Category: Housing Market (Page 3 of 35)

The Mortgage Pre-Qualification | What’s Needed…and Why All The Paperwork?

April 29, 2024 / Tom Bonetto

So, you are thinking about buying a house? Good for you!! Now, let’s get to work on a mortgage pre-qualification.

Many potential home buyers begin looking at homes without understanding the steps involved prior to engaging a Real Estate Professional. It’s essentially a matter of making sure the horse is in front of the cart!

Being prepared with the documents needed for mortgage pre-qualification will help make the process go more smoothly and quickly. Here’s what you will need to provide…

When buying a property, getting pre-qualified is a crucial step in the process of getting a mortgage. Before you can get there, though, your lender will need to review and verify information about your assets, income, and credit.

Standard Buyers

For borrowers who are regular employees (hourly or salaried) and are not self-employed here’s what your lender will need:

Pay stubs from at least the past 30 days
Tax returns (including W-2s) from the past two years
Bank statements from the past two months to three months – checking, savings, money market accounts
Employment information – contact information of employers in the past two years (some employers have an employment verification phone number lenders can call)
Other income sources – bonuses, child and/or spousal support, disability or VA benefits, pension, Social Security or other sources
Account statements from the past two months to three months – 401(k)s and/or IRAs, CDs, mutual funds or other investment or retirement vehicles
Driver’s license, Social Security card or other form of ID
2 years of residential history
Down payment gift letter, if applicable

A few caveats…if you are planning on using part-time employment income to qualify, you will need to have had that job for 2+ years.

Secondly, if you are commissioned or are using bonus income for qualification purposes, you will need to show a 2 year history of receiving those.

Self Employed Borrowers

If you are considered self-employed (or a 25% or more owner of any company from which you derive income), here’s what else will be required, in addition to the list above:

2 years Federal tax returns, business and personal
Year-to-date profit and loss
Copy of business license

A few other consideration for self-employed borrowers…lenders will require that you’ve been in business for yourself for 2 years, minimum.

Also, qualification income will be based on net profit from your tax returns, not gross sales receipts.

Investment Property/2^nd Home Buyers

If you already own a home and are looking to purchase an investment property, your lender will require a few more things:

Schedule of Real Estate Owned – information about the home’s value, occupancy status and purpose, as well as the property’s monthly expenses. You will also need to provide information about your current mortgage, including the lender’s name and account number, loan type, monthly payment amount, outstanding balance and credit limit.
The Schedule E from your 1040 tax return that shows owned properties that are currently rented.
Any investment properties that do not show on your Schedule E will require a copy of the lease of that property.
If you are moving to a new primary residence and will be leasing the home you are in now, the lender will require a signed lease agreement AND a copy of the deposited first month’s rent and security deposit.

Why So Much Documentation?

In today’s regulatory environment, the paperwork requirements can seem quite intrusive.

It seems like they need to know everything about you, including your blood type!

Many of today’s buyers are told by friends and family that the process was much, much easier when they bought their home ten to twenty years ago…and they were right!

There is one main reason that the loan process is much more burdensome for today’s buyer than in prior years…

It’s that the federal government has set new guidelines that now demand that lenders prove beyond a doubt that borrowers are capable of paying the mortgage regularly.

During the run-up to the housing crisis years ago, many people ‘qualified’ for mortgages that they could never pay back. This led to millions of families losing their home, so new protections were put in place to make sure this can’t happen again.

In Conclusion

Although the process can be cumbersome, if you partner with the right lender, things should work out just fine. Do reach out to me, as it would be my pleasure to be your “Lending Coach” through the purchase process.

The blog postings on this site represent the positions, strategies or opinions of the author and do not necessarily represent the positions, strategies or opinions of Guild Mortgage Company or its affiliates. Each loan is subject to underwriter final approval. All information, loan programs, interest rates, terms and conditions are subject to change without notice. Always consult an accountant or tax advisor for full eligibility requirements on tax deductions.

Dave Ramsey | Spot-On Regarding Housing

April 8, 2024 / Tom Bonetto

Many know Dave Ramsey from his radio show and his w ebsite where he offers some of the best financial advice around.

Recently, he took a bit of a ‘victory lap’ regarding his real estate market predictions.

Relatively steady home prices, despite higher interest rates, seem to have vindicated Ramsey’s bet. “You were wrong!” he said of his critics, adding, “I freaking know what I’m talking about.”

No Housing “Bubble” – Appreciation to Continue

When the Federal Reserve started raising interest rates in 2022, many were concerned that higher borrowing costs would reduce home sales and prices.

However, Ramsey claims he was skeptical of these concerns and was instead expecting home prices to remain steady or rise modestly. His thesis was based on simple supply-demand dynamics.

“When there is a shortage of an item … prices go up,” he said. “That’s basic economics.”

This theory seems to be vindicated by a report from the National Association of Realtors. Home prices climbed 5.7% over the past year as of February, with the median American home being worth $384,500.

Dave’s Latest Prediction

“Prices will go up,” Ramsey predicts. “This is what’s happening with real estate. I promise you, you can look up this [episode] five years from now and you’re going to go ‘god, that old fart was right again.’”

As for interest rates, Ramsey doesn’t make a firm prediction but advises buyers to focus on prices instead and refinance when borrowing rates go down.

“Marry the house, date the rate,” he said.

Who Is Dave Ramsey

Ramsey also makes efforts to educate people on the ways of using monetary resources judiciously, through his ‘F inancial Peace University,’ speaking in churches and community centers.

Ramsey advises everyone to follow his prime mantra, “Avoid debt at all costs.”

Dave’s 7 “Baby Steps”

One of Dave Ramsey’s financial literacy campaigns features seven “baby steps” that individuals and households should pursue in order to gain financial freedom. Each step should proceed when the previous one has been completed or is near completion. These include:

Establish an emergency savings fund of at least $1,000
Pay off all non-housing debts ASAP starting with those with the smallest outstanding balances (known as the debt snowball method)
Increase your emergency fund to 3-6 months’ income
Invest 15% or more of your gross monthly income into a retirement account like a 401(k) or IRA
Start college funds (if you have children) in qualified accounts like 592 plans and ESAs
Pay off your mortgage as early as possible
Build wealth

In Conclusion

If buyers are waiting to purchase thinking that home prices are going to move lower, that is most likely a bad idea. Instead, Ma rry the House but Date the Rate – purchase today and gain appreciation and refinance later if rates go down. Reach out to me for more, as it would be my pleasure to put a home-purchase plan in place!

Special Round-Table Podcast | The State of Today’s Real Estate Market

March 18, 2024 / Tom Bonetto

I was invited to join a panel of industry experts and discuss the state of today’s real estate market.

We discuss the industry challenges, mortgage rates, and have some thoughts about what might happen in the future, as well.

Here’s the link:

Do check it out, as I think you will gain a few insights and enjoy it!

Owning vs. Renting | The Hard Facts

March 4, 2024 / Tom Bonetto

Imagine turning your monthly expenses into a growing investment, something that could multiply your net worth exponentially.

Not a lot of people know this, but the average homeowner’s net worth is 40 times that of a renter.

Owning a home offers numerous advantages over renting, making it a seriously smarter long-term financial decision for many.

Building Equity

Firstly, homeownership builds equity, whereas renting does not. Each mortgage payment contributes to ownership of the property, gradually increasing the homeowner’s stake in the home.

Over time, this equity can be leveraged for various purposes, such as home improvements, education expenses, or retirement funding.

In contrast, renting provides no return on investment, with monthly payments essentially going towards the landlord’s profit.

Stability and Security

Secondly, owning a home provides homeowners with fantastic stability and security.

Renters, on the other hand, are subject to the whims of landlords and rental market fluctuations, with the risk of rent increases, lease terminations, or changes in rental terms.

Homeownership offers predictability and control over housing costs, particularly with a fixed-rate mortgage where monthly payments remain constant over the loan term.

Furthermore, homeownership helps people to establish roots within a community and create a space that reflects their personal preferences and lifestyle.

Tax Benefits

Another serious advantage of owning a home is the potential for tax benefits.

Homeowners can deduct mortgage interest, property taxes, and certain home-related expenses from their taxable income, reducing their overall tax burden.

Renters do not enjoy these tax advantages, missing out on opportunities to reduce their tax liabilities through housing-related deductions.

Building Long-Term Wealth

Finally, homeownership provides a unique pathway to long-term wealth accumulation and financial security. As mentioned earlier, the average homeowner’s net worth is 40 times that of a renter!

Real estate historically appreciates in value over time, building equity and wealth for homeowners. More on that here…

For example, Case-Shiller recently reported that home prices rose 5.5% last year, with national home values 46% higher since 2019! And prices are forecasted to rise this year due to ongoing high demand and tight supply.

In contrast, renting does not offer the opportunity to build wealth through property appreciation, leaving renters without a tangible asset to show for their housing expenses.

In Conclusion

Switching from renter to homeowner is simpler than you might think. It’s a strategic move towards securing your financial future, as owning a home offers numerous advantages over renting!

Do reach out to me for more, as it would be my pleasure to help you put together a plan to become a homeowner as well as long-term wealth-building strategy.

Quick and Inexpensive Ways to Increase the Value of Your Home

January 29, 2024 / Tom Bonetto

Enhancing the value of your home doesn’t always require a hefty budget.

There are numerous cost-effective measures that can significantly improve your property’s appeal and worth. One of the simplest and most impactful changes is a fresh coat of paint.

Paint

A well-chosen color scheme, for example, can breathe new life into your home, making it look more modern and well-maintained.

Paint can change a formerly dingy room into something exciting.

Additionally, painting is a task that can often be tackled as a DIY project, further reducing costs.

Enhancing Curb Appeal

Curb appeal plays a big role in a home’s perceived value, and even some simple landscaping can go a long way.

Planting flowers, trimming bushes, and maintaining a neat lawn (or hard-scape in the desert) are relatively inexpensive ways to enhance the exterior look.

Even creating a welcoming entryway by adding a new doormat or adding potted plants can also make a positive first impression on potential buyers.

Kitchens and Bathrooms

Inexpensive kitchen and bathroom upgrades can also boost your home’s value.

Rather than a complete renovation, consider small changes like updating cabinet hardware, replacing older faucets, or installing a new backsplash. These changes can give these high-traffic areas a fresh and modern look without breaking the bank.

Additionally, upgrading lighting fixtures throughout the house is a cost-effective way to improve both functionality and aesthetics.

Organizing Your Home

De-cluttering and organizing your living spaces can make a big impact on the perceived value of your home.

Minimalism is key right now, and removing excess furniture and personal items can make rooms appear larger and more inviting. Additionally, consider inexpensive storage solutions, such as baskets or shelves, to keep spaces organized and clutter-free.

Energy-efficient upgrades not only enhance your home’s appeal but also contribute to long-term savings. Installing a programmable thermostat, for example, and sealing drafts can improve energy efficiency.

By the way, many utility companies offer incentives or rebates for energy-efficient upgrades, making these improvements even more cost-effective.

Fixture Upgrades

Finally, consider small-scale upgrades that add a touch of luxury to your home. Upgrading doorknobs, cabinet handles, or light switch plates to more modern or stylish options can make a noticeable difference.

Additionally, adding a mirror or two strategically placed in rooms can create the illusion of more space and reflect natural light, making your home feel brighter and more open.

In Conclusion

Improving the value of your home doesn’t have to be a costly endeavor. With thoughtful planning and strategic choices, simple and inexpensive upgrades can enhance both the aesthetic appeal and functionality of your property.

By focusing on areas that make a significant impact, such as painting, landscaping, small kitchen and bathroom upgrades, organization, energy efficiency, and fixture upgrades, you can improve your home’s value without breaking the bank!

Category: Housing Market (Page 3 of 35)