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Making smart decisions when it comes to choosing a mortgage loan can save you a huge amount of money for years to come.
We talk a lot about interest rates. In most cases, the rates we’re discussing are base rates without any points or fees added by mortgage lenders. Many lenders may not want you to know this, but those points and fees may be negotiated to your best advantage.
A recent survey showed that, while 4 out of 5 Americans consider themselves bargain hunters, less than 30 percent of consumers actually look for, or ask for, better terms for their home loan.
Why is it so important to shop lenders?
There are several reasons. The main one of course would be….money! Aside from lender fees that you would pay as a lump sum at close of escrow, even negotiating your interest rate a few fractions of a percent can save you thousands of dollars over the lifetime of your loan. What’s equally important is the level of service you can expect from your mortgage lender. Finding out how easy it is to have problems resolved through their customer service branch, or even if a lender regularly sells your loan to another bank are good things to know up front. Continue reading Shopping Home Loans Can Save You Money→
Do you have a down payment? Want a no-money-down loan? Are you self-employed? Follow these tips to making sure you’re ready to buy a home.
There are plenty of reasons why owning a home is one of the most sound investments you can have. Even still, there are some out there who think
buying a home is a lot like buying a car. You know, walk on the “lot”, pick out what you want, haggle the price a little, and drive home…right?
Actually, the two couldn’t be more different. But before you get into the PURCHASING part of home buying, it’s best to make sure you’re ready to afford a home. What does it take? What do lenders look for? Can you buy a home when you’re self employed?
First up, your finances.
It’s one thing to have a good credit score, and it’s another to know that the money you make is enough to afford a monthly mortgage payment. Assuming your credit is in good shape, lenders also look at your DTI, or Debt-to-Income ratio. Very simply, this is an easy bit of math where you divide your monthly recurring debt (Car payments, credit cards, alimony if applicable, student loans, personal loans, rent/mortgage payment) by your combined gross monthly household income. The result should come in the form of a decimal point. Of course, from there, basic math says that you move that decimal point over two spaces to the left, and the answer turns into a percentage. So let’s say you have a monthly combined gross income of $7,000. Your recurring debt expenses are $2,500. Divide 2500 by 7000 and the answer is (rounded up) .36, or 36 percent DTI. Some lenders will allow mortgages when a borrower’s DTI is as high as 42%, but most like to see it between around 28-35% to offer the best rate.
From there, your lender will determine your best monthly mortgage payment that is affordable within your DTI, and along with your qualifying interest rate, will then determine your total loan amount.
Okay, what if I don’t have 20% down to purchase a home?
Of course, we know especially with today’s housing prices, not everyone has saved up the usual high five figure amount that would equal a 20% down payment. Even still, your lender will look at your DTI to determine your loan figure based on the amount of cash (if any) you can put toward your home purchase. Keep in mind that while there are low money and no money down loans out there, you still have to be able to afford the monthly mortgage. The more you have to put toward the purchase price, the more home you can afford, and/or the lower monthly payment you’ll have.
I’m self-employed. Can I qualify for a home loan?
There was a time, before the recession, that it was fairly easy to get a home loan, even if you were self-employed. The “stated income” loan often used by those who were self-employed required little in the way of proof that what you actually made equaled what you put on your loan application. Guess what? Believe it or not, both buyers and lenders “occasionally” abused the system, which resulted in many buying homes they actually could not afford.
Since the recession, new rules and guidelines have been in place and are enforced for self-employed home buyers. First of all, you’ll need to show your lender at least two years’ worth of tax returns from your business that provide an accurate portrayal of your annual earnings. Also, your lender will use only your adjusted gross income as a qualifier, and not your overall gross income.
Team Avalos Real Estate is here to help you with all of your real estate needs!
“Boomerang” home buyers are re-entering the marketplace, and some are able to take advantage of first time home buyer programs.
The last decade brought us a few tough years, especially for some home buyers. Real estate professionals like us were able to help many avoid foreclosure during the darkest days of what’s become known now as “The Great Recession.” In some cases, foreclosure was avoided through a short sale or other means such as deed-in-lieu. Of course, in avoiding foreclosure, the now former homeowner was once again in the position of renting the place in which they lived.
Fortunately, in most cases, distressed times are short-lived, and many were (and are) able to get back on their financial feet. Lenders made changes to their restrictions, some allowed former short sellers to qualify for a mortgage in as little as two years under certain circumstances.
Things are heating up in the Santa Clarita Valley real estate market.
This is the perfect time of year to consider buying or selling a home. It’s the best opportunity for families to take advantage of school breaks in transitioning to a new home and a new neighborhood.
In Santa Clarita, we’ve seen single family home prices rise over 15 percent in the past year, and condo prices jump $46,000 in equity. For homeowners, this is great news. Those who are considering selling their homes should see these rises as a great opportunity to get the best value for their home.
Homes in High Demand
Late last year, it was predicted by some financial experts that mortgage interest rates would rise to over 5 percent due to the reduction of federal dollars that had stimulated the mortgage-backed security market. Even with a $30 billion monthly reduction, interest rates are still hovering in the low 4 percent range. This news is bring out qualified buyers who are looking to take advantage of their increased buying power and find the home of their dreams. Continue reading Summer Home Buying Season Hits The Santa Clarita Valley→
Raising your credit score allows you better options for mortgage loan rates and terms.
It goes without saying that most home buyers rely on a mortgage loan to complete their property purchase. Unless you’re paying all cash, you’re limited by two things: Your income, and your credit score. You may not have much control over how much money you make, but you do have control over your credit score…IF you take the right steps.
Aside from how much money you make (and how much you spend), mortgage lenders use your FICO (Fair Isaac & Company) score to determine your credit worthiness. The higher the score, the more “worthy” you are deemed. Higher credit scores can open up more options for you such as a lower interest rate or better loan terms. Typically, a FICO score of 700 or more is considered a good thing. Anything below alerts lenders to a potential credit risk.
That’s not to say you can’t get a loan if you have a lower credit score, but again, your options may be limited to a higher interest rate or terms not quite as favorable. So what can you do to improve your credit score? Here are the top things you can do to start. Continue reading Top Ways To Improve Your Credit Score→
Serving Home Buyers and Home Sellers in the Santa Clarita Valley