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Mortgage Basics: The Pre-Approval Process

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Pre-Approval BasicsMany homebuyers are not aware that getting pre-approved for a home loan might just be what gets you them a new home faster. Before you start looking at homes, consider taking the time to talk with a lender or two about getting pre-approved for a mortgage so speed up the closing process and prevent missing the chance to purchase a home if you don’t have the mortgage approval necessary but other bidders do.

What’s Involved in Pre-Approval?

Before you can be pre-approved for a home loan, your credit, income, and debt history will all be checked to ensure you’re a good candidate for financing. This is also where you determine how much money you’re able to bring to the table as a down payment. The process itself is relatively quick and after these checks are completed, you’ll know how much can borrow.

Once you’re pre-approved, you generally have a period of 1 to 3 months to look for and secure a home before further action needs to be taken. You have the option of  locking in your mortgage rate during this time as well, so even if mortgage rates up before you purchase, your lender will still provide you with the better rate.

No matter what amount you’re pre-approved for, you’ll see that getting financing early has a number of benefits.

The Advantages of Getting Pre-Approved

With pre-approval in hand, you’ll be seen as a serious buyer. Sellers often see someone with pre-approved financing as a more attractive candidate than a buyer who submits an offer without having secured a loan. After your offer is accepted and you’re under contract, your pre-approval will also help the rest of the purchase process go smoothly. You won’t need to worry about shopping around for a mortgage or approving for a mortgage as you are trying to close one of the most important deals of your life.

Getting a pre-approval is part of planning ahead when you intend to become a homeowner. Follow some of these steps to help insure you have a smoother home purchasing experience.

 

Why Getting Pre-Approved is Important While House Hunting

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Mortgage and Home Loan Pre-Approval BasicsIt is easy to get swept up in the excitement of shopping for a new home, especially when it is your first. It is fun to tour open houses and get a feel for what is on the market that might feel like home. That being said, beginning to house hunt before you have gotten pre-approved with a mortgage lender may lead to disappointment.

You may think you know what you can afford, but  factors such as your income, credit scores and credit play a role in determining how much home you can qualify for and afford. You don’t want to discover that after you have put in an offer on your “dream” home that you don’t qualify for the size of loan you need or that there are other complications related to your credit or other credit worthiness factors.

Mortgage Pre-Approval Before You Shop

When you get pre-approved for a mortgage through a mortgage lender, the lender does a complete financial review and provides you with the maximum price you can spend on your home. When you have this number in mind while house hunting, there are the following benefits:

  • You can begin your house hunt with reasonable expectations based on what you can truly afford
  • When submitting an offer on a home, you know exactly how much you can bid during the negotiations

Pre-Approval: Insurance When House Hunting

There are buyers that believe a pre-approval is only beneficial to make them more credible when making an offer. If the above teaches you anything it should be that getting pre-approved makes you more informed and reduces the stress of your house hunt and insures you aren’t using inaccurate figures when setting a home price that you believe you can qualify for and afford.

You have enough to focus you energy on, the last thing you need to worry about is getting your financing confirmed right before you make an offer on your home when there are other offers and your offer is time senstiive. Getting pre-approved is the first step you should take before house hunting.

Tips For Making Your Realtor Relationship Run Smoothly

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Whether you’ve been living in your home for a year or for thirty years, you will have to go through the same process to sell your home. Finding a Realtor who knows the market you live in can make the sales process more efficient and can save you time and frustration.

As the mediator between you and the buyer’s agent, your Realtor’s job isn’t easy. If you keep a few simple things in mind, the process will go much more smoothly.

Take Your Emotions Out of the Sale

Your home means a great deal to you. If you’ve made updates, you’ll want the buyer to appreciate your hard work. However all buyers are not going to love your exact tastes. It’s important not to be offended if a buyer doesn’t love everything about your home or consider it to be worth the price you’d like to get for it. It is not uncommon for your upgrades to not be given a dollar for dollar value when your home is appraised. In fact, sometimes they will get little to no mention in the appraisal and may not affect your appraisal value.

Cleaning Things Up

Whether it’s for a showing or after the paperwork is signed, keeping your home clean and put together can make a world of difference as perception is reality. A dirty house can and will put off potential buyers. The better the house looks, the more buyers are willing to pay, which means the more you stand to get from the sale.

Let Your Realtor Do Their Job

It’s your realtor’s job to sell your home. Trust them to market your house to the people they think have the highest likelihood of buying it. Your home should always speak for itself and if not, your real estate agent is there to do the talking. This same idea comes into play when you’re negotiating a deal. They’re there to get you the best deal possible. It’s important for your Realtor to hear your thoughts and concerns, but they do need space to do their job. It doesn’t hurt for them to like you throughout the process as well. We all enjoy working hard for clients that we enjoy and it is certainly more likely that you will not be getting 100% out of your Realtor if you are on their bad side. The same is true of contractors and others we might employ as well.

Following these tips might not be easy, but sometimes they can mean the difference between the sales process being short and sweet or long, drawn out and frustrating. If you do decide your Realtor is not a good fit, simply communicate that to them and find one that you think is a better fit. The sooner in the process you can make such a determination, the better.

Meeting Your Home’s Former Owners Before and After the Sale

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Meeting Your Home's Former OwnersBuying and selling a home can be a strange combination of very personal feelings and very impersonal relations. Both the buyer and the seller usually have strong emotional connections to the house, but in the course of making the sale, the two parties don’t always meet in person.

If you don’t get an opportunity to met the current owners before you buy, there are important questions you need answers to that you should ask the selling agent. That being said, an unexpected visit from a former owner can give you the chance to ask lingering questions and learn more about the house from before it was yours.

What to Ask the Home Owner or Realtor Before You Buy

  • How recently were the plumbing and other systems updated?
  • Were there any problems during the updates?
  • Are there other issues with the neighborhood, area, or the home?
Sometimes you don’t get an opportunity to met the sellers before the transaction is complete, but come face to face with their seller some time later when the seller chooses to return to their old home.

What To Ask a Former Owner After the Sale

Undoubtedly, when a stranger comes to your door, it can be a little disconcerting. When it’s the former owner of your home, however, you can take advantage of the fact by asking them questions your home inspector might not have elaborated on, or about things that weren’t disclosed during the actual sale. Some of these questions can include:

  • How receptive were the neighbors to renovations and updates to the home?
  • Do they have any favorite contractors they can suggest?
  • Do they have any thoughts for upgrades that they were considering before they sold. They may have ideas and thoughts about improving the home that hadn’t occurred to you? 
  • Do they have any stories about the home’s history? 

Of course, the former owner may wish to ask you questions too. Many sellers often still feel a personal connection to the house and want to share that with you.

What Former Owners Might Say

It isn’t uncommon  for former owners return for sentimental reasons. They may have had children grow up in the home, or it might have been their first major purchase. Ultimately, they often just want to make sure you’re caring for their former residence. They even may ask you questions about your family, or how you plan to change the house to fit your tastes. In any case, meeting your home’s former owners is a chance to learn more about your home and learn about your home’s history.

 

Strategies for Paying Off Your Mortgage Faster

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When taking out a mortgage, buyers often consider how they will get a rate that will enable them to pay off their mortgage as quickly as possible. In other words, they want the lowest rate possible, as we all do. Many times it is often only those that are approaching retirement that actually start to think about how they will pay off their mortgage. With careful planning, paying off your mortgage faster can be a realistic goal regardless of what your rate is.

Paying Down Your Mortgage

  1. Pay your Mortgage More Than Once Per Month – Setting up a bi-weekly or weekly payment schedule can help you pay of your mortgage many times faster than by making a standard monthly payment. If you pay bi-weekly, you end up paying one or two extra mortgage payments per year which automatically reduces your amortization period.
  2. Increase Your payments When You Have More Money Coming In – Instead of using additional funds from a raise or bonus at work for something else, put it towards your mortgage every time you make a payment.
  3. Get a Reasonable Interest Rate – It goes without saying that it is important that you do your due diligence when shopping for a mortgage. While rate is only one of the factors to consider when choosing a mortgage professional, it is important that you choose your mortgage professional and rate carefully.
  4. Consider an Adjustable Rate Mortgage – While an adjustable rate mortgage may not offer the security of an unchanging mortgage payment, it can provide for a smaller rate and payment due than a fixed rate mortgage. This lower rate / payment will enable you to make larger payments towards the principal, which can help you pay off your mortgage significantly faster. Keep in mind that an adjustable rate mortgage may or not make the most sense for your needs, we can help you understand the options and which ones fit your needs the best.

If you abide by some of the above strategies, it may be possible to pay off your mortgage up to a decade earlier. Not having to pay substantial housing costs later in life can help ease a major financial burden and can free up money for retirement, college education for the kids, investments or other financial needs.

 

Before You Buy: Home Hunting Tips

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Buying a home can be an exciting and somewhat stressful experience. When shopping for your new home, keep in mind that one of the most important aspects of home ownership is often neglected, finding the right mortgage.

Your mortgage is the backbone of the entire purchase, but without doing proper research, you might not be getting the best deal you can. Before you begin the home search process, consider the following ways to increase your chances of a speedy, stress-free home buying experience.

1. Get Pre-qualified Before You Start Home Hunting

Getting pre-qualified means you will better understand how much home you can afford and which mortgage program(s) best fits your needs. By giving yourself options, you’ll be able to find a lender you’re comfortable working with and a mortgage you’ll be able to afford. Once you’ve done this, you can begin your home search without worry. You will also save yourself time as shopping for homes that you can’t afford only takes up time you could be spending finding the right home you can afford.

2. Know Your Personal Finances

Knowing your financial situation prior to speaking with a lender can help speed up the process when you do seek financing to buy a home. Budgeting for your current expenses and using a mortgage calculator can help predict what you’d pay with a mortgage. From there you can make a choice about how much you feel comfortable borrowing. A secure, steady working situation will also help make you more appealing to lenders since you’ll be able to prove stable income.

With a little bit of preparation before you speak with a lender, your lender can help you make an informed decision about how much house can afford to purchase and which loan program is the best fit for your needs.

 3. Understand All the Costs Involved With A New Mortgage

When you pick a financial institution to work with, you will submitting your information, checking your credit, and being given a mortgage quote.  While your monthly payment is a vital part of your mortgage, you’ll also be responsible for paying interest, insurance and lender fees, which your lender will help you understand. Many borrowers forget about these extra fees and instead of consulting with a mortgage professional, use a mortgage calculator as their guide in how much they will have to pay for a given loan size without taking these extras fees into consideration.

Top Mistakes of Home Buyers

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Home Buyer Mistakes to AvoidThe process of buying a home is one that you need to engage in with your head as well as your heart. You can’t make impulsive decisions when buying a home or you may find that you make a poor investment that will cost you time, money and frustration down the road.

Insure that you are a smart first-time home buyer by avoiding some common mistakes:

Mistakes to Avoid as a First-Time Home Buyer

  • You Can’t Get Over the Decor – Don’t allow the paint colors or the furniture in a home to sway you either way. The current home owners will take their furniture with them, and paint can be easily changed. Try to picture yourself in the home to determine if it’s the right fit.
  • Skip an inspection – It doesn’t matter how the home looks on the surface; you need a home inspection when purchasing ANY home. You don’t want to be surprised by issues down the road that may have been deal breakers.
  • Rely on Verbal Promises – The only agreements in a real estate transaction are those put in writing. Just because there is an unwritten agreement that you ‘may’ be able to occupy the home before your official closing date, does not mean anyone is obligated to abide by that. Put the important details in your offer and subsequent contracts and you will have better guarantees.
  • Get Approved For a Mortgage After You Make an Offer – It is important that you get pre-approved for a mortgage before you actually start shopping for a home. We can help you get pre-approved in minutes.
  • You See the Home Only One Time – Make sure you schedule a walk-through of the home before you take possession. You never know what condition it will be in when time has elapsed between the initial viewing and the closing date.
  • You Jump on the First House You Like – Seeing a number of houses will help you get your priorities in order. Visiting multiple homes even when you find one you like will help you to think with your head as well as your heart.

Using Gift Money for Your Down Payment

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Gift Money BasicsWith minimum down payment requirements for the purchase of your first home, coming up with the funds can be a challenge. Many new home buyers find themselves in a position to afford the carrying costs of their home, but can’t seem to come up with the cash to put the required money down.

The specific amount required can vary from one lender to the next. It can also vary by state but the general range is between 5% and 20% at a minimum. What first-time home buyers may not know when they are struggling to come up with the money, is that it is possible to use ‘gift’ money if they have a family member with sufficient financial resources.

Gift Down Payment Guidelines

The specific regulations for the use of gift money do vary by state. However, the basic guidelines are as follows:

  • Money can be provided to buyers by family or friends. However, it must truly be a gift and not simply money loaned. Often, mortgage lenders will require the person giving the gift to sign a notice guaranteeing the money is a gift. Sometimes, the source of those funds must be proven as well.
  • The individual providing the gift does not have to pay taxes on the gifted amount, provided it is under the state mandated maximum.
  • Often, the mortgage lender will require that the gift money be available to the buyer 30 days before closing.

Taking some or all of your down payment as a gift can help you get to the first rung on the property ladder. However, it is very important that you only use gift money when it is legitimately that – a gift. If you try to take advantage of this system and claim a loan as a gift, you are not only engaging in fraud, but you may find that you are in over your head financially even if you do obtain the loan.

What to Look For When Searching For a Quality House to Buy

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Home Inspection 101Houses, like people, can be all shapes and sizes. What you choose to buy might not be what someone else chooses, but the thing nearly all home buyers look for is a well-made house. Home inspectors, builders, and previous owners can all help by informing you of the condition of a potential purchase, but knowing what to look for with your own eyes is important since you are the ultimate decision maker.

Not every house is perfect and you can sometimes use this to your advantage. Cosmetic issues like paint and finishes are often some of the most glaring, but are also typically the easiest to fix. A house that has serious issues, however, is not. Insure that you evaluate the following:

Look Structural and Foundation Issues

When you’re touring a home, look for significant cracks in the walls or the ceiling or possible areas where such cracks may have been repaired. These can be signs of settling, structural, or foundation issues, and may be costly to repair if they’re deemed serious. Also be vigilant to the presence of bugs, especially termites, because they can cause significant structural damage.

Look For Water Damage

Be sure to look for signs of water damage that might imply a leak in the roof, windows, or plumbing. If there are cracks in the foundation of the home, water can come in that way as well, causing wood to rot, mold to grow, and general damage to flooring or drywall. Depending on the extent of the damage, these repairs can be cosmetic or costly. Mold can also have serious health implications, which means it is important to check for, especially if you have children.

Other Issues To Watch Out For

While the basic structure of the house is the most important thing, home buyers should also take note that a builder or previous owner’s cost-cutting measure can result in more money spent in the end. Some of these things are a matter of comfort, and some can be a distinct issue, including:

  • The quantity and quality of insulation used.
  • Proper installation of rain gutters, shutters, and accent details.
  • Any drafts coming from windows and doors.
  • How water drains outside.

Just remember, your new home doesn’t have to be perfect, you may save money if there is work that needs to be done, just be sure that you know about existing issues before purchasing. Always do your due diligence!

 

Remodeling Your Home the Right Way

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Remodeling TipsWhen you approach remodeling in the right way, you can bring value to your home, both in the monetary and enjoyment categories. There are mistakes, however, that you can make when renovating your home for the first time that can significantly increase the costs involved. Keep these in mind when you are ready to take on your first big remodel!

Tips for Successful Home Remodeling

  1. Hire the Right People – You need trustworthy, reputable contractors to work on your home. After all, remodeling a house for the first time and leaving it in the hands of contractors means that there is a significant amount of trust required. Ask friends and family who they have used for their projects and do your research online before hiring. Remember, the cheapest option for a contractor is not usually the best one. The costs involved in fixing work that was done incorrectly will usually be higher than those of paying a reputable contractor to do the work correctly the first time.
  2. Make Versatile Choices – There are always trends in home remodeling. Things like tile size and color, for example, change in popularity on a regular basis. Although a certain option may be in today, in 5 years from now, too trendy a selection will just appear more dated. You’re likely to tire of a trendy option quickly, as a result, or struggle to sell your home. Select classic designs when making more expensive changes. Reserve the trends for disposable decor and paint color.
  3. Maintain Flow – Your home’s structure and overall style should mesh well together. If you have a century home and over-modernize it, the home may lose some of its appeal to buyers, and decline in value.

Your home is a big investment, and it can work well for you provided you make careful choices before relying on impulse to renovate it.

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