Let's get you Home Loan ready!

 Buying a home is such an exciting journey.  We are so excited to be a part of this fantastic journey with you!
There are many important factors when purchasing a home.  As a former mortgage underwriter Christina Hayes has put together a wonderful list of important factors when considering the purchase of a home:

  1. Credit: As mentioned many times, most lenders require at a minimum a middle credit score of a 640.  Be sure to check your credit scores before applying for a mortgage.  The higher your credit score the better your interest rate and your odds at qualifying for a home loan.
  2. Income: Having a stable income and stable employment is key.  Lenders will ask for the last 2 years of income if employed and may ask up to 4 years of tax returns in Self Employed.  They will also ask for the last 2-3 months of pay stubs.  Having gaps in employment and or changing jobs within the last 2 years may raise red flags.  If you recently changed employers, but stayed in the same line of work that is okay, if you have had gaps in employment most lenders will ask for a letter of explanation. 
  3. Self Employed: If you are self employed Lenders will ask for 2-4 years of tax returns (all pages) of your personal & business taxes.  Lenders will look very closely at your AGI (Adjusted Gross Income) this is the figure they will use to calculate your income.  So be sure to take a close look at your AGI. On IRS Form 1040 it can be found on line 37, on IRS Form 1040A it can be found on line 21, and if using IRS Form 1040EZ it can be found on line 4.  Lenders may also ask you for copies of your business license, and your P & L (Profit & Loss) statements.  *So if you are self employed make sure you have your documentation in order before applying for a home loan.
  4. Down Payment:  Many new home buyers get two very important figures confused. Down Payment & Closing Costs are not the same and are two different figures.  Your down payment will be a percentage of the price of the home.  Most lenders will require some sort of down payment.  VA offers 100% financing, however you will still have closing costs.  USDA also offers 100% financing.  FHA offers 96.5% financing, meaning you must have 3.5% down payment.  We will go into this a bit further. 
    *If you are purchasing a home via FHA and the price is $100,000.00 you will have to have 3.5% or $3,500 as your down payment, plus your closing costs which could be another $4K -$7K in costs.  Total needed to bring to closing would be $7,500- $10,500 based on this scenario. *Talk to your mortgage officer to discuss best loan program for you and your family. *The best loan available right now is USDA if available in your area.  As it is a 100% financing loan.
  5. Bank Statements: So why do lenders ask for these? Are they curious as to how many times you ordered pizza last month? Well, not really.  What lenders are looking for is consistent deposits, for instance your paycheck is deposited every 2 weeks, this is what they will look at, when comparing against your check stubs.  Lenders are also looking for NSF (Non-Sufficient Funds) transactions.  Your bank statement will have a total of NSF's and amounts paid (if any) be prepared to explain this if you do have any.  As this is a sign of high risk.  Lenders will also be looking for the down payment of the home (if any) to match the amount listed on the purchase contract.  If the purchase contract states $5,000 Earnest Money aka down payment, then they will also ask for the cancelled check, or a copy of the cashiers check and the statement showing where the money was deducted from.  Lenders will also be on the look out for large deposits or deposits without a set schedule.  Be prepared to explain most deposits over $200.00.  Lenders are also looking to see if you have enough Reserves. Reserves is a term used to calculate how much money you will have left over in your bank account after all upfront costs such as down payment, and closing costs, to have what they consider a safety net.  Many lenders will require you to have at a minimum 3 months reserves for PITI. (Principal Interest Taxes & Insurance). 
    *So when considering a home loan, take a close look at your bank statements, be sure you will have the 3 month minimum after upfront costs. 
  6. Renting: If you are currently renting, your lender will ask for 12 months cancelled rent checks.  They will also ask if you are related in any way to your Landlord, and for a legible copy of your lease agreement.  Now what if you live rent free lets say with your parents, to save up for a down payment, etc.  This is okay too, as long as you can provide an explanation, and the statement matches your bank statement. As in your savings have grown over the past lets say 3 months. Let's say you were renting 6 months ago, and now you live with parents. As long as you can provide a paper trail with a strong explanation it will be okay. 
  7. Driver's License: Not only is this needed to prove you are who you say you are.  Lenders will also look to see if the address you provided as your currentaddress  is in fact on your driver's license, if not be prepared to explain.  I would go ahead and change your driver's license prior to requesting a home loan.  
  8. Upgrading Houses: So you own a home and want to purchase another?  If you plan on selling your home, you can place an offer on the new house contingent upon the sale of your home. What this means is that you want to purchase the new home, and can and will once your own home sells.  If you plan on retaining your current home and lets say you want to rent it out, you must be able to qualify for the new mortgage payments and the current mortgage payments.  Lenders will not take into account rental income you may make without any documentation.  A new lease with a new tenant isn't sufficient.  You either must qualify for both mortgages or you will have to sell your current home.  If you have more than one property be sure you are filing them as rentals on your tax returns.  
  9. Rent-to-Own:  We have many clients who find themselves in a R-T-O agreement.  Be sure everything promised has been placed in writing by the owner of the property.  

    If you are a client, we will gladly help you get your documentation in order for you to submit to your mortgage lender. 

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