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First Time Home Buyers


STOP WASTING MONEY ON RENT!
Great news for first-time home buyers!

Don’t be one of the millions of Americans throwing money away on rent.

Now is a great time to invest in a home of your own...especially for a first-time home buyer.

  • Take advantage of near-record low interest rates
  • Home prices are more affordable than ever
  • Call us today for a FREE consultation and to receive our Home Buyer’s Handbook and Credit Scoring Guide

Start building equity in a home today. You work hard for your money... isn’t it time it started working harder for you?


How much home can I afford?

Guidance at every step

Most homebuyers find that they need to finance at least part of their home purchase.

Therefore, the first stage in finding the right home is to review your personal financial situation and make an informed estimate of your true purchasing power.

Your purchasing power will depend on:

  • Your Income
  • Your Credit Rating
  • Other Monthly Expenses
  • Your Down Payment
  • Available Interest Rates

Step 1: Make a rough estimate of how much home you can afford based on your income

Here are two methods that will give you an approximate starting point for how much home you can afford. Keep in mind that these are guidelines. There are many other factors that determine how much home you can afford.

  • Method 1:
    The price of your home shouldn't be any more than 2.5 times your annual salary.

    Annual Salary Maximum Home Value
    $50,000 $125,000
    $60,000 $150,000
    $70,000 $175,000
    $80,000 $200,000
    $90,000 $225,000
    $100,000 $250,000
    $110,000 $275,000
    $120,000 $300,000
  • Method 2:
    A house payment should be no more than 25% of your gross monthly (pre-tax) income.

    Annual Salary Gross Monthly Income Maximum House Payment
    $50,000 $4,167 $1,250
    $60,000 $5,000 $1,500
    $70,000 $5,833 $1,750
    $80,000 $6,667 $2,000
    $90,000 $7,500 $2,250
    $100,000 $8,333 $2,500
    $110,000 $9,167 $2,750
    $120,000 $10,000 $3,000

Step 2: Take a close look at your credit report

Your Credit History is one of the principal measures used by a lender to determine your interest rate. The better your credit, the better lending terms your bank or lending institution will be able to offer you.

Remember that there are several factors that affect your credit report including your payment history, your current ratio of debt to income and signs of responsibility and stability. And since not all creditors report to all three agencies, it's best to order a report from all three institutions.

If there are any discrepancies on your credit report, it's important that you contact the rating agencies and have those records corrected.


Step 3: Talk to a qualified lender

After you've made a preliminary review of your finances, you'll want to talk to a qualified lender. A mortgage professional will not only be able to give you information on the best rates and terms available in the current market, but he or she can also explain to you what options you have given your unique financial situation.

Pre Approval vs. Pre Qualification

You'll also want to talk to the lender to see if you can be pre-approved or pre-qualified. Pre-Qualification is only a loan agent's opinion that you'll be able to obtain financing. No verifications are made, so formal approval is not issued. Pre-Approval means your loan application has been taken through a rigorous procedure. Pre-approval saves you the time of looking at houses you can't afford.


PROOF OF INCOME AND ASSETS:

If the loan is for a primary residence, a lender will need:

  • Drivers License and Social Security Card
  • 2 years W-2s
  • Most recent 30 days of paystubs for job listed on the application
  • 2 months bank statements, all pages, all accounts
  • Name and address of landlord if currently renting as well as copies of your cancelled rent checks
  • Ratified purchase contract on the new home and all addenda
  • Copy of the listing
  • Copy of the front and back of the cleared earnest deposit check

If you are self-employed, a lender will need:
  • Drivers License and Social Security Card
  • 2 years W-2s
  • Most recent 30 days of paystubs for job listed on the application
  • 2 months bank statements, all pages, all accounts
  • 2 years tax returns, all schedules, corporate and individual
  • If there is a gap of more than 3 months not covered by tax returns, then you will need to provide the year-to-date profit and loss statement for the business

MARRIAGE/DIVORCE:

If you are newly married or divorced, the last name on your paperwork must match your Driver’s Licence and application. If it does NOT, we will need a copy of your marriage license, separation statement or divorce decree.

ALIMONY/CHILD SUPPORT:

If you pay alimony or child support, we will need copies of that paperwork proving your monthly obligation. If you receive alimony or child support and need to claim it as income to qualify for a mortgage, we will need copies of that paperwork showing the monthly payment.

FULL-TIME STUDENT:

We will need a copy of your transcript if you are/were a full-time student during the past two years.


FAQ

SHOULD I GET PRE-APPROVED OR PRE-QUALIFIED?

It’s always a good idea to get Pre-approved with a local lender prior to starting your home search. By getting Pre-approved the lender can help you determine what you qualify for and uncover any credit issues that could keep you from making home ownership a reality.

I’M SHOPPING FOR A HOUSE. WHEN SHOULD I APPLY FOR A MORTGAGE?

When you are in the market for a new home you should always get pre-approved first by a local lender. It gives you negotiating power with the seller. Once you find a house and make an offer, it’s time to start the formal mortgage application process.

HOW LONG UNTIL MY LOAN IS APPROVED?

Once you complete the loan application, approval times will vary based on loan program. You will be asked for specific documentation. This information along with your application goes through an underwriting process. The underwriter will review all of the documentation and determine if additional information is needed. Provided all the requested documentation is received and is in good order, it takes approximately 30 days from application to closing. Certain loan programs, such as USDA, have their own underwriting and can take longer.

YOU SAY MY LOAN IS APPROVED WITH CONDITIONS. NOW WHAT?

This means that the underwriter needs additional information before they'll commit to financing your loan. Your loan officer will let you know what the conditions are. The sooner you provide the information, the sooner you may receive final approval and ultimately close on your loan.

WHAT IS A RATE LOCK?

A rate lock is a binding agreement that allows you to “lock in” a certain interest rate on your mortgage for a specified amount of time while your loan is in process.

Home and keys

YOU TOLD ME WHAT MY MORTGAGE PAYMENT IS. WHAT IS INCLUDED IN THAT AMOUNT?

Your mortgage payment includes (PITI) principal, interest, property taxes and insurance; homeowners insurance and in some cases private mortgage insurance or (PMI). Your yearly taxes and insurance are divided by 12 and paid monthly so when they come due, your lender has that money in your account to pay those policies on your behalf.

YOU MENTIONED PRIVATE MORTGAGE INSURANCE (PMI) ABOVE. WHAT IS THAT?

Lenders may require homeowners to pay PMI if they put down less than 20% of the purchase price on the home they’re buying. This policy insures the lender in case you are not able to repay the loan. PMI can be paid outside of the loan, but most choose to have it financed into the loan.

I PAID FOR MY CREDIT REPORT AND THE APPRAISAL. DO I RECEIVE COPIES OF THESE?

In most cases, yes. According to the Fair Credit Reporting Act, a lender is required to provide this to you directly and not share this information. Your credit report will be reviewed early in the application process. If there is a problem with the credit report or the appraisal, you will be quickly notified.

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