Now is the time to lock in a lower-rate Mortgage or Refinance your current higher-rate loan. Owning a home is one of the most important decisions you'll ever make. We can guide you through the process from application to settlement for new loans or if you decide to Refinance your current mortgage.
Here are 5 reasons why it may make sense to Refinance:
- Reduce your monthly payment. Rates have dropped!
- Pay off your loan faster by switching from a 30 yr term to a 15 yr term.
- Tap into the equity in your home with a cash-out refinance.
- Drop your mortgage insurance when you have accumulated enough equity.
- Switch from a rising adjustable-rate and lock into a low fixed rate term.
We're happy to answer any questions that you have regarding our mortgage loan options, the application and approval process, or any other aspect.
Let's talk, contact us or call 410-828-4500
Home Buying Preparation
Being able to buy a home can take some forethought and preparation. The information below is a list of how to get started.
Step 1: Check your credit report and credit score
If you are thinking about buying a home, one of the first things you should do is check your credit report and your credit score. Your credit history and your credit score are the single most important factors in qualifying for a mortgage and getting the best rate available.
Credit Report: You can obtain your credit report for free at www.annualcreditreport.com. Review your report for accuracy. If you find mistakes, you can submit a request to each of the credit bureaus asking them to fix the error.
Credit Score: Credit scores range from 300-850. Minimum credit scores vary by product and lender, but generally, 620 is considered the minimum requirement to qualify for a mortgage. For a fee, you can obtain your credit score.
Your credit score fluctuates depending on your payment history, how much you owe, how long you have used credit, the types of credit that you have, and how often you apply for credit.
When you are preparing to buy a home, it's a good idea to keep your credit cards paid off, or keep the balances as low as possible. It's also wise to avoid applying for any new loans or credit cards. Doing so can negatively impact your credit score. It can also change your debt to income ratio, which is a significant factor in how much you can borrow to buy a home.
Low credit score? If your credit score is low, don't worry. There are ways that you can improve it over time. Check out the services from our partner, Greenpath Financial Wellness
Step 2: Save money
To buy a home, you'll need to save money for a downpayment, closing costs, and other related expenses. In some cases, you'll also need to have the equivalent of a few months of mortgage payments in your savings as a reserve.
Downpayment: Mortgage products vary, but generally, you can expect to need a minimum of 3.5% of the purchase price saved for the downpayment. For example, if you are purchasing a home for $200,000, a 3.5% downpayment equals $7,000. A 5% downpayment equals $10,000. Having a least 5% saved for a downpayment gives you more loan options.
Closing and other costs: In addition to a downpayment, there are costs associated with buying a home. Some of the expenses are a home appraisal, home inspection, loan processing fees, transfer and recordation fees, prepaid insurance premiums and interest, and escrows such as property taxes.
These costs will vary depending on the price of the home, where the home is located, whether or not you are a first time home buyer, and other factors.
As a rule of thumb, you can expect the closing and other costs to be around 3.5%-4% of the price of the home. In some cases, the seller is permitted to pay some of the closing costs on your behalf. When you are ready to submit an offer on a home, speak to your lender and Realtor about the possibility.
Step 3: Steady employment
Lenders want to know that your income is reliable. A long work history shows income stability. In general, they look for a 2-year history in a similar line of work. When you apply for your mortgage loan, your lender will need to verify your employment history.
In most cases, you will need to provide your pay stubs for the last 2-3 months, your W-2s and tax returns for the previous 2 years, proof of other income and recent bank statements. If you are self-employed, you will need to provide additional information.
Step 4: Get pre-qualified for a mortgage loan
Getting pre-qualified before you start shopping for a home is essential. Going through the pre-qualification process will let you know if you have the necessary savings, income, and credit score to buy a home.
It will also let you and your Realtor know how much you can realistically borrow before shopping and falling in love with a home.
The pre-qualification process is relatively easy and usually only takes a day or so. In general, it involves providing the amount of your income to the loan officer and the loan officer ordering your credit report, including your credit score. Based on those items, your lender will make a preliminary determination about how much you can borrow and what your monthly payments will be.
Determining how much "house" you can afford: Lenders use a formula called your debt to income ratio, or (DTI). Your mortgage payment is comprised of how much you borrow, what interest rate you will pay, the amount of your property taxes, and the amount of your homeowner's insurance.
Income to Debt Ratio: As a general guideline, a lender is looking for your mortgage payment to be between 28% and 30% of your gross monthly income. So for instance, if your gross income is $4,000 a month, your mortgage payment should be no more than $1200 per month (including taxes, interest, and insurance.)
Your total monthly debt, which includes your house payment, car payment, credit cards, loans, etc. should be between 36%to 40% of your gross income. As an example, if your gross monthly income is $4000 per month, your total monthly debt should be no more than $1600 per month.
When you've been pre-qualified: When you've been pre-qualified, your loan officer will provide you with a letter stating the maximum amount you can borrow.
Step 5: Start shopping for your home!
After you've been pre-qualified, you're ready to officially start shopping for a home. When you're ready to make an offer, your Realtor will create the required paperwork and submit it to the Seller's agent. Your pre-qualification letter will also be submitted.
When your offer is accepted, your Realtor and loan officer will help you navigate the rest of the steps to become a homeowner.