How to Know if You’re Ready to Buy a House

Home SignBuying a house should never be entered into lightly – and often many potential buyers may not realize the process involved. Doing as much research as possible can help determine exactly what is needed and required to make a home purchase happen.

Here are 10 great ways to help you identify the point at which making a home purchase becomes feasible for you:

1) Reduce Card Debt
When you’re trying to obtain a mortgage, perhaps the most important aspect of doing so is getting your credit card debt reduced as close to zero as possible, according to Money Under 30. That’s true for two reasons. First, the size of your credit card balances relative to your limits makes up a significant portion of your credit score. Second, lenders look at debt-to-income ratio. As long as you’re carrying relatively small balances from one month to the next (or ideally, not carrying a balance at all), you’ll be in good shape.

2) Pay Off Loans
One of the biggest hurdles (for the Millennial generation) when it comes to being financially capable of buying a home is student loans. It doesn’t mean loans have to be paid off in full, but they certainly need to be somewhat small relative to your income.

3) Having Savings
If you’re trying to buy a home in today’s market, you’ll almost certainly need to make a down payment. While it’s possible to get mortgages with down-payment requirements as low as three percent, the added long-term expense could end up costing you significantly over the life of the loan. Making as large a down payment as possible is going to keep your borrowing costs down. (Don’t forget to look into sponsored programs that help with a down payment!)

4) Rainy-Day Fund
In addition to the money that will go toward your down payment, it’s vital to have some additional money saved just in case something goes wrong with the home. As a general rule, having about $1 per square foot – or one percent of the purchase price – in the bank will help cover some basic expenses you’re likely to encounter after your home purchase.

5) A Long-Term Plan
Whether you’re buying a home as a single person or for a whole family, you need to consider what your situation is going to look like two, five, 10 or even 20 years down the road. If your housing needs are going to expand or shrink in the near future, this will affect to size and kind of home you’re looking to purchase now. (For example, it is best not to buy a small home now if you know you’ll need a larger one in a few years when you have kids.)

6) Reliable Income
Lenders also want to make sure you’re going to be able to keep up with your mortgage payments in the long term, so a steady job is a must. While no one can predict their employers’ future with 100 percent accuracy, it might not be a good idea to go house hunting at a time of turmoil. As long as you’re fairly confident in your position, home shopping should be no problem.

7) A  Comfortable Cushion
One issue some homeowners encounter after buying a home is they’ve pushed themselves so far financially trying to get ready for the real estate sales process that they come out the other side in rough financial shape. Being “house poor” means people own a house but otherwise struggle financially because of the cost of that property. You’ll need to make sure you’re not buying too much house or else risk running into other financial problems even if you can technically afford the mortgage and other costs.

8) An Understanding of What Constitutes Affordability
Along similar lines, it’s vital to not only factor in the cost of the mortgage and taxes for your home budget, but also other expenses. This may include higher electric and heating bills that come with living in a bigger space or more costly insurance coverage.

9) A List of Must-Haves and Nice-To-Haves
When people actually start shopping for homes, it can be easy to fall in love with certain properties, according to Forbes. However, while it would be nice to have a state-of-the-art kitchen with stainless-steel appliances, it’s probably going to be expensive and not necessary for your happiness in the home. Having a list of things that you will absolutely need out of your new property – big backyard, finished lower level or a home office – will help you get a better idea of what you can actually afford.

10) Your Real Estate Agent
The key role of real estate professionals in every portion of the process cannot be overstated. They will be able to help first-time buyers as well as those who have previously been through the process get as prepared as possible so they can maximize their understanding and the value they get out of buying a home.

Need help qualifying for a mortgage? Contact Sibcy Cline Mortgage Services. They have professionals who will guide you through the entire lending process.

Brought to you by HMS Home Warranty.  HMS is an industry leader with over 30 years of creating success for clients and providing peace of mind for customers.  To learn more: www.hmsnational.com

 

Avoid these Seven Credit Mistakes before Applying for a Mortgage Loan

Home on a Stack of CashCredit history is an important factor when applying for a mortgage loan. Your FICO® score (a measure of consumer credit risk) plays an important role in your mortgage’s loan terms.

Your goal is to have a high FICO® score (700+) to achieve a lower interest rate loan. The higher your score, the lower your rate will be.  (Note: People do qualify for mortgage loans with lower scores.)

If your score is not in a higher range, you can work on boosting it higher by responsibly managing your credit over time.

Here are seven things to avoid with your credit before applying for a mortgage loan so that your FICO® score is as high as possible.

1–Not Checking Your Credit

Mistakes can occur on credit history that can affect a FICO® score. It is important to check your credit report to ensure it is accurate. There are three major U.S. credit bureaus to check: Equifax, Experian and TransUnion. If you do find mistakes, you can dispute any errors and get them fixed. Be sure to check first with your loan officer before disputing items as this can sometimes have a negative affect on your credit.

2–Applying for Credit

When you apply for credit there will be an inquiry on your credit report. This new credit application can cause a small dip in a FICO® score.  If you have a “hard” inquiry – meaning you have applied for credit or a loan, the issuer of that credit or loan will pull a report (that you have authorized) on your credit history. If your score is on the edge, this could cause you to then qualify for a mortgage loan at a higher interest rate. (Inquiries will remain on your report for two years, but FICO® scores only count for the past 12 months.)

3–Over-Using Current Credit Cards

Mortgage lenders look at debt-to-income ratios and this will include outstanding credit card balances. If you have a large monthly credit card balance, you might not receive the lower mortgage interest rate. The good news is that over-using your credit cards does not have a long-term impact on your FICO® score.

4–Falling Behind on Payments

Late payments will lower your credit score. Always be current on all of your accounts.

5–Consolidating Credit

If you move outstanding credit balances, your new credit card could appear to have too high of a ratio of debt. Your goal is to keep the balance on all credit cards as low as possible.

6–Making Large Cash Purchases

Part of your loan approval will be verification of cash in the bank. If you use this cash for a large purchase, it will lower your reserves and impact your  score and loan approval.

7–Making Large Deposits

All deposits need to be documented and accounted for. You will need to explain where the money came from.

Need help applying for a mortgage? Contact Sibcy Cline Mortgage Services. Our loan officers can guide you through the entire mortgage process.

How to Get Ready to Buy Your First Home

花火8When preparing to buy a home, it’s important for buyers to work with a real estate professional who can advise the best possible strategies for getting a mortgage and finding an affordable home. This partnership can make the real estate sales process go a lot more smoothly.

Perhaps the most important part of getting into the housing market for the first time is to do as much homework as possible before diving in. That means first determining what homes in a given area are selling for, and what that cost would mean in terms of monthly mortgage payments, mortgage insurance, homeowners insurance, property taxes and so on. Closing costs should also be considered.

A Strong Financial Profile
Buyers not only need to have savings available to make a sizable down payment, but  have the ability to afford the long-term cost of a home on an ongoing basis. Having a strong credit score will not only result in a good rating and unlock mortgage availability, but will also bring down mortgage rates (and thus the cost of a home.)

Additionally, larger down payments will reduce the principal of the loan. When buyers combine a high down payment (preferably in excess of 20 percent) along with good credit, they may position themselves to save tens of thousands of dollars over the life of their loans.

Keep in Mind
When trying to determine how much home buyers can afford, they should try to remember a few basic rules of thumb about housing costs. Generally speaking, experts advise that a mortgage payment should not cost more than one quarter of one’s monthly income. While there may be a little bit of wiggle room here, this is a good anchor point at which to set expectations for affordability.

Of course, some home buyers may have their sights set on properties that are more expensive than they can currently afford, especially with the way prices are rising in today’s market. This simply means they will need to put in more work to improve their credit score (to get a better rate) or put more into savings (to increase the size of a down payment).

Working with a real estate professional will help buyers truly understand what they should be looking for in the market and how they can best approach their home-buying efforts.

Interested in becoming pre-approved for a mortgage loan? Start with Sibcy Cline Mortgage Services.

Brought to you by HMS Home Warranty. HMS is an industry leader with over 30 years of creating success for clients and providing peace of mind for customers.  To learn more click www.hmsnational.com

First-Time Buyer? Tips to Follow to Get Pre-qualified for a Home

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It is important for first-time home buyers to know the best ways to navigate the mortgage market. Taking time to better understand the real estate sales process and how to qualify for the best possible mortgage terms will go a long way in reducing stress. Plus, getting the right type of home loan could save a buyer tens of thousands of dollars over the life of the mortgage.

Get Pre-Approval
One of the smartest things inexperienced home buyers can do to make themselves eligible to buy a home as quickly as possible is to get pre-approval on a mortgage. Your loan officer will be looking for the best type of mortgage loan to meet your needs with the lowest rate possible. A pre-approval helps the first-time home buyers better understand the true cost of homeownership: beyond the mortgage payment there is the cost for mortgage insurance, homeowner’s insurance and property taxes. Plus, with pre-approval, an offer on a home is taken more seriously by the home seller. 

Down Payment
The larger the down payment buyers can put together, the better off they will be going forward. This will not only increase chances of qualifying for a mortgage in the first place – and in doing so, getting a better rate – but also reduce their payments going forward, making homeownership more affordable. In some cases, it will also eliminate the need to pay private mortgage insurance altogether.

Work on Your Credit Score
It is also important that potential buyers
make sure their credit is up to snuff before they even think about actually applying for a mortgage. The higher an applicant’s credit score, the more likely to get approved and lock in a low rate. However, that may mean months of work to improve the financial conditions that go into a credit score, including paying down outstanding credit card balances and keeping up with all payments. (When you are buying a home it is really important NOT to make large purchases such as furniture, appliances or a new car. These type of purchases are reported to credit bureaus and can add a blemish to your credit.)

Save Money
At the same time, it’s important for new home buyers to make sure they’ve put aside additional savings to help cover closing costs and other expenses that typically crop up after moving into a home such as additional furnishings and unexpected repairs. Keep in mind that property taxes can rise. 

Talk to a Loan Officer and Real Estate Agent
Be sure to meet with a loan officer and real estate professional for guidance and valuable advice on how to proceed in the market and get the best possible deal out for your home purchase.

Brought to you by HMS Home Warranty. HMS is an industry leader with over 30 years of creating success for clients and providing peace of mind for customers. Learn more here.

 

 

Tips to Help You Prepare Financially to Buy a Home

House_Money.jpgWith the spring home-shopping season right around the corner, potential buyers are encouraged to begin preparing their finances. Working with a real estate professional will provide the proper guidance for home buyers to be prepared at to what is expected during the buying process (especially with a competitive seller’s market).

Homeownership is a dream shared by millions of Americans, but it’s not always easy for those with little or no experience in buying a home. One of the most important aspects of readiness for homeownership is having the money to support that home purchase.

Where to Begin
It is important for potential home buyers to eliminate as much debt as possible prior to buying a home. The debt-to-income ratio is often the biggest issue a lender will look at because would-be borrowers are about to add hundreds of thousands of dollars to their obligations. Generally speaking, home buyers should pay no more than 28 percent of their gross monthly incomes for their mortgage bills, and if a big chunk of that income is already going to other debts, lenders are unlikely to approve an application.

Hopeful buyers should also determine just “how much house” they can afford based on available properties in their areas. A buyer’s real estate agent or mortgage loan officer can provide that information.

Laying the Groundwork
Once the research and financial analysis has been completed, it’s time to think about credit standings and ability to make a sizable down payment. These two issues often go hand-in-hand with debt-to-income ratios because less debt means more money can go into savings as credit scores naturally start to rise. Usually the larger the down payment, the better the mortgage deals home buyers are likely to get, both in terms of getting approval on an application and lowering the ongoing costs associated with a home loan (i.e. lower interest rates and no requirement for mortgage insurance).

In addition, home shoppers will have to start putting together all their necessary financial documents that are typically associated with the mortgage process. These include pay stubs and bank statements – to prove income and savings – as well as tax returns for at least the past few years and other supporting documentation that lenders will use to verify claims made on a mortgage application.

It’s strongly encouraged for would-be buyers to get pre-approval on their mortgages, rather than house hunting first because that will help them expedite the bidding process

Need to be pre-approved for a mortgage loan? Contact Sibcy Cline Mortgage Services.

Brought to you by HMS Home Warranty. HMS is an industry leader with over 30 years of creating success for clients and providing peace of mind for customers. To learn more click www.hmsnational.com.

2018 Tax Reform Mortgage Updates

Businessman Notepad Property Value ConceptThe mortgage tax laws have been reformed for 2018. Here are some highlights to be aware of:

  • Interest from Home Equity Lines are no longer tax deductible
  • PMI will not be tax deductible
  • State/local/property taxes are limited to a maximum aggregate of $10,000
  • Mortgage interest deductions are limited to $750,000

If you have a HELOC Second Mortgage:
Prime is now up to 4.5% (compared to 3.75% a year ago) and the Federal Reserve is
expecting to raise short-term interest rates potentially 3 times in 2018. Now might be the time to roll your HELOC into a fixed mortgage with a refinance while first mortgage rates are still low!

Need more information? Contact Sibcy Cline Mortgage Services.

Have Student Loans? Yes, You Can Buy a Home!

Letter A, Report Card, Test Results.Thought about buying a home but are fearful that student loans will cause a problem with obtaining a mortgage? There is good news for you: Freddie Mac and Fannie Mae have loosened up 2018 guidelines on qualifying for conventional mortgages with student loans.

If you did not qualify for a mortgage in prior years, you may be able to qualify now with your income-based repayment schedule for your student loans.

Contact Sibcy Cline Mortgage Services to get pre-qualified today!