Keeping An Eye on the Facts
There have been many changes in the real estate world over the past year. Some areas and locales are experiencing a rise in home prices and values. A new set of mortgage laws are now in place. Homebuyers and homeowners who are seeking financing are required to understand and digest a lot of new information these days. Here is a list of the most important things to know:
Figure out what you can afford:
What you can afford depends on your income, credit rating, current monthly expenses, down payment and the interest rate. This is the information that will allow you to calculate how much you can afford to spend on a home. However, many additional factors play a part in the loan qualification process, and you should rely on the expertise and guidance of a professionally licensed Loan Officer.
Start saving money:
Mortgage lenders today consider so-called risk factors more than ever when they are evaluating a loan applicant’s qualification. Providing documentation of additional cash reserves – above and beyond the amount that you need for down payment and closing costs – can sometimes make the difference in whether or not you will be approved for your mortgage.
Start gathering your documents:
Gathering your documents early will expedite the application and underwriting process later on. At a minimum, the needed items include the following:
- W2s and tax returns for the last two years
- Residence addresses for the past two years
- Pay stubs for the last two months, including year-to-date earnings
- Bank statements for the last two months (checking, savings, money market, retirement accounts)
- More may be required
Find the right loan for you:
Be sure the loan program you choose is right for your current financial situation. Whether you are a first time home buyer or seasoned investor, you need to be comfortable with the monthly payment and the loan program. Work closely with your Loan Officer to investigate your options and understand them fully.
Get to know the local housing market:
Real estate agents are an excellent resource, but you should do some research on your own. Your local newspaper’s back archives of property listings will give you some historical perspective. Search on the Internet for general information about residential real estate in the area. Read everything that you can find about your local housing market.
Be aware of the qualified mortgage (QM) rules:
On January 10 of this year a new set of mortgage lending rules took effect. They are mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act, H.R.417). Under the provisions of this Act, the Consumer Federal Protection Bureau (CFPB) has provided a definition of the so-called Qualified Mortgage (QM). The new rulesaredesigned to reduce the number of high-risk home loans originated in the United States. They focus on the borrower’s ability to repay, and lenders must take reasonable steps to ensure that borrowers have the financial ability to repay their loans. There is now a limit to the amount of debt a borrower may carry. Interest-only and negative amortization loans are now forbidden, and balloon loans are severely limited.
Pre?Approval of your loan:
This is where the rubber meets the road. You supply information about employment, assets, residence history, and so on. Your Loan Officer obtains your written permission to run your credit report. When the lender reviews all this information they give you a Pre?Approval Letter. Handle it with care ? to a home seller, it’s like a suitcase full of cash! Your real estate agent will use your Pre-Approval Letter to make the best offer on the home you choose, and the seller will know you’re a serious buyer. It gives you buying clout!
2014 may turn out to be an excellent year to transact a home purchase or a refinance of your current residence. Just be sure to keep an eye on the facts! Please call or email me with any questions.
Connie Margowsky, Senior Loan Officer
NMLS # 80234
Mortgage Network, Inc.
411 The Hill
Portsmouth, NH 03801
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