Tag: home purchase (Page 3 of 4)

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.

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!

Marry the House…But Date the Rate

June 27, 2022 / Tom Bonetto

I can’t take credit for the popular phrase “Marry the house…but date the rate”. It’s being posted by mortgage professionals and real estate agents all over the place.

What does this expression mean?

It means that if you find a home you love, don’t let current interest rates prevent you from moving forward and buying it.

Essentially, don’t be afraid to buy the house you want right now because of external market conditions!

A mortgage does not have to be long term, in fact most people refinance their homes several times as mortgage rates improve or should they need to take cash out from their equity.

Is It A Good Idea?

Committing to the house doesn’t mean you have to commit to today’s financing forever. Buyers can always look for a better financing opportunity down the road and make a change when the time is right.

It is absolutely possible to change your financing to more favorable terms later, should better rates and products become available… and if rates only get worse, then you’ll be glad you married the house when you did.

Interestingly, the average tenure of a mortgage is under 6 years…meaning most homeowner’s either move or refinance their mortgages quite often.

Better Rates Down The Road?

I do think there’s a good possibility of lower rates in the future. More on that here…and here.

Believe it or not, we might be in for an upcoming perfect storm – and in a good way for borrowers.

It does look a recession is around the corner, which almost always results in lower mortgage rates. I know that sounds counter intuitive, but mortgage rates actually fall during recessions.

Mortgage Rates and Recessions from 1972-2022

Also, one of the few areas that seem relatively immune from recession is the housing market. Historically, one of the safest bets during recession is real estate.

The chart below shows how housing stays quite resilient during and through recessions:

Case-Shiller US Price Index from 1960-2022

Looking back at eight of the nine recessions since 1960, home prices significantly increased or at least remained stable each time during and after the recession. One of the reasons this occurs is because interest rates significantly fall during recessionary periods.

What Buyers Should Do Now

Essentially, all of these factors listed above should combine for LOWER rates later this year into 2023.

Of course, things can change, but it sure is looking like a recession is on the horizon, which will undoubtedly bring lower mortgage rates.

Well, waiting to purchase a home and “timing the market” is one option…but it’s almost always a bad idea.

Why? Because no one knows exactly when rates will hit rock bottom – and home prices will continue to accelerate.

More importantly, buyers will miss out on the gains of owning a home. Homes increased in value over 15% last year in the west…and things aren’t getting any cheaper. More on trying to time the market here…

Purchase Strategy

I recommend making your purchase now – and NOT paying extra discount points to lower your interest rate. As a matter of fact, you could use “negative” points to help offset any closing costs.

Instead of paying discount points to access lower mortgage rates, borrowers can receive credits from their lender and use those monies to pay for closing costs and fees associated with the home loan.

More on that strategy here…

Yes, the interest rate might be slightly higher, but you will want to refinance this mortgage when rates drop later this year or next year! This will also limit your out-of-pocket fees for the initial transaction.

In Conclusion

Although things look a little grim currently, the future is actually looking bright for mortgage rates later this year and into next year.

Would you like to find out more? Contact me to discuss your current situation and how you might be able to take advantage of today’s market. It would be my pleasure to help you!

A Unique Home Buying Opportunity

April 20, 2020 / Tom Bonetto

Is now a good time to buy a home?

It might be — but not for the reasons you might initially think.

These really are most unusual times, especially when you consider the Covid-19 pandemic…but really good home buying opportunities are out there, to be sure.

Right now, buyer demand is down, as sellers just aren’t seeing the multitudes of offers they had a little over a month ago. A few have even taken their homes off the market, but the majority are looking to sell now and are forced to consider offers from a smaller buyer pool.

After Covid-19

When the coronavirus pandemic subsides, home prices could very well be higher, and financing could be harder to come by, so buyers should try to find deals now, if they are able.

So says Barbara Corcoran, founder of the Corcoran Group, a New York-based residential brokerage.

“If you’re smart enough to attack the market as an educated consumer, and get out there, and make a bid on a sweetheart deal, you’re gonna be the smartest guy. And everybody’s going to applaud you six months from now,” Corcoran said on Wednesday.

You can find the entire article here…

The Key Issue

The market could very soon favor sellers even more than it did previously. Many sellers have pulled their homes off of the market, which will further limit inventory and drive prices higher. It’s just simple supply and demand.

On top of that, buyers will have more competition once consumers start buying again.

“The reality is [that] when they [buyers] come to the market, everyone’s going to be in the market at the same time, they’re going to pay more for the home then than they’re going to pay now,” said Corcoran.

While the current lock down is making buying real estate difficult, buyers should still keep an eye on their local market so they can recognize a good deal when they see it, Corcoran said.

To identify good deals, buyers should learn about their local market, monitor sales data and find the right real estate agent.

“Because then they’re [the educated buyer] in the position to actually recognize a sweetheart deal when they see it. And if they pounce on it, they’re going to get the deal of a lifetime,” said Corcoran.

“Every real estate cycle that has gone up and down, the deals weren’t made in the down cycles, nor in the up cycles. They were always made in the times where there’s the greatest uncertainty where everybody’s guessing.”

In Conclusion

Now really is a good time to act, if you are able. Do reach out to me if you would like some help with financing – and I’d be glad to point you in the direction of the right real estate agent, as well!

Tag: home purchase (Page 3 of 4)