Why the Pre-Approval is so Important

A few words about a really important part of the process of buying a home – getting pre-approved for a mortgage.

Being pre-approved for a mortgage can give you a crucial advantage as a buyer. Because it assures the seller that you’re ready and able to purchase the home and it sets you apart from other potential buyers who might be just looking. It’s also wonderful in a competitive environment. Because if you’re pre-approved and your competition isn’t, chances are you would get the house. And even when you are at the very beginning stage of house hunting, being pre-approved is important then too. Because if you see a house for X number of dollars for sale, you’ll know right away if you can afford it or not. There’s nothing worse than looking at a place and wanting it really badly only to find out later it’s out of your price range. Being pre-approved can help avoid all that disappointment.

You really have nothing to lose here. Getting a pre-approval from a lender is easy and it can often be done in just a few hours. But make sure you’re being pre-approved and not pre-qualified. Because pre-qualification, that doesn’t really count. Pre-approval is what you want. It’s an extremely detailed process that examines your financial picture in-depth. Your bank statements, pay stubs, tax returns, and information about other loans you might have. They’ll look at your credit card balances, and your credit report. Once your lender has all the facts they’ll determine in writing how much you’ll be eligible to borrow when you buy a home.

So what’s it take to be pre-approved for a mortgage? Well, a decent credit score and a decent credit report to start. You’ll also need enough money in the bank for at least a 3% down payment, another 3% to 4% for closing costs and enough left over to cover the mortgage and other bills for at least two months. As far as income goes, you’ll need to make enough money to comfortably afford the home you want to buy. If there’s a problem and you’re not approved, that could actually help you. Because the lender will tell you why. Like maybe your credit card balances are too high. And that tells you what you have to work on before you do purchase a house.

But assuming you are approved, you’ll end up wth a letter. That letter will accompany every offer you make and tell the seller you’re ready to do the deal.

So how do you begin? You call your REALTOR today and get a few names of trusted mortgage experts. And if you’re thinking “Hey, I’ll just wait until the spring market to get pre-approved”. Well guess what, the spring market starts in less than one month. So if you want to buy this spring, it’s smart to get pre-approved this winter (what’s left of it). You’ll be ready to go when many more for-sale signs start to pop up on lawns all across San Antonio.

 

 

 

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Real Estate and the Military: The VA Loan Quiz.

Five true or false questions designed to see what you know when it comes to VA loans. Here we go:

1.True or False, the VA loan is only for veterans.

That’s false. It’s available to veterans of course but it’s also available to active duty service men and women, members of the National Guard, and surviving spouses.

2. True or False, you better be careful when you use the VA loan, because you can only use it once.

False again.  You can use the VA loan multiple times. You just to restore what’s called the entitlement. Which is the dollar amount you’re able to borrow under the program. In most cases that means paying off one loan before you get another.  But in some cases you might be able to have two VA loans at once, as long as both loans combined are under the entitlement cap.

3. True or False, the VA loan can be used for buying a house, refinancing a house, or even a cash out refi.

True.  The VA loan can be used for many, many purposes, not just buying a house. You can also refinance a place to get a lower interest rate or do that cash out refi. You can also pull out equity for home improvements, education, or paying off debt. The VA loan is very flexible.

4. True or False. The VA does not hold the mortgage, a private lender does.

That’s true.  The VA guarantees the loan, they don’t actually hold the note. But that guarantee is so powerful in today’s mortgage market place that over 22 million people have used the VA loan since World War 2. That guarantee also means there’s no Private Mortgage Insurance (PMI), which the VA says will save you a lot of money over the course of your loan.

5.True or False, a VA loan is risky because it’s a zero down mortgage, and that’s what got us into the housing crisis.

That my friend is false. Yes, the housing crisis was fueled in part by zero down home loans. And yes, the VA loan is also zero down, but the rate of default among VA loans is among the lowest of any mortgage in America. Even lower than FHA backed loans. Why, the vast majority of veterans and active duty service members pay their mortgages and pay them on time every month.

So, how did you do on the quiz? I hope you did well. If you’re a veteran or active duty member of the armed services I hope you understand all the benefits you’ve earned. Contact a real estate professional to help you get into a home with the VA loan.

If you’re a civilian, have you ever told a veteran or active duty service member, “Thank you for your service”.  Just think, the VA loan says the same thing. Except it’s not just you, it’s everyone. It’s the people and government of America speaking with one collective voice telling every one of our Nation’s defenders, thank you for your service.

Leave the Landlord Behind: How Owning a Home of Your Own Can Help Transform Your Life

A few words for anyone who hopes to own a home someday but so far hasn’t made that jump. Just a few words about how your life will change when you stop renting and actually buy a home of your own.

Let’s start with your monthly expenses. When you rent a place you pay the landlord every month. Assuming you’re on a lease, that rent check stays the same for about one year. Then it usually increases. Fortune magazine predicted that in 2016 rents would rise around 8%. That would turn a $1000 monthly rent into a $1080 monthly rent. Now this year might not be as bad as that, but in most areas a 3 to 5% increase is expected in 2017. So if you keep on renting you’ll need to budget for those annual rent increases.

Now compare that with having a mortgage. If you get a 30 year fixed rate mortgage, the payment will stay the same year after year. Now just think about that. If your mortgage is $1000 a month this year, it will stay right there. Next year, and the year after that, and the year after that. It will stay right there for 30 years. Now you probably won’t be living there for 30 years but if you are, three decades from now your monthly mortgage payment will still be $1000.

Next, let’s look at your taxes. When you rent you typically don’t itemize deductions. You probably just take the standard deduction. Which is fine but that changes when you buy a place. As a homeowner you get two big deductions that renters don’t. One is your mortgage interest, that could add up to thousands of dollars in deductions. The other is your property taxes, which could easily hit a thousand, maybe more. So every year you could get a bigger tax refund or if you adjust your withholding you could have more spending money every month. Now again, renters don’t get those deductions. But of course you might be thinking renters also don’t have to pay property taxes.  That’s true, but in most cases those property taxes are reflected in the amount rent the landlord charges.

Now moving on from the money, let’s look at what you can do with the place. When you rent you can only do what the lease allows. Generally you can paint the place any color you want but might have to repaint it back (to white for instance) when you leave. Now for other changes which could be anything from a new light switch to a ceiling fan to a new fridge or anything else, you’ll need to ask the landlord. Maybe you’ll get it, maybe not. Whatever you do, you need to the landlord’s permission.

Now compare that with owning the place. When you own it you can do anything you want. Anything. Now the changes you make will have to be done according to code, that’s a safety issue, and according to zoning laws (you can’t put a zoo in your backyard). Also, if you have a condo association or homeowners association, you’ll have to follow those rules too. But, paint it, remodel it, change it, make it all yours. You can do all of that with a place you own. It’s yours, so have fun!

Those are just a few of the changes you’ll experience when you make the jump from renting to owning. Other things will happen too but they’ll take more time. Like the way you gradually build wealth because over time real estate values generally grow. And every month you’re paying down that mortgage. So in the long run you’re building equity and that may well become the greatest source of wealth in your life.

So when the time is right and you can comfortably afford to buy and own a home, you can look forward to all things I’ve talked about here. If you decide to make that jump, then I say – welcome home.