Real Estate Really

New Good Faith Estimate

A Good Faith Estimate or GFE, is a document your lender will provide you when you are purchasing a home so you understand what fees and other financial obligations you'll be facing with your new purchase.  Starting January 1, there are new guidelines for the GFE and you need to understand what you are reading.  The new format is a little more difficult to understand than the old form, but it was designed to protect the consumer.  That said, be sure you understand everything on it.

Read more....Understanding the New Good Faith Estimate

Interest Only Loans.....Again?

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Some of the major banks, like JP Morgan Chase, want to push President Obama to expand its mortgage-modification program to allow interest only periods on reworked loans.  This is their way to bring more homeowners into the initiative. 

Excuse me, but won't this only postpone defaults? What's next making homes affordable by allowing interest only loans again? 

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Pre Qual or Pre Approval

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Do you know the difference between a pre qualification and pre approval when securing financing for the purchase of a home.  They aren't the same!

A pre qualification is an informal estimate, usually done over the phone without any documentation, of the amount a borrower may afford to borrow.

A pre approval is a lender's conditional commitment to lend to a specific borrower, following receipt and review of financial records and a preliminary approval process.

Always get a pre approval letter from you lender when submitting an offer on a house.  Keep in mind this is still not a full loan committment from the lender.  You are only fully approved after all your documentation has been reviewed and accepted by the lender's underwriter.

Just something to think about!

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Getting a Mortgage

 

Buying a home can be exciting and fun.  Unless you are paying cash for a home, the most important part of your home purchase process in obtaining a loan.  I have found that many buyers, especially first time buyers, look for a home and then think about financing.  In fact, you should do the opposite.

You have to examine your finances, including your debts.  Some buyers are simply not ready for the financial responsibility of home ownership.  There are some programs that can help buyers with down payment assistance, but you should be prepared to have some money of your own for the purchase.  Let's face it, you have appraisal fees, home inspection fees, moving costs and other costs that you should be prepared to pay for outside of closing.  So look at that checking account and if you don't have enough money, start saving.

Now once you have decided its time to buy, don't just go out and start looking at houses.  Instead, shop around for a lender.  Its important to work with somebody who is reliable and honest.  You also have to feel comfortable with your lender.  You are giving them a ton of personal information, so you need to  feel a good level of trust with them.  Comparing interest rates is not the only thing to look for when choosing a loan or lender, only a small part of it. 

Look, you have to educate yourself. There are dozens of loan types and hundreds of loan programs available through thousands of mortgage brokers, bankers, lenders, finance companies, credit unions and even stock brokerage firms. But you can do the research up front to determine what might best suit you.  Do the homework.  Mortgage information sources are as vast as the number of mortgages available: Web sites, topical newspaper articles, mortgage books, consumer seminars and workshops, financial planners, real estate agents, mortgage brokers and lenders are all available to assist you along the way.

Remember, figure out if you are ready for a mortgage, determine how your mortgage will fit into your budget, and to some extent, your future obligations 15-30 years down the road.  This is a huge purchase and you need to be not only ready, but able as well. 

Financing Mistakes

Home financing mistakes happen frequently (can you say Option Arm?) so it’s important to focus on what you should not do as well as what you should do. 

Don’t choose the wrong mortgage: There is probably a slim chance that any lender is going to offer you an ARM or Option ARM type of loan these days.  But you may qualify for both a Conventional and FHA type of loan.  There are differences between these and other possible loan types, so do your homework and do your math. A little bit of research upfront may save you some dough in the long run.

 Don’t confuse "preapproved" and prequalified" with a loan commitment: Basically if you have a social security number, a name and a pulse, any lender can pre qualify/ pre approve you for a loan.  However, no loan is ever really approved unless the lender has your application and other required documents, and, you have been through their desktop underwriting process.  Even then, if you have some items that need explaining and you haven’t handled the issues with the lender, you could have a problem before or at closing.  You are only going to get a full loan commitment when the lender has checked and double checked and these days, triple checked your paperwork. So when you call an 800 number and the person on the other end of the phone says you are pre approved for a gazillion dollars, don’t believe it.

Don’t have too much credit: Lenders use a formula to calculate debt to income in a ratio.  Excessive credit is almost as bad as no credit or even bad credit. Even if you pay your bills on time, lenders tend to focus just as much on how much credit and debt you have, as they do on payment timeliness. So being up to your ears in car loans and credit cards is a sure way to be turned down for a mortgage. If you want to get a loan for a home, pay down those credit cards and reduce the limits on the cards. 

Don’t lie on your loan application: What can I say, don’t lie on the application.  The lender is going to find out the truth, so you might as well be up front in the beginning.  You’ll save yourself a lot of anguish.  Let’s face it, your lender is like your doctor.  If you have some issues, most lenders will help you get on the right path so you can get a loan.