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You must have a Loan Approval
before you can make an
offer on a Foreclosure Short Sale or REO. Likewise it is a good idea to
be pre-approved before making any offer.
Buyers Save Money and Time when Pre
Approved for Mortgages.
Many real estate buyers 'guess' how much they can
afford. They do extensive searching only to find they can't get approved in their 'guessed'
price range.
Even before you've found a home, condo or particular piece of real estate, you can apply
online for a free preapproval on a mortgage loan.
If you're preapproved, you receive
a letter telling you that the Mortgage Company will lend you up to a certain amount to
finance your real estate, subject to a property appraisal and other stated conditions.
A
pre approval means that you can look for homes or condos more confidently. By arranging
financing in advance, you can act quickly when you find the right property. You'll know
exactly how much you can borrow, and the letter shows sellers and real estate agents that
you're ready and able to buy. You're in a stronger position to negotiate Real Estate asking prices down with a
loan pre approval. 40% of Real Estate contracts fall thru because of financing problems
with mortgages. When a yard sign or MLS Listing says Contract Pending .other buyers and
Real Estate Agents pass it up. Sellers realize that and may not negotiate too far from the
asking price. A recent concern of many sellers is whether the home will appraise at
the amount set forth in the contract. If the contract is contingent upon financing, the purchaser may have the right to terminate the contract and
receive the refund of the down payment
Web Site >
AnnualCreditReport.com They
are a centralized service for consumers to request annual credit reports. It
was created by the three nationwide consumer credit reporting companies,
Equifax, Experian and Trans Union. Annual Credit Report.com processes requests for
free credit file disclosures (commonly called credit reports).
Most real estate experts agree that it is a good idea to obtain a
copy of your credit report with your payment history.
If you don't have a copy of your credit report, most lenders will
generally require you to
pay for a copy when they process your loan application before you
apply for a loan.
You'll have a chance to resolve any problems in advance.
How Much Tampa Bay Home can you really Afford? Pre-Qualifying and
Pre-Approval
One of the most important rules of home buying is understanding how
much home you can really afford. A good real estate agent can
usually give you a ballpark estimate of the amount of a loan you are
most likely to secure. A lender may also "pre-qualify" you with a
similar estimate. Pre-qualifying however, is no guarantee you will
be able to obtain a loan. An appointment with a lender can get you
pre-approved for the maximum amount of mortgage you can secure. The
procedure includes running a credit check and verifying your income
and expenses. Your lender may then provide you with a certificate of
approval for the amount of the loan for which you qualify.
You and your Tampa Bay Real Estate Agent can then start hunting for
your home with confidence and save a great deal of time by limiting
the search for homes that meet your price range and needs. You'll
also be in a much better bargaining position when it comes to
negotiating the best price for the homes you choose. Pre-approval of
a mortgage will also help your transaction move forward to a quicker
closing. I have a wide variety of resources that will help guide you
through the process
Loan pre-qualification vs. pre-approval
One of the best ways to determine your budget is to have your real
estate agent or lender pre-qualify you for a loan. Pre-qualification
is different from pre-approval, because it is only an estimate of
what you'll be able to afford. Pre-approval is a more formal process
where a lender examines your finances and agrees in advance to loan
you money up to a specified amount.
Lenders will look at more than just your income to determine the
size of the loan. Likewise, you may find that there are some
creative financing options that can help boost your purchasing
power. Banks and lending institutions will use several criteria to
determine how much money they'll agree to lend......These include:
Your credit history
The amount of your outstanding debts
The amount of money you have available for a down payment and
closing costs
Your gross monthly income
Your choice of mortgage (15, 30-year, FHA, VA etc.)
Current interest rates
Lenders also use your financial information to figure out two, very
important ratios: the debt-to-income ratio and the housing expense
ratio.
Debt-to-income ratio
Many lenders use a rule of thumb that the amount of debt you are
paying on each month (car payment, student loan, credit card, etc,)
shouldn't exceed more than 36 percent of your gross monthly income.
FHA loans are slightly more lenient.
Housing expense ratio
It is generally difficult to obtain a loan if the mortgage payment
will be more than 28 to 33 percent of your gross monthly income.
If you can make a large down payment, lenders may be more lenient
with their qualifying ratios. For example, a person with a 20
percent down payment may be qualified with the 33 percent housing
expense ratio, while someone with a 5 percent down payment is held
to the stricter 28 percent ratio.
Other ways to improve your purchasing power include the following:
Negotiating Closing Costs
Through negotiation, some sellers may agree to pay all or most of
your closing costs (for example, if you agree to meet their full
asking price). If you choose to try this, make sure to ask your real
estate agent for advice.
Loan Programs
Many local governments have special loan programs designed to help
first-time homebuyers. Loans may be available at reduced interest
rates, or with little or no down payments. Check with your local
housing authority for more information.
Loan Types
Some homebuyers choose Adjustable Rate Mortgages (ARMs) because of
low initial interest rates - Be careful to read all the fine print. Others opt for 30-year loans because
they have lower monthly payments than 15-year loans. There are
significant differences between different loans, so make sure to
discuss the pros and cons of different loans with your agent or
lender before making a decision.
Gifts
If you're having trouble saving money, many lenders will allow you
to use gift funds for the down payment and closing costs. However,
most lenders require a "gift letter" stating the gift doesn't have
to be repaid, and will also require you to pay at least a portion of
the down payment with your own cash.
The loan application process
- Lenders will want to see a
copy of your credit report listing all your long-term debts, as well
as your payment history.
If you don't have a copy of your credit report, most lenders will
generally require you to pay for a copy when they process your loan
application
Late payments - For most people, problems with
their credit report are
likely related to late payments on a debt. If you were late one
month in paying off your
credit card, but otherwise have a good payment history, chances are
most lenders won't be
too concerned. But if you have a history of late payments you'll
need to document the
reasons why. A slow payment history won't necessarily get you turned
down for a loan, but
you may have to pay a higher rate of interest.
Errors on your credit report - Many people are
surprised to learn that
credit reports can often contains errors or inaccurate information.
If this is the case
with your credit report, you'll need to contact the reporting agency
or creditor to have
the problem resolved. This can sometimes be a slow process, so give
yourself time to clear up the mistake.
Bankruptcies and foreclosures - There's no way
around it, a
bankruptcy on your credit report is not a good thing. But that
doesn't mean you still
can't obtain a loan. Even though a bankruptcy may stay on your
credit report for seven to
ten years, lenders will often consider the circumstances surrounding
a bankruptcy (family
illness, injury, etc.). Moreover, if you have reestablished good
credit since the
bankruptcy, a lender will be more inclined to approve your
application
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