Don’t Let Fear Stop You from Applying for a Mortgage

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A considerable number of potential buyers shy away from jumping into the real estate market due to their uncertainty about the buying process. A specific cause for concern tends to be mortgage qualification.

For many, the mortgage process can be scary, but it doesn’t have to be!

In order to qualify in today’s market, you’ll need to have saved for a down payment (73% of all buyers made a down payment of less than 20%, with many buyers putting down 3% or less), a stable income and good credit history.

Throughout the entire home buying process, you will interact with many different professionals, all of whom perform necessary roles. These professionals are also valuable resources for you.

Once you’re ready to apply, here are 5 easy steps that Freddie Mac suggests you follow:

  1. Find out your current credit history & score – even if you don’t have perfect credit, you may already qualify for a loan. The average FICO® Score of all closed loans in September was 724, according to Ellie Mae.
  2. Start gathering all your documentation – income verification (such as W-2 forms or tax returns), credit history, and assets (such as bank statements to verify your savings).
  3. Contact a professional – your real estate agent will be able to recommend a loan officer that can help you develop a spending plan, as well as determine how much home you can afford.
  4. Consult with your lender – he or she will review your income, expenses, and financial goals to determine the type and amount of mortgage you qualify for.
  5. Talk to your lender about pre-approval – a pre-approval letter provides an estimate of what you might be able to borrow (provided your financial status doesn’t change), and demonstrates to home sellers that you are serious about buying!

Bottom Line

Do your research, reach out to professionals, stick to your budget, and be sure that you are ready to take on the financial responsibilities of becoming a homeowner.

2 Myths That May Be Holding Back Buyers

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Fannie Mae’s article, “What Consumers (Don’t) Know About Mortgage Qualification Criteria,revealed that “only 5 to 16 percent of respondents know the correct ranges for key mortgage qualification criteria.

Myth #1: “I Need a 20% Down Payment”

Fannie Mae’s survey revealed that consumers overestimate the down payment funds needed to qualify for a home loan. According to the report, 76% of Americans either don’t know (40%) or are misinformed (36%) about the minimum down payment required.

Many believe that they need at least 20% down to buy their dream home, but many programs actually let buyers put down as little as 3%.

Below are the results of a Digital Risk survey of Millennials who recently purchased a home.

2 Myths That May Be Holding Back Buyers | MyKCM

As you can see, 64.2% were able to purchase their home by putting down less than 20%, with 43.8% putting down less than 10%!

Myth #2: “I need a 780 FICO Score or Higher to Buy”

The survey revealed that 59% of Americans either don’t know (54%) or are misinformed (5%) about what FICO score is necessary to qualify.

Many Americans believe a ‘good’ credit score is 780 or higher.

To help debunk this myth, let’s take a look at Ellie Mae’s latest Origination Insight Report, which focuses on recently closed (approved) loans. As you can see below, 54.7% of approved mortgages had a credit score of 600-749.

2 Myths That May Be Holding Back Buyers | MyKCM

Bottom Line

Whether buying your first home or moving up to your dream home, knowing your options will make the mortgage process easier. Your dream home may already be within your reach. Call me! 407-925-7721 Cell or Text

Student Loans = Higher Credit Scores

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According to a recent analysis by CoreLogic, Millennial renters (aged 20-34) who have student loan debt also have higher credit scores than those who do not have student loans.

This may come as a surprise, as there is so much talk about student loans burdening Millennials and holding them back from many milestones that previous generations have been able to achieve (i.e. homeownership, investing for retirement).

CoreLogic used the information provided on rental applications and the applicants’ credit history from credit bureaus to determine if there was a correlation between student loan debt and credit scores.

The analysis concluded that:

“Student loan debt did not prevent millennials from access to credit even though it may delay their homebuying decisions.”

In fact, those with a higher amount of debt actually had higher credit scores.

“Renters with student loan debt have higher average credit scores than those without; and those with higher debt amounts have higher average credit scores than those with lower student loan debt amounts.”

Bottom Line

Millennials are on pace to become the most educated generation in our nation’s history, with that comes a pretty big bill for education. But there is a light at the end of the tunnel:

“Despite the fact that student loan debt has grown into the nation’s second largest consumer debt, following mortgage, and has created a significant financial burden for millennials, it does not appear to prevent millennials from accessing credit.”

Want to speed up closings? 6 tips

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CHICAGO – Dec. 15, 2016 – Homebuyers anxious to move into their new house in a hurry may be discouraged to discover that the average time from contract to close is 50 days, according to Ellie Mae. But Realtors can help clients shorten that timeframe by encouraging a more focused home search and being proactive about paperwork, among other things.

An organized buying process is particularly important for relocation clients and customers who hope to sell one property before buying another. In both cases, buyers tend to be working against tight moving deadlines.

Tips to help buyers complete a transaction faster:

  • Get pre-approved, not just pre-qualified. A pre-qualification is just a quick conversation with a lender who may have only glanced at the borrower’s credit score. A pre-approval is a more thorough review of their credit history. A pre-approval “makes your offer look stronger,” says Adriana Mollica, a sales associate with Teles Properties in Beverly Hills, Calif. “It also minimizes any surprises that may delay or force a cancelation during escrow.”
  • Narrow down options. Buyers with have a long wish list of desired home features are rarely satisfied by the houses they see. Realtors should have a heart-to-heart talk if these buyers also hope to move in quickly and discuss whether their desires are plausible for the area and price range they’re searching in, says Michael Shaffer, broker-associate at LIV Sotheby’s International Realty in Greenwood Village, Colo. Buyers should narrow their wish list down to the top must-have features and look at only at homes that fit the criteria.
  • Look at homes that have lingered on the market. Homeowners who haven’t sold quickly enough are often the most motivated to negotiate a deal. Buyers should understand the leverage they have when making an offer on a home that has been on the market for a long time, but remember that “a long time” means different things in different various areas. “In some markets, that may be a week or two,” Shaffer says. “In others, it could be a year or more.”
  • Don’t make lowball offers. A strong offer doesn’t have to meet the full list price – but it may mean vowing to make a larger downpayment, offering up more earnest money or accepting an early closing date. Sellers who have a sense of commitment from a buyer may be more likely to accept an offer, particularly as the end of the year nears.
  • Waive contingencies – maybe. Contingency clauses notoriously spark delays, but buyers should weigh whether to give them up. Some contingencies may be worth fighting for. Clients shouldn’t suffer from buyer’s remorse later or land in financial trouble because they waived contingencies.
  • Put paperwork in order. Buyers should already have at least three months of bank statements, pay stubs and letters of explanation for any unusual expenses or financial gifts that are being applied toward a downpayment. Even with a pre-approval, buyers will need paperwork to finalize the transaction, and having it ready upfront could save time. “In most cases, things get held up because paperwork and information isn’t readily available,” says Raena Casteel of the Casteel Little Real Estate Group in Tucson, Ariz.

Source: “Got the Need for Speed? 10 Timely Tricks for Buying a Home in a Hurry,” realtor.com® (Dec. 12, 2016)

© Copyright 2016 INFORMATION, INC. Bethesda, MD (301) 215-4688

4 Reasons to Buy Your Dream Home This Winter

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As the temperature in many areas of the country starts to cool down, you might think that the housing market will do the same. This couldn’t be further from the truth! Here are 4 reasons you should consider buying your dream home this winter instead of waiting for spring!

1. Prices Will Continue to Rise

CoreLogic’s latest Home Price Index reports that home prices have appreciated by 6.3% over the last 12 months. The same report predicts that prices will continue to increase at a rate of 5.2% over the next year.

The bottom in home prices has come and gone. Home values will continue to appreciate for years. Waiting no longer makes sense.

2. Mortgage Interest Rates are Projected to Increase

Your monthly housing cost is as much related to the price you pay for your home as it is to the mortgage interest rate you secure.

Freddie Mac’s Primary Mortgage Market Survey shows that interest rates for a 30-year mortgage are currently at 4.08%. The Mortgage Bankers Association, Fannie Mae, Freddie Mac & the National Association of Realtors are in unison, projecting that rates will increase by this time next year.

An increase in rates will impact YOUR monthly mortgage payment. A year from now, your housing expense will increase if a mortgage is necessary to buy your next home.

3. Either Way You’re Paying a Mortgage

There are some renters who have not yet purchased a home because they are uncomfortable taking on the obligation of a mortgage. Everyone should realize that, unless you are living with your parents rent free, you are paying a mortgage – either yours or your landlord’s.

As an owner, your mortgage payment is a form of ‘forced savings’ that allows you to have equity in your home that you can tap into later in life. As a renter, you guarantee your landlord is the person with that equity.

Are you ready to put your housing cost to work for you?

4. It’s Time to Move on with Your Life

The ‘cost’ of a home is determined by two major components: the price of the home and the current mortgage rate. It appears that both are on the rise.

But what if they weren’t? Would you wait?

Look at the actual reason you are buying and decide whether it is worth waiting. Whether you want to have a great place for your children to grow up, you want your family to be safer or you just want to have control over renovations, maybe now is the time to buy.

If the right thing for you and your family is to purchase a home this year, buying sooner rather than later could lead to substantial savings.