Tag: home purchase (Page 2 of 3)

Missed Opportunities by Trying to Time the Market | Don’t Wait!

August 5, 2024 / Tom Bonetto

Those who have been waiting for mortgage rates to come down have missed a huge financial opportunity.

Home prices rose 6% in 2022, 6% in 2023 and 4% so far year-to-date in 2024.

person holding white ipad on brown wooden table

That means over the last 30 months home prices have risen on average 17% compounded.

Using a median home price of $350K 30 months ago – if you waited for rates to improve, you would have missed a $60,000 wealth creation opportunity.

But don’t let those statistics discourage you. Now’s a very good time to purchase, as appreciation gains look likely for the near future!

What the Experts Are Saying

Case-Shiller’s lead analyst, Brian Luke said “while annual gains have decelerated recently, this may have more to do with 2023 than 2024, as recent performance remains encouraging. Our home price index has appreciated 4.1% year-to-date, the fasted start in 2 years”

He goes on to talk about the cost of waiting, saying “the waiting game for the possibility of favorable changes in lending rates continues to be costly for potential buyers as home prices march forward.”

Mortgage Rates

Mortgage rates are near 12-month lows – as inflation seems to be coming down and the unemployment rate has moved higher.

Both of these are potential recession indicators, meaning that the Federal Reserve may cut the Federal Funds rate shortly. You can find out more here…

Pricing Pressure Ahead?

As rates move lower, more buyers will become eligible to purchase. In fact, the National Association of Realtors states that for every 1% decline in mortgage rates, 5 million more people can be eligible to buy.

Even if a small fraction of these eligible buyers decides to move forward, it will likely pressure prices higher and shrink the number of available home choices even further. More on that here…

The Bottom Line

Home price appreciation remains strong, despite higher mortgage rates and slightly increasing inventory.

Home values continue to set new all-time highs, and housing still proves to be one of the best investments out there. If you’ve been thinking about purchasing, now is a good time to do it!

Do reach out to me and we can strategize about your next purchase or refinance!

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.

6 Ways to Improve Your Chances of Qualifying for a Mortgage

June 24, 2024 / Tom Bonetto

It can seem like a daunting task to actually qualify for a mortgage. But really, that’s not the case, as it absolutely can be done!

With that said, being well-prepared can significantly improve your chances of approval.

Here are six ways to enhance your prospects:

1. Improve Your Credit Score

Your credit score is a major factor in mortgage approval. Lenders use it to gauge your reliability as a borrower. To improve your credit score:

Pay all bills on time, as punctuality has a significant impact on your score.
Reduce outstanding debt, particularly credit card balances.
Avoid opening new credit accounts close to your mortgage application date.
Check your credit report for errors and dispute any inaccuracies. A higher credit score not only increases your chances of approval but also helps you secure a better interest rate.

2. Save for a Down Payment

A substantial down payment can strengthen your mortgage application. It reduces the loan amount and demonstrates your financial responsibility.

If you are able, try to save 20% of the home’s purchase price to avoid private mortgage insurance (PMI) and lower your monthly payments. But even if you can’t reach 20%, a larger down payment still improves your application’s appeal by lowering the loan-to-value ratio (LTV).

Fortunately, in today’s environment, there are great low down-payment options available. Find out more here…

3. Stabilize Your Employment and Income

Lenders look for steady employment and consistent income. To enhance your mortgage approval prospects:

Maintain stable employment, ideally with the same employer, for at least two years.
Document all sources of income, including bonuses, overtime, and secondary employment.
Avoid making significant career shifts close to your application. A stable employment history reassures lenders of your ability to meet monthly mortgage payments.

4. Reduce Your Debt-to-Income Ratio (DTI)

Your debt-to-income ratio compares your monthly debt payments to your gross monthly income. To improve your DTI:

Pay down existing debts, focusing on high-interest loans and credit cards.
Avoid taking on new debt before and during the mortgage application process.
Increase your income through a side job or additional work hours, if feasible. A lower DTI indicates to lenders that you have sufficient income to manage your mortgage payments alongside other obligations.

5. Gather and Organize Financial Documentation

Lenders require extensive documentation to assess your financial health. Be prepared to provide:

Recent pay stubs, W-2 forms, and tax returns.
Bank statements for checking, savings, and investment accounts.
Documentation of any additional income sources, such as rental income or alimony.
A list of all monthly debt payments and living expenses. Organizing these documents ahead of time can streamline the application process and demonstrate your preparedness and financial responsibility.

6. Get Pre-Approved for a Mortgage

Obtaining pre-approval from a lender shows that you are a serious buyer and gives you a clear understanding of your borrowing capacity.

To get pre-approved:

Submit your financial documentation for an initial review by the lender.
Discuss your financial situation and home-buying goals with the lender.
Obtain a pre-approval letter that specifies the loan amount you qualify for. Pre-approval not only boosts your credibility with sellers but also helps you stay within your budget and avoid falling in love with a home you cannot afford.

In Conclusion

Of equal importance is to have the right mortgage lender with you during this process. I can help walk you through these steps and coach you along the way! Do reach out to me for more…

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.

Overcoming Financial Constraints: Buying a Home with Limited Income

August 1, 2023 / Tom Bonetto

The prospect of buying a home is an essential milestone in many people’s lives, signifying financial stability and long-term security.

However, for individuals with limited income, achieving this dream can seem daunting.

Nevertheless, with careful planning, resourcefulness, and the right strategies, it is possible to turn this aspiration into a reality.

Let’s take a look at the challenges faced by those with limited income when purchasing a home and outlines practical steps to overcome these obstacles.

Assessing Financial Readiness

The first step in buying a home with limited income is to assess one’s financial readiness. This involves taking a close look at one’s budget, income, and existing debts.

A realistic understanding of current financial capabilities will help in setting a suitable price range for a home and determine the affordability of monthly mortgage payments.

It’s crucial at this time to consult with a financial advisor or mortgage expert to gain a better understanding of the financial situation and to put a plan in place.

Saving for a Down Payment

One of the major hurdles for individuals with limited income is saving for a down payment. While conventional wisdom suggests a 20% down payment, this might be unrealistic for many.

Fortunately, there are many low down-payment options – some as low as 3% down!

Researching and applying for these options can significantly reduce the upfront costs associated with buying a home.

Consider Multiple Options

While buying a traditional single-family home may be the ultimate goal, individuals with limited income might consider alternative housing solutions. Townhouses and condominiums might offer more accessible entry points into the housing market.

These options can provide an opportunity to build equity and eventually transition to a larger home in the future.

Know Your Markets

The location of a prospective home can significantly impact its affordability.

Researching different neighborhoods and real estate markets is crucial to find areas where property prices align better with the limited income.

Additionally, considering up-and-coming neighborhoods can be a wise investment strategy, as property values tend to rise in such areas over time.

Improve Your Credit Score

A good credit score is essential when applying for a mortgage. Homebuyers with limited income should focus on improving their credit score before starting the homebuying process.

Paying bills on time, reducing credit card debt, and correcting any errors in credit reports can positively impact the credit score and increase the chances of securing a favorable mortgage deal.

In Conclusion

Buying a home with limited income is undoubtedly challenging, but it is not an impossible feat.

By taking a proactive and strategic approach, prospective homebuyers can overcome financial constraints and realize their dream of homeownership.

Assessing financial readiness, exploring affordable housing programs, saving for a down payment, and researching the real estate market are just some of the steps that can lead to a successful homebuying journey.

Please do contact me to discuss your current situation and how you might be able to prepare for a home purchase. It would be my pleasure to help you!

Buy Now and Refi Later with no Lender Fees – Buy-Fi!

January 9, 2023 / Tom Bonetto

There’s a predicament facing potential buyers today. Should they wait until the mortgage and housing markets quiet down or move ahead in this unsettling economic environment?

A better question might be, “As a buyer, what are you waiting to see: mortgage rates to come down, prices to come down, or both?”

Most do believe that mortgage rates will come down in the near future, and you can find more on that here in my 2023 forecast…and there’s a ton of data to support that position.

Home Prices

Regarding home prices, however, most are still forecasting increases in home values. While listing prices may be coming down, sales prices are still rising from the same month a year ago.

The National Association of Realtors (NAR) reported the median sales price for November 2022 was up 3.5% from November 2021. Most expect December’s numbers to be in line.

Lawrence Yun, Chief Economist for NAR at their recent annual conference, forecasts home price appreciation for 2023 at +1% and for 2024 at +5%. So prices aren’t expected to go down.

So what’s a buyer to do? Well, I’d recommend that they marry the house, but date the rate. More on that here…as houses aren’t going to get any cheaper!

And I have another program in place that will help offset some of the refinance costs down the road…it’s called Buy-Fi.

How does Buy-Fi work?

Here are the specifics…

– Apply with The Lending Coach for the purchase of your new home

– Close on that purchase home loan before 4/30/23

– I’ll watch interest rates and when they drop, I’ve got you covered

– Refinance any time before 12/31/24 and I’ll waive your lender fees

Buyers can find out more regarding the specific terms and conditions on Buy-Fi here…

One final thought, owning real estate allows individuals to benefit from inflation on that large asset. The leverage from using borrowed funds to finance the purchase creates leverage that additionally works in favor of the buyer.

And residential real estate generally does extraordinarily well during inflationary/recessionary periods!

Please do reach out to me to find out more, as it would be my pleasure to help you!

Tag: home purchase (Page 2 of 3)