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Home » finances

How to Prepare Your Finances for a Mortgage

March 21, 2018 by admin Leave a Comment

How to Prepare Your Finances for a Mortgage

Preparing to buy a house may be one of the most exciting and scariest moves you’ll make your whole life aside from having kids or getting married. This is a major undertaking but too many people are so afraid of it that they never end up doing it. This is a great step to take in your life, but only if your finances are well prepared. Because we deal a lot with buyers, we want to make sure that all of our buyers are well informed and have done the homework necessary to prepare themselves for a mortgage.

I remember back in 2005 when the subprime mortgage bust was just about to ruin everything and I had a family that was paying $500 a month in rent going up to a $2500 mortgage. I advised against it but at the time they were determined, so determined in fact, they were ready to sell one of their firstborn in order to get the house. I don’t know whatever happened to that family, but I do know that probably was not the best option for them.

Now that we can breathe a little easier and subprime mortgages are not even on the radar anymore, planning for a mortgage does take a little preparation and self-reflection. Here are five simple steps to prepare your finances for a mortgage.

Read More: Get real buying advice from real people

#1. Understand your finances.

You don’t want a full-on analysis of your finances for the first time sitting in front of a lender as they peer over there glasses at you like you’re an idiot. Make sure you understand your finances first before sitting down with a lender. Now, they might be great, but if they’re not, shouldn’t you know that first? Get a copy of your credit history and report from one of the three major companies Trans Union, Experian, and Equifax. (They’re technically all the same but might give you different results).

Go through the report and correct any errors, close up delinquent accounts, or pay off small debts if you can. If you have a credit score over 680, chances are you’ll be able to get a good interest rate. It still will depend on your income and your debts. But, once you have a good handle on your own finances and you understand what others will be looking at when viewing your credit history, you’ll be more prepared to talk with a lender.

How to Prepare Your Finances for a Mortgage

Related: 10 House Hunting and Buying Mistakes to Avoid

#2. Save for a down payment

When you first make an offer on a home you’ll need an earnest money deposit. This is typically 1% to 3% of the asking price of the house. This money is to “hold” the property until it closes and it’s a good-faith gesture that you’re willing to put money down on the house so no one else comes along with a better offer. This earnest money deposit will go toward your down payment so you can consider that when saving for your down payment. The higher the down payment the wider your options will be. You might be able to get better terms, lower interest rates, and lower closing costs. Anywhere from 5% to 20% is a good number to shoot for. Some FHA loans do allow for a 3.5% down payment but you will be sacrificing other benefits.

More: Can I buy a house that’s not for sale?

#3. Find a good lender and shop around.

Even though this is a much bigger purchase than a couch or dining room table, you shouldn’t shop around any less. Ask your bank, credit union, mortgage broker or even your real estate agent about different options when it comes to your lender. Find someone you are comfortable with. Often times larger banks can pass you want from one person to another will small brokerages deal on a more one-on-one basis. This personal touch might be a little bit more expensive but speaking from experience, having one person to go to for all of the lending issues rather than 10 is a benefit.

How to Prepare Your Finances for a Mortgage
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#4. Be realistic about what you can afford.

This gets really exciting but just because your lender says you can afford $500,000 doesn’t mean you need to max out that budget. This is the very most your income can support and if you max that out you may not have money for repairs, replacements or general maintenance of the house. Consider looking at homes 10% under your max budget and it’ll give you a little bit of wiggle room for competing bids or save you money in the long run.

Read More: Is it okay to find a Realtor® at an open house?

#5. Don’t make any major financial moves during this time.

Once you started down the road to homeownership don’t make any sudden moves. Don’t quit your job, don’t apply for any more credit right now, don’t make any large purchases or accept any large amounts of money from people unless it’s a gift for your down payment, in which your lender should know about. Think of it as putting a freeze on all of your finances. Of course, you can still pay your bills and go out to dinner, but don’t make any major moves financially until your home closes.

I’d love to offer more information and suggestions on reputable lenders in the Sunset Beach real estate area. Give us a call today or browse our website for more information, details, and of course all the listings throughout the area.

Filed Under: Buyers Tagged With: finances, first time buyer, lender, mortgage

Getting Ready to Buy? Do This First

January 11, 2017 by admin Leave a Comment

If 2017 is going to be your year to buy a house, whether it’s your first home or you are a repeat buyer, you can start to get your finances in order now so that when it does come time to buy you ready to go.Getting Ready to Buy? Do This First

We want all of our buyers to be comfortable when they purchase their home. Being stressed, over budget, and nervous about finances is not a good way to enter homeownership. There are three main things that potential homebuyers need to concern themselves with if they’re planning on buying this year.

#1. Understanding and getting a good grasp on their credit history and report.

Order a copy of your credit history and report from one of the three major credit reporting agencies, Experian, Trans Union, or Equifax. You can also get a copy through your local bank. Any of these reports will be very similar so you want to look for errors, mistakes, outstanding balances, collection notices, or anything that looks out of the ordinary. Clean up your credit history and report the best you can, which could take a month or two depending on the errors or issues therein. Try to increase your credit score to at least 680 by paying your bills on time, paying off debt but leaving available credit on credit card so that it shows you have additional credit available, and paying down as much debt as possible.

Read more:  5 Important Things to Know About Buying Near Water

#2. Save a little bit of money.

You will need an earnest money deposit and a down payment as well as inspection costs when purchasing a house. If you are a repeat buyer you might be able to use the equity when you sell your existing home and turn around and put it as the down payment to your new house but if this is your first time buying you’ll need a substantial down payment. FHA loans require 3.5% down and conventional loans need at least 10%. Talk to your lender about the different options when it comes to loans. An earnest money deposit is typically 1% to 3% of the purchase price of the house so you want this in liquid cash in order to hold the offer on the house. You also need money for the home inspection, which can range anywhere from $300-$800 depending on the type of inspection and the inspection agency.

Read more: A Buyer’s Agent Can Save You Thousands

#3. Try to stay calm and patient.

Finding the best house for your needs and your budget may have been in a day or it might happen over the next six months. By preparing now you’ll be ready to jump on the right house when it hits the market. Make sure you know what you want in a house, have your debt to income ratio below 43% and try to stay unemotional during the negotiation process.

Read more: How Long Does it Really Take to Buy a House?

Again, we want your home buying experience to be as stress-free and easy as possible, so by doing just these simple things you could be light years ahead of your competition. Call us today to get started or browse listings on our website for free.

Filed Under: Buyers Tagged With: 2017, buyers, finances, home buying, homeowners

What our clients say

Ken and Linda Foltz

“Life will lead you to where you belong. Five years ago life led me to meeting Karen Baker at an...
Sunset Beach and Beyond Realty
2015-03-16T20:16:32+00:00
“Life will lead you to where you belong. Five years ago life led me to meeting Karen Baker at an Open House. Our relationship continues as Karen and her husband Frank have been outstanding not only in helping my husband and I find the right retirement relocation home, but we have watched their commitment in helping many others find their homes. She and Frank treat every client as if they are the only ones that exist. They provide thorough research of areas and homes of interest and present you with the options. They are not your typical hard sell, must-buy-now realtors. They are here to help you find your next home?. You won’t go wrong with the Bakers!
https://sunsetbeachandbeyond.com/testimonials/ken-and-linda-foltz/

Steve & Jean DeVito

“The Bakers treated us like family during our whirlwind weekend of looking at houses. Prior to our on-site visit to...
Sunset Beach and Beyond Realty
2015-03-16T20:17:46+00:00
“The Bakers treated us like family during our whirlwind weekend of looking at houses. Prior to our on-site visit to Sunset Beach they created a portal and populated it with properties that met our ever-evolving criteria. By time we arrived we had a good feel for what we could afford and what was available that met our criteria. The Bakers, especially Karen, were able to make sense of what we thought we were looking for and eventually matched us with a house that we ended up purchasing — Karen called it the “This is it” house and she was right. We are loving our 2nd home and appreciate how painless Karen and Frank made the process. All the paperwork was done seamlessly and quickly and the closing went off without a hitch. The Bakers do not believe in the hard sell — they gave us the knowledge we needed and the guidance we needed to make our dream a reality.”
https://sunsetbeachandbeyond.com/testimonials/steve-jean-devito/

Matt & Amy Carver

Amy and I have bought and sold four properties in the past twelve years. Both of you are the best...
Sunset Beach and Beyond Realty
2015-03-16T20:18:22+00:00
Amy and I have bought and sold four properties in the past twelve years. Both of you are the best realtors we have ever dealt with. Amy and I both felt we could trust you to look out for our interest. The level of service you provided was outstanding, from taking the trash out, helping the buyer with inspecting the irrigation system, dealing with our tenants, always being there if we needed to ask a question, providing constant updates on the market and always keeping us informed on the sale of our house. I think your next venture should be training other realtors, because both of you have mastered the art of providing excellent service. I will be sure to recommend the Frank and Karen team to anybody looking for a trust worthy, knowledgeable and top performing realtor. It was a pleasure working with both of you.”
https://sunsetbeachandbeyond.com/testimonials/matt-amy-carver/

Ernie & Carol G.

“Karen & Frank Baker are the best. They are very knowledgeable with the area & showed us many homes. When...
Sunset Beach and Beyond Realty
2015-03-16T20:18:50+00:00
“Karen & Frank Baker are the best. They are very knowledgeable with the area & showed us many homes. When we made up our minds which one we wanted, they got us the best deal on it. We were very satisfided with them. After the purchased was made & we moved in, they were still there to answer any questions or problems that we might of had. Like I said, they are the BEST.”
https://sunsetbeachandbeyond.com/testimonials/ernie-carol-g/

Dave & Rose

“Thanks again for all the time you spent with us, As overwhelming as it was, you two made it fun”
Sunset Beach and Beyond Realty
2015-03-16T20:19:23+00:00
“Thanks again for all the time you spent with us, As overwhelming as it was, you two made it fun”
https://sunsetbeachandbeyond.com/testimonials/dave-rose/
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