Home Financing Essentials

 

A Survival Kit for Home Financing

Essentials within 3 days of buying a home

 

Congratulations on receiving an accepted offer to buy your next home.  There are many things that you will need to do in order to complete this process.  We have put together this survival kit for home financing to help you to know what needs to be done in the next few days.

 

Loan approval with an LDS Lender.  You will now need to get fully approved for your loan.  Hopefully you have already been pre-qualified or pre-approved and you will now need to get final approval including verifying your current employment, income, bank balances and an appraisal on the property that you are buying.  You should contact your LDS Lender in the next 3 days to start that process.  An Essential Documents Packet will be sent to you at the close of your purchase transaction and will include important documents that you need to keep.

 

What to expect:

 
  1. Everything is Risk based to lenders

a)      Down Payment: The more money a buyer puts into their home the less likely they are to walk away from it in times of financial crisis.

b)      Credit Score(s): Higher credit scores get better rates: Above 720 is Excellent, 700+ is good, 680 is average.  You can go as low as 620 in an “A paper” loan if you have a good down payment.  Scores under 620 require sub-prime financing and will need a minimum of 10% down payment.  The lower the score the more down payment or equity you will need to have.

c)      Loan to Value: Higher loan(s) to value will have slightly higher rates.

d)     Job stability: Lenders are looking for at least 2 years continuous employment on your job or in the same line of work.  There are some exceptions to this such as having graduated from college and now working in that type of work.

e)      Reserve Savings: Lenders want to see between 2 and 6 months of monthly PITI payments left over in your bank account(s) when you close.  PITI is Principal, Interest, Taxes & Insurance.

f)       There are many loan program variations available.  Consult with your LDS Lender to help you know which is best for you.

g)      All LDS Lenders will issue a pre-approval letter or certificate confirming that you are pre-approved for a loan to buy the home or your choice.

h)      Tips on Credit and running your Credit Report:  Your credit score is reduced when it is run so be careful how often you allow it to be run.  Discuss this with your LDS Lender.

i)        Tips for an easier close.   These suggestions will take some of the mystery out of the process and help make this important event, a pleasant one.

j)        Investment Properties: Lenders know that most homeowners will default on an investment property before they will do so on the home that they live in.  As a result investment properties are a higher risk to lenders and they will have higher rates as well as requiring a larger down payment.

 

  1. Buyer’s Remorse:

    It is common to second guess your purchase and question if you have made the right decision.  After all this is one of the biggest decisions you will ever make in this life.

a)      We will provide you with a working budget that can be used on paper or in an Excel format where totals are automatically calculated and carried forward.  We recommend that you fill out the budget and confirm that you are comfortable with replacing your housing payment with the new PITI loan payments.  The mortgage lending industry is fairly conservative and will only approve you for a loan payment that falls within their ratios where most people can make the payments.  As an LDS people we also need to factor in our church donations however, keep in mind that you’ll get a substantial tax deduction as a homeowner.  Where in addition to your church donations being fully tax deductible, so are all of your interest (this is nearly all of your house payment) and property tax payments.  Your LDS Lender will consult with you to make sure that you are buying within your means.

b)      Your LDS Lender will also give you a detailed cost estimate outlining all of the projected costs that you will incur when buying your particular home.

c)      Money for closing costs: Make sure you have enough money for the required closing costs, prepaid items such as property taxes (6 months), homeowners insurance (1 year’s premium) and impound reserves (usually 2 months of taxes and insurance).  Money for closing costs usually needs to be verified as your ”personal money” unless it is being paid for by the seller.  If you are borrowing this money the lender will want to add that payment into your qualifying debt to income ratios.  Please be sure to advise your LDS lender so that this can be addressed up front and avoid any problems at closing.  You may also be able to use “Gift Funds” from a family member.  Be sure to discuss this option with your LDS lender as well.

 

  1. Important Documents:

    Gather all of your Important documents that you might need while all of your other belongings are packed and or in transit.  Put these in a safe and accessible place.  After settling into your new home you may want to store these important papers with your income tax documents.

 

  1. Closing Agent:

    Different areas of the country have different service providers who handle the closing function.  Some are done by Attorney’s, others are done with Escrow Companies and some are done with Title Companies.  Your LDS Real Estate Agent will advise you as to who will be handling that function on your purchase and your LDS Lender will advise you on refinance transactions.

 

Personal Property Inventory: Take an inventory of your home room by room before you start packing.  We have provided the template forms to do so.  This can assist you in identifying what goes into each room of your new home.  It can also be a great resource if something is lost or broken during your move.

Tips To Make Moving Easier:  Read Moving Tips and Moving Tips Timeline.  Visit the websites on our list of Favorite Websites for moving.  They feature where to go for: school information, local utilities, comparing local phone services & rates, computer technology support, Consumer Reports, driving direction anywhere in theU.S., etc.

 

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