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Process of Home Financing


 

When It Comes To Buying a Home - Financing Comes First


Buying a home in today's market is a bit intimidating. And your new home purchase is likely to be one of the most important decisions you've ever had to make. Usually it's one of the most valuable assets you'll own.


Fantastic home buys are waiting for you. If you have the motivation, vision, and are willing to plan for your future, it's really the right time buy a home.


For some people, it will take patience, restraint and careful planning to get there. If you just bought a big shiny new truck or have a stack of credit card bills on the kitchen counter you may have to readjust your budgeting, but you can still buy a home if you are motivated and focused. Follow the guidelines below and you can get a good mortgage, and you will be able to purchase the home of your dreams.

Everybody comes into the Las Cruces real estate market with a different perspective and level of experience, so there is no "one size fits all" advice. These general rules apply to almost everyone when it comes to the home loan you will need to buy a home. So here are some of the do's and don'ts that you should consider.

 

1. Get Pre-Approved Before House Hunting!
To get pre-qualified, you give a mortgage specialist information on your income, debts, and perhaps a quick credit check. That means the resulting estimate of the maximum mortgage you can obtain is exactly that - an estimate. Pre-approval is different: you must authorize your lender to obtain detailed credit reports, verify your income and debts, obtain employment history, and determine your income-to-debt ratio along with other underwriting steps. This puts you much closer to obtaining a loan and locking in a rate and term. You'll enjoy an advantage over other prospective buyers if you've gotten yourself pre-approved for a loan before you even start your home search. Pre-approval generally means that you are good to go, subject to the lender's approval of your chosen house being approved as security for the loan. The appraisal of the property you want to purchase is one of the last crucial steps because it validates the home's value for the lender.

The above process allows you to focus your home search in the correct price range, saving a lot of wasted time and frustration, but it can also give you an edge when competing with other offers on a home that you find. Pre-qualification will also give leverage when negotiating with a seller especially when there are other offers  involved. It essentially makes you a cash buyer.


2. Be Realistic.
Once you know what home loan your are qualified for and the amount of cash you have available for and/or  need for your down payment and closing cost you know the maximum price of the home you can buy. Don't try shooting for that five-bedroom house if it's going to be too much of a stretch in your current budget.  To get into the market, you should have a plan. Determine what you are looking to for make a list of your wants and need and decide what compromises you are willing to make to get all you need at the price you can afford.


3. Forget The New TV.
While you are going through the financing process, don't make any big purchases over the next couple of months. Any purchases you make in the 3 - 6 months before buying a home will leave less money available for the down payment as well as mortgage payments. A significant debt such as a $15,000 auto loan will look bad to the mortgage lender's computerized credit scoring systems. Plus, the underwriter won't want to see you adding a couple of hundred dollars per month to your monthly expenses. Ideally, your lender will want your total debt which includes both your Mortgage Principal, Interest, Taxes and Insurance,  plus these monthly expense debts to be less than 36 - 40% percent of your gross monthly income. If you have great credit this number is flexible.

4. Save, save, save!
Increase the size of the down payment you're able to make by saving
home-financing,home-mortgage-saving-to-buy-a-home-in-las-crucesas much as possible, as often as possible. This shows the lender that you are a good risk for a home loan. You can afford to be a borrower and your down payment will reduce the percentage of the homes' value that they are securing with their loan.  Be sure your cash is in short term investments  that offer reasonable rates of return and make your funds available when you need them. If your lender says you need more cash down, put yourself on a regular savings plan and watch it grow. Anything worth doing takes planning and commitment, so financing your home purchase is no exception.

5. Don't Be Late!
Make loan and other debt payments on time, especially over the months leading up to the filing of your mortgage application. It sounds simple, but every 30-, 60- or 90-day delinquency on a loan or credit card is going to reduce your Credit Score.  Your lender considers your Credit Score to be  significant when  it determine the type, amount, and interest rate of any loan you qualify for, and will determine if you qualify for a loan at all.


6. Pay Off Loans.
Ask your lender if you should consider paying off more debts even if it means putting down a smaller amount at closing. This will leave you with a larger mortgage, but it will allow you to replace non tax-deductible, high-interest rate debt with lower-rate mortgage debt that features deductible interest. Ask your tax specialist what will work best for you. If you have a tax advisor, it is well worth consulting with them.

7. No New Debts.
Get your the mortgage qualification before you add any new debts. Numerous credit inquiries, such as new applications for credit cards or auto loans, can hurt your credit score big-time, especially if they pop up in the months before you want to buy a home. Car purchases made by novice home buyers are notorious deal-killers if made shortly before trying to get a mortgage.

8. Know Your Financial Style.
One of the most important decisions you will make is the selection of your Mortgage Home Loan. There a wide variety of Mortgage types with different terms and interest rates. An essential factor that is overlooked is your money personality.  You have a choice when getting a mortgage so choose wisely. A good mortgage broker will explain the pros and cons of each Mortgage type. The conservative 30 year fixed rate mortgage is usually the safest if you qualify and if it is at a good rate of interest. Creative Mortgage options are available, but they are riskier and be sure they are appropriate for you. Consult with both the lender and your accountant before choosing any Mortgage.  

9. Tough Choices.
If times get hard and you can't make all your payments, pay your mortgage or current rent payment first, followed by any installment loans such as auto loans, and credit card payments last. That's because credit scoring systems look at the performance of similar loans first when deciding what type of score to assign. It will give the most weight to the performance of major expenses like a mortgage or rent, and then the performance of something like an auto loan, which features fixed payments and a fixed rate the way many mortgages do. Lastly, it would evaluate the payment performance of so-called "revolving" loans, like credit cards, which feature variable payments that fluctuate with the outstanding balance.

10. Too Good To Be True.
Just like Home loans not only come in many types, and there are many sources for your home loan. There are local banks, mortgage companies, credit unions, and savings and loans. Everyone wants to give you a mortgage because the profits are high. Don't believe everything you see and hear! If it sounds too good to be true, it probably is!

A reputable LOCAL lender operating with a physical presence in your home state can't run and hide. Initially, ask family, friends, or your Las Cruces real estate professional to guide you to the best sources of financing your home. Your Realtor has already assisted hundreds of homebuyers through this process and worked with dozens of lenders. THEN SHOP.  It is crucial that you select someone you can trust and work with, as well as a lender that has the experience, credentials, and attitude that you need.  


Remember that in this market, like all markets, there are great opportunities waiting for those who set their goals, are motivated, and take the time to plan and prepare.

home loan pre qualification, mortgage-loans, financing-for-homes-in-las-cruce










Pre-Qualification  

Several factors are involved in answering the question of what you can afford (qualify for). The affordability calculation includes these factors: 


  • Income. When you're qualifying for a loan, lenders usually use your gross income (all the money you earn before taxes) as a key factor in underwriting the loan. Gross income may also include the average of overtime pay and commissions and bonuses, or other income sources. Talk to your lender about any other sources of income which can include.


    • Monthly mortgage payment as a percentage of your income. Lenders use evaluate your total monthly mortgage payment including: principal, interest, property taxes, mortgage insurance, hazard insurance (homeowner's insurance), plus any homeowner association dues as a percentage of your gross monthly income to determine affordability.


    • Your total debt situation. You may have car loans, student loans, credit card debt, child support, alimony or other monthly expenses. In general, lenders evaluate the total of all your monthly expenses (excluding basics like utilities and groceries).

    The Affordability Calculation uses the ratios of income versus debt. To determine the amount of money you qualify for is modified by your credit worthiness.

    • Credit history. An established, satisfactory record of paying your bills on time is an important part of getting a home loan. If you've had credit difficulties, your home loan options may be more limited.
      But there are many ways that legitimate professionals can help you improve your credit score.
      Learn more about credit histories


    • Employment history. Lenders will also consider your employment history when reviewing a mortgage application. The stability of your income and likelihood that it will continue are important factors in determining your ability to repay the mortgage. If you're self-employed, work on commission or have been at your job less than two years, you may need to provide additional information about your work history and income such as tax returns or school records

    • Down Payment

    When you borrow money for a home, unless the loan in question is a specialized loan program (restrictions apply), you will almost always be required to contribute some of your own money toward the purchase of the home. This money is called your down payment. The amount of the down payment varies depending on the type and size of mortgage you choose, the purchase price of the home and your financial situation.

    • Consider the impact of mortgage insurance.

    If your down payment is less than 20% of the home purchase price, you can expect to pay some form of mortgage insurance. The cost of the Mortgage Insurance is a part of your Monthly Mortgage Payment (MIP). Mortgage Insurance insures a portion of the mortgage loan to protect the Lender if you are unable to pay. Home loans that are insured let you buy a home with a lower down payment than the lender would otherwise require. Mortgage insurance costs vary, depending on the amount of your down payment and the type of loan you select. Two government agencies - the Federal Housing Administration (FHA) and the Veterans Administration (VA) - provide insurance for certain kinds of mortgage loans. Mortgage insurance is also available from private companies. If mortgage insurance is required, your lender will select the private mortgage insurance

    • Getting help with a down payment. There are options available on many loan programs if you need help with a down payment


    • Gifts from family members - If a family member is able to help you with your down payment, he or she will be asked to supply a gift letter showing that there is no expectation of repayment. The donor and recipient should consult a tax professional to understand gift and/or estate tax implications.

    • Other sources for Down Payment money- Life Insurance, if you have a cash value policy; Stocks and bonds; Company profit sharing or savings plan; retirement savings plan (401K)

    Closing Costs

    In addition to the down payment, you will also be responsible for paying fees for the loan and closing costs. These will be required at the time of closing unless you qualify and choose to have these included in your financing. At the current time the $8,000 tax credit can be used for these costs.

    Closing costs generally range between four and six percent of your loan amount, unless you are obtaining an FHA or VA loan.  If you are obtaining a loan, the law requires the lender to provide an estimate of these costs at the time you apply. This is called the "Good Faith Estimate."


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    Evelyn Bruder
    Evelyn Bruder Las Cruces Real Estate Dream Team
    evelyn@homeslascruces.com
    (575) 650-7224

    141 Roadrunner Parkway Suite 141
    Las Cruces, NM 88011

    Steinborn & Associates Real Estate (575) 522-3698

     
    Las Cruces RealtorLas Cruces Real Estate ABRLas Cruces Homes SpecialistLas Cruces Real Estate e-PROLas Cruces Real Estate GRILas Cruces MLSLas Cruces Real Estate Cyber StarSteinborn & Associates Real Estate Top Producer