Why should I buy, instead of rent?
Paying rent is like lining your landlord’s pockets — you pay while they build equity, write off the interest on their mortgage and deduct their property taxes. When you own your home, it is an investment. Over the long term, the worth of a home generally increases, which means your home may make you some money when you decide to sell, or act as collateral for a loan that can pay for debt consolidation, medical bills, college tuition or a fabulous vacation. Plus, your home is yours, to paint, decorate and renovate any way you like!
The Difference between pre-approval and pre-qualification.
For many new homebuyers, the terms pre-qualification and pre-approval seem interchangeable. But they are not — and the distinction is an important one.
When you get pre-qualified, I perform a quick check to determine generally how large a home loan you can afford. Essentially, when a buyer is pre-qualified, the lender is saying it would most likely approve the buyer for “x” amount.
In order to get pre-qualified, you’ll need to provide me with some basic information on gross monthly income, other reliable reoccurring income, the balances and payments on current debts, and how much money has been saved for a down payment. Qualifying ratios are applied to those figures to determine what percentage of your gross monthly income can be used to pay for the home loan and attached expenses.
Pre-approval goes much deeper. In order to issue a pre-approval, I need to examine and verify your debt, income, savings, assets and credit report to ensure you can repay the loan amount. Where pre-qualification is a sort of educated guesstimate of the buyer’s purchasing power, pre-approval says the prospective lender would definitely be approved for the loan.
This is particularly useful when home shopping for multiple reasons. To begin with, pre-approval instantly lets you know what your actual budget is. When you begin home shopping, knowing what you can afford from the outset will help you and your real estate agent better focus your efforts to find the best home for your money. It sets the scope of your home-buying strategy.
Once you find a home within your budget that you like, being pre-approved provides you with an advantageous position over other buyers, because pre-approval assures the seller that you have access to the loan necessary to back your offer. I will provide you with a letter or certificate demonstrating that you are pre-approved for a certain amount of money, which you can provide as part of your offer.
Would you, a relative or a friend like to learn more, or get pre-qualified or pre-approved for a home loan at no cost? Please contact me and I will be happy to help you!
How does a Realtor find homes to show me and how do I know they are not missing my dream home?
When you first start working with a Realtor, after you find out the amount of home you can afford, you’ll discuss what you’re looking for in a home. The Realtor can take that information and set you up with direct emails from their MLS system so that you can get new homes meeting your criteria sent straight to your inbox. You’ll know these homes are in your price range and have what you’re looking for—and since the system sends you all homes matching your criteria you know you won’t miss any!
This process also allows for discussion between the clients before spending their valuable time to go out and view homes. You can weed through houses you receive to find the ones that truly interest you!
Personally, after getting to know my clients better, I start looking through MLS for homes they might not originally think could be their dream home, but fit their requirements and style. I can then educate my clients on the different aspects of the home that may not have been in the MLS system for them to see and how those homes can truly be exactly what they need.
Good Realtors are actively searching through listings to find their client’s dream home, and the automated MLS emails allow the clients to be even more a part of the process. Between the client’s eyes and the Realtors, the best home for the client won’t be overlooked!
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How does home staging work? Why is it worth the money?
Home staging is all about the best marketing of your home. Once you’ve decided to place your home on the market the next step is to make your home look as appealing as possible to potential buyers to get as much foot traffic to your listing as you can. The more people that view your home, the more potential buyers!
A home staging professional’s goal is to sell your home for the best possible price. We aim to extract the most equity possible out of a seller’s home, and to do this it needs to not only have what the buyer wants, but look immediately appealing to the buyer’s sense of style. This is increasingly important as more and more buyers view things online before going in person to the home.
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Actually, 92% of potential buyers preview homes on the internet before going to see them. Having a professionally staged and photographed home are critical to driving traffic to your home. It makes it more appealing to buyers on its first impression and makes it more likely they will take the time to see the property in person.
At Décor Staging our designs are geared toward the overall style and flow of a home, the architectural features, the potential buyer’s age and income, the first impression and photographic appeal and the use of color as a psychological component.
Having been in the home staging market for many years I can personally attest and give examples of how staging a listing can increase market value and return on investment. Contact me at kerry@decorstaging.com or 650-619-9052 and I can share more information with you!
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How Can I Prepare My Financials for Buying a Home?
The state of your financials is an important part of applying for a loan. Nowadays we are back to the basics of full disclosure of all income and assets. Stated income or overstating your income are not going to work and will not pass underwriting. This is actually a positive move in the right direction as recently there were too many people on all sides of transactions that did not disclose material facts, and because of this many people have lost or are losing their homes.
So, what do we need? Just remember the “two’s.”
Most lenders will need the last two years’ federal tax returns, with all schedules, W-2s and ALL pages. Next, they need your last two paycheck stubs and the last two months’ bank, brokerage and retirement account statements. Again, ALL pages must be included — including blank pages. If you are currently renting, we will contact your property management company to get the documentation we need, but if you pay an individual instead of a company, we will need copies of the front and back of the last 12 months of canceled checks.
With this information your loan process can begin.
Three most common errors when submitting documents:
1.All of the pages of the bank statements are not accounted for. Again, be sure to include blank pages and cover pages.
2.Faxed copies are often illegible. For better clarity, use a scanner to scan the documents. Do not mail! There’s lots of sensitive information in your documents and you do not want that lost in the mail.
3.The documents need to be the most current documents you can get. Two years of tax returns means the last two years, not any two years and the same goes for the other requirements!
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How Does My Credit Score and Report Affect the Loan I Can Take Out?
Where your credit stands is a very important thing to understand when you start the home buying process*. When your credit is run by a lender, they are looking to see how much of a risk lending money to you may be. Many other factors come into that, including your debt-to-income ratio, other investments you have and other financial information, but understanding your credit score and what your credit report says is immensely important.
Your credit score, also known as a FICO score, is extremely important because it directly relates to your credit history and impacts the rate that you receive on your loan. Depending on the lender’s guidelines, where your credit score stands could mean a substantial rate change or fees.
There are three different credit reporting bureaus that give your information to those who check your credit. You’re given one free credit report on yourself each year from their websites to be able to check the health of your credit. Doing this doesn’t show up on your report, but allows you to understand what is being recorded and make sure that all the activity on there is yours and not anyone else who may have stolen your identity. You can get these free reports at the following sites:
www.transunion.com
www.experian.com
www.equifax.com
Checking each at particular times of the year, like one in January, the second in May and the third in September, allows you to keep a keen eye on your report and stop any malicious activity quickly.
What does this mean for your home loan? Well, the information on your report is used to create your FICO score which is affected by things such as how many times your credit has been checked recently, how many credit cards you have, when you have been late on your payments, and late bills from hospitals, utilities and student loans. All of these things affect your score including if you do NOT have any credit … that is, if you’ve avoided credit cards or other bills that many people have. To find out your FICO score you can go to www.myfico.com and for a nominal fee they’ll let you know where you stand.
As an example, your rate today, based on a 740 credit score or above, may be 5.25% and zero points. If, with the same scenario, your credit score was at 720 there would be a ÂĽ point charge as a fee for your credit score being lower. At a credit score of 700 there is a Âľ point charge, and below 700 there is a 1 point charge. In some cases, if your credit score is below 700 the loan is unable to be processed. (Break points with credit scores are lender-specific; these quotes are based on W.J. Bradley’s current break points.)
A point is equal to 1% of your loan amount. In the scenario above, a $500,000 loan with a credit score of 740 would have no points, a 720 credit score would cost a ÂĽ point or $1250, a 700 credit score would cost Âľ of a point or $3750 and under 700 would be 1 point, or $5000. When you see how much your credit score can cost you on top of your loan amount, hopefully you see how important it is to keep your scores up!
A few tips for better credit:
- Make your payments on time. Not doing so shows on your credit report and can heavily impact your credit score.
- Watch your usage as your credit score also relates to your credit limit!
-Check your credit often through Transunion, Experian and Equifax to catch problems early and have them resolved. You can receive a free credit report through each site yearly.
-Remember that hospital bills, utilities, school loans and other non-consumer debts can show up on your credit report if they are sent to collections. All of these need to be managed with care.
* W.J. Bradley is not a credit counseling or financial advisement firm and this information is for educational purposes only and is not to be taken as guidelines or guarantees to improve your credit or financial situation or eligibility to secure a home loan.
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