing exactly what you can afford and if you even qualify for a home loan. By going in already knowing how much you qualify for, you don’t set yourself up for disappointment by falling in love with a home that is way out of your price range.
  1. “For Sale By Owner” (FSBO) saves you money. Many homeowners believe that selling their home themselves will save them a lot of money. In truth though, people who go the FSBO route end of losing money by making mistakes like overpricing their home, mishandled the transaction, or didn’t know how to negotiate the best price and terms.
  1. Real estate agents will say anything to make a sale. Agents are required, by law, to be licensed and follow a strict set of rules and regulations. Agents also rely heavily on referrals, word of mouth, and repeat business so if they are blatantly lying this could cost them a lot more than a simple sale. When you move forward in hiring an agent, take some time to talk to family, friends, and coworkers to see who’ve they’ve worked with in the past. If you don’t know anyone who’s recently used an agent, you can ask the agent you’re interested in hiring for references. Don’t be afraid to ask questions, remember they are working for you and you want someone who has your best interest at heart.

Ready to make the move towards homeownership? Give us a call today and let us earn your business.

Buying or Renting: Which Is The Best Option For You?

When it comes to buying or renting, an argument can be made to defend both sides. Both come with pros and cons, but as you decide which option is right for you, here are a some factors to consider. picket-fences-349713_640

Reasons to Buy

  • Apply for a fixed-rate mortgage loan and your monthly moments won’t go up for the life of the loan, unlike rent which is more likely to keep increasing.
  • Your mortgage interest might be tax-deductible. To learn more about this and if your property taxes and mortgage points qualify also, speak with your tax advisor to learn more.

Reasons to Rent

  • If you’re not ready to settle down in one location, or may be relocating soon, renting is a short term commitment.
  • Repairs are performed and paid for by your landlord
  • If your rent payment is late, your credit score won’t be affected

After you’ve taken some time which is the best option for you, and decided buying is the way you want to go, first take a moment to check your credit score. This will have a huge impact when you go to apply for your home loan. The lowest credit score you can have, and still (possibly) get a mortgage loan, according to the FHA is 580. However, your interest rate will probably be a lot higher and other fees may apply.

To learn more about your credit score and if you qualify for a home loan, speak with your bank, credit union, or mortgage lender. They can answer all your questions and help you decide your best course of action.

Once you know your credit score, take some time to organize your paperwork. Applying for a home loan is a long process and requires a lot of financial information. In most cases, mortgage lenders require the previous W-2’s from the past 2 years, tax returns, 2 recent pay stubs, and the past 2 months of bank statements (every page). The more organized you can be in your paperwork, the less stress you’ll have in the mortgage process.

As you continue down the path towards home ownership, decide how much you can afford. Again your bank, credit union, or mortgage lender can give you further information and insights, but help give you some idea, there are mortgage calculator tools you can use to get an idea.

Once you’ve learned how much you can afford and have been pre-approved for a home loan, hire a real estate agent to help you navigate the home buying process and find your dream home. This is a huge investment you’ll be making and you’ll want to make sure you’re choosing the right home for you and your family.

Ready to buy? Give us a call today! We are here to answer your questions and assist you in making your homeownership dreams come true.

How To Know You Are Ready To Buy

Are you ready to buy a home but aren’t sure if now is the right time? People usually hesitate to buy for two reasons: time and money. As you begin to weigh is now is the best time for you to buy, consider: how long are you planning on owning the home and can you afford to buy?

When looking at the latter question, here 3 things to weigh in your decision.  houses-691662_640

Do you have enough for a down payment? Most lenders require a 20 percent down payment or will charge you private mortgage insurance (PMI). To decide what is the best option for you, speak with your loan officer or lender.

What about the increase in home prices? Home prices are on the rise and with the economy constantly improving, they are bound to keep moving up. However, as you put this into consideration, remember the best decision you can make about buying a home is to decide if it is right for you. If now isn’t the time, don’t do it. You will know when the right time is.

Have you budgeted for monthly expenses? When buying a home, the first mortgage payment can be expensive because you will pay these four things: the principal, interest, taxes, and insurance (also known as PITI). If you have fixed-rate mortgage, you interest and principal will remain the same. However, taxes are inclined to go up depending on what your local county government decides or Homeowner’s association decide.

Ready to buy, but still have your doubts? Talk with your loan officer at your bank or credit union to help you decide if now is the best time.