Joseph Reidy's Blog
If you plan to buy a house, you'll want to apply for a mortgage before you launch your house search. That way, you'll have your finances in order and can narrow your home search accordingly.
Ultimately, there are several steps that you should take prior to applying for a mortgage, and these are:
1. Check Your Credit Score
A bank or credit union likely will analyze your credit score as it reviews your mortgage application. However, you can find out your credit score free of charge before you kick off the mortgage application process.
You are eligible to receive a free copy of your credit report annually from each of the three credit reporting bureaus (Equifax, Experian and TransUnion). Submit a request for your credit report today, and you can receive comprehensive insights into your credit history.
2. Examine Your Earnings and Debt
How much you currently earn and your outstanding debt could play pivotal roles in your ability to acquire a favorable mortgage. Thus, you'll want to examine these factors closely so that you can better understand how lenders will view your mortgage application.
Also, if you have lots of outstanding debt, there is no need to worry. If you allocate the necessary time and resources to learn about your debt and pay it off, you can increase the likelihood of obtaining a favorable mortgage.
3. Establish a Budget
Although a mortgage may prove to be essential to buy a house, it is important to consider various homebuying expenses as well.
For example, you may need to pay closing costs, home inspection fees and other expenses throughout the homebuying process. If you're worried about having the necessary finances to cover these costs, you may want to start saving money for them as soon as possible.
It often helps to account for the costs associated with cable, electricity, internet and other home must-haves too. The aforementioned homeownership expenses can add up quickly, but those who plan ahead can ensure they have sufficient funds available to cover these costs.
As you prepare to search for a house, it usually is a great idea to hire a real estate agent. This housing market can help you prepare for each stage of the homebuying cycle and ensure you can achieve your homebuying goals.
Typically, a real estate agent will meet with you and find out what you want in a dream house. This housing market professional then can keep you up to date about residences that match or exceed your expectations.
Perhaps best of all, a real estate agent understands that no one should be forced to overspend to acquire their ideal residence. As such, this housing market professional will make it simple for you to discover a terrific house at a budget-friendly price.
Lastly, don't hesitate to reach out to a real estate agent for guidance before you apply for a mortgage. With a real estate agent at your side, you can learn about lenders in your area and find one that can provide you with the financing that you need to purchase your dream house.
Figure out your financesYou should be an expert at you and your significant other's personal finances if you are thinking about buying a home. The first thing to look at is your income and expenditures. Put the following information in a spreadsheet:
- Total monthly income
- Total monthly expenditures (bills, gas, food, etc.)
- Total monthly savings
- Total savings and assets
- Credit and FICO score (request both of these online)
Lock Down Your FinancingThere are several types of mortgages that you'll need to choose from, and you'll want to learn about fixed and adjustable mortgage rates. This information should be informed by your long-term plans. Are you looking for your first home or your forever home? If you don't plan on fully paying off the home you might look for a low, adjustable rate while you earn money. But if you want to stay in your home until it's paid off, a fixed rate might be better for you.
Finding and buying your homeOnce you've determined your price range, start thinking about things like location and the kind of home you can afford. If you're handy with tools and have the time, it might be in your best interest to buy a home than needs some work at a lower cost. If you'd rather put in more hours at work, go with the home that needs less work and save money that way. Depending on whether or not you're in a buyer's market or a seller's market, the ball can be in your court or the seller's. In a seller's market, which is more likely today in many parts of the country, the seller will have more leverage in negotiations, including closing dates and move-out dates. Due to high competition, you should also be prepared to miss out on some offers. But be patient, and you should find the home you're looking for.
No income verification mortgage loans sound like a great idea. Also known as stated loans, these are easier to obtain than traditional mortgages. You won’t have to go through endless amounts of paperwork that traditional mortgages require. Think again. These types of loans are high risk and borrowers may have a hard time paying these loans back. Many lenders have removed these kinds of loans from their list of options. In certain circumstances, these loans can work for you, but you have to do your homework.
Where Can You Get A Stated Loan?
Some lenders still provide these stated loans with no verification process required. Unlike earlier times, these loans are now pretty difficult to obtain. Typically, this type of mortgage is geared towards the self-employed and requires a large down payment. Also, the borrower must have a very good credit score to be considered for the loan.
Are Stated Loans Unaffordable?
Since these loans come at very high interest rates, they are often seen as unaffordable due to the high monthly payment. Stated loans can have double the interest rate of what the current available mortgage rates are. However, if you don’t have many options, or are in a hurry to get a home and have money in the bank, it could work well for you.
Could A No Income Verification Loan Be Right For You?
If you really want a home loan, the first step is to be truly honest about your income. If you find a beautiful home and know that it’s out of your price range, you could risk defaulting on the loan.
To truly understand what you can afford, you’ll need to figure out all of your monthly expenses including taxes, mortgage insurance, phone bills and grocery bills. This will give you a full picture of your finances. Once you look at all of these factors, you may find that it does make the most sense for you to get a no income verification loan.
Deciding On The Type Of Loan You’ll Get
If you find that you need a lower monthly payment, it may make more sense for you to go after a traditional home loan. If you’re self-employed and know that your options are limited, a stated loan certainly is an option for you, you’ll just need to understand the risks of the entire process. You’ll also need to have a bunch of documents ready for the lender once you decide to go for the home loan. You can compare the costs of a no income verification loan to a traditional mortgage. Then, you can ask your lender what they’ll need from you in order to verify everything for the traditional mortgage. Any good broker can help you through your decision-making process. You’ll want to be well informed and compare all of the programs along with their fees. You should get recommendations on a lender who has the knowledge and experience to help you find the home loan that’s right for you.
There’s numerous reasons why the name on a title to a home may not be the same as the name that’s on the mortgage loan. These reasons include:
- Only one buyer had stable credit
- Only one person was on the loan application
- One person was released from the mortgage
No matter why this is the case, having your name on the mortgage but not on the title to a home can affect you and people residing in the home in different ways.
Why Would Only One Name Be On The Mortgage?
If people are looking to get a home or refinance a home, but only one person has good credit a decision must be made. For the best possible mortgage rates, you’ll want to person with the best credit to be the primary loan holder. This may mean that you need additional legal documents in the process.
The person with lower credit may still be able to have their name placed on the title to the home. Anyone who plans to contribute financially to a home, even if not on the mortgage, should place their name on the title. This would be one instance when a name would be on the title to a home and not on the mortgage loan. In this case, a person has property rights, but no legal-financial responsibility to the home. It’s important to agree on the home arrangement that you’re considering. This would be done through a will or a legal contract. This way, all parties are protected in regards to the ownership of the home should something happen to the individual whose name is on the mortgage.
Legal Things To Consider
Those who are listed on the mortgage are the people who are responsible for house payments. If a person’s name isn’t on the mortgage, it doesn’t release them from complete responsibility from the home. If your name is on the title to the home but not on the mortgage, the bank generally has first dibs on the home if there’s a lapse in payments. If you want to keep living in the house, you’ll have to keep making payments on the home. If you can’t make the mortgage payments, you’ll risk going into foreclosure.
An issue that can come up if your name is not on the mortgage is that you cannot use the home you’re living in as a tax deduction. Even if you make payments on the home, in order for you to get tax benefits, your name must be on the mortgage stating that you’re legally responsible for the home. If you are paying for the mortgage because your name appears on the title to the home, you aren’t legally entitled to pay, giving away your rights to tax benefits. If you’re married, filing jointly, and only one name appears on the mortgage, however, you can use this as a tax deduction. This becomes an issue if two unmarried people buy a home together.
Ask For Legal Assistance
Whenever you have an issue with the title of your home or with names on the mortgage, it’s good to consult legal counsel. The attorney can assist you in determining who is legally responsible for the home and if the people listed on the title of the home are correct. This can help save you from trouble at a future date.
Since credit scores and loans can get messy at times during the home buying process, it’s good to understand all the implications of home mortgages and titles.
Your own gut may be a great check when buying a house. You know if a deal feels right for you or not. Partner with a licensed realtor who holds herself to the highest ethical standards and you may never have to worry about being part of a kickback or a mortgage fraud scheme. You may get the best prices on each part of the home buying and home owning process.
Empower yourself when buying a house
That includes getting the best deal on your closing costs, mortgage insurance rates, property appraisal costs, title fees, homeowner's insurance rates and mortgage fees. However, unless you live in the house that you buy with this realtor until you decide not to own a house anymore, benefits of working with the above the board realtor will run out.
To truly gain while buying a house, you need to trust yourself. You need to learn the ins and outs of the mortgage process. This doesn't mean that you need to know as much as a real estate with an active license. But, to protect yourself against mortgage fraud and other disadvantages, it does mean that you should know about mortgage elements like:
- Real estate agent commissions and fees, including the average and competitive realtor commissions in areas that you are looking for a house in
- Homeowner's association fees and costs that go to embezzlers (This can happen if homeowner's association board members aren't keeping a watchful eye on balance sheets, payments and bank records.)
- Down payments (In addition to knowing what the average down payment percentage is, you should know how down payments will impact your monthly mortgage installments.)
- Home inspection fees (Again, find out what the average rate for home inspection fees are in the area where you want to buy a house.)
- Mortgage insurance costs (This costs is separate from homeowner's insurance.)
- Insurance to protect your house and land, including financial protection against natural and human caused damages.
- Fees associated with the mortgage application itself (Get clear about costs that you are responsible for paying that you won't be reimbursed.)
- Values of houses in the area that you want to move into (It doesn't hurt to run comparables on houses in the area yourself.)
Know what you're getting into when buying a house
These additional costs may not be directly associated with buying a house, but they will impact your ability to make your monthly mortgage payments. At the top of the list are utility costs. Electricity and running water aren't the only utilities you may be responsible for after you buy a house. Other utility and home related costs include sewage and trash pickup fees.
After you buy a house, you may also be required to pay for gas, telephone services, oil,cable television and Internet services. You'll also have to pay to maintain your home. Maintenance costs cover repairing appliances like the refrigerator,washing machine or air conditioner.
Make sure that you can pay these costs comfortably before you take on the responsibility of owning a house. It can keep you from falling behind in your mortgage payments. It can help you to sleep good at night.