One of the best things you can do to help ensure that you have the best possible shot at getting the home you want to buy is to get pre-approved for a mortgage. Pre-approval is basically a promise from the lender that you’re qualified to borrow up to a certain amount of money at a specific interest rate, subject to a property appraisal and other requirements.
But there’s one step you should take before trying to get pre-approved for a home loan: check your credit reports and credit scores. By taking care of this early on, you’ll have an idea of what kinds of loans you may qualify for, and you’ll have time to clear up any mistakes or problems you find on your reports before you start home shopping.
In the pre-approval process, the lender looks closely at your credit and verifies your income (as opposed to pre-qualification, for which your information is not verified). The lender then gives you a pre-approval letter, which says that your loan will be approved once you make a purchase offer on a home, and once you submit the following documents – the purchase contract, the preliminary title information, the appraisal, and your income and asset documentation. Keep in mind, though, that pre-approval is not an absolute guarantee that your loan will be approved.
What does “pre-approval” mean?
Pre-approval means that the lender is confident that you can make the necessary down payment and that your income is sufficient to cover the mortgage payments. At this stage, only one concern remains. The lender needs to make certain that the property’s value offers sufficient collateral in relation to the loan amount. In other words, the home must be appraised for an amount more than, or equal to, the purchase price.
Why is it important to get pre-approved?
When you’re ready to make a purchase offer, both your real estate agent and the seller will want to see a pre-approval letter. This proves that you’re likely to be able to make the purchase and, therefore, you can be taken seriously. In a competitive housing market, sellers prefer a pre-approved buyer to those who, for all anyone knows, might be unable to close the deal.
How do I get pre-approved?
Before you roll up your sleeves and look into the details of getting pre-approved, you should first understand all three basic stages of the mortgage application process: pre-qualification, pre-approval, and mortgage commitment.
Getting pre-qualified is an informal process in which you are interviewed by a mortgage professional about your income and expenses. This gives you a general idea of the price range you can afford. It really doesn’t bring you any closer to securing a mortgage.
When you are pre-approved for a mortgage, it means that a lender has looked closely at your credit report, your employment history and your income and has then determined which loan programs you qualify for, the maximum amount that you can borrow, and the interest rates you will be offered. Be aware, however, that your loan representative is not the one who will ultimately approve your loan. That is the underwriter’s role, and these days underwriting is automated. In order for your loan representative to submit your application for pre-approval, you must provide your last two years’ tax returns and W-2s, your most recent pay stubs, bank account statements, and a signed authorization to order your credit report. The automated underwriting system will deliver a pre-approval letter within minutes, and will list any conditions that need to be met for full approval.
A lender will issue a loan commitment after it has approved both you and the property you intend to purchase. Having examined all of the necessary documentation to verify your ability and willingness to repay the loan, your loan representative will submit your complete application to the underwriter. The underwriter will return one of four decisions: approval, approved with conditions, suspended (which means they need more documentation from you before they can make a decision), or denied.
The process of getting pre-approved
The process of getting pre-approved is actually quite simple. All you have to do is provide your lender the documentation that they require. Be prepared to supply your loan representative with pay stubs, bank account statements, tax returns and W-2 forms from the previous 2 years, and documents to show other sources of income (which could include a second job, overtime, commissions and bonuses, interest and dividend income, Social Security payments, VA and retirement benefits, alimony, and child support). Beyond that, the ball is in the underwriter’s court.
Courtesy of credit.com
When you’re not really ready to sell, you tend to be unrealistic and say things to your friends, family and your real estate agent like this:
“I can sell it myself.”
“My home is worth more than that.”
“The buyer can fix things themselves.”
“Let’s price it higher, and see what happens.”
Let’s address these one at a time. About 15% of homes sold by their owners are successful. Sure you can sell it yourself, but your home is competing with listed properties that are effectively marketed and represented by professionals.
You may believe your home should be money in the bank. It should be worth more than you paid for it, it should never go down in value, and it should provide you with enough equity so you can trade up to another home, put your kids through college, retire, or meet some other financial goal.
There are times when you can really make out selling your home, and times when you won’t meet your goals. If you stay in your home long enough to build equity (at least 4 years or more), don’t take out equity loans or lines of credit, and you keep your home in good repair, you’re likely to make some money when you sell.
Realistically, your home is only worth what a qualified buyer will pay for it today, not what it was worth yesterday or what it will be worth tomorrow.
Last, most buyers don’t want to fix anything, so if your home needs work, you’re cutting down on the number of buyers who will make offers on your home. That leaves you with only the buyers who want a bargain or a fixer-upper, which means you won’t get top dollar for your home.
If you’re serious about selling your home, you’ll hire a professional to advise you and help you. A real estate professional will show you the current numbers and comparables and explain current market conditions and how they will impact your pricing and marketing strategies.
You’re ready to sell if you’re prepared to listen to your real estate professional and follow his or her advice. You’re ready to sell if you’re willing to do the hard work to make your home appeal strongly to buyers.
You’re ready to sell if your price your home to current market conditions, not what you believe you deserve.
Written by Blanche Evans
As the last decade has shown us, it’s not enough to get into a home of your own — you have to be able to stay there comfortably and affordably, including having enough of a cushion to ride out rough times.
That’s why the secondary market is taking a proactive interest in making sure buyers buy within their means – the true meaning of sustainability. Fannie Mae, one of the giant government-sponsored entities that buys mortgages on the secondary market, has important guidelines for you so that you not only get the right house, you can afford to stay there.
Here are Fannie Mae’s five steps to sustainable home ownership:
Get educated. The first thing you should do is to learn all you can about mortgage loans so you can apply for the best loan for your situation. Fixed-rate mortgages, adjustable-rate mortgages, FHA and VA loans, conforming jumbo loans, hybrid loans and others each have an advantage for the right borrower.
You also need to know what makes the same loan cost you more than others, from credit scores, to paying discount points to bring the interest rate down, to varying lenders’ fees.
Your real estate agent may know of local home buyer education programs, and neighborhood banks or mortgage lenders who may help you obtain a loan. Fannie Mae recommends contacting the HUD to find housing authorities in your area. Local HUD housing counselors can alert you to special buyer programs for which you may qualify, such as no-down-payment loans for teachers, law enforcement, nurses, firefighters and other workforce personnel.
Get Your Finances in Order. All government guaranteed loans such as FHA and VA and conforming loans that are sold to the secondary market to Fannie Mae and Freddie Mac are enforcing stricter guidelines.
Before you choose a home, you must know if you can qualify to buy it. You need to obtain a copy of your credit report that includes your credit score. If your credit score is low (anything below 620), take the time to improve it. If you find errors on the report, take the time to correct them.
Establish a Budget. When you apply for a loan, your lender will tell you how much you can afford based on your maximum gross income and income-to-debt-ratios. To buy safely within your means, your mortgage payments should not exceed 28 to 33 percent of your total monthly gross income. If you have debts such as student loans, car payments, child support payments, or revolving credit cards, your debts plus your mortgage should not exceed 36 to 40 percent of your total monthly gross income.
Create a monthly budget that itemizes your recurring bills, and then add in the bills you’ll receive once you own your home — yard maintenance, HOA fees, utility bills, and home maintenance and improvement. If you can pay all these bills, plus contribute to a savings plan such as a 401K, Sep IRA or other, you are ready to buy a home.
Start Saving. Depending on the type of loan you think you’ll obtain, you should have cash reserves to make your down payment and closing costs. Earnest money, a deposit to the seller, is usually required, beginning at about $500 to two percent of the purchase price. This is subtracted from your closing costs at closing.
Get pre-approved. A preapproval means you have shared your financial information with a lender. The lender has pulled your credit report and matched your income and debt ratios to various loan programs to see where you qualify best. Once you and the lender agree to a loan program, the lender will issue you a preapproval letter with a maximum amount you can spend for the loan. Use the preapproval as your best guide to shop for the right home.
A lender preapproval isn’t bulletproof. You can’t apply for a loan until you have the address of the home you ish to buy, which means the loan won’t be approved until it goes through the underwriting process. If the underwriter approves, you’ve got your loan and your new home.
Homeownership isn’t for everyone, but it may be the right move for you. If you intend to stay in your home a number of years to build equity, and you can afford your home without undue financial stress, you’re a good candidate to be a homeowner.
Written by Blanche Evans
The Freddie Mac Blog posted the costs per square-foot of housing in a few U.S. markets compared to international destinations based on information collected by website Credit Sesame.
The average cost per square foot of a home in Paris is a whopping $3,287, far outpacing the next most expensive city — London at $1,590 per square foot. The other global locations are Singapore at $1,561 per square foot, Madrid at $1,395 per square foot, Hong Kong at $1,118 per square foot and Cairo, which is fairly affordable at $574 per square foot.
New York City checks in at an average price of $1,068 per square foot — which compared to those other locations is a steal.
Even so, that’s double compared to San Francisco where the average price of a home is $520 per square foot.
Guess where it’s really cheap to live all things considered: Houston at $54 per square foot on average.
Drum roll please for the average price per square foot of a house in Austin: $137, according to the latest data from the Austin Board of Realtors.
That’s up slightly from a year ago when the average was $134 per square foot. In January 2012, that number was a modest $107 per square foot.
Yes, housing is more expensive in Austin than ever before, but it’s barely registering on the Richter Scale of housing prices from a worldwide perspective.
By Christine Ryan Jyoti
This post originally appeared on LearnVest.
It’s next to impossible to get through the home-buying experience completely unscathed. Maybe you accidentally buy a house with mold in the basement (like I did) or you snag a condo across the street from what will soon be a multiyear redevelopment project.
Been through a bad experience? Don’t beat yourself up. No matter how much you prepare, buying real estate can be an intense and messy experience. But the right preparation can also save you time, money and heartache. According to a nationwide survey by the real estate firm Redfin, as many as a quarter of homeowners wish they had never purchased their place at all. And you certainly don’t want to number among that number! Curious about what real buyers now regret, LearnVest caught up with five brave people willing to share the biggest mistake they made when buying a home—to hopefully save you big when you decide to take the plunge.
Buying Instead of Renting
Who: Jay Stevens*, 34, a blogger/entrepreneur, and his wife, 32, a Ph.D. student
In the summer of 2007, Stevens and his then fiancée (now wife) were looking to put down roots. They had hoped to find a two-bedroom apartment to rent, but wound up buying a $360,000 three-level townhouse 48 hours after first seeing it.
What went wrong?
“We were super excited, and everyone we knew were buying homes, and we thought that was ‘just what you were supposed to do’ at our age,” says Stevens.
After falling in love with the “dream house” and the surrounding community, the couple approached a lender and found out they were approved for a $500,000 loan. That sealed the deal—but Stevens says they should have given the decision more thought. “Just because a bank will give you a large amount of money, it doesn’t mean you should accept it,” he says, now knowing this in retrospect.
While they both had full-time jobs and enough in savings to handle the financial commitment of home ownership, Stevens still thinks they could have made better choices with their money.
After factoring in approximately what they would have been paying in rent, Stevens says buying the townhouse—which was significantly more space than the couple really needed—probably ended up costing them an additional $1,500 a month. Moreover, the house ended up losing $60,000 in value in a matter of two years. Stevens says he and his wife felt “stuck” and down on themselves for making an impulse move with such a large amount of money.
Because they bought at the peak of the market, the couple isn’t currently able to sell the house. But the silver lining is that Stevens and his wife ended up becoming landlords, and they’re currently renting out the house while they wait for a better time to sell it.
Hiring the Wrong Real Estate Agent
Who: Katherine Doe, 29, a marketing manager
Location: Mount Pleasant, S.C.
“I picked up and moved from Rochester, N.Y., for the low-country lifestyle and charm of Charleston,” says Doe.
In the summer of 2013, she rented a furnished condo in a Charleston suburb for four months while she looked for a two-bedroom condo to purchase.
“It’s a cutthroat, sellers market here, and I was a first-time buyer,” says Doe. “I thought I was doing everything right, following all directions and requests, and taking my agent’s advice in getting an attorney—her referral—for the process,” she adds. “I also used a mortgage broker that was recommended in the area.”
Doe bought a condo in October 2013, but things didn’t quite go as expected.
“I ended up purchasing a ‘furnished’ condo with no furniture included,” she says. “The listing indicated it was being sold furnished, so I assumed it was automatically included,” says Doe. But when her agent put together the contract, she failed to include that furniture was part of the deal. By the time Doe realized the mistake, the contract was already signed and executed, and there was nothing her lawyer could do to help.
“I had thought that a lawyer was reviewing everything—part of my naivety,” she says.
Plus, because of delays in processing her mortgage paperwork (her real estate broker disappeared on an unannounced vacation abroad), Doe also almost ended up without a place to live, as the lease on her rental was soon expiring. Luckily, she had a kindhearted landlord who allowed her to stay in the apartment for an extra month.
Doe says she should have realized that real estate transactions can go wrong, even if you think you’re completely ready. She also admits that if she’d taken the time to talk to people in the area, she would have learned that it’s common for local condo closings to be delayed and overshadowed by multimillion-dollar transactions.
Had she done this research, “I would have learned that there are always problems … and that condo sales are complicated because of HOAs [home ownership associations],” she says. “The HOA I was dealing with didn’t have a proper budget prepared for the lender to submit to the bank,” says Doe. “It took a few weeks for them to pull that together.”
Fortunately, Doe ended up getting refunds from the real estate broker, the mortgage company and the attorney due to negligence, but she puts the value of the “lost” furniture at $2,000. That money, she says, could have been used for other necessary upgrades, like installing new flooring or painting the walls.
The experience was “a challenge I pushed through and feel proud of,” says Doe. “Given that my mortgage is cheaper than renting and I’m getting all kinds of tax benefits because I work from a home office, it is financially worth it,” she adds.
Not Researching the Neighborhood
Who: Rachel Jones*, 44, an occupational therapist
Location: Bronx, N.Y.
Jones and her then-husband bought a two-bedroom condo in New York City’s the Bronx in late 2006. Although they were originally looking to buy a house, they ultimately decided on a condo because it was cheaper. With a baby on the way, they wanted to be able to afford mortgage payments on one salary while Jones took time off work to be with their child.
The couple, who has since separated, didn’t plan on staying in the condo long-term, so they didn’t research the area’s public schools.
They moved into their new home in November of 2006 and welcomed their first child two months later. “We had a ‘five-year’ plan to move out of the city and really didn’t expect to still be around after kindergarten,” explains Jones. Looking at public schools “didn’t seem relevant at the time,” she adds.
Jones has decided to stay in the condo for the foreseeable future because she is able to independently manage the mortgage payments, has a supportive network of friends in the area, and has her ex living close by.
While the unanticipated breakup changed the couple’s long-term real estate plans, Jones is now dealing with the financial consequences in her current day-to-day. Her two kids (now four and seven years old) are attending private school, an expense she hadn’t originally planned on (it’s about $13,000 annually for both children, and her partner contributes to the cost). She lives with additional unexpected costs, such as paying for garage parking (street parking is troublesome) and traveling outside of her neighborhood for decent groceries.
She suggests people spend time in the area they’re considering moving to, even if it’s not a long-term move. “Really look at all aspects—the school system, median income and education level, retail, etc.,” she says. “Visit the grocery stores, the parks,” she adds. “Watch people and their kids; spend some time in the restaurants and stores.”
What did Jones do right? “We bought so we could manage on one income if need be—smartest decision we made,” she says.
Getting Confused About Mortgages
Who: Taylor White, 35, a podcast host
Location: San Diego
When Taylor White was 22, he bought his first home for $114,000 in San Diego. Though he was excited about the purchase, “I didn’t fully understand all the ins-and-outs of getting a mortgage,” he says.
Wanting to keep his initial payments low, White opted for a two-year fixed mortgage. “When the two years was about up, I knew the rate would then fluctuate, so I wanted to refinance and get a 30-year fixed mortgage,” he says. He wanted to be able to count on the same mortgage payment each month.
“Little did I know that, even though I had a two-year adjustable rate mortgage, it came with a five-year prepayment penalty,” says White. “I had to pay extra fees as a penalty of paying it off early by getting a new loan,” he adds.
It was an expensive mistake: White ended up losing thousands of dollars. “It was a costly learning experience I will keep in mind the next time I am shopping for a loan, to make sure I fully understand the rate, terms and whether it comes with a prepayment penalty or not,” he says.
Landing a Fixer-Upper
Who: Isabel Tumblin, 40, a stay-at-home mother, and her husband, 49, a government manager
Location: Washington, D.C.
After their first child was born, Tumblin and her husband knew it was time to move out of their one-bedroom condo. They ideally wanted to buy a three-bedroom home in a decent location close to public transportation.
In August 2007 they bought a four-bedroom fixer-upper in an up-and-coming neighborhood. The charming corner row house, built in 1921, was two blocks from the metro, had a large lot and plenty of windows with views of green space. The couple saw a lot of potential in the property. “It was a house we could grow old in,” says Tumblin.
That said, they had never previously owned a house that needed serious work, and were now the owners of a home that required immediate renovation (as in, new kitchen, bathrooms, floors and electrical system).
Without doing research or getting any quotes, the couple hired a general contractor they’d used in the past for small jobs. After an aggravating renovation experience, the quality of the work ended up not meeting their standards. In addition, the couple had no idea how much electrical upgrades were going to cost.
Tumblin says they’re still paying to fix mistakes the original contractor made. She’s concerned they’ll have to redo the bathrooms and kitchen sooner than expected, which will set back other home improvement projects they’d like to take on. “More than the monetary cost is the emotional cost of having to look at the mistakes day after day,” she says.
Tumblin’s advice? “Make sure you know what you are getting into. Be very thorough during the inspection. And get at least three quotes from experienced general contractors,” she adds.
The report reveals how the largest U.S. metros compare in terms of employee satisfaction, number of employees hiring and business outlook over the past 12 months, according to local employee feedback.
The study graded cities on a five-point scale, with a score of 1.0 indicating very dissatisfied and 5.0 indicating very satisfied.
We checked out the list, and narrowed it down to the top 10 cities where employees are most satisfied.
1. San Jose, California
2. San Francisco, California
3. Washington, D.C.
4. Norfolk, Virginia
5. Salt Lake City, Utah
6. San Diego, California
7. Seattle, Washington
8. Oklahoma City, Oklahoma
9. San Antonio, Texas
10. Austin, Texas
1. Need to light a bunch of candles but don’t have a long lighter? Try a piece of uncooked spaghetti instead. “Simply light the noodle, and you can make it around your patio twice without burning your finger tips,” said Yahoo.
2. It’s inevitable there will be a power outage when you’ve just burned through your last candle.
If you have an orange and a bottle of olive oil, you can create a makeshift candle in under one minute. Check out this video to learn how.
3. Need some tunes while you’re cleaning and organizing? “Hack a bowl to blast your music,” said Yahoo. “Simply place the speaker end of the phone in a bowl (or juice glass) and press play.”
4. Make a simple stencil. It’s polka dots the easy way when you hack off a piece of your extra laundry basket and tape it to the wall.
5. When’s the last time you used that old magazine holder? Dig it out of the back of the closet and put it to good use as a storage container for your plastic wrap, baggies, and foil, or your cutting boards. The shape of the holder helps to keep different shapes wrangled and easy to access.
6. Have a broken light bulb you can’t get out of the socket? Raid your fridge. A carrot, or a potato cut in half, shoved into the socket can help you get out all the broken bits.
7. Create a prettier laundry room. Turn that unused drink dispenser into a laundry dispenser and kiss the ugly detergent bottle goodbye.
8. Company’s coming over and your bathroom mirror is a mess. Where’s the glass cleaner when you need it?! Forget the spit-shine and grab a coffee filter for clean windows and mirrors in a pinch, said Good Housekeeping.
9. And about that toilet…you can clean it even without the blue stuff. Drop in a couple of tablets of Alka Seltzer, and “wait 20 minutes. The citric acid will dissolve the grime,” said Buzzfeed.
10. Soap is great, but the only thing that can remove the smell of onions and garlic from your hands is time. Unless you use this Good Housekeeping tip: “Keep coffee grounds in a can near the sink. Rub a small amount over your hands after peeling onions, chopping garlic or handling fish to get rid of the odor.” Of course, then your hands will smell like coffee, but that’s probably preferable to fish fingers.
If you’ve got a bottle of olive oil, you have more than the beginnings of a good salad dressing. Real Simple says you can also use olive oil to:
11. Shine stainless steel
12. Keep wax from sticking to a candle holder when rubbed on the base of the holder
13. Unstick a zipper
14. Dust wooden furniture
15. Lubricate a squeaky door by dabbing oil on the hinges
Baking soda is another multi-purpose item Real Simple says you can use to:
16. “Erase crayon, pencil, ink, and furniture scuffs from painted surfaces” with a damp sponge
17. Unclog a drain. “Pour 1/2 to 1 cup of baking soda down the drain, then slowly pour 1/2 to 1 cup of white vinegar after it. Let sit for five minutes (covered, if possible). Follow with a gallon of boiling water.”
18. “Remove tough stains from enameled cast iron and stainless steel” and remove crusted food from casserole pans
19. Clean up small oil and grease spills in the garage floor or your driveway by scrubbing with a wet brush
20. Ants marching through your home? Forget the bug spray and head for the spice rack. “Cinnamon is a natural deterrent for bugs,” said Business Insider.
Written by Jaymi Naciri