7 Things To Avoid After Applying for a Mortgage!

7 Things To Avoid After Applying for a Mortgage! | MyKCM

Congratulations! You’ve found a home to buy and have applied for a mortgage! You are undoubtedly excited about the opportunity to decorate your new home! But before you make any big purchases, move any money around, or make any big-time life changes, consult your loan officer. They will be able to tell you how your decision will impact your home loan.

Below is a list of 7 Things You Shouldn’t Do After Applying for a Mortgage! Some may seem obvious, but some may not!

1. Don’t change jobs or the way you are paid at your job! Your loan officer must be able to track the source and amount of your annual income. If possible, you’ll want to avoid changing from salary to commission or becoming self-employed during this time as well.

2. Don’t deposit cash into your bank accounts. Lenders need to source your money and cash is not really traceable. Before you deposit any amount of cash into your accounts, discuss the proper way to document your transactions with your loan officer.

3. Don’t make any large purchases like a new car or new furniture for your new home. New debt comes with it, including new monthly obligations. New obligations create new qualifications. People with new debt have higher debt to income ratios… higher ratios make for riskier loans… and sometimes qualified borrowers no longer qualify.

4. Don’t co-sign other loans for anyone. When you co-sign, you are obligated. As we mentioned, with that obligation comes higher ratios as well. Even if you swear you will not be the one making the payments, your lender will have to count the payment against you.

5. Don’t change bank accounts. Remember, lenders need to source and track assets. That task is significantly easier when there is consistency among your accounts. Before you even transfer money between accounts, talk to your loan officer.

6. Don’t apply for new credit. It doesn’t matter whether it’s a new credit card or a new car. When you have your credit report run by organizations in multiple financial channels (mortgage, credit card, auto, etc.), your FICO score will be affected. Lower credit scores can determine your interest rate and maybe even your eligibility for approval.

7. Don’t close any credit accounts. Many clients have erroneously believed that having less available credit makes them less risky and more likely to be approved. Wrong. A major component of your score is your length and depth of credit history (as opposed to just your payment history) and your total usage of credit as a percentage of available credit. Closing accounts has a negative impact on both those determinants of your score.

Bottom Line

Any blip in income, assets, or credit should be reviewed and executed in a way that ensures your home loan can still be approved. The best advice is to fully disclose and discuss your plans with your loan officer before you do anything financial in nature. They are there to guide you through the process.

3 Tips for Making Your Dream of Buying A Home Come True

3 Tips for Making Your Dream of Buying A Home Come True [INFOGRAPHIC] | MyKCM

Some Highlights:

  • Setting up an automatic savings plan that saves a small amount of every check is one of the best ways to save without thinking too much about it.
  • Living within a budget right now will help you save money for down payments while also paying down other debts that might be holding you back.
  • What are you willing to cut back on to make your dreams of homeownership a reality?

Buying a House This Year? This Should Be Your 1st Step!

Buying a House This Year? This Should Be Your 1st Step! | MyKCM

In many markets across the country, the number of buyers searching for their dream homes outnumbers the number of homes for sale. This has led to a competitive marketplace where buyers often need to stand out. One way to show that you are serious about buying your dream home is to get pre-qualified or pre-approved for a mortgage before starting your search.

Even if you are not in an incredibly competitive market, understanding your budget will give you the confidence of knowing whether or not your dream home is within your reach.

Freddie Mac lays out the advantages of pre-approval in the ‘My Home’ section of their website:

“It’s highly recommended that you work with your lender to get pre-approved before you begin house hunting. Pre-approval will tell you how much home you can afford and can help you move faster, and with greater confidence, in competitive markets.”

One of the many advantages of working with a local real estate professional is that many have relationships with lenders who will be able to help you through this process. Once you have selected a lender, you will need to fill out their loan application and provide them with important information regarding “your credit, debt, work history, down payment and residential history.”

Freddie Mac describes the ‘4 Cs’ that help determine the amount you will be qualified to borrow:

  1. Capacity: Your current and future ability to make your payments
  2. Capital or cash reserves: The money, savings, and investments you have that can be sold quickly for cash
  3. Collateral: The home, or type of home, that you would like to purchase
  4. Credit: Your history of paying bills and other debts on time

Getting pre-approved is one of many steps that will show home sellers that you are serious about buying, and it often helps speed up the process once your offer has been accepted.

Bottom Line

Many potential homebuyers overestimate the down payment and credit scores necessary to qualify for a mortgage. If you are ready and willing to buy, you may be pleasantly surprised at your ability to do so today.

Taking Fear Out of the Mortgage Process

Taking Fear Out of the Mortgage Process | MyKCM

A considerable number of potential buyers shy away from jumping into the real estate market due to their uncertainties about the buying process. A specific cause for concern tends to be mortgage qualification.

For many, the mortgage process can be scary, but it doesn’t have to be!

In order to qualify in today’s market, you’ll need a down payment (the average down payment on all loans last year was 5%, with many buyers putting down 3% or less), a stable income, and good credit history.

Throughout the entire home buying process, you will interact with many different professionals who will all perform necessary roles. These professionals are also valuable resources for you.

Once you’re ready to apply, here are 5 easy steps that Freddie Mac suggests to follow:

  1. Find out your current credit history & score – even if you don’t have perfect credit, you may already qualify for a loan. The average FICO Score® of all closed loans in September was 731, according to Ellie Mae.
  2. Start gathering all of your documentation – income verification (such as W-2 forms or tax returns), credit history, and assets (such as bank statements to verify your savings).
  3. Contact a professional – your real estate agent will be able to recommend a loan officer who can help you develop a spending plan, as well as help you determine how much home you can afford.
  4. Consult with your lender – he or she will review your income, expenses, and financial goals in order to determine the type and amount of mortgage you qualify for.
  5. Talk to your lender about pre-approval – a pre-approval letter provides an estimate of what you might be able to borrow (provided your financial status doesn’t change) and demonstrates to home sellers that you are serious about buying!

Bottom Line

Do your research, reach out to professionals, stick to your budget, and be sure that you are ready to take on the financial responsibilities of becoming a homeowner.

What You Need to Know About the Mortgage Process

What You Need to Know About the Mortgage Process [INFOGRAPHIC] | MyKCM

Some Highlights:

  • Many buyers are purchasing a home with a down payment as little as 3%.
  • You may already qualify for a loan, even if you don’t have perfect credit.
  • Take advantage of the knowledge of your local professionals who are there to help you determine how much you can afford.

You DO NOT Need 20% Down to Buy Your Home NOW!

You DO NOT Need 20% Down to Buy Your Home NOW! | MyKCM

The Aspiring Home Buyers Profile from the National Association of Realtors (NAR) found that the American public is still somewhat confused about what is required to qualify for a home mortgage loan in today’s housing market. The results of the survey show that the main reason why non-homeowners do not own their own homes is because they believe that they cannot afford them.

This brings us to two major misconceptions that we want to address today.

1. Down Payment

A recent survey by Laurel Road, the National Online Lender and FDIC-Insured Bank, revealed that consumers overestimate the down payment funds needed to qualify for a home loan.

According to the survey, 53% of Americans who plan to buy or have already bought a home admit to their concerns about their ability to afford a home in the current market. In addition, 46% are currently unfamiliar with alternative down payment options, and 46% of millennials do not feel confident that they could currently afford a 20% down payment.

What these people don’t realize, however, is that there are many loans written with down payments of 3% or less.

Many renters may actually be able to enter the housing market sooner than they ever imagined with new programs that have emerged allowing less cash out of pocket.

2. FICO®Scores

An Ipsos survey revealed that 62% of respondents believe they need excellent credit to buy a home, with 43% thinking a “good credit score” is over 780. In actuality, the average FICO® scores for approved conventional and FHA mortgages are much lower.

The average conventional loan closed in May had a credit score of 753, while FHA mortgages closed with an average score of 676. The average across all loans closed in May was 724. The chart below shows the distribution of FICO® Scores for all loans approved in May.

You DO NOT Need 20% Down to Buy Your Home NOW! | MyKCM

Bottom Line

If you are a prospective buyer who is ‘ready’ and ‘willing’ to act now, but you are not sure if you are ‘able’ to, let’s sit down to help you understand your true options today.

The Cost of Renting vs. Buying

  • The Cost of Renting vs. Buying [INFOGRAPHIC] | MyKCM

Some Highlights:

  • Historically, the choice between renting or buying a home has been a tough decision.
  • Looking at the percentage of income needed to rent a median-priced home today (28.8%) vs. the percentage needed to buy a median-priced home (17.1%), the choice becomes obvious.
  • Every market is different. Before you renew your lease again, find out if you can put your housing costs to work by buying this year!

Have a great weekend!

Lee McLain