BEFORE WE BEGIN…
PRE-QUALIFICATION AND PRE-APPROVAL
Many buyers apply for a loan and obtain approval before they find the home they want to buy. Why?
Pre-qualifying will help you in the following ways:
1. Generally, interest rates are locked in for a set period of time. You will know in advance exactly what your payments will be on offers you choose to make.
2. You won’t waste time considering homes you cannot afford.
Pre-approval will help you in the following ways:
1. A seller may choose to make concessions if they know that your financing is secured. You are like a cash buyer and this may make your offer more competitive.
2. You can select the best loan package without being under pressure.
HOW MUCH HOME CAN YOU AFFORD?
There are three key factors to consider:
1. The down payment
2. Your ability to qualify for a mortgage
3. The closing costs associated with your transaction.
DOWN PAYMENT REQUIREMENTS:
Most loans today require a down payment of at least 5% depending on the type and terms of the loan. If you are able to come up with a 20-25% down payment, you may be eligible to take advantage of special fast-track programs and possibly eliminate mortgage insurance.
You will be required to pay fees for loan processing and other closing costs. These fees must be paid in full at the final settlement, unless you are able to include them in your financing. Typically, total closing costs will range between 2-5% of your mortgage loan.
QUALIFYING FOR THE MORTGAGE:
Most lenders require that your monthly payment range between 25-28% of your gross monthly income.
Your mortgage payment to the lender includes the following items:
1. The principal on the loan (P)
2.The interest on the loan (I)
3. Property taxes (T),
4.The homeowner’s insurance (I).
Your total monthly PITI and all debts (from installments to revolving charge accounts) should range between 33-38% of your gross monthly income. These key factors determine your ability to secure a home loan: Credit Report, Assets, Income, and Property Value.
When applying for a Real Estate Loan
1. Do not change jobs, become self-employed or quit your job.
2. Do not buy a car, truck or van (or you may be living in it)!
3. Do not use charge cards excessively or let your accounts fall behind.
4. Do not spend money you have set aside for closing.
5. Do not omit debts or liabilities from your loan application.
6. Do not buy furniture.
7. Do not originate any inquiries into your credit.
8. Do not make large deposits without first checking with your loan officer.
9. Do not change bank accounts.
10. Do not co-sign a loan for anyone.
THE HOME-BUYING PROCESS
Here are 12 steps to Home Buying.
Each one is important in making your decision to being a home owner.
Some of these steps may have to be done more than once.
#1. Determine - Your wants and needs. Your needs are more important than your wants.
You may want 4 bedrooms but 3 will do. Make a list of both and decide the really important ones.
#2. Pre-Approval - Contact your mortgage broker.
They will discuss your current financial situation and determine the amount of mortgage you would be approved for.
This is a very important step.
#3. Contact - You will need to find a way to get information on properties that might suit you.
Contacting a Realtor is the best way. He/she will sit down with you and go over your needs and wants list.
#4. Tour - The Realtor you choose will set up a time for you to go and physically tour some homes.
You may see something the first day that excites you or you may see nothing at all. Both of these situations are important.
#5. Re-Evaluate - The needs/wants list may be too aggressive or not aggressive enough.
Your sights might be set too low or high with your financial abilities. (Step #4 and #5 may have to be taken a few times.)
#6. Market Evaluation - When you find a home that you think will work for you, your Realtor will prepare a Market Evaluation.
This is a list of all the homes currently for sale, homes that have recently SOLD and some homes that were on the market and did not sell (expired). This helps determine if the price the seller is asking is reasonable in today’s market.
#7. Offer - This is where pen comes to paper. An offer is written. (Contract of Purchase and Sale).
This has, among other things, the price you are willing to pay, the dates you want to have and move in, the subject conditions (financing, inspection, etc.) and the things you want included in the price.
#8. Negotiate - Now is the time for you Realtor to help you get the best price.
They will take your offer to the Listing Realtor and/or Seller and present your offer.
#9. Fulfill - Once you have agreed on terms and conditions in the contract, you will need to work on fulfilling the obligations in the contract.
You might need to hire a Home Inspector or have the home appraised by the financial institution. Once these are fulfilled you must sign a subject removal making the home yours!
#10. Lawyer/Notary – You will need to choose a lawyer or Notary Public to do your conveyance.
This is when the title to the property is transferred into your name.
#11. Get Ready to MOVE – Now it is a waiting game. You will move into your property at 12 noon on the possession date (unless otherwise specified on the contract).
While you are waiting you will need to have all your utilities and insurance put on the property.
#12. Move In - On the assigned day you can physically move into the property. This is the day you have been waiting for. ENJOY!
Have a Question?
Get in touch. I'm happy to help.
Direct: 604-353-SOLD (7653)