| 1. | Do not incurr any new debt. This is very important, you want your total debt obligations to be low as possible when trying to qualify for a loan. If you were to go out and finance an item before you appplied for a loan you would be increasing your expense ratios (read the loan info section for more info), thus reducing the amount you will be qualified to borrow. |
| 2. | Create a current budget Determine your current monthly cash inflows and cash outflows. Give every dollar coming in a name and stick to your budget. Consistency is important. You will be suprised how well it works! |
| 3. | Analyze your budget Determine whether you will be able to add a mortgage payment to your monthly outflows. (remember you will not be paying rent anymore) If you are not sure whether or not you can afford to buy a new home, get an understanding of some commonly used loan qualifying ratios in our loan info section. |
| 4. | Get your papers together (these will be asked for by the lender when you apply for a loan) For all individuals who will be liable for the promissory note: Last three years income tax returns, current pay stubs (within last 30 days), copies of at least 2 months current bank statements and other asset information (include all liquid assets available to close the transaction), evidence of any supplemental income you earn on a regular basis, and any records of past credit problems that have been resolved. |
| 5. | Credit Report The bank will want your social security number to run your credit. Each time you let a lender run your credit your credit score can be effected. So remember do not give a lender your social security number unless you are willing to let them run your credit. |
Be prepared when you meet with a lender, follow these five steps
This will determine the amount of money you are qualified to borrow. Borrowed funds combined with the amount you have for a down payment and closing cost, will be the maximum amount you would want to spend on a home. Remember this is the most that you can spend, but don't feel obligated to spend this amount on a home. You will most likely want to make repairs, buy new furniture or go on a vacation sometime in the near future. Keep this in mind! If you jump into a large payment it can control your life and bring unwanted stress to you and your family.
The pre-approval process is fairly straight forward, so a good loan officer should be able to pre-approve you during a single meeting. Remember to have all of your paperwork ready.
You may want to go to a few different lenders to compare loan products and rates, however most banks use similar underwriting criteria, and offer similar products, so you should be able to get a good feel for what you can afford by talking to one lender. The biggest difference you will find between lenders is interest rates and fees. The rate you pay to borrow the funds determines the amount of the interest payment you pay each month which is combined with the principal payment to equal your total monthly debt obligation.Your total monthly debt obligation plus the cost of insurance and property taxes combine to create your PITI (Principal, Interest, Taxes and Insurance) Your PITI is the number the loan officer will use to compute your debt/income (expense) ratio which, in part, determines the amount of money you are qualified to borrow. So, all other factors held constant, higher interest equals smaller loan amount and less purchasing power. To learn more about how the loan process works check out the loan info section.
The pre-approval process is fairly straight forward, so a good loan officer should be able to pre-approve you during a single meeting. Remember to have all of your paperwork ready.
You may want to go to a few different lenders to compare loan products and rates, however most banks use similar underwriting criteria, and offer similar products, so you should be able to get a good feel for what you can afford by talking to one lender. The biggest difference you will find between lenders is interest rates and fees. The rate you pay to borrow the funds determines the amount of the interest payment you pay each month which is combined with the principal payment to equal your total monthly debt obligation.Your total monthly debt obligation plus the cost of insurance and property taxes combine to create your PITI (Principal, Interest, Taxes and Insurance) Your PITI is the number the loan officer will use to compute your debt/income (expense) ratio which, in part, determines the amount of money you are qualified to borrow. So, all other factors held constant, higher interest equals smaller loan amount and less purchasing power. To learn more about how the loan process works check out the loan info section.
Now that you know you are ready to buy a home, get in touch with a lender and get pre-qualified for a loan:
So, you have been pre-qualified for a loan. The next step is to find a Realtor®
There are a lot of real estate agents out there, but there are few great Realtors®. As a buyer, you have the choice to seek the assistance of a buyers agent, or to look for houses on your own and then contact the listing agent to write your offer.
Since the seller pays the commission, many buyers employ a buyers agent to represent them and to help them search for homes. A buyer's agent will be able to give you maximum access to listings and industry information, and can also provide you with a professional opinion of value. Your agent will look out for you and will represent your interest, not the sellers. Naturally, the seller's agent is only looking out for the best interest of the seller who has hired them to sell the property for the highest price the market will allow. In order to have a professional on your side of the negotiation, choose a Realtor® to represent you in the transaction. It cost you no extra money and their negotiating skills and professional opinion could save you a bundle.
Here are a few traits you should look for in a solid buyers agent:
Since the seller pays the commission, many buyers employ a buyers agent to represent them and to help them search for homes. A buyer's agent will be able to give you maximum access to listings and industry information, and can also provide you with a professional opinion of value. Your agent will look out for you and will represent your interest, not the sellers. Naturally, the seller's agent is only looking out for the best interest of the seller who has hired them to sell the property for the highest price the market will allow. In order to have a professional on your side of the negotiation, choose a Realtor® to represent you in the transaction. It cost you no extra money and their negotiating skills and professional opinion could save you a bundle.
Here are a few traits you should look for in a solid buyers agent:
| · | A person who understands that a clients needs are what drives the relationship. You want to build your relationship on the notion that your agent is an extension of you. They should be able to scour the market daily with a clear understanding of what properties will and won't work for you. The first thing they should do is determine, in depth, what exactly you are looking for. This will eliminate a lot of wasted time later on, and allow the agent to get to know you and what characteristics and ammenities are important to you . |
| · | A full-time, licensed real estate agent that is dedicated to their profession. A person who spends all of their time involved in real estate transactions is much more likely to know the current market conditions and more likely to be available when you need them. You want an agent who is constantly checking the market, so you don't miss out when that great deal comes along. The more involved they are the better. |
| · | Knows the geographical area that you are interested in and has market savvy. If an agent is familiar with the local market as well as the current situation of the regional housing market, they will be able to guide you more effectively toward that goal of buying the right house for the best price. The more they know, the better. |
| · | Find an agent who has refined their technological skills. The internet has completely changed the way that real estate transactions occur and an agent must embrace those technological advances and implement them into their own marketing strategy. While this is a much more important trait to look for in a listing agent, think long term, if you are like most Americans you will probably end up selling you home within seven to ten years. An agent who has integrated the internet's amazing marketing ability into their strategy is sure to have the advantage. |
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If you have never purchased real estate, you may be wondering where to start. Don't worry, you are not alone. Even with all of the information available on the internet, it can be confusing trying to sort through it on your own. By being properly prepared you will be able to reduce the stress and confusion you may encounter during the quick paced and chaotic home buying process. Our goal is to provide you with the details you will need so that your home buying process is as pleasurable and exciting as it should be!
-James Murphy
Allan Real Estate Investments
-James Murphy
Allan Real Estate Investments
Hopefully you are now more familiar with the first steps you will need to take. Purchasing real estate may be the single largest investment of your lifetime and there is no sense rushing the process. If you have any more questions or would like to schedule an appointment to review your unique situation, feel free to give me a call or an e-mail and I will be glad to help.
James Murphy
Allan Real Estate Investments
(805)748-3708
james@allanrealestate.com
James Murphy
Allan Real Estate Investments
(805)748-3708
james@allanrealestate.com