When To Consider Raising Your Home Buying Budget

Setting a budget for your home purchase is an important decision.  You need to know how much you can afford each month and translate that into the amount you can afford to take out on your new mortgage.  When you start house hunting with that budget in mind, you may find to your dismay that you are not seeing many homes in the price range you have set that match your needs.

There are three choices you have in this situation.  The first is to wait it out, keep looking, and hope the house you want comes up on the market in your price range.  The second is to compromise and buy a house that is affordable but not really what you want.  The final choice is to look at raising your home buying budget.

How Much Will It Really Cost?

The first thing to consider when you are looking at raising your maximum purchase prices is what difference it will make in your actual monthly payment.  In many cases, the difference may not be as difficult to handle as you might think.  Pull out that mortgage calculator and figure out what it would cost you per month to go $25,000 over budget, $50,000 over budget, or even $100,000 over budget.  Sometimes even a small raise in your maximum price can put you into a whole new class of available homes.

Do You Have A House In Mind?

So you drove past a house for sale the other day and fell in love, but it’s out of your price range.  Take that number home and punch it into your loan calculator.  Can you afford that house, even if it might be a stretch?  Are you willing to consider making other budget cutbacks, such as on entertainment, to have the house of your dreams?  How important is it to have everything on your wish list?

If having the right house is important enough, and the increased price is not going to strain your finances too much, you can consider going for it.  Remember that you can always offer less than asking price, and hope to get that dream home for a price closer to the original budget!

A little flexibility is always a good idea when you start searching for the right house.  Sometimes spending a little more will save you later in terms of property value.  It can also save you from having to move again when you decide the compromise to save money was not worth it.

 

Things You Need When Applying For A Home Loan

Congratulations!  Now that you have found the perfect home, all that’s left is getting the perfect mortgage.  In order to do that, you will have to know what your lender needs from you in order to get your loan application approved.

Property Description

When applying for a home loan, you will need to provide the lender with detailed information regarding the property that you intend to purchase, including a physical address, what type of loan you are requesting and how you obtained the funds to be used as a down payment.

Borrower & Co-Borrower Information

All persons named on a home loan must be able to provide their name, date of birth, current address, former address (if within the last two years), marital status, current and former employment information, telephone number and social security number.

Most lenders require tax returns for the two years preceding the loan application, along with current paystubs or, if self-employed, a year-to-date profit/loss statement.

Current Mortgage Expenses

An important part of every home loan is affordability, which is why your lender will need to know how much of your income is available to pay for a new home.  If you have a current mortgage, be ready to provide a detailed list of expenses that you pay each month in relation to the property.  This includes a mortgage payment, real estate taxes, mortgage insurance, homeowner’s association dues, utilities, etc.  If you plan to sell the home, let your lender know so that they will understand you are simply replacing one debt with another.

Yes Or No

Almost every loan application asks both the borrower and co-borrower (if applicable) to answer a few simple yes and no questions on the application.  Questions pertaining to outstanding judgments, bankruptcy filings, foreclosures, lawsuits, alimony, child support and citizenship status are standard and should be expected when applying for a home loan.

Statement Of Assets & Liabilities

When applying for a home loan, both the borrower and co-borrower will be required to disclose all of their current assets and liabilities.  An asset is property, either real or personal, that is owned and is of value.  A liability, on the other hand, is a financial obligation for which one is liable.

A loan application will request information relating to assets and their current market value, including automobiles, real estate, stocks, bonds, life insurance (cash value), business net worth, personal property, etc.  If any amount of money is owed on these properties, the lender will request information relating to the unpaid balance in order to determine the actual equity that the borrower has in any given property.

 

Homeowner’s Associations: What You Need To Know

As you begin looking for a home to purchase, you will start to come across houses that have a homeowner’s association.  This is an association made up of the people who own homes in the area, created to help maintain certain standards in the community.  They set rules and regulations for all kinds of things, from the color you can paint your house to the time you need to turn down the stereo in your backyard.

You will need to decide whether or not you want to live in a neighborhood with an existing homeowner’s association or whether you would rather avoid them.  This is, of course, a personal choice, but you should know what homeowner’s associations are all about before you make the call.

Why A Homeowner’s Association?

If you have ever had neighbors who were incredibly loud, let their house get run-down, behaved inappropriately, or any of the long list of things that can make life unpleasant and bring down the value of your home, you know why a homeowner’s association can be helpful.  With rules for conduct among neighbors clearly set out, you can be confident that your home’s value won’t be brought down by a pile of old appliances in the neighbor’s yard.

You can also avoid nasty confrontations with your neighbors by simply taking grievances before the homeowner’s association board and letting them handle any rule violations.

Homeowner’s associations also often take care of shared areas in the neighborhood, keeping them available for the use of the families in the association.  This many include a park or a pool.

The Cost Of An Association

Every homeowner’s association collects dues monthly or yearly from the people who live in the neighborhood.  This money goes toward running the association and taking care of the shared spaces.  You will be informed of this amount before you buy, and should factor it into your monthly budget.

There is another cost to belonging to a homeowner’s association, and that is a little bit of your freedom.  When you live in an association area, you will have to abide by the rules as well, even if you think they are silly.  You do, however, have the option of petitioning the homeowner’s association to change any rule you don’t agree with.  But if you lose, you will have to live with it.

There are both good and bad sides to having a homeowner’s association.  For those who prefer living in a more controlled environment, they are a great choice.  For those who want to be free to do as they want on their property, the constraints might not be appreciated.

Buying A Home With Past Credit Problems

Buying a home can be both exciting and stressful but, for those with past credit problems, the process may also seem intimidating.  The good news is that many lenders have adapted to the idea that many hopeful homeowners simply need a second chance, which means that past credit problems no longer have to define your future.

Credit Blemishes

When life unexpectedly takes a turn for the worst, it’s not always possible to come out without a few bumps and bruises.  Every day, people are faced with late or missed credit card payments, mortgage foreclosures, bankruptcy proceedings, auto repossessions and even civil judgments that will affect their credit reports for years to come.  Whether it’s from a job loss, injury or just a simple case of temporary hardship, credit blemishes are often a part of life.  The good news is that they no longer have to prevent you from becoming a homeowner.

Give Yourself A Little Credit

After experiencing a credit problem, most lenders will want to see an attempt to rebuild your credit through a steady payment history with a new account.  This can be accomplished by applying for a credit card and maintaining a responsible use of the account.  If you aren’t approved for an unsecured card, you can always apply for a secured credit card.  Either will rebuild your credit over time and will help to show lenders that your past credit problems are just that – in the past.

Clean Up Your Credit Report

Before applying for a home loan, make sure that you check your credit report from each of the three major credit reporting agencies.  Every 12 months, consumers can request a free copy of their credit report from Experian, Equifax and TransUnion.  If anything is incorrect or found to be inaccurate, filing a dispute with the credit reporting agency can help to get the information corrected before speaking with a lender.

When you apply for a home loan, the lender will access your credit report for the purpose of determining your creditworthiness.  In an effort to ensure that you have the best possible chance at being approved for the loan at the best possible interest rates, making sure that your credit report is accurate is a must.

Save Up For A Down Payment

Some homebuyers often qualify for a mortgage with down payments as low as five percent (three percent for FHA loans), but those with past credit problems may be required to shell out up to 35 percent or more for a down payment on their new home.  A buyer who pays a larger down payment obviously has more vested interest in the home and may, thereby, be less likely to default on a loan.  If you have past credit problems, check with your lender about specific down payment requirements and start saving!

Creative Financing Options

If you’ve exhausted all of your conventional efforts and are still turning up empty, don’t give up just yet.  Alternative financing is an option that many homebuyers use to purchase a home.  Your REALTOR® can provide you with details regarding any lease purchase and/or owner financing properties, which may require no credit check, no bank qualifying, a low down payment and competitive interest rate options.