| Lender tips |
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| Six Ways to Accumulate a Downpayment |
One of the biggest problems facing potential homebuyers today is coming up with enough money for the down payment and closig costs.
The amount of money you have available can greatly limit or increase your purchasing power. Rather than saving all of the money yourself, there are options that may help.
Here are some ways to accumulate the necessary funds that are acceptable to most lenders. |
- Have a relative give you the money as a gift (Unless you are obtaining a government-insured loan, 5% of the sales price must come from your own funds)
- Documentation will be required to prove that the money is actually a gift and not a loan.
- Any taxpayer is permitted to give up to $10,000 per year to another person without having to pay a gift tax.
- The gift funds must be verified.
- Borrrow against your 401K or insurance policy
- You can also cash out your 401K, but you will be subject to withdrawl penalties and payment of taxes.
- If you borrow against it, the loan payment will be counted as a debt.
- Sell or borrow against an asset
- Selling an asset such as a car can help increase the amount of money you have available.
- Borrowing against an asset is also acceptable as long as you qualify with the additional debt.
- Obtain a low point or zero point loan
- This will reduce the amout of your closing cost substantially.
- Ask the seller to contribute towards the closing costs
- Your real estate agency can assist you with this when you make an offer on a home.
- Consider different loan programs
- Your loan officer can help you in determining the best loan program to suit your needs. There are a wide variety of programs that lower down payment and allow sellers contribution.
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| How to Increase Your Purchasing Power |
There are several factors that lenders take into consideration when determining how much they will lend to you for your purchase. The three most important factors are your income, debts, and downpayment. Any one of these factors can greatly impact the amount of mortgage you qualify for. Lenders are primarly concerned with the percentage of your gross monthly income that goes to your new monthly housing expense and your other monthly debts. As a general rule no more than 36% of your income should be going to your housing payment plus other monthly debt. These guidelines vary by the amount of downpayment you make and the loan program you choose.
If you have been pre-approved and you are not satisfied with the amount you qualify for, consider the following most common obstacles to qualifying for a higher loan amount. You may consider one or more of the following tips to increase your purchasing power. |
- Excessive long term debts
- Consolidate your debts by taking out one loan with lower monthly payments and pay off all debts.
- Pay off long term debts by using some of your cash and make lower downpayments.
- Selling an asset to pay off debts is another option.
- Contact your loan officer before paying any debt off.
- Inadequate income
- Income from alimony, child support, bonuses, overtme or future raises might be considered in qualifying. If you've overlooked any income, be sure to tell your loan officer.
- Find a co-mortgagor who will go on the loan with you to help you qualify.
- Make a higher downpayment.
- Consider a financing option that will allow you to stretch your purchasing power. Some of these options include FHA loans, adjustable rate, or balloon financing.
- Credit problems
- Rebuild your credit by paying off judgments, liens and collections. Contact your creditor and request that negative information be removed.
- Lack of Downpayment
- Get a gift from an immediate family member.
- Sell or borrow against an asset.
- Ask the seller to contribute towards closing costs.
- Borrow against or cash out your 401K.
- Obtain a low point or zero point loan.
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| Four Things to Avoid When Purchasing a Home |
There are four major things to avoid doing before applying for a loan and during the loan process itself. Any one of these four things can greatly impact your ability to qualify for a mortgage loan, so it is critical to avoid doing any of the following until AFTER your loan
has closed. |
- DO NOT CHANGE JOBS
Changing jobs before or during the loan process can create a real problem in qualifying you for a loan, particularly if that job is in a different line of work or at a lower rate of pay. During the loan process, it can also create time delays as the new job will need to be verified.
- DO NOT SWITCH BANKS OR MOVE YOUR MONEY AROUND
It is best to leave your money right where it is until your loan is closed. Moving your money to a new bank or even into a new account can wreck havoc with the verification process.
- DO NOT PAY OFF BILLS
Your loan officer will advise you if it is necessary to pay off bills to help you qualify for a loan. They will also show you the best way to pay off bills to make sure they have the evidence they need to prove that the bills have been paid.
- DO NOT MAKE ANY MAJOR PURCHASES
Many borrowers make the mistake of buying a new car, some furniture or making another major purchase without realizing the impact it can have on their ability to buy a home. A larger monthly payment can affect the amount of home quality for and, during the loan process itself, actually making it more difficult to get your loan approved.
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If you must do any thing listed above (even if you've just been pre-qualified for a loan) contact your loan officer. They can help you by re-qualifying you if necessary and advising you of your options. By avoiding these four things, you can look forward to a successful loan closing.
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