The first step in the home buying process is getting pre-approved. With a pre-approval letter, you will know how much you are borrowing so that you can set your house hunting budget. Most real estate agents won’t want to work with those who are not pre-approved. When you have the pre-approval the seller knows then that you are capable of buying their house, and you will look like a more serious candidate who is in a good position to negotiate.
The first step in getting your pre-approval is to gather your financial information. You will need to be prepared to provide your loan officer with your W2 Statements as well as your Federal Tax returns for the past two years. Bank statements from the last two months, recent pay stubs and proof of any other income.
The preapproval amount is not tied to a specific loan type or rate. Loan officers will go by the current day’s mortgage rate to estimate costs and payments. The pre-approval letters are typically only valid for 90 days. If your still house hunting after 60 days, contact your loan officer to re-validate.
Once you get pre-approved, check out these helpful House Hunting Tips on my website.
The Illinois Housing Development Authority (IHDA) offers many beneficial loan programs that some borrowers may not be familiar with. While an FHA loan is a government run program that allows buyers to borrow money with low down payments (as low as 3.5% down), the IHDA program is built on the framework of an FHA first mortgage but goes one step further by placing a second mortgage (the IHDA loan) on top of a regular FHA loan in order to reduce the down payment requirement to 1% of the purchase price.
IHDA’s Home Start Loan Program provides first-time home buyers and veterans access to additional funds upfront to help with their down payment. This program is designed to help these borrowers buy a home they may not qualify for by providing the following: lower interest rates, acceptance of lower credit scores (as low as 620) and down payment assistance up to $6,000.
Another great IHDA program is the Welcome Home Heroes Program, which is open to Illinois Veterans, active military personnel, reservists and members of the Illinois National Guard. Offered in this program is $10,000 in down payment and closing cost assistance on a 30-year fixed mortgage and an option mortgage credit certification to reduce federal income tax liability. Contact me for eligibility requirements.
These programs are a great way for borrowers who may otherwise not be eligible for other financing to take advantage of these opportunities, as well as the historically low housing prices and interest rates. Though these two particular programs are strictly offered in Illinois, other states do offer similar programs. Contact me for more information.
There is more demand for a rental property now than ever. This high demand is causing rent prices to skyrocket. If you are looking for a long term lease your mortgage could be less than rent per month!
The mortgage bill for today’s homeowners is the best it has been in decades. With 20% down on a median priced home, around $154,000, your monthly payment could be only $616. This number is only 12.1% of the median U.S. family income.
It is the best time to buy if you are in a stable financial state with good credit. In almost all of the top metro areas it is now cheaper to buy than rent.
Benefits of Homeownership:
- Pride of ownership
o You have control of your home
o Sense of stability and security
- Financial benefits:
o Price appreciation helps build home equity
o Tax benefits
Are you ready to own a home? First you need to take a look at your financial situation. Can you afford a monthly mortgage? If so, the next step is to shop for a loan. Contact me today for your mortgage needs and I can help you become a homeowner.
When you are thinking of buying a home, you may have questions about the breakdown of your mortgage payment, or may want a clearer idea of the different mortgage scenarios available.
For a rough estimate of a monthly payment, or to compare what the payments would be with different terms of the loan, visit my webpage to use our online calculators and other online resources:
http://www.1stadvantagemortgage.com/resources/calculators.php
With these three calculators, you’ll be able to gain a better grasp of what your payments would be, find out which loan program would benefit your situation the most, or see what you would save in interest by making additional payments to your principal each month. It's always important to talk to a professional when making such an important purchase, but the online tools available on my page are a great start in gaining more knowledge on the overall loan process.
When you are ready to take the next step in buying a home, I'll be happy to explain the process further and help them with one of the most important financial decisions of your lifetime.
Once your closing is over, homeowners will receive a mortgage statement either in the mail or online. If you’ve never dealt with such statements, they may seem difficult to understand. But considering that the statements reflect the status of what is likely your largest investment, it’s important that you learn how to read it.
The standard statement has the following components:
Loan number– This number is crucial in order to receive proper service on the loan. By having this number handy when you speak to your loan officer, you’ll expedite any assistance you need and avoid having to discuss personal information such as your social security number.
Interest rate– This may be fixed or variable, depending on the type of loan you received at the start of the home-buying process. Keep an eye on this number and on the state of the market; you may decide to explore refinancing based on the difference.
Escrow Account Balance– Some lenders may require a separate escrow account be maintained to pay for property taxes and insurance. This balance shows you how much currently remains in the account.
Principle Paid, Interest Paid, Escrow, and Total Payment– Your monthly mortgage payment is broken down into a few parts. The total payment shows your principle, which is the amount paid towards the value of the house, and interest, which is the amount paid to the lender as a condition of borrowing. A portion will also go towards the escrow account. The statement will specify how much of your payment goes to each, as well as showing you the total payment each month.
Congratulations, your home is under contract! Now what do you do? Life is always easier when you are prepared, so here is a list of things to expect prior to closing.
Pay Close Attention to the Calendar
Your purchase contract is filled with contingency expiration dates. Make sure you are aware of the buyer’s financing contingency and option period. As your loan officer, I’ll make you aware of these deadlines and of anything that needs to take place prior to a certain date. Your realtor is also a great source of information to ask any questions to, as we’re both here to help through this process.
Be Prepared for the Inspection
It’s typical for buyers to perform an inspection and negotiate repairs during the contract’s option period. The inspector will schedule a time to complete the inspection thru the showing service. As with showings, it’s best if you are not present during the inspection. Please make sure the inspector is able to access all parts of your home (no locked doors, etc.) and that all of the utilities are turned on and working prior to the inspection.
Repairs
If any repairs have been negotiated with the buyer, it is your responsibility to have the repairs completed by licensed service providers. Please let me know if you need any referrals, as I have great business relationships with many different people in the industry. Make sure you get a receipt from each provider detailing the work performed as the buyer may want to see a copy of all receipts prior to closing.
Appraisal
The buyer’s lender will schedule an appraisal on your property. If the appraiser needs to access your home in order to complete the appraisal they will schedule an appointment and you’ll be notified ASAP.
Moving Out
The sales contract requires the home be turned over to the buyer in the same condition it was in when the contract was accepted. Be careful when moving out to not damage the property. Once all of your items have been removed, go through each room again. Think about what condition you expect your new home to be in when you move in and make sure your home is in the same condition after you move out.
Final Walk-Thru
Once you have moved out, the buyer will schedule a “final walk thru” to check the status of agreed upon repairs. Make sure the house looks great prior to the buyer’s final walk thru.
Closing
24-48 hours prior to closing (depending on when the title company receives the closing instructions from the buyer’s lender), the title company will send you a HUD-1 Settlement Statement detailing all of the financial aspects of the transaction. We will review this document together to make sure everything is accurate. The HUD-1 will tell you the exact amount of the proceeds you will receive from the sale and/or the amount of money you need to bring to closing.
Don’t Forget
The buyer will need house keys, garage door openers, mailbox keys, security fobs, etc! You can either bring all of these with you to closing, or bring a key to closing and leave the remaining items at the house for the new owner.
Congratulations!
Many homeowners out there wonder if they should use the extra cash they have to pre-pay their mortgage. When you pre-pay your mortgage, you end up paying less interest in the long run, but there are things to think about before going through with this.
Home equity accumulates in four ways: the money committed in the original down-payment, any appreciation in the local housing market over time, physical improvements or renovations and, of course, principal payments on the mortgage itself.
While seemingly desirable at first look, this accumulation of wealth in the home has some consequences that you should keep in mind. First, the cash in your home is virtually buried and inaccessible. Not only is it unavailable in the event of a family emergency, it is vulnerable to loss due to periodic downturns in housing values, unfortunate circumstances like fires, or natural disasters such as hurricanes (insurance may not cover the full market value of your home). Also, year after year the money that is essentially trapped in your property is earning zero interest, unlike if you were investing that money elsewhere.
Putting more money into your house may build home equity, but it won’t be easy to get the money back quickly if needed. Essentially mortgage prepayment isn’t always the best choice during a bad economy; with unemployment where it currently stands and many jobs at risk, having access to money is critical if unfortunate circumstances arise. For now, make sure you get a good rate and pay your mortgage on time every time; and if for some reason you need extra cash, use your reserves in a smart and responsible way. However, if you do need access to funds quickly, you can always contact me about a second mortgage or a HELOC in order to access your equity. With today’s decline in values they are tougher to get than before, but still an option.
SmartMove Mortgage Products from the Illinois Housing Development Authority offer affordable interest rates and down payment assistance for borrowers of low to moderate income. The programs are ideal for borrowers who need extra flexibility on sources of income, or who have limited funds for a down payment and/or closing costs. Features of these products include:
• Offers up to $6,000 in down payment and closing cost assistance as a 10-year 0% forgivable loan
• Maximum LTVs from 96.5 – 100%
• Conventional / FHA / USDA insured products available
• Fixed rate with terms up to 30 years
• Reduced mortgage insurance requirements on conventional programs
Note, however, that certain qualifications apply.
• Minimum credit score requirement: 620 (FHA and USDA loans); 660 (conventional loans)
• Maximum total debt (back end) ratio of 45%
• Buyer must contribute 1% or $1,000 of the purchase price, whichever is greater
• First-time homebuyer or qualified exemption
• Household income and purchase price limits apply
• Homeownership counseling is required
There's a big change coming in the HARP 2.0 program that will make it easier and faster for homeowners to refinance their underwater mortgages, and possibly save them several hundred dollars as well.
Within the next few days, HARP 2.0 will be rolled out to lenders, and we will have the opportunity to offer our borrowers a great opportunity to refinance to a lower rate and save significantly on their monthly mortgage costs.
Those new guidelines include eliminating the limit on how far underwater a borrower can be and still qualify for a HARP refinance. Previously, borrowers could owe no more than 125% of the value of their home; the new guidelines have no limit on how much your mortgage debt may exceed your home value.
There are some qualifications that each borrower must meet. You are only eligible if your current loan was bought by Fannie Mae or Freddie Mac prior to May 31, 2009 – we can help you determine this. You will also need to show that you have been current on your mortgage payments – you may have one 30-day late payment in the past 12 months, but none within the past 6 months. Contact me to see if you can qualify for this program.
HARP 2.0 is available through 2013, so even if you don’t qualify now—if you had a late payment in the last six months, for example—there’s still time to get back on track to qualify and take advantage of this great program.
The point of HARP 2.0 is to help struggling, underwater homeowners or simply to assist borrowers who wanted to refinance into a lower rate but couldn’t qualify under previous guidelines. With this program you will be able to refinance into a better rate, reduce your mortgage payments, pay down your loan balance and rebuild your equity.
