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Thinking of Buying Your First Home?

By
Mortgage and Lending with Financial Center Mortgage

 Buying your first home can be an intimidating process. You have so many questions, and you need answers. Can I really buy a home? Am I ready?  You will be amazed at the loan options that are available to help you buy a home. The most important step is to get pre-approved for a mortgage to buy your home.  It is easier than you think.  Let's get some of your basic questions answered.

Frequently Asked Questions

How much can I afford?

This is an important question that you need to answer. Many times you can qualify for a house payment that is higher that what you would be comfortable with. Have an idea of what you can afford each month, and we can work to structure your payment to stay within your budget.

How much can I qualify for?

Most loan programs will allow your total monthly credit debt to be 50% of your gross income (before taxes are taken out). Your monthly credit debts include your mortgage payment, credit cards, installment debt, child support, etc. 

How much of a down payment do I need?

Many programs are available with $0 down payment required.  Typically, if you can put 5% down, you will qualify for a lower interest rate.

How do you calculate my income?

If you are salaried employee (w2), we will take your gross monthly income before taxes are taken out. If you are self employed, or commissioned, typically the bank will average your net income from the past 2 years to use to qualify you.

What if I can not document my income?

If you credit score is typically above 620, you can qualify for 100% financing regardless of if you can document your income. Here are some of the income documentation types. Remember, the more you can document, the better the interest rates will be.

  • Full Doc- Pay stubs, w-2's, and or taxes returns (net income)
  • Stated Income - No Document is provided, borrower states how much they make monthly.
  • No Ratio - No monthly income is disclosed, Credit and asset are primarily used to qualify.
  • No Doc - No Income, No Assets, No Employment - Credit is used to qualify.

How important is my credit? What is Good?

Credit is extremely important in determining what interest rate, and loan programs you qualify for. Here is a measure for your credit score:

  • 680+ - Very Good Credit , Qualify most options.
  • 620 to 680 - Conforming credit, 100% options and variable doc types are available.
  • 580 - Subprime - 100% financing available, full doc only. Interest rates and terms will not be as attractive.

Can you help me improve my credit score?

Yes, I can run a Credit Xpert analysis for you. I can show you things that you can do to maximize your credit score. Here are some good tips for you:

  • Pay your bills on time, and keep your revolving credit balances low.
  • DO NOT CLOSE CREDIT CARD ACCOUNTS! You lose credit history which hurts your credit score.
  • Do not open new accounts.

What if I do not have a credit score?

Programs are available that allow you to use non-traditional sources of credit. You will need 4 letters from other credit sources that show you have paid your bills on time for the past 12 months. Typical sources are rental history, utility bills, insurance, cell phones, etc. FHA may be a great option for you.

What is FHA?

The Federal Housing Administration is a government sponsored program that is set up to help increase the percentage of home ownership in the United States. It have very attractive interest rates, good terms, and flexible underwriter guidelines. Here are some typical guidelines for FHA:

  • 3% Down Payment - Can come from a gift from a relative.
  • No Reserve Requirements - Many programs require 2 months of your mortgage payment to be documented in your asset accounts.
  • Debt to Income - Typically 41%, but can go over 50% if there are compensating factors.
  • Non occupying Cosigners - You can have a family member co-sign on your mortgage to help qualify.
  • Bankruptcy - Must be at least 24 months old, with clean credit history afterward.
  • Foreclosure - Must be at least 36 months old
  • Mortgage insurance is required - Allows the bank to offer extremely attractive interest rates, with low down payment.
  • Credit Score - Must have a clean credit history for the past 12 months. Medical related issues can be overlooked by the bank. Alternative Credit is acceptable if the borrower does not have enough traditional credit.

How much money do I need to have to buy a home?

  • Down Payment - Can be as little as $0 Down.
  • Closing Costs and Prepaid Expenses - Will vary by the loan amount, property taxes, and your hazard insurance. Many programs will allow the Seller to pay these expenses for you to reduce your cash at closing. Seller can pay up to 6% of the purchase price depending on the program.
  • Reserve Requirements - Many programs will require you to have 2 extra months of your mortgage payment to be saved up in your accounts (savings, checking, retirement, stock, etc).

Why would a seller be willing to pay money towards my closing costs?

The seller is motivated to sell their home. The closing costs can be negotiated into the purchase price by your realtor, help you qualify for the mortgage, and help the seller sell the home.  I would estimate 80% of first time home buyers structure their closing costs in the purchase price. I will work with your realtor to keep you cash at closing to the absolute minimum.

What program is right for you?

Every client that I work with is unique.  A 10 minute review process will help me determine which program you will qualify for, and what the best loan options are for you. During this process, we will review your credit, job history, assets, and what you are budgeting for a mortgage payment. My job as a mortgage broker is to act as an independent contractor to represent you to the bank. I do not work for the bank, so you can tell me everything in confidence and I will structure your loan to fit the best program based off your qualifications. Call me today at (503) 675-0513 to get you started on the path to owning a home.

Regards,

Spencer Brown

 

Karen Lohre
Gulf and Southern - Niskayuna, NY
thanks for the info...I found it to be very interesting.
Jul 06, 2007 03:38 PM
Brad Andersohn
Retired Executive Director of Education at eXp - Boulder Creek, CA
ActiveBrad - 707.646.1876

Hi Spencer, I see this is your first post on Active Rain.  Congratulations!!  I just wanted to welcome you to our Real Estate Industry Network! 

Welcome aboard, I hope you'll continue to blog, and invite others.  Wishing you all the success this industry has to offer.

Enjoy!!

Below are some useful sites and groups you may want to visit right away:

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You can join any groups you have an interest in, or would like to learn more about.  Maybe Target Marketing, Real Estate Technology, or you can search All Groups, there are hundreds to choose from.

I hope you'll find these to be useful tools in helping you get started here on Active Rain.  You will meet many wonderful people here!! Again, welcome to Active Rain, the best place for your Blog!

Good Luck to you and your business!
Jul 06, 2007 09:10 PM