by Cat Alford, August 23, 2017 in Home Buying/Selling
Buying a home is a significant accomplishment for anyone because the process takes planning, saving and a good credit score. For single women, becoming a homeowner can be an even greater accomplishment – but also more difficult when you’re relying on one income and one credit report.
To make the process as smooth as possible, here are 10 tips for single women looking to buy a home.
Check Your Credit Report
One of the first steps to prepare for homeownership is to check your credit report. Your credit report will show you a significant amount of financial information from the past few years.
Every account you have now or had in the past few years will be on your report. You should see student loans, credit card accounts, car loans and any other loans you might have.
Your credit report also shows if you paid these accounts on time or if you were late on any payments. If you have late marks on your account, mortgage lenders will likely ask you about them – I had one late payment on my credit report that was four years old. My mortgage lender asked me to explain what happened (it was an oversight on my part all those years ago!).
So, even if you have a high credit score and a near perfect history, prepare to explain any late payments.
Fix Adverse Accounts
Adverse accounts are anything negative that you see on your credit report. They’re usually in a separate section near the top of the report.
You might be surprised with what you see there – I once had the public library report me to collections for not returning a book. I had no idea they did that until I saw my credit report.
Adverse accounts damage your credit score and don’t look good to lenders. After all, they want to make sure you’re going to pay your mortgage on time each month, so having evidence of late payments or accounts in collections looks bad.
If you don’t have any adverse accounts, that’s great. If you do, go through them one at a time. Make sure they’re legitimate, call each lender or collections agency and try to get them removed or resolved before applying for a mortgage.
Determine Your Budget
Owning a house is a significant financial decision. It adds up to more than a mortgage payment. You have to consider home insurance, utilities and unexpected expenses.
Many potential homeowners think buying a home is cheaper than renting because they only consider the monthly payments. However, as a homeowner, you have to be prepared to fix issues as they come up.
The first week I moved in my first house, the dishwasher broke, the hot water heater broke and the electricity went out. So far (knock on wood), I haven’t had any issues since then, but it was a serious reality check.
Right after I bought my house, I was low on cash since I just paid closing costs. So, as a first time homeowner, I was scared when things started breaking. Luckily I repaired everything, but it was quite an initiation into homeownership!
That’s why determining your housing budget is so important ahead of time. Even if you can afford a nicer or bigger house, make sure to leave yourself lots of wiggle room for potential costly home issues.
Save for a Down Payment
Once you know your price point for your home (or even before), it’s time to start saving for a down payment. Ideally, you may want to save up 20% to use as a down payment to avoid private mortgage insurance. So, if you want to buy a $100,000 home, you should save $20,000 as a down payment.
Though saving this amount of money could take months or years, it might be worth the wait to get the home you want and a mortgage loan with the best terms and interest rates possible. There are also lower down payment options available if 20% is daunting!
Get Preapproved
Once you have a down payment, it’s time to get a preapproval. You should do this before you start shopping for a home so you’ll know what your realistic budget looks like.
When you get preapproved, you’ll give your financial information to a lender, who will then determine whether you’re eligible for a loan. As long as you’ve fixed adverse accounts on your credit report, have a high credit score and have a down payment, you should be on your way to qualifying for a mortgage.
Practice Your Mortgage Payment
Once you get preapproved, you should have an idea of what your future mortgage payment will be. As you shop around for houses, “practice” your mortgage payment. If your rent is $800, but your mortgage payment will be $1,200, practice paying $1,200 and put the difference in savings.
Research Neighborhoods and Real Estate Agents
It’s important to research neighborhoods and real estate agents. You want to choose a neighborhood that’s safe but also affordable. Try to determine the vibe of the neighborhood. Do you want to live somewhere with a young and lively crowd, or do you want a neighborhood filled with families?
When it comes to real estate agents, get recommendations from friends and family. You want a real estate agent with experience helping first-time single home buyers. You also want someone patient who will answer your questions and who won’t direct you to a home you can’t afford.
Bring a Trusted Friend or Family Member to House Hunt
House hunting can be a confusing process. For that reason, bringing a trusted friend or family member to house hunt with you can be helpful. Invite someone who has been a homeowner before to help you determine the best house for you.
Check and Double Check Before Closing
Once you make an offer on a house and it’s accepted, you’ll start to prepare for your closing. During this time, it’s highly recommended you consider a home inspection. A home inspection will show any potential issues with your home. If the home has issues, you can ask the sellers to make repairs so the home is in good condition when you buy it.
Make sure you send your down payment to the correct company. There’s been a rise in fraud lately when it comes to transferring money before closing on a home. Then, check and double check with your agent or lender. Make sure you’ve signed all the necessary documents and have all your financial ducks in a row.
Enjoy – You’ve Earned This
The last tip I have is to really enjoy the moment. If you’re a single woman, you’ve overcome the odds to save and buy a home by yourself. It’s not an easy process and it can be long.
So, once you finally close on your home and you get the key to a place you can call your own, enjoy! You’ve earned this.
by Kevin Graham, August 8, 2017 in Home Buying/Selling
So you’ve decided you’d like to buy a home, and you’ve looked around at different houses, but the question is – where do you begin, and how do you get a loan?
If you’re buying for the first time, the loan process can be confusing and unfamiliar. Many questions might arise: Is my credit score high enough to qualify for a loan? How long does it take? Where do I start?
To help with all those concerns and more, here’s a detailed step-by-step outline of what you can expect when you begin the home-buying process.
Get a Preapproval
The first step we recommend any home buyer take is getting a preapproval. The idea behind a preapproval is simple: Before checking out what’s on the market, you should be confident that you know how much a lender will loan you.
When you get preapproved, your credit is pulled. This gives the lender two things: your actual credit score and a look at the data on your credit report. You need to have a credit score of 580 to qualify for a loan through the Federal Housing Administration (FHA) and a 620 for a conventional loan through Fannie Mae or Freddie Mac. A VA loan backed by the U.S. Department of Veterans Affairs doesn’t require a specific score, but lenders can set guidelines themselves. At Quicken Loans, we look for a credit score of at least 620 for VA loans.
In addition to your credit score, lenders will see how much debt you’re carrying and whether you have any bankruptcies or collections on your record. If you do have something like this on your record, it’s still possible that you could get a mortgage, but you might only qualify for certain loan options.
The lender will also ask about your income and assets upfront to calculate how much you can afford based on a debt-to-income (DTI) ratio. The more information you can give your lender upfront, the stronger your preapproval will be because both you and the seller can have confidence that your loan is more likely to be approved in the end.
Your income is verified when you give the lender your W-2s and 1040s. Bank statements also show assets. These are key in making sure you have enough reserves to make your mortgage payment for a while if you’re between jobs.
You’ll also be matched up with a preliminary loan program, although this could change later in the process.
Income and asset documentation can be provided later at the underwriting stage, but submitting it upfront will likely give you a better understanding of how much you can afford to pay.
Budget
Your preapproval letter will tell you how much money a lender is willing to let you borrow. However, just because you can borrow a certain amount doesn’t mean you have to push your budget to the limit. You can put various purchase prices into a mortgage calculator to come out with a realistic estimate of a monthly mortgage payment. (You can also add the cost of taxes and insurance if you know what they’re likely to be.)
You want to make sure you have enough money every month for savings, emergencies, investments and other expenses. Don’t forget to leave a little bit of room for fun money as well!
House Hunting
Going out and looking at homes is usually the part of the home buying process that’s the most fun. You get to imagine what your life would be like in each house you walk through. Even here, though, you’re going to want to make sure you start with a solid game plan.
Depending on your budget, it may or may not be possible to find a home with every feature you want. With that in mind, make a list of your top priorities for the homes you’re looking at.
Once you have your wish list in place, we recommend hiring a real estate agent. They know the market. They see a ton of homes every year and can work with you to find something that meets your needs and is within your budget. Our friends at My Happy Home Solutions can help match you up with an agent who can work with you to find a house that matches your needs.
Making an Offer
Let’s say you’ve found the perfect house. It’s now time to make an offer. There are several things to think about here. You’ll work with your real estate agent or attorney to write the purchase agreement, includes your offer for the purchase price as well as a list of anything from the house that you might want included in the sale. Although these types of details are negotiable, sellers are likely to want an agreement with very few strings attached – one that’s as clean as possible. This may mean avoiding things like asking for seller concessions and for furniture to be included in the deal.
It’s also at this stage that you’ll make an earnest money deposit. This is a percentage of the purchase price given to the seller when the offer is accepted to show that you’re serious about the property.
Underwriting
Once your offer is accepted, the purchase agreement is sent back to your banker. The banker will review your options to make sure you’re in the right loan program for you. Once that happens, your loan is sent through for underwriting.
During the underwriting process, your income, assets and employment are verified and compared to the information on your credit report. Lenders always pullsyour credit at the beginning of the process, but a preapproval lasts for just 90 days. If you’ve been house hunting for a while, it may be necessary for the lender to pull your credit again. Try not to take on additional debt during the house hunting process. Doing so while trying to buy a house at the same time could put your financing in jeopardy.
It’s also during this time that your lender may ask for additional or updated documentation if they need it for approval purposes.
Appraisal and Inspection
Your lender will set up a home appraisal as you’re going through the underwriting process. The appraisal protects both the lender and mortgage investor (Fannie Mae, Freddie Mac, FHA, etc.) as well as the buyer of the property.
During the appraisal process, the home is evaluated against comparable properties in the area. That means that if the property you’re buying is a two-bedroom ranch with a recently renovated master bath, the appraiser finds properties in the area that are as similar to your property as possible, looks at the sales data and gives you a dollar value for the home you’re looking at.
Having an estimated home value protects you from overpaying for the home. Mortgage investors also don’t allow lenders to loan more than the home is worth because if something happened and the lender had to take the house back when payments weren’t being made, the lender or would have to try to recoup their investment in a sale. Knowing the appraised value keeps them from making risky investments.
If the appraisal comes in lower than the sales price, you have three options. The seller can lower the price to the appraisal value. You also have the option of bringing the difference between the appraisal value and the sale price to the closing table. Or you can walk away from the home.
While not required, it’s highly advantageous for you to get a home inspection as well. Even if there’s nothing currently wrong with the home, walking through it with an inspector will give you an idea of what to watch for in the future should problems arise. If there’s anything truly serious, you also have the chance to back out at that point. Yes, you’ll have to start over in your search for the right home. On the other hand, you won’t be living in a house that might fall apart in six months. However, sometimes sellers will lower the price so you have the money to fix whatever’s wrong, or they’ll fix the issues themselves before you move in.
Certain basic safety items are looked at during an appraisal, but a home inspection goes deeper. If you’re moving into an older house with lead-based paint, for example, that would be caught by an appraisal and may have to be fixed before you can move in.
Closing
When the underwriting process is complete, it’s time to come to the closing table. You’ll bring your down payment and any other closing costs, sign the mortgage and take possession of the deed.
There are ways to keep your closing costs down. One way you may be able to do this is by increasing the price of your offer in order to convince the seller to pay for other things. In this way, you roll the closing costs into the loan.
How Long Does the Mortgage Process Take?
Now that you know how the process works, how long does it actually take to get the keys? That’s different for everyone, but let’s try to give you a rough idea.
Through Rocket Mortgage® by Quicken Loans®, you can be preapproved in minutes by sharing your income and asset documentation from your bank. Even if you get started over the phone, most people can expect to be preapproved within a day or so.
The longest part of the process is often shopping for a home, so if you have a list of wants and needs you can take to your agent, that should help you get started quickly.
Once you have your purchase agreement and underwriting starts, we try to close your loan within 30 days here at Quicken Loans.
Besides looking for the home, the next biggest delay in the process can sometimes be getting an appraisal scheduled. There are areas of the country where there’s a shortage of appraisers. If you’re buying in one of these areas, it’s important that both the buyer and seller have realistic expectations.
You can really help speed up the process if you get all the documentation that you’re asked for turned in on time. This may be the one thing about the mortgage process that’s most directly in your control.
by Patrick Chism, August 7, 2017 in Saving Money
Have you ever wondered what makes us spend or save? Many of us know people who are frivolous spenders and others who are fervent savers. For me, spending money on a new outfit and shoes is way more exciting than putting it in my savings account. But what makes a person be more of a saver or a spender? And more importantly, can these behaviors be changed? Let’s take a look at the psychology of spending and saving so that you can understand your own tendencies and take steps to improve.
A Healthy Balance Between Saving and Spending
Finding a healthy balance between saving and spending is something that many people grapple with from day to day. A recent Capital One survey of 2,000 Americans found that 25% of respondents struggle to keep up with their monthly obligations.
I recently discussed the survey with Weslia Echols, who is an accredited financial counselor and the founder of Trinity Financial Coaching in Detroit. She discussed some key factors that impact saving and spending habits.
“What I see from working with many clients is that they actually think that they are making a good decision when they choose spending over saving,” she said. “Many rationalize their decisions by making a bad decision for a good cause.”
Echols said that in general, people lack financial education and a long-term view of their money across the board. And while money may seem daunting, simple steps like using a budgeting service or implementing various techniques to free up money can put a person on the path to success.
Experiences and Observations
Beyond financial education, Echols explains that spending and saving habits actually have more to do with their past experiences and observations.
“Sometimes we have to coach people through their ability to make behavioral changes to help them with their finances,” she said. “Some people have mental blocks that keep them from saving and handling money responsibly.”
Watch Out for the Joneses
Echols pointed to the notion of “keeping up with the Joneses” as it plays into the rationale for spending. This expression refers to the desire to match or exceed the lifestyle and material wealth of people around you.
“Some people don’t realize that it doesn’t make sense keep up with your friend’s spending habits,” she explained. “And many people think the phrase ‘living beneath your means’ is a negative concept even though it will probably help them live more economically.”
Time Is a Four-Letter Word
Time is also an important psychological factor when it comes to the decision to spend money over saving it.
“I think people believe they have plenty of time to save money when they really don’t,” Echols admitted. “This is a big hurdle we face when it comes to spending habits. Life flies by very quickly while many people choose other priorities over saving money.”
For instance, savings and investments will ideally make up a large part of a person’s retirement funds, and the longer you wait to start, the less money you’ll have during your golden years. If you’re still thinking about investing, take some time to look at the math. Even waiting a year or two can mean losing out on hundreds of thousands of dollars when you consider interest.
Tracking Finances
In order to save, people have to either look for ways to cut monthly expenses, increase their income or, in many instances, both, she said.
“Spending and saving both come down to making decisions that align with your goals,” Echols said. “What I’m finding is that people aren’t tracking their finances and haven’t sat down to assess their monthly cash flow. They may be spending more than they have but sometimes they aren’t aware of that.”
She used the analogy of a steak dinner: You can choose to spend $45 for a restaurant dinner or make the same meal yourself at home for less money. This is where people make a choice, and only one option can save them money.
“People have to choose to control their money. If they don’t, their money will control them!” Echols stressed. “We tell our clients that it comes down to exercising diligence and making the necessary behavior changes.”
A good place to start is through a free budgeting service like Mint.com. Here you can look at your bills, income and financial goals all in one place. It’s a great way to make yourself more aware of the changes you need to make.
Start Early
If you want to make a change in your financial life, it’s always best to start when you’re younger. While teaching an old dog new tricks is absolutely possible, it’s usually easier to learn something when you’re younger.
“This is why I love working with college students, so I can get to them early in life,” Echols said. “The biggest piece of advice I give is to start with a monthly budget and I tell them that they’re in the driver’s seat of their money.”
But even if you haven’t developed these skills in your more formative years, you can still make some simple (but effective) changes now. One way to do this is by automating your finances. Set up automatic deposits into your savings or investment accounts. This way, even when you’re not feeling especially disciplined, your bank account is doing the hard work for you.
Bad Habits Can Be Unlearned
Echols acknowledges that many of our bad habits with spending come from how we saw our parents or family live. But she says it’s just one aspect of a culmination of bad influences and financial decisions.
“It’s important to recognize when you are your own worst enemy and when your behavior is sabotaging your quest for financial success,” she said. “This understanding will help to avoid more behavioral mistakes in the long run.”
Echols has more than 20 years of experience in administration, accounting, financial planning and credit management. To find financial resources or a financial advisor in your area, visit the National Association of Personal Financial Advisors.
