Tag Archive for: pre-qualified

Why Title Insurance is a Good Idea for Every Homeowner

December 28, 2021
mortgage blog, title insurance, preferred rate

Homeownership is one of the biggest financial commitments that most people will ever make. You’ve probably heard of title insurance, but is it really necessary? If you are applying for a mortgage, your mortgage lender will most likely require title insurance. But even if it’s not required, title insurance offers clear benefits for new homeowners. 

Related: How to fast track your mortgage and get pre-approved for your best mortgage rate

Do I really need title insurance?

When you’re ready to buy a home, you’ll want to protect your investment in every way that you can. And if you have a mortgage, your mortgage lender will most likely require different types of insurance since your home is collateral for your loan. 

This is where title insurance comes in. Title companies verify the legal history of your home and make sure your new home has a clear title free from liens, outstanding debts, and public ownership claims.

During the transfer of ownership, you don’t want to be surprised by legal problems that show up, such as back taxes, ownership disputes, forged titles, or outstanding debt. 

Title insurance is specifically designed to protect both you and your mortgage lender from any disputes over the ownership of your new home. If a dispute does come up, the title company works on your behalf to clear the claims and verify home ownership. If there are fees during the process, the title company would be responsible for paying those fees.

Without title insurance, you’d need to face the battle on your own and pay any fees that could be required.  

What kind of policy is best for me and my home?

There are two primary types of title insurance policies: one policy for the mortgage lender and one policy for the homeowner.

When you apply for a mortgage to purchase your home, the mortgage lender will very likely require title insurance. This protects them from financial complications associated with any title disputes or other ownership complications. If you pay cash for a home or do not have a mortgage, then you will not be obligated to purchase a policy specifically for the mortgage lender. 

The title insurance policy for the homeowner protects you and anyone listed on the title or deed to the home. This policy is usually not mandatory but will protect you from legal and financial disputes. This is even true if the seller presents the warranty deed, confirming the title is clear. Despite this presumed protection, anything can happen.

Related: How to FAST TRACK your mortgage pre-approval

What are my coverage options for title insurance?

After purchasing your home, title insurance can offer protection against common disputes if any issues come up. These are common situations that a new policy covers:

  • Deeds that have been altered or forged 
  • Fraudulent claims 
  • Outstanding tax liens or other debts  
  • Encroachments or property line disputes 
  • Family members who may lay claim to claim the home 

Related: Does every mortgage need an escrow account?

How do I buy title insurance?

Your local mortgage advisor or real estate agent will most likely suggest a title insurance company. Since your local mortgage advisor works with thousands of home loans every year, it’s a wise move to follow their direction. That said, the choice is ultimately yours. Before you sign, you can always talk with your mortgage advisor about recommendations and research title companies.

Before offering you a policy, a title company will perform a title search, which is a process that searches for outstanding debts, loans, or ownership complications. This ensures that the seller has clear ownership of the title and has a right to sell the property. 

Once the title company has completed its research, it will offer a quote based on its findings. However, the title company may decline to offer a policy if the property is considered high risk. 

In the rare instance that title insurance is declined, your mortgage advisor can help you through the process and discuss your options. Your real estate agent is another partner that will be very helpful.

Is title insurance included in closing costs?

Typically, title companies charge 0.5% to 1% of the home’s final sale price, and it’s due at closing. However, this number can vary from state to state. Other risk factors could also influence the cost of the policy, such as the home’s age and the property’s legal history.

Total closing costs run anywhere from 2-5% of the home loan amount and typically include title insurance, appraisal fees, property taxes, loan origination fees, and other items.

If you’d rather not pay your closing costs out of pocket, schedule a time to talk with a local mortgage advisor about possible options

Related: How to roll your closing costs into your mortgage

Taking Action

When you’re ready to buy a home and apply for a mortgage, title insurance will keep you and your home protected. Getting pre-approved for a mortgage is the best first step you can take when you’re shopping for your next home. Connect with a local mortgage advisor to discuss your loan options and save money on your mortgage. We’d love to help.

How to Get a Fast Mortgage Pre-Approval

November 30, 2021
mortgage blog, mortgage pre-approval, preferred rate

Whether you’re getting ready to move up, move out of state, or buy a home for the first time, getting a mortgage pre-approval is the best move you can make in today’s housing market.

Mortgage rates dropped again with the news of the new covid variant, but they’re expected to rise again right along with inflation. Meanwhile, housing prices are still climbing, and homeowners are buying and selling amidst cash offers and bidding wars.

Getting a mortgage pre-approval sets you up for success no matter what kind of competition you face. With a mortgage pre-approval, you’ll know exactly how much you can afford. But more importantly, you’ll have the confidence that your loan is already approved! 

What’s the Difference? Getting a Mortgage Pre-approved vs. Pre-qualified

A mortgage pre-approval is way ahead of getting pre-qualified for a mortgage. When you get your mortgage pre-approved, your mortgage lender has approved your home loan amount. To do so, the lender has reviewed all required documentation such as income, debt-to-income ratio, credit report, employment, investments, and bank account statements. For this reason, your mortgage lender gives you a formal letter of approval. Once you have an offer, underwriting can fund the loan immediately.

A pre-qualification is simpler but you run the risk of getting your loan rejected. At its core, a pre-qualification tells all interested parties that you’ll most likely for a certain amount. With a pre-qualification, the mortgage lender only requires a few pieces of general information such as your income and a current credit report. Since they don’t run all the numbers, you face the possibility that your loan won’t fund when the time comes.

When you find your dream home, the last thing you want is to watch your loan fall through after you’ve made a competitive offer. Start here.

How to Fast Track Your Mortgage Pre-approval

When you decide to get pre-approved for a mortgage, the mortgage lender does the extra work to verify your income, credit, and the documentation required for a home loan. After your mortgage is pre-approved, you’ll receive a mortgage pre-approval letter to present with every offer. As a buyer, you’ll be confident knowing that your loan is approved up to the maximum amount designated. What’s more, realtors and sellers will know that you’re a serious buyer who can close fast.

An experienced mortgage advisor will discuss your loan options, financial goals, current mortgage rates, and your ideal budget. 

Step 1: Estimate how much you can afford.

Use a mortgage calculator to find out how much you can afford. The results will only be a ballpark figure, but it can help set expectations. Decide on your price range, then connect with a mortgage advisor to discuss your homeownership goals.

Check out this mortgage calculator to see how much you can afford

Step 2: Connect with a local mortgage advisor.

Talk with a mortgage advisor as soon as you’re thinking about getting a home loan. A local mortgage advisor will understand the unique challenges of the housing market in your specific area. An advisor can offer invaluable guidance regarding your loan options, and get your documentation moving quickly through to underwriting. A mortgage advisor is your greatest asset in the loan process, so be sure to work with someone who understands your goals. An advisor can start the mortgage pre-approval process right away while you start shopping for your next home.

Find a qualified mortgage expert in your local area

Step 3: Download your free credit report.

You can download a free credit report once every 12 months. It’s a good idea to find out your credit score and check the report to see if any errors need attention. Your credit score will have a direct impact on the terms of your loan and your mortgage rate. By getting a free copy of your credit report early, you can resolve any errors ahead of time.

Click here to download your free credit report

Step 4: Gather required documentation.

Ask your mortgage advisor for a quick list to help keep things on track. An experienced mortgage advisor will provide a checklist to follow and will make sure the process runs smoothly. Most mortgage lenders require similar documentation, with a few exceptions. Start gathering paperwork you’ll need to verify income and assets, employment information, bank statements, and tax returns.

  • Identification such as a passport or driver’s license
  • Employment verification
  • Proof of income (e.g., pay stubs, W-2 statements, bonuses, alimony)
  • Tax returns for the past two years 
  • Recent bank statements
  • Investment account statements

If you’re self-employed or plan to qualify using non-standard income, your advisor can talk with you about additional information that will be required.

Related: Boost your credit score in less than 60 days

Step 5: Take your mortgage pre-approval letter & make competitive offers.

Typically, a qualified borrower can get a mortgage pre-approval letter in just a few days. Depending on your situation, it might take a bit longer, which is why it’s wise to start early.

Connect with a local mortgage advisor so you can make sure all your documentation is in order. If you have good credit and verifiable income, getting pre-approved for a mortgage is a quick process.

If you have a financial situation that is less common, getting pre-approved for a mortgage is even more important, so you aren’t faced with holdups when you’re ready to make an offer. A qualified mortgage advisor can keep things moving quickly.

Once you’ve got your mortgage pre-approval letter, it’s time to make those offers!

Taking Action

Getting pre-approved for your next mortgage is the best first step you can take, especially in today’s housing market. We can help get your loan pre-approved so you know exactly how much you can afford and make a competitive offer. Connect with a local mortgage advisor to get started. We’d love to help.

The True Value of a Mortgage Advisor

July 20, 2022
blog mortgage advisor

When you’re getting ready to buy a new home or refinance a mortgage, an experienced mortgage advisor can make all the difference. Unfortunately, every big bank and mortgage lender seems to promise the lowest rate and fastest close. So how can you tell who to trust when seeking the best mortgage lender? Mortgages aren’t one-size-fits-all anymore. 

The truth is that every homeowner has a different story and different financial goals. A qualified mortgage advisor listens, understands, and works with you to build a mortgage that meets your long-term goals and saves you money at the same time. What’s more, a qualified mortgage advisor will work hard to secure the right financing for your current budget while also helping you build wealth through home equity.

One of the best early moves you can make is to lock in your rate today by getting pre-approved.

Financing your home is one of the biggest financial commitments most people ever make. When you partner with a mortgage advisor you can be confident that they are working on your behalf to create a mortgage that fits your goals. While big banks and online lenders treat every borrower the same, our mortgage advisors build genuine relationships and often become a trusted advisor for life.

How a Custom Home Loan Can Save You Money

This might seem obvious, but mortgages are not one-size-fits-all. Loan programs are becoming increasingly specialized to meet the growing needs of homeowners with personal goals about homeownership, financial security, and building wealth.

What’s more, securing the lowest mortgage won’t always save you money or give you the lowest mortgage payment. Consider just a few costly variables that go beyond the advertised “low mortgage rate” you might see from big banks or online lenders:

  • Fees
  • Points
  • Closing costs
  • Adjustable terms
  • Variable terms
  • APR vs. Interest Rates
  • Balloon payments
  • Private Mortgage Insurance
  • Prepayment penalties

These are just a few variables that could end up costing you a lot of money in the long term. Every mortgage has fine print and there are a lot of variables to consider. This is one of the biggest reasons why working with an experienced mortgage advisor in your area is a smart move.

Custom Loan Programs to Keep You Competitive

A great mortgage advisor will also make sure that you’re ready to compete when it’s time to make an offer. They can help expedite paperwork, fast-track your mortgage pre-approval, and execute a fast close. What’s more, a qualified local mortgage advisor knows every hurdle that might come up and will make sure the entire process moves seamlessly from start to finish. 

We can even set you up with our Keys on Time™ program, which guarantees the seller that your loan will close on time or we’ll pay a $2,000 commitment fee (restrictions apply). 

Another custom mortgage solution is the CashBuys™ program, which allows you to operate like an all-cash buyer while still financing your mortgage. With the CashBuys program, you can get pre-approved for your mortgage and finance your mortgage behind the scenes, then make a real-time all-cash offer to the seller. Find out more about the CashBuys program here.

Related: How to FAST TRACK your mortgage pre-approval

How to Unlock the True Value of Your Home

Finally, a qualified mortgage advisor can help set you up with a mortgage payment you can afford and put you on the fast track to building home equity. They can also show you the true cost of homeownership over time, including historic appreciation rates and average annual costs. As a trusted advisor, they can guide you through different strategies that will help you save money over the life of your loan, as well as opportunities to leverage your home through its equity. 

The bottom line: An experienced mortgage advisor will take the time to understand your unique situation and offer custom home loan options to meet your financial goals.

Connect with your local mortgage advisor and start your application and get pre-approved for your best home loan.

Taking Action

From buying and selling property, investing in real estate, wealth-generation strategies, and providing opportunities to improve your financial situation, our trusted mortgage advisors are here to help guide you along your homeownership journey. Connect with a local mortgage advisor today to get started. We’d love to help.

Get Approved for an FHA Mortgage with 3.5% Down

July 27, 2022
mortgage blog, fha mortgage, home loans, preferred rate

An FHA mortgage is one of the best options for new homeowners and first-time homebuyers. FHA home loans have more flexible requirements for approval and offer some of the lowest mortgage rates available. What’s more, with an FHA loan, you can get approved with a lower down payment and an imperfect credit history.

FHA loans are government-backed mortgages which means they are widely available. Still, be sure to partner with a mortgage lender who underwrites FHA mortgages and has experience in your local housing market. An experienced local mortgage advisor will talk through your big picture goals and make sure your mortgage helps you build financial security. After all, a new mortgage in 2022 is one of the biggest financial commitments many people will make this year.

One of the best early moves you can make is to get pre-approved and lock in your mortgage rate.

Finding The Right Mortgage Advisor for an FHA Mortgage

For the best FHA mortgage, partner with a mortgage advisor who does custom mortgages. FHA loans are fairly straightforward, but every mortgage has subtle differences that can end up costing you thousands of dollars over the life of your home loan. Even when a lender promises a low introductory interest rate, it can cost you more through one-time fees at closing.

Partnering with a local mortgage advisor who writes custom mortgages and FHA loans on a regular basis can get you a better home loan every time. They’ll look at your whole profile — the purchase price and appraisal, along with your credit score, income, debt-to-income ratio, assets, employment history, and your down payment.

Quick tip—not all mortgage lenders are licensed to write FHA loans. So it’s best to make sure your lender writes FHA mortgages before you start working together. Make sure to check client reviews, too. Your mortgage is one of the biggest financial commitments you’ll make.

How to Get Approved for an FHA Home Loan

FHA loans are easier to qualify for compared to most other home loans.

There are three main financial buckets that lenders evaluate for your mortgage: your income, credit score, and total assets. Combined, this provides your lender with your DTI ratio (debt-to-income ratio). Your DTI is one of the most influential factors mortgage lenders use to determine risk.

Here’s a snapshot to get approved at a preferred rate:

  • 3.5% Down Payment: The minimum down payment required for an FHA loan is 3.5% of the amount you want to borrow. If your credit score is 500-579, a minimum down payment of 10% is required.
  • Minimum Credit Score: The minimum credit score to qualify for an FHA loan is typically 580, though some lenders will approve a borrower who has a credit score between 500-579. Note that you must be free of 30-day late payments within the past year and no foreclosures within the past three years.
  • Debt-to-Income (DTI) Ratio up to 45%: Your debt-to-income ratio (DTI) measures your monthly income against any recurring debt obligations and is one of the biggest factors that affects your mortgage offer. Most mortgage lenders require a DTI of less than 45% to qualify for an FHA. In addition, your mortgage payment should be below 32% of your gross monthly income.
  • Low Closing Costs: Closing costs for an FHA mortgage are the one-time fees associated with writing the loan. Prepare to pay 2%-5% of the total loan amount at closing. This is in addition to your down payment.

Related: How to FAST TRACK your mortgage pre-approval

A Few Restrictions With FHA Loans

First, the property must be your primary residence when you decide to apply for an FHA loan. It can be a single-family home or a multi-unit property (up to four units), as long as you live in one of the units full-time.

Second, FHA loans include an additional fee referred to as a mortgage insurance premium (MIP). This is similar to PMI (private mortgage insurance) that is typically added to a conventional mortgage for homebuyers who put less than 20% down.

For the mortgage insurance premium required with FHA loans, there are two fees: a 1.75% fee due at closing and an annual installment that is typically added to your mortgage payment each month. Many homebuyers roll the up-front fee into their mortgage. Also, the MIP payment is typically added directly to your mortgage payment each month for convenience.

Quick tip: many homeowners refinance their mortgage once they’ve built some home equity. Once you own at least 80% of your home, you can qualify for a number of custom loan programs that may reduce your mortgage payment. Also, you’ll be able to get rid of your mortgage insurance premium.

Connect with your local mortgage advisor and start your application and get pre-approved for your best home loan.

Summary

FHA loans offer homebuyers an opportunity to make homeownership a reality in 2022 with a down payment of 3.5% and less than perfect credit history. Be prepared for closing costs and a mortgage insurance premium that will be added to your mortgage payment. 

Finally, partner with a local mortgage advisor who is licensed to write FHA loans and specializes in custom home loans. This will give you the best of both worlds and a mortgage that will save you money.

Taking Action

Applying for an FHA loan in 2022 is a smart move for homebuyers looking for a low mortgage rate and a low down payment. From buying and selling property, investing in real estate, wealth-generation strategies, and providing opportunities to improve your financial situation, our trusted mortgage advisors are here to help guide you along your homeownership journey. Connect with a local mortgage advisor today to get started. We’d love to help.

Good News for First-Time Homebuyers

August 17, 2022
mortgage blog, first-time homebuyers, preferred rate

As mortgage rates swing upwards along with inflation, it can be discouraging to wonder if homeownership can ever be a real possibility. What’s more, as housing costs increase, many people are choosing to relocate, even change careers to move to areas with more affordable housing and a balanced lifestyle. But there’s good news for first-time homebuyers! Keep reading to learn first-hand about the benefits and advantages that are available to you.

Even if you’ve owned a home before, many repeat homeowners can still qualify as first-time homebuyers right now, so keep reading to see if you’re eligible. Homeownership might be closer than you think.

One of the best early moves you can make is to get pre-approved and lock in your mortgage rate.

How to Qualify as a First-Time Home Buyer

According to the U.S. Department of Housing and Urban Development (HUD), a first-time homebuyer meets any of the following conditions:

  • An individual who has not owned a principal residence for at least three years.
  • An individual who has owned a home (but their spouse has not) can still purchase a new home together as first-time homebuyers.
  • A single parent who has only owned a home with a former spouse while married.
  • A displaced person who has only owned a home with a former spouse while married.
  • An individual who has only owned a principal residence not permanently affixed to a permanent foundation (following applicable regulations).
  • An individual who has only owned a property that was not in compliance with state, local, or model building codes, and cannot meet compliance for less than the cost of constructing a permanent structure.

Top Mortgage Benefits for First-Time Home Buyers

A few highlights:

  • Down payments as low as 3.0%
  • Use of gift funds to help with closing costs
  • HUD-issued grants and down payment assistance
  • Government-backed loans with lower interest rates
  • Withdraw IRA funds for use without penalty
  • Tax deductions for points and origination fees

Many first-time homebuyer programs allow you to use gifted funds from family or friends, withdraw from retirement funds without a penalty, and even access down payment assistance. Talking with a mortgage expert can help you get access to the best options based on your goals.

Related: How to FAST TRACK your mortgage pre-approval

Top Home Loans for First-Time Home Buyers

One of the biggest obstacles for a lot of first-time homebuyers is the down payment. These popular first-time homebuyer mortgages can help lower your down payment and get you into a house without massive fees or unexpected costs:

  1. FHA Loan – 3.5% down payment
  2. VA Loan – 0% down payment
  3. USDA Loan – 0% down payment
  4. Conventional 97 Home Loan – 3% down payment
  5. HomeReady Home Loan by Fannie Mae – 3% down payment
  6. Good Neighbor Next Door Program – $100 down
  7. 203(k) Section Loans – 3.5% down payment

Connect with your local mortgage advisor and start your application and get pre-approved for your best home loan.

Depending on your unique situation (including your employment status and credit rating), there are custom solutions that can take advantage of government-backed loans, get you super low rates and save you money.

You can finally stop renting and start building equity in your first home. Homeownership is possible.

Down Payment Assistance for First-Time Home Buyers

FHA grant and loan programs and down payment assistance programs are available across the country, and many are state-specific.

Find out more about FHA Home Loans and Down Payment Assistance programs that are offered to first-time homebuyers available in 2021 in your state: find your state.

You can even learn about government programs that make it easier to purchase a home. Go here to check information on vouchers, state programs, and even foreclosures in your state.

Taking Action

If you’re dreaming about buying a home and you’re curious to see if you qualify for first-time homebuyer advantages, start the process today by connecting with your local mortgage advisor. Talk with your advisor and ask them to show you which home loan programs will give you the best advantages. Getting pre-approved early on can help you move fast when you find your dream home. We’d love to help.

Mortgage Rates are Rising: How Much Can I Afford?

April 27, 2022
mortgage blog, mortgage rates, how much can I afford, preferred rate

Mortgage rates are ticking up right alongside inflation, and home prices continue to rise in many areas across the country. So if you’re looking to buy a home in 2022, it can be difficult to figure out how much you can afford.

One of the top questions we’re hearing from homebuyers across the US is, how much can I afford right now?

It makes sense. The minute you start shopping for a new home, you want to know how much you can afford and what your mortgage payment will be. With rates increasing it’s hard to plan ahead. After all, the last thing you want is to make an offer on your dream home only to watch your loan fall through.

One of the best moves you can make is to lock in your rate today by getting pre-approved, which we blogged about here.

5 SMART TIPS TO DECIDE HOW MUCH YOU CAN AFFORD

If you’re looking for a ballpark figure, be sure to check out this mortgage calculator. Just a reminder that daily mortgage rates can change and mortgage calculators only offer you a general idea of what you can afford.

The truth is, when you apply for a mortgage, your borrower profile determines your mortgage rate: income, employment, credit history, assets, and debt-to-income ratio. For this reason, mortgage calculators are useful, but they are only a starting point.

The best action you can take is to connect with a local mortgage advisor. Start here to find an experienced advisor in your neighborhood.

Tip #1 – Evaluate your spending habits.

When you start shopping for a new home, look at your current spending patterns. This might seem like a simple approach, but it’s common for some borrowers to qualify for a mortgage they can’t really afford.

This is because home loans are largely based on algorithms defined by mortgage lenders to calculate risk. If your spending habits aren’t in line with your new mortgage payment, it’s better to know your limits before you apply.

Also, think about creating a new budget based on being a homeowner. For example, do you plan on hosting backyard BBQs, putting in new landscaping, or maintaining a pool? Remember, you’ll have new monthly costs such as homeowner’s insurance, property taxes, home maintenance, and unexpected repairs.

Related: How to FAST TRACK your mortgage pre-approval

Tip #2 – Follow the standard 28/36% rule.

Most financial advisors recommend putting 28% or less in monthly income toward housing. As a homeowner, this amount (before income taxes) should be able to cover all housing costs, including your mortgage payment, utilities, property taxes, and homeowner’s insurance. 

The 36% rule extends the recommended monthly allotment to include debt repayments. For this model, all housing costs plus all debt repayments (such as credit cards, auto loans, student loans) should fall at or below 36% or your monthly gross income.

Some borrowers decide to set up a mortgage escrow account, which can help create a monthly budget. With an escrow account, your mortgage payment will include your property taxes and homeowner’s insurance. For homeowners, this is a convenient option that can help to establish financial stability.

Related: Does every mortgage need an escrow account?

Tip #3 – Evaluate your debt-to-income ratio (DTI).

Your debt-to-income ratio is one of the main factors mortgage lenders use to determine risk. To determine your debt-to-income (DTI) ratio, simply measure your gross monthly income against your monthly debt obligations.

Monthly expenses such as groceries or utilities are not taken into account here. Instead, only debt obligations count toward your DTI. For example–car payments, student loans, and credit cards would be included to determine your DTI when you apply for a home loan.

If you have a debt-to-income ratio above 43%, it will be more difficult to qualify for a mortgage at a low rate. Ideally, the lower your DTI, the better home loan you’ll secure.

That said, there are a number of custom loan programs to help homebuyers qualify even with a high DTI. So talk to your mortgage advisor and start your application to lock your rate and get pre-approved for your best home loan.

Mortgage rates rising, but this doesn’t mean you have to max out on your mortgage. It’s wise to keep a buffer in your finances when it comes to how much house you can afford. An affordable mortgage payment can help you breathe easier. Connect with a local mortgage advisor to get started.

Tip #4 – Boost your credit score.

It’s always a good idea to download a free copy of your credit report. This will give you a chance to fix any errors, dispute incorrect information, and know your credit score.

One of the best ways to boost your credit score fast is to pay down credit cards (start with the highest balances), keep your credit accounts open, and don’t apply for any new credit. Be prepared to offer an explanation for anything on your credit report that is out of the ordinary. This can help you get a better mortgage.

Related: Boost your credit score in less than 60 days

Tip #5 – Plan your down payment.

If you’re able to put down at least 20% toward your new home, you’ll have more loan options at the best rate. Staying below 80% LTV (loan-to-value) typically means the mortgage lender won’t require PMI (private mortgage insurance). As a result, you’ll secure a lower mortgage payment and a better mortgage rate.

That said, there are several loan options and custom mortgages available. Many home loans for first-time homebuyers offer home loans with 0-5% down. FHA loans only require a 3.5% down payment. Conventional 97 requires only a 3% down payment.

Take the best next step and connect with a mortgage advisor to lock your rate and get pre-approved. An advisor can look at the big picture, offer the best loan options, and help you decide which home loan is best based on your homeownership goals.

Taking Action

Get pre-approved and lock in your mortgage rate now. Deciding how much you can afford can help you fast-track your mortgage pre-approval, especially in today’s housing market. When you’re ready, an experienced mortgage advisor can help you get approved, lock in the lowest mortgage rate, and secure the right home loan. Connect with a local mortgage advisor to discuss your options and save money on your mortgage. We’d love to help.

Find Out How Much You Can Afford for Your Best Mortgage

November 23, 2021
blog house with pool, mortgage, preferred rate

Mortgage rates are ticking up, inflation is rising, and home prices are steadily increasing in many areas across the country. So if you’re wondering how much you can afford on your next mortgage, you’re not alone.

One of the main questions we hear from homebuyers across the US is, how much can I afford right now based on my current salary?

It makes sense. The minute you start shopping for a new home, you want to know how much you can afford and what type of mortgage you’ll qualify for. After all, the last thing you want is to make an offer on your dream home, compete against multiple bids, only to watch your loan fall through.

One of the best moves you can make is to get pre-approved to qualify for the lowest mortgage rate, which we blogged about here.

TAKE 5 STEPS TO FIND OUT HOW MUCH YOU CAN AFFORD

If you’re looking for a ballpark figure, be sure to check out this mortgage calculator. Just a reminder that daily mortgage rates on websites rarely pan out. Once you apply for a mortgage, everything else comes into play: income, employment, credit rating, debt-to-income ratio, the home appraisal, just to name a few. For the same reason, mortgage calculators are useful, but they are only a starting point. Connecting with a mortgage advisor is the best action you can take.

Step 1: Evaluate your spending habits.

This might seem like a simple approach, but it’s not uncommon to qualify for a mortgage you can’t really afford. Loans are largely based on algorithms defined by mortgage lenders to calculate risk. If your spending habits aren’t in line with a new mortgage payment, it’s better to know your limits.

When you decide to start shopping, look at your current spending patterns. Also, think about new spending that will change once you become a homeowner. For example, do you plan on hosting backyard BBQs, new landscaping, maintaining a pool? Remember, you’ll also have new costs such as home maintenance and repairs, homeowner’s insurance, and property taxes.

Related: How to FAST TRACK your mortgage pre-approval

Step 2: Follow the standard 28/36% rule.

Most financial advisors recommend that homeowners spend 28% or less of their monthly income on housing. As a homeowner, this amount (before taxes) should cover all housing costs, including your mortgage payment, utilities, property taxes, and homeowner’s insurance. 

If you set up a mortgage escrow account, your mortgage payment will include your property taxes and homeowner’s insurance. For homeowners, this is a convenient option that helps with budgeting and financial stability each month.

Related: Does every mortgage need an escrow account?

Step 3: Evaluate your debt-to-income ratio (DTI).

Your debt-to-income ratio is one of the main levers used by mortgage lenders to determine your loan amount. To determine your debt-to-income (DTI) ratio, simply compare your monthly income (before taxes) against your monthly debt obligations.

Monthly expenses such as groceries or utilities are not taken into account here. Instead, total debt payments are the main factor. For example, be sure to include car payments, credit card payments, and any student loan debt. 

If you have a DTI above 43%, it will be more difficult to qualify for a mortgage at a low rate. Ideally, the lower your DTI, the better mortgage you’ll qualify for. There are loan programs to help homebuyers qualify even with a high DTI, so talk to your mortgage advisor to start your application and get approved for the best loan.

One caveat: You don’t have to max out on your mortgage. Just because you might qualify for a high loan amount, it’s your choice how much you decide to borrow (up to qualified limits). It’s a smart move to keep a buffer in your finances when it comes to how much house you can afford.

Step 4: Bump up your credit score.

It’s always a smart decision to download a free copy of your credit report. This will give you a chance to fix any errors, dispute incorrect information, and know your credit score.

One of the best ways to boost your credit score fast is to pay down credit cards (start with the highest balances), keep your credit accounts open, and don’t apply for any new credit. If you have anything out of the ordinary, be prepared to offer an explanation that can help you get a better mortgage.

Related: Boost your credit score in less than 60 days

Step 5: Plan your down payment.

If you’re able to put down at least 20% toward your new home, you’ll have more loan options at the best rate. This is because you’ll be below the 80% threshold that many mortgage lenders prefer since it reduces their risk. Staying below 80% LTV (loan-to-value) typically means the mortgage lender won’t require PMI (private mortgage insurance), so you’ll enjoy a lower mortgage payment and a better mortgage rate.

That said, there are several loan options and the choice is yours. Many home loans for first-time homebuyers offer home loans with 0-5% down. FHA loans only require a 3.5% down payment. Conventional 97 requires only a 3% down payment.

The best action step is to connect with a mortgage advisor and get pre-approved. An advisor can look at the big picture, offer the best loan options, and help you decide which home loan is best based on your homeownership goals.

Taking Action

Getting pre-approved for a mortgage is the best first step you can take when you’re shopping for your next home. We can help get you qualified so you know exactly how much you can afford and how to secure the lowest mortgage rate. There are several advantages depending on your homeownership goals. Connect with a local mortgage advisor to get started. We’d love to help.

Smart Tips to Get Preapproved for a Mortgage (Before That Offer)

June 4, 2021
blog young couple on couch2

As soon as you start shopping for a new home, one of the most important steps you can take is to get pre-approved for your home loan. Getting pre-approved for a mortgage can boost your buying power and give you peace of mind while you shop.

Why? When you get pre-approved for a mortgage, the lender has already approved a maximum amount for your home loan. You won’t have to worry about whether or not you’ll get approved for a different amount, and you’ll have real buying power when you make an offer.

Follow these tips and learn how to get pre-approved for a mortgage fast. Once the mortgage pre-approval process is underway, you can hit those open houses with confidence.

Getting Pre-qualified vs. Pre-approved for a Mortgage

First things first, getting pre-qualified and getting pre-approved for a mortgage aren’t the same thing, and knowing the difference can give you an edge.

Pre-qualification seems like a simple process because it requires less documentation. 

To get pre-qualified, a lender will ask you for some basic information, including your credit score, current income, and employment status. A pre-qualification is helpful as an estimate for what you can afford, but it doesn’t guarantee that you’ll qualify for a home loan for that amount.

Pre-approval is a more thorough process, but the payoff for potential buyers is significant.

When you get pre-approved for a mortgage, the lender does the extra work to verify your credit and income, along with the required documentation for a home loan. Your mortgage advisor will discuss different loan options, current mortgage rates, and your budget. 

Once your mortgage is pre-approved, you’ll have a mortgage pre-approval letter that you can present with every offer. You’ll know the maximum amount you can borrow, and the sellers will know that you’re a serious buyer who can close fast.

A mortgage lender won’t finalize the loan terms until you’ve made an offer that the seller accepts. Once the new property is in escrow, the lender will complete the terms of your home loan and get paperwork ready for closing.

Related: The truth about closing costs and no-closing-cost loans

Top 5 Questions on Getting Pre-approved for a Mortgage (Answered)

1. Do I need to get pre-approved for a mortgage before I make an offer?

The short answer is no. There is no requirement to be pre-approved for a mortgage before you make an offer.

However, getting pre-approved for a mortgage is one of the best moves you can make if you want to make a competitive offer that stands out. In today’s housing market, your offer will be stronger if you have fewer contingencies. 

For example, let’s say you make an offer on a property, and there are five other offers. In this scenario, the sellers have a lot of options. There are exceptions to every situation, but most sellers (and realtors) will want buyers who can close fast with the fewest contingencies.

A mortgage pre-approval letter shows that you’re a serious buyer who is ready to close fast. It also assures the seller that you’ve been approved for a home loan that meets or exceeds the offer.

2. What documents will I need to get pre-approved?

Getting pre-approved for a mortgage is similar to starting an application for a home loan, with a few exceptions. Mortgage lenders require varying documentation depending on the type of home loan you want, but it’s a good idea to start gathering the basic financial information early.

  • Identification such as a passport or driver’s license
  • Employment verification
  • Proof of income (e.g., pay stubs, W-2 statements, bonuses, alimony)
  • Tax returns for the past two years 
  • Recent bank statements
  • Investment account statements

If you’re self-employed or plan to qualify using non-standard income, your advisor can talk with you about additional information that will be required.

3. Does getting pre-approved for a mortgage affect my credit score?

Probably not. In most cases, getting pre-approved for a mortgage won’t affect your credit score. During the process, your lender will pull your credit report to process your mortgage pre-approval. A single request typically won’t impact your credit.

However, some buyers decide to apply with multiple lenders to compare rates and loan options. This strategy can negatively impact your credit score since multiple lenders will trigger numerous credit inquiries.

Working with an experienced mortgage advisor can help protect your credit rating. A qualified mortgage advisor can pull your credit score just once and shop for the best rates and loan options from various lenders–without affecting your credit score.

Related: How to find an experienced mortgage advisor in your local area

4. How long will it take to get a mortgage pre-approval letter?

Typically, a qualified borrower can get a mortgage pre-approval letter in just a few days. Depending on your situation, it might take a bit longer, which is why it’s wise to start early.

Connect with an experienced mortgage advisor so you can make sure all your documentation is in order. If you have good credit and verifiable income, getting pre-approved for a mortgage is a quick process.

If you have a financial situation that is less common, getting pre-approved for a mortgage is even more important, so you aren’t faced with holdups when you’re ready to make an offer. A qualified mortgage advisor can keep things moving quickly.

5. What happens if my home loan doesn’t get approved?

Once you’ve made an offer on a new home, it can be stressful waiting to find out if your home loan is approved. Even worse, rushing to get your application pushed through only to get denied.

This is one reason it’s smart to get pre-approved for a mortgage before you find your perfect home. Getting pre-approved for a mortgage gives you confidence and stability.

By getting pre-approved early, your mortgage advisor can put together customized loan options that fit your financial situation. Even if your credit isn’t perfect, there are several loan options that could be a good fit. Especially if you’re a first-time homebuyer.

How to Get a Fast Mortgage Pre-approval


Step 1: Estimate how much you can afford

Use a mortgage calculator to find out how much you can afford. The results will only be a ballpark figure, but it can help set expectations. Decide on your price range, then connect with a mortgage advisor to discuss your homeownership goals.

Check out this mortgage calculator to see how much you can afford


Step 2: Connect with a Mortgage Advisor

First, talk to a mortgage advisor as soon as you’re thinking about getting a home loan. A qualified mortgage expert can start the mortgage pre-approval process right away while you start shopping for your next home.

Find a qualified mortgage expert in your local area


Step 3: Download your free credit report

You can download a free credit report once every 12 months. It’s a good idea to find out your credit score and check the report to see if any errors need attention. Your credit score will have a direct impact on the terms of your loan and your mortgage rate. By getting a free copy of your credit report early, you can resolve any errors ahead of time.

Click here to download your free credit report


Step 4: Gather required documentation

Most mortgage lenders require similar documentation, with a few exceptions. Start gathering paperwork you’ll need to verify income and assets, employment information, bank statements, and tax returns. If you’re self-employed or plan to use non-standard income to qualify, your mortgage advisor can talk with you about additional information that might be required.

Ask your mortgage advisor for a quick list to help keep things on track. An experienced mortgage advisor will provide a checklist to follow and will make sure the process runs smoothly.

Final Takeaway

Getting pre-approved for a mortgage means that your mortgage lender has already approved the total loan amount for your home loan. Getting pre-approved will help you stand out among other potential buyers and also lets sellers know you’re serious and you’ll be able to close fast.

Shopping with a mortgage pre-approval letter will give you peace of mind and a competitive edge when you decide to make an offer. Start the process early so your lender has all the required documentation and your mortgage advisor can keep things running on time.

Next Steps

If you’re thinking about buying a home, getting pre-approved for a mortgage will give you several advantages in today’s housing market. Start gathering your documentation and connect with a mortgage advisor to discuss your homeownership goals. Getting pre-approved is a straightforward process with big payoffs. We’d love to help.

Get Preapproved for a Mortgage Before You Make an Offer

July 13, 2022
mortgage blog, preapproved, mortgage

When you’re shopping for a new home, one of the most important steps you can take is to get pre-approved for your home loan. Getting pre-approved for a mortgage can boost your buying power and give you greater confidence when you make an offer.

Why? When you get pre-approved for a mortgage, the lender has already approved a maximum amount for your home loan. You won’t have to worry about whether or not your financing could fall through and you’ll have real buying power when you make an offer.

Follow these tips and learn how to get pre-approved for a mortgage fast. Once the mortgage pre-approval process is underway, you can hit those open houses with confidence.

 

Getting Pre-qualified vs. Pre-approved for a Mortgage

First things first, getting pre-qualified and getting pre-approved for a mortgage aren’t the same thing, and knowing the difference can give you an edge.

Pre-qualification seems like a simple process because it requires less documentation. 

To get pre-qualified, a lender will ask you for some basic information, including your credit score, current income, and employment status. A pre-qualification is helpful as an estimate of what you can afford, but it doesn’t guarantee that you’ll qualify for a home loan for that amount.

Pre-approval is a more thorough process, but the payoff for potential buyers is significant.

When you get pre-approved for a mortgage, the lender does the extra work to verify your credit and income, along with the required documentation for a home loan. Your mortgage advisor will discuss different loan options, current mortgage rates, and your budget. 

Once your mortgage is pre-approved, you’ll have a mortgage pre-approval letter that you can present with every offer. You’ll know the maximum amount you can borrow, and the sellers will know that you’re a serious buyer who can close fast.

A mortgage lender won’t finalize the loan terms until you’ve made an offer that the seller accepts. Once the new property is in escrow, the lender will complete the terms of your home loan and get the paperwork ready for closing.

Related: The truth about closing costs and no-closing-cost loans

Top 5 Questions on Getting Pre-approved for a Mortgage

1. Do I need to get pre-approved for a mortgage before I make an offer?

The short answer is no. There is no requirement to be pre-approved for a mortgage before you make an offer.

However, getting pre-approved for a mortgage is one of the best moves you can make if you want to make a competitive offer that stands out. In today’s housing market, your offer will be stronger if you have fewer contingencies. 

For example, let’s say you make an offer on a property, and there are five other offers. In this scenario, the sellers have a lot of options. There are exceptions to every situation, but most sellers (and realtors) will want buyers who can close fast with the fewest contingencies.

A mortgage pre-approval letter shows that you’re a serious buyer who is ready to close fast. It also assures the seller that you’ve been approved for a home loan that meets or exceeds the offer.

2. What documents will I need to get pre-approved?

Getting pre-approved for a mortgage is similar to starting an application for a home loan, with a few exceptions. Mortgage lenders require varying documentation depending on the type of home loan you want, but it’s a good idea to start gathering the basic financial information early.

  • Identification such as a passport or driver’s license
  • Employment verification
  • Proof of income (e.g., pay stubs, W-2 statements, bonuses, alimony)
  • Tax returns for the past two years 
  • Recent bank statements
  • Investment account statements

If you’re self-employed or plan to qualify using non-standard income, your advisor can talk with you about additional information that will be required.

3. Does getting pre-approved for a mortgage affect my credit score?

Probably not. In most cases, getting pre-approved for a mortgage won’t affect your credit score. During the process, your lender will pull your credit report to process your mortgage pre-approval. A single request typically won’t impact your credit.

However, some buyers decide to apply with multiple lenders to compare rates and loan options. This strategy can negatively impact your credit score since multiple lenders will trigger numerous credit inquiries.

Working with an experienced mortgage advisor can help protect your credit rating. A qualified mortgage advisor can pull your credit score just once and shop for the best rates and loan options from various lenders–without affecting your credit score.

Related: How to find a experienced mortgage advisor in your area

4. How long will it take to get a mortgage pre-approval letter?

Typically, a qualified borrower can get a mortgage pre-approval letter in just a few days. Depending on your situation, it might take a bit longer, which is why it’s wise to start early.

Connect with an experienced mortgage advisor so you can make sure all your documentation is in order. If you have good credit and verifiable income, getting pre-approved for a mortgage is a quick process.

If you have a financial situation that is less common, getting pre-approved for a mortgage is even more important, so you aren’t faced with holdups when you’re ready to make an offer. A qualified mortgage advisor can keep things moving quickly.

5. What happens if my home loan doesn’t get approved?

Once you’ve made an offer on a new home, it can be stressful waiting to find out if your home loan is approved. Even worse, rushing to get your application pushed through only to get denied.

This is one reason it’s smart to get pre-approved for a mortgage before you find your perfect home. Getting pre-approved for a mortgage gives you confidence and stability.

By getting pre-approved early, your mortgage advisor can put together customized loan options that fit your financial situation. Even if your credit isn’t perfect, there are several loan options that could be a good fit. Especially if you’re a first-time homebuyer.

 

How to Get a Fast Mortgage Pre-approval


Step 1: Estimate how much you can afford

Use a mortgage calculator to find out how much you can afford. The results will only be a ballpark figure, but it can help set expectations. Decide on your price range, then connect with a mortgage advisor to discuss your homeownership goals.

Check out this mortgage calculator to see how much you can afford


Step 2: Connect with a Mortgage Advisor

First, talk to a mortgage advisor as soon as you’re thinking about getting a home loan. A qualified mortgage expert can start the mortgage pre-approval process right away while you start shopping for your next home.

Find a qualified mortgage expert in your area


Step 3: Download your free credit report

You can download a free credit report once every 12 months. It’s a good idea to find out your credit score and check the report to see if any errors need attention. Your credit score will have a direct impact on the terms of your loan and your mortgage rate. By getting a free copy of your credit report early, you can resolve any errors ahead of time.

Click here to download your free credit report


Step 4: Gather required documentation

Most mortgage lenders require similar documentation, with a few exceptions. Start gathering paperwork you’ll need to verify income and assets, employment information, bank statements, and tax returns. If you’re self-employed or plan to use non-standard income to qualify, your mortgage advisor can talk with you about additional information that might be required.

Ask your mortgage advisor for a quick list to help keep things on track. An experienced mortgage advisor will provide a checklist to follow and will make sure the process runs smoothly.

Summary

Getting pre-approved for a mortgage means that your mortgage lender has already approved the total loan amount for your home loan. Getting pre-approved will help you stand out among other potential buyers and also lets sellers know you’re serious and you’ll be able to close fast.

Shopping with a mortgage pre-approval letter will give you peace of mind and a competitive edge when you decide to make an offer. Start the process early so your lender has all the required documentation and your mortgage advisor can keep things running on time.

Taking Action

If you’re thinking about buying a home, getting pre-approved for a mortgage will give you several advantages in today’s housing market. Start gathering your documentation and connect with a mortgage advisor to discuss your homeownership goals. Getting pre-approved is a straightforward process with big payoffs. We’d love to help.