How We See It

Lora Hollins

Lora Hollins

Posted:
May 17, 2013

Tips Every Homebuyer Should Know

By Lora Hollins, Vice President and Mortgage Lending Officer, NMLS#458240

With housing prices and mortgage interest rates at record lows, now may be a good time to explore buying a home. Buying a home is the single largest investment that most people will make in their lifetime. So, it is important to take an honest look at your budget first to make certain you are fully prepared to buy a home.

Today, there are more obstacles to getting a mortgage, including higher credit score standards and closer reviews of applications. Preparation is the key to navigating today’s market. Consider these tips to help your household prepare for buying that new home:

  • Review your finances. A thorough analysis of your financial situation is central to the decision to buy. Calculate all of your monthly expenses, in addition to your potential mortgage payment, homeowner’s insurance, taxes, and condo fees. Factor in other obligations like car payments, credit card debt and living expenses. Budget for home maintenance costs as well. Aim to keep the mortgage payment and all other obligations below 40 percent of your monthly income and stay within your budget when considering homes.
  • Check your credit score. Your credit history is an important factor when applying for a loan. Most lenders rely on the Fair Isaac Corporation (FICO) credit score when reviewing your loan application. The score reflects how well you manage your debt and is calculated using data from your credit report. A lower credit score may result in a higher interest rate on your loan and limit the options of loan products for which you qualify

If your score is too low, you may not be approved for a loan at that time. There are a number of steps you can take to improve your credit score, including paying your bills on time, only opening lines of credit you need and keeping your credit card balances below half of your available credit. To learn more and get information about improving your credit score, visit www.myfico.com.

  • Prequalify for mortgage loan. Lenders can provide a pre-qualification letter as proof the borrower has gone through the application process.  A pre-qualification letter strengthens a borrower’s position to purchase a home. While it does not guarantee final approval, it satisfies the requirement for Sellers.  You should be aware that Realtors prefer to work with buyers who have been pre-qualified.   
  • Factor in closing costs. Once you have found a home within your budget and agreed on a purchase price, there will be costs associated with closing the sale. These costs can vary and will depend on the purchase price and whether a real estate attorney or title/escrow company will be involved in the transaction. By law, lenders are required to give you a written Good Faith Estimate of closing costs within three days of accepting your completed mortgage application with property address.  The Good Faith Estimate disclosure package will include a list of documentation that the lender will require for the final approval. 

If you have additional questions regarding securing a mortgage, contact your banker at your earliest convenience to address any specific questions you may have.

Source:  American Bankers Association

 

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