Are you buying a home for the first time? Congratulations! Buying your own home is an excellent way to build your net worth while living in a space that you can renovate and truly make your own.
If you’re going to be taking out a mortgage to help pay for the up-front costs of your home, you’ll want to get a head start on the approval process.
With that in mind, below are four handy tips to ensure that your mortgage application is approved on your first try.
Gather All Of The Necessary Information And Paperwork
You’re going to need as much financial data as possible so try to prepare your past two income tax returns, pay stubs and other details ahead of time. It may also be helpful to create a quick budget to show your lender how your income stacks up against your monthly bills.
Maintain A Clean Credit History
It likely goes without saying that you’ll need as clean a credit history as possible in order to ensure a quick mortgage approval. If you think that there may be some negative items on your report, try to have a copy pulled before you see your mortgage lender as they’ll be asking you about them.
Don’t Try To Fudge Any Facts On Your Application
Your mortgage lender is legally and professionally obligated to perform a significant amount of due diligence on you before they are able to process your approval. If you’ve lied on your application it is likely to be discovered and will be seen as a serious breach of trust on your part.
Even if your financial picture isn’t all that strong it’s far better to be honest than to try to hide or falsify your data.
Make A Down Payment Higher Than 20 Percent
Finally, if you can make a down payment on your home that is higher than 20 percent of the purchase cost you may find it easier to get approved. Placing more than 20 percent down typically eliminates you from various mortgage insurance requirements and can show the lender that you’re capable of paying the mortgage back in full.
The above tips are just a few ways that you can work to ensure that you have a better chance at being approved for your mortgage. If you have other questions or for more information, contact your local mortgage professional and they’ll be happy to share their expertise.
Last week’s economic highlights included the National Association of Home Builders (NAHB) Housing Market Index for October. The Commerce Department also released Housing Starts for September. Freddie Mac reported that the average rate for a 30-year fixed rate mortgage dropped below four percent. The Fed released its Beige Book report, and Weekly jobless claims came in lower than expected. Here are the details:
Homebuilder Confidence Slips in Spite of Lower Mortgage Rates
U.S. Homebuilder confidence in housing market conditions slipped by 5 points to October’s reading of 54 as compared to September’s reading; this was also lower than the expected reading of 59. Builders are concerned over strict mortgage credit rules, but the NAHB’s chief economist noted that pent-up demand, lower mortgage rates and improved labor markets are expected to drive builder confidence in the near term. Readings of 50 and above indicate that more builders are confident about market conditions than not.
Freddie Mac reported lower average mortgage rates across the board with the rate for a 30-year fixed rate mortgage at 3.97 percent, a drop of 15 basis points from the prior reading. 15-year fixed rate mortgages had an average rate of 3.18 percent from the prior week’s reading of 3.30 percent. The average rate for a 5/1 adjustable rate mortgage fell by 13 basis points to 2.92 percent. Average discount points remained at 0.50 for all mortgage types.
If 30-year fixed rate mortgages can stay below the four percent mark, this could mean additional incentive for fence-sitters to become active home buyers.
Surprise: New Jobless Claims Hit 14-Year Low
Concerns over job markets and employment stability have consistently been of concern to home buyers in the aftermath of the recession. Last week’s jobless claims report brought encouraging news as it came in at 264,000 new jobless claims filed against predictions of 289,000 new claims and the prior week’s reading of 287,000 new jobless claims filed. This was the lowest number of new jobless claims filed in more than 14 years. Analysts said that lower numbers of weekly jobless claims indicate fewer layoffs, which should help boost prospective home buyers’ confidence in job stability.
Fed: Economy Growing at “Modest to Moderate Pace”
The Federal Reserve released its Beige Book report on Wednesday. This report contains anecdotes from business sources within the 12 Federal Reserve districts. The report said that the economy continues to grow at a modest to moderate pace and noted that potential concerns over the stronger U.S. dollar causing increases in export costs did not concern the Fed’s business sources.
Housing Starts, Consumer Confidence Up
September’s housing starts were above both expectations and August’s reading. 1.02 million starts were reported with the majority being multi-family homes. The expected reading was 1.015 million housing starts; this was based on August’s reading of 956,000 starts. This news is consistent with the drop in builder confidence for sales of new single-family homes.
The University of Michigan/Thompson-Reuters Consumer Sentiment Index for October rose to 86.4 against an expected reading of 83.5 and September’s reading of 84.6. This was the highest consumer sentiment reading in seven years. Analysts rained on the consumer sentiment parade by noting that recent jitters over Wall Street and concerns about Ebola outbreaks could cause the Consumer Sentiment Index to lose ground.
Next week’s scheduled economic reports include the National Association of REALTORS® Existing Home Sales report, FHFA’s Home Price Index and New Home Sales. Leading Economic Indicators will also be released.
The National Association of Home Builders (NAHB) reported that home builder sentiment lost its momentum in October and posted a seasonally adjusted reading of 54 in its Home Builder Market Index.
This reading was five points lower than expected and also five points lower than September’s reading. October’s reading was the first time in five months that builder confidence has fallen.
To put October’s reading in perspective, things aren’t all that bad. A reading over 50 indicates more builders are confident about housing market conditions than not. Also, October’s lower reading of 54 after the HMI reading reached a nine-year high in September.
Low Mortgage Rates, Pent-up Demand Expected to Drive Housing Markets
David Crowe, Chief Economist for NAHB said that low mortgage rates, improved labor markets and “significant” pent-up demand for homes all point to continued growth for housing markets.
NAHB reported that builders’ views on current market conditions dropped from September’s reading of 63 to 57 in October. The confidence rating for upcoming sales fell from 67 to 64. The gauge of home buyer traffic for new homes fell by six points to a reading of 41.
Analysts said that although stronger jobs markets can help would-be buyers get into the market, concerns over ultra-strict mortgage standards are dampening potential home sales.
Multi-family Housing Starts Outstrips Single Family Home Construction
Starts for all types of housing gained 8.60 percent in the first eight months of 2014, but single family housing construction accounted for only 3.10 percent of housing starts between January and August. September’s housing starts are set for release today (Friday).
New Jobless Claims Fall to Lowest Since 2005
In related news, the Labor Department reported that weekly jobless claims were lower than expected and also lower than for the prior week. The reading for new jobless claims was 264,000 new claims; this was 23,000 fewer new claims than the prior week’s reading of 287,000 new jobless claims filed. A reading of 289,000 new jobless claims had been expected. This was the lowest reading for new jobless claims since April 2005.
Have you decided to sell your home, perhaps to make an upgrade to a newer, larger house? Whatever your reasons for selling, you’ll have a number of decisions to make as you craft your listing and begin receiving offers from buyers but few are as important as your initial selling price.
Let’s take a look at three reasons why setting your listing price is the most important factor in your home sale.
Reason #1: You Can Scare Off Potential Buyers With A High Price
You’ll receive the majority of your buyer interest in the first few days and weeks after you place your home up for sale, so it’s critical that your price isn’t set so high that it scares a number of buyers off.
While some sellers believe that it’s better to price high and let buyers submit lower offers, this can actually work against you. It’s better to have your home priced fairly from the beginning as you can always refuse offers that you deem are too low.
Reason #2: Your Price Directly Impacts How Long Your Sale Will Take
If you’re interested in seeing your home sell quickly it’s going to be in your best interest to have it priced competitively. Buyers will be shopping around for similar homes in your community and if there are other listings with lower prices on the market you may find it takes you a while to get your home sold.
Also, if you do find a buyer that is interested they’ll likely try to enter into price negotiations with you which can extend the length of the sale by a week or more as you go back and forth to reach an agreement.
Reason #3: A Low Price Means Leaving Money On The Table
While pricing too high can cause issues with your sale, pricing your home too low isn’t going to benefit you either. While you’ll likely find that you receive a high number of offers very quickly, you’ll end up leaving some of your home equity on the table – equity that you could easily have realized as buyers would have been willing to pay the difference.
Refinancing your mortgage is a great way to reduce your monthly payments or take out some of the equity in your home to reinvest in renovations, upgrades or in other areas in your financial portfolio.
Let’s take a quick look at a few questions that you can ask yourself in order to determine whether you should refinance now or wait until sometime in the future.
Can You Lock In A Lower Interest Rate?
Depending on when you first purchased your home and took out your mortgage, you may find that by refinancing now you can lock in a lower interest rate.
Getting a lower rate can end up saving you thousands of dollars a year in interest, but you’ll need to weigh the closing costs of the refinancing against the savings you’ll obtain to ensure that refinancing is worthwhile.
How Much Do You Owe On The Home?
If you still owe a significant amount on your home you may find that it’s worth refinancing, especially if you’re confident that you won’t be selling the home any time soon. Conversely, if you’re very close to having your mortgage paid off you may find that refinancing has little benefit.
Do You Need To Tap Into Your Home Equity?
If you feel that now is the time to tap into the equity you’ve built up in your home over time in order to cover renovation or upgrade costs you may want to consider refinancing. This will allow you to take out a large chunk of cash without having to open a new loan or line of credit. If possible, try to secure a lower interest rate for added benefit.
Do You Plan On Moving?
If you’re planning on moving in the next couple of years then you may want to hold off on refinancing your mortgage. As mentioned above, there are closing costs attached with a refinancing deal and these must be factored in when assessing whether or not you stand to gain or lose.
If you’re staying in your home for the near future there’s a far better chance that the costs of a refinancing will be covered by the amount that you save.
Every financial situation is unique, and you may find that you have other questions about refinancing that aren’t listed above. Don’t hesitate to contact your mortgage professional as they’ve worked with all sorts of refinancing clients and can share helpful advice that is relevant to your situation.