Mortgage Financing has had an abundance of change throughout the years and 2007 was no exception. In fact, 2007 has been defined by changes across the board. The changes have often happened daily, without warning, and have been implemented at a bat of an eye. Intelligent & experienced reactions by Mortgage Professionals sometimes can't even keep up with them. But rather than address these changes, I want to give the Public some very simple things to help them get into & live a comfortable Homeowner's existence....no matter what is going on around them. This post will concentrate on those looking to buy a home for the first time.
Pay your rent by check (you'll need 12 consecutive months of on-time rent payments), it's that simple. Pay it on time, by check, and keep copies for your records of the cancelled checks. This demonstrates a documentable housing history which does wonders for your strength as a borrower in the lender's eyes. Forget Money Orders & Cash, pay by check.
I can't even count the number of times interviewing someone looking to buy a home and the conversation turns to the price range of home they are looking to buy. I then ask, "Were you looking to put any money down?" A lot of times I get, "Yeah, I have about $3000.00 to put down." Well, let me tell you, outside of a FHA Loan or 100% financing Home Loan, down payments typically are in 5% intervals. Meaning, you are putting down 5%, or 10%, or 15% and so on. So, if you are looking to buy a $200,000 home and only have $3000.00, you need 100% financing and that $3000.00 probably won't even cover closing costs, even with seller's assist.
Speaking of interviews, don't be afraid to interview the Mortgage Professional that you may be working with. While they will inundate you with numerous questions to get a barometer of your financial & credit situation, don't be afraid to interview them to make sure that is the Professional you want to be working with. Question their level of experience, loan products available, their personal availability to you, and other professionals they could refer to you that may help in the home buying process. It's not a bad idea to get references. Do your homework, become a sponge.
When you get that Pre-Approval Letter, it will probably say that you are qualified to buy a home up to X amount of dollars. Bear in mind, just because in the Lender's eyes, on paper, you qualify for that much home....it doesn't mean you will be comfortable with that payment in the reality of your life. When qualifying potential homeowners, somewhat inevitable expenses such as utilities, cell-phones (I can't believe that I'm saying this is a somewhat inevitable expense:-), groceries, gas, etc...aren't taken into the equation. So, make sure you are comfortable with the payment and be sure to take into account other daily expenses that you incur. While buying a home is a promising step into a more financially free capacity for you and your family, there's no sense in being Mortgage Poor.
Whatever Loan Program is best for you, it is vital....let me repeat that....VITAL, that when you close on your home, you have money in the bank. We call it Reserves; you can call it 'Cash for a Rainy Day.' After-all, homeownership carries responsibilities and if something goes wrong with the home, you want to make sure you have the cash to take care of the problem.
Get the proper documentation together BEFORE speaking with a Mortgage Professional. This typically entails 2 most recent pay-stubs from all borrowers, last 2 years W-2's, last 2 months bank statements (all pages), most recent statement from any other asset account (401K, Stocks, Mutual Funds, CD's, Retirement, etc), 12 months cancelled rent checks, and at the point of application your Mortgage Professional will let you know what else may be needed to start the process.
Have a good idea of what your credit looks like before you speak with a Mortgage Professional. This siteis a pretty useful tool in helping you understand what credit is all about and will help you get a copy of your own Credit Report. If you have had credit issues in the past, be prepared to address what life occurrences (job loss, medical issues, etc) led to your credit becoming less than perfect.
When looking for a Mortgage Professional, I recommend doing a few things. Ask friends & family members if they have any recommendations of somebody they used in the past; this helps break down the trust barrier right away. Also, speak with your respective bank or credit union. While Mortgages aren't their forte these days, sometimes they can be a nice option for certain borrowers. Finally, do your own independent research. Look on the Internet, Phone Book, and any other resources you deem important in coming across a Trusted & Competent Mortgage Professional.
This is just a rather simplistic overview of important things you should know and do before buying a home. I'd like to invite any other Mortgage Professionals here on Active-Rain to feel free to add in their 2 pennies in a comment below of things you feel important for consumers to know. Happy Belated Holidays to anybody reading, let 2008 be the year you Buy A Home!
Jason.... Good honest information for first time buyers... I especially like the fact that you instruct them to think about their lifestyle and spending habits so they don't over-extend their budget from the start.
If this doesn't get featured for Localism, I'll be shocked. I'd love permission to post this on my business website. Especially for first time home buyers... you've laid out exactly what they need to know! Nice job You!!
Lane - LOL! Don't let me fool ya man, I can be as boring and as textbook as most...sometimes I like to keep it simple and bland:-)
Dan - It's so easy to get caught up in the 'Oh my gosh, we can get into a $300,000 home' without realizing it may over-extend the budget and lifestyle that one has worked so hard to get to and maintain
Jason, Great information and love it when you 'just because...you qualify for that much home....' So true & tell people this all of the time. The one thing that I usually also tell them is that the quickest way to hate your home is to be living for your home. Anyway, yes, I noticed all that link love throughout your post as well.
Jason.... Jennifer loves your link love, but where is mine? lol Seriously, some great information here. You presented in an easy to read fashion. The biggest thing that upsets me when I interview a potential client is when they tell me that they have been talking to a lender that has qualified them. But that's not the part that upsets me. It's when I ask them at what rate and what payment. And their answer is... I don't know or I am not sure. WHAT???? Especially the payment. And I partially blame the loan officer on this one, even though the borrower should be asking anyhow.
Lastly.... good information to the consumer, telling them not to be afraid in interviewing the loan officer also... to a great 2008....
Now this is how a Localism post on advise and tips is written. Wonder if the Localism people are featuring stuff? In any case I tried to flag for you....well written and you know me...I loooooveee a great Localism well written post! With this info...how can one not give you a call?
Yes Jason....trying to get my ten comments in...so just copied and pasted that comment on 10 posts. Now, give me my 25 pts. : ) Seriously, Jason, this is a fantastic post...If you where in CT, I would sent my buyers to you....Absolutely love the "Bear in mind, just because in the Lender's eyes, on paper, you qualify for that much home....it doesn't mean you will be comfortable with that payment in the reality of your life." Music to my ears! Love when lenders talk this way!
Jason, Great post.. I really think you gave great advice. The only thing I would add to it is that right now FICO is king. Make sure people don't shop around with their credit cards. Part of keeping your FICO up is the length of your credit history with the cards and also make sure they stay below the 40% balance of the limit.
Matt - Excellent point, thank you. FICO is king now and it is important that people make sure their scores are as high as possible. Consulting your Mortgage Professional in this is important to make sure you are in the best position possible in regards to financing.
Suzanne - Thank you, hope you had a wonderful Holiday!
What great advice for first time home buyers, Jason! No matter how much an agent tells them ahead of time, some don't believe they need all of that information until they hear it from a lender. Now they've heard it...
I'll take that kiss :o ) Excellent tips for renters.
"just because in the Lender's eyes, on paper, you qualify for that much home....it doesn't mean you will be comfortable with that payment in the reality of your life. "
So true. Don't max yourself out -you have to be able to afford all the other expenses- including the inevitable maintenance that is spent on a home. I can't believe how much we spend at Home Depot!
Lisa - And I hope the ears are wide open, thanks Lisa!
Ginger - The maintenance alone can be brutal if you are ill prepared financially. That's why I love to stress no matter if you get into a home with little or no money out of pocket, make sure you have money in the bank after closing for such things. You never know what will pop up. Nice to see you Ginger!
Jason, I have added this to my article book in my office, I find common sense Real Estate articles and have created a book..I of course include the author, I don't take credit for someones elses creative work.
Heres hoping you have a Great New Year, I look forward to your continued comments here on Active Rain.
What you can expect is relatively simple. I hope to make these little posts informative, entertaining, timely and have a flare that allows you the reader to be able to look at the financing side of the real estate biz. And maybe, just maybe, it gives you a little peek into my soul...
Jason
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Hi Jason, 
This may be the most boring post I've ever seen from you...
And it should be required reading for every first time home buyer in the market that isn't operating from a trust fund.
Is it bad that when you aren't at your best you are better than most at articulating a thought?
Good job.