Owning Is Still More Affordable Than Renting

January 20, 2021 by chorton Leave a Comment

If spending time at home over the last year is making you think hard about purchasing a house instead of renting one, you’re not alone. You may be wondering, if the dollars and pennies add up in your favor because home prices continue to grow . According to the experts, in many cases, it is still more affordable to buy a house than rent.

In 2020, mortgage rates reached all-time lows 16 times, and up to now, they are continuing to put in low this year. Owning a median-priced three-bedroom home is more affordable than leasing a three-bedroom house.

It is startling to see that type of trend. However, it shows how both the expense of leasing has been comparatively high in comparison with the cost of ownership and how declining interest rates have a remarkable effect on the housing market and property ownership. The coming year is wholly uncertain, amid so many questions linked to this Coronavirus pandemic and the broader economy.

If you’re considering buying a home this year, contact one of our professional agents today to learn more about the options that match your budget while affordability is in your favor.

Documents Needed For Mortgage Pre-Approval

December 22, 2020 by chorton Leave a Comment

Are you aware the documents needed to get approved for a mortgage?

While pre-qualifying can seem attractive since it requires so much less work, pre-approval is far more inclined to assist you create a successful offer on a house.

In other words, there’s a difference between pre-qualification and pre-approval.

Pre-approval shows that you’re very likely to acquire a mortgage while pre-qualification only indicates there is a possibility that you might get a mortgage.

If you’re feeling a bit daunted by the amount of paperwork you have to collect and complete to get pre-approval, you’re not alone. Most home loans need extensive paperwork. It is going to take you a bit of time and attempt to get everything prepared and to complete the application procedure.

One serious bonus to going through the pre-approval process, however, is you will be well-prepared to your true mortgage application process. The majority of everything you are doing in pre-approval will use to the official application.

As soon as you have picked a lender, this is precisely what they’ll be looking for to complete the application and pre-approval.

Everything You Need to Give The Bank For a Conventional Loan
A conventional loan is a standard loan that does not involve a unique program like the FHA or USDA. The traditional mortgage is among the most popular loan products on earth. If you do not qualify for these special loan programs and you are a worker getting W-2s each year, you might submit an application for a traditional loan.

One of the few downsides of the majority of conventional loans is that you will pay private mortgage insurance if you place less than twenty percent down.

The mortgage documents You’ll Need for conventional pre-approval include:

Identification (among which you need to present in person)
A valid Driver’s permit
A Passport
An Official state or national ID
Income
30 days of pay stubs
Your previous two national tax yields
Your final two W-2s
Evidence of additional income–such as alimony or social safety
Finance Accounts
Bank statements for the past two statement periods
retirement and investment account statements
Property you have
Document revealing the settlement of your previous property sale should you have one
Additional documents
Gift letter out of any family member helping with a down payment
Landlord contact info for the past two years
Letter of explanation concerning issues like any other problems on your own credit report
Divorce-related documents if applicable

What You Want to Provide The Lender For an FHA Loan
FHA loans are one of the most popular kinds of loan products on the market. Among the most crucial advantages of an FHA loan is that the low 3.5 percent deposit.

Not every property qualifies for an FHA loan, particularly when you’re purchasing a condominium. It’s essential to check if the complex you are purchasing at has been FHA approved. As stated in this reference, there are also condition prerequisites for a home to qualify.

Mortgage records required for a Federal Housing Administration loan include:

Identification (among which You Have to present in person)
A valid driver’s license
An passport
A formal state or federal ID
Income
30 days of pay stubs
Your previous two federal tax yields
Your final two W-2s or previous two 1099s
Proof of additional income–such as alimony or social safety
Finance Accounts
Bank statements for the past two statement periods
Investment and retirement account statements
land you own
Closing disclosure for buy, or HUD-1 if the sale occurred before October 3, 2015
Additional documents
Gift letter out of any family helping with a loan payment
Landlord contact information for the last two decades
Letter of explanation concerning issues like collections along with other problems on your credit report
Divorce-related documents if applicable

What’s Needed by The Bank For an Investment Property Buy
If You’re Purchasing a home that you intend to rent like a multi-family, the documents that you require for pre-approval will include:

Identification (one of which You Have to present in person)
A valid driver’s license
A passport
A formal state or national ID
Income
30 days of pay stubs
Your past two national tax returns
Your final two W-2s or previous two 1099s
Proof of additional income–for example cheque or social security
Finance Accounts
Bank statements for the last two statement periods
Investment and retirement accounts statements
land you have
Settlement statement for recent home sales
Present statements for mortgages you have on other properties
Proof of insurance for all your possessions
Present leases for your entire leasing properties
Additional Documents
Donation letter out of any family helping with payment
Landlord contact information for the past two years
Letter of explanation regarding issues like collections and other problems on your own credit report
Divorce-related documents if appropriate

Self-Employed or Business-Owner Mortgage Document Requirements
If You’re self indulgent or own your own business, You’ll Need the next mortgage documents for pre-approval:

Last 2 Decades of 1099s
Property you own
Settlement statement from the previous home selling
Additional records
Gift letter from any household helping with a down payment
Landlord contact info for the past two years
Letter of explanation concerning issues like collections and other issues on your credit report
Divorce-related documents if appropriate
Current business license
Balance sheet if appropriate
Gain and loss statements for the last two weeks

What You Need to give the lender to get a VA Mortgage
A veteran’s loan is a fantastic mortgage product that’s for those who are serving or have served in the army. Among the most significant advantages of a VA mortgage is the fact you do not require a down payment. It is among those few no deposit products still available.

The Veteran’s Administration will Request the next mortgage records for pre-approval:

Identification (one of which you have to present in person)
A valid driver’s permit
A passport
A formal state or national ID
Income
30 days of pay stubs
Your past two national tax returns
Your last two W-2s or preceding 2 1099s
Proof of additional income–such as alimony or social safety
Finance Accounts
Bank statements for the previous two announcement spans
Investment and retirement account statements
land you have
Settlement announcement from the previous residence sale
Additional records
Certificate of Qualification from the Veteran’s Administration, which might need some or all of these records:
Type DD-214, certificate of discharge or release
Statement of service from the adjutant, personnel division, commander, or higher headquarters should on active duty
Form 26-1817 or form 21-534 for surviving spouses, also form 1300, report of casualty, or death certificate
Landlord contact info for the last two decades
Letter of explanation concerning issues like collections and other issues on your credit report
Divorce-related documents if appropriate

What Does The Lender Want To Get a USDA Loan?
A USDA loan is the other no down payment loan product available to buyers. The USDA loan, however, can only be written in these locations which are considered rural. The definition of rural is generally beneath a population of thirty-five million individuals.

Identification (one of which you need to present in person)
A valid Driver’s license
A passport
An official state or national ID
Income
30 days of pay stubs
Your previous two national tax returns
Your final two W-2s or preceding two 1099s
Evidence of additional income–such as alimony or social security
Finance Accounts
Bank statements for the last two statement periods
Investment and retirement accounts statements
Property you own
Settlement statement from the previous home sale
Additional documents
Gift letter out of any family helping with payment
Landlord contact info for the last two years
Letter of explanation concerning issues like collections along with other issues on your credit report
Divorce-related documents if applicable
Type 410-4: Uniform Residential Loan Application, stuffed out by (s)
Type 3550-4: Employment & Asset Certification, a separate form filled out and signed by each candidate
Form 3550-1: Authorization to Release Information, a separate form filled out and signed by each applicant and each adult household member
Form 4506-T: Request for Transcript of Tax Return, Another form filled out by every applicant
Life Insurance Plan
Child care costs documentation for any dependent 12 or younger
Present school transcript for household members That Are full-time students and 18 years or older
Annual medical expenses for applicants 62 years of age or older, or having a disability (to be thought of for an in-household income)
A written excuse of 2 years of history, such as an explanation of openings if there aren’t any

A Job-Based Incentive Loan
There are some programs intended to help employees in particular professions to own houses, like teachers, police, and firefighters. Among the more well-known programs is known as Good Neighbor Next Door. Each includes its own criteria, but most will need the following:

Identification (one of which You Have to present in person)
A valid driver’s permit
A Passport
An official state or federal ID
Income
30 days of pay stubs
Your previous two national tax yields
Your last two W-2s or previous two 1099s
Proof of additional income–including alimony or social security
Accounts
Bank statements for the past two statement periods
retirement and investment account statements
Property
Settlement statement in the previous home sale
Additional records
Gift letter from any family helping with payment
Landlord contact info for the last two decades
Letter of explanation regarding issues like collections along with other problems on your own credit report
Divorce-related records if appropriate

Once you have your pre-approval, you’ll want to make sure you don’t do anything that will get your mortgage approval taken away like buying a new car. Many buyers do not realize how much purchasing a car while buying a home can impact their finances.

Are you thinking of selling your home? Our agents at Preferred Properties of Texas have a passion for Real Estate and would love to share their marketing expertise! Contact our office today to speak to one of knowledgeable agents.

Fixed-Rate Versus Adjustable-Rate Mortgages: Pros and Cons

December 18, 2020 by chorton Leave a Comment

As you look for a home, whether it’s your first or your fifth, you’ll need to decide whether you want to get a fixed-rate or an adjustable-rate mortgage. What’s the difference? With fixed-rate mortgages, monthly payments remain the same for the life of the loan, no matter how long it runs. With an adjustable-rate mortgage (ARM), monthly payments remain the same for a set period, then may change thereafter.

While predetermined rates with a fixed-rate mortgage mean that you always know what your payment is, an ARM tends to have a lower initial interest rate and the potential for monthly payments to drop. Of course, depending on the market, your payments also could become higher over time.

There are some interesting ARMs out there: In a 5/1 ARM, the rate is fixed for five years and then changes once annually. Similarly, there are 3/1, 7/1 and 10/1 ARMs, meaning that your rate could be fixed for three, seven or 10 years before adjustments.

Many homeowners like the stability of a fixed rate because it makes it easier to budget:. With a fixed-rate mortgage, your monthly payments are predetermined. But if you want to take a chance at saving money, you’ll be able to do so with an ARM’s low initial rate. Do you want to pay more in the interest of stability? Are you willing to take a chance that payments will rise if interest rates do?

Also consider lifestyle choices: A fixed-rate mortgage works if you’re established in your career and expect to settle into your new house for years. If you expect to move in a few years, then perhaps you can opt for an ARM and save money during the initial fixed-rate period before you sell and move on. Of course, homeowners with fixed-rate mortgages can always refinance to take advantage of falling rates if they don’t mind paying out more closing costs. It may be worth it.

Some ARMs set a cap on how high your interest rate can go, and some limit how low your rate can go. In considering the pros and cons of ARMs, find out:

How high your interest rate and monthly payments can go with each adjustment.
How frequently your interest rate will adjust.
How soon your payment could go up.
Whether there is a cap on how high your interest rate could go.
Whether there is a limit on how low your interest rate could go.

The main advantage of a fixed-rate loan is that you’re protected from sudden and potentially significant increases in monthly mortgage payments if interest rates rise. Fixed rates are easy to understand and vary little from lender to lender. The downside is that if interest rates are high, qualifying for a loan is more difficult because the payments are less affordable. Thirty-year mortgages tend to offer the lowest monthly payment. The trade-off for the low payment is a significantly higher overall cost because the extra decade or more in the term is devoted primarily to paying interest. Shorter-term mortgages cost significantly less.

Another advantage of an ARM: Its initial low payment may enable you to qualify for a larger loan, and in an environment with a falling interest rate, that allows you to enjoy lower rates without needing to refinance. Consider personal factors too, and balance them with the economic realities of an ever-changing marketplace. Your finances often experience periods of advance and decline; interest rates rise and fall, and the economy itself waxes and wanes.

Choose carefully to avoid costly mistakes.

Once you are pre-qualified for a home come by Preferred Properties of Texas so that we can help you with a new home.

When Should I Upgrade to a Bigger Home?

July 25, 2020 by chorton Leave a Comment

#1. How do you know you need a bigger place?

Is getting more crowded in the bathroom in the mornings? Our kids piling up in the bedrooms? Do you feel like you’re just walking over everybody throughout the house? It might be time to upgrade your home. You might just be a little bit of space. Maybe you have pets and are taking up more space than you’d like. Maybe you need a bigger backyard, your family room, larger layout or just a more open space; whatever the reason, you know you need more home.

#2. Can we afford it?

In this market, you might be nervous about selling your property and buying another one because of everything going on right now. It might be a great time to sell but is it a good time to turn around and buy again? It’s important to talk to your real estate agent and your lender about buying and selling at the same time.

Your lender will discuss how much you need in order to afford a bigger home and what the current market is doing so that you know how much you can sell your home for in order to put more equity into your new home. A lender will also look at all of your income, debts, assets, and liabilities to give you a fair and accurate assumption of how much you can afford in a monthly mortgage payment. If everything falls into place perfectly, you may be able to transition easily.

#3. How much does it cost to buy and sell simultaneously?

This really is a balancing act. Lenders, escrow agents, real estate agents, buyers and sellers all need to work together to make a cohesive simultaneous purchase and sale. But, don’t fear, because it can happen. It happens all the time. You have to decide when is the right time to do it and do you sell first or by first? There are a lot of factors involved to that one question. Your agent may feel that now is a great time to sell and then look for homes or look for the right home and then put the house on the market because it will sell quickly. This really is a strategic game to play and an experienced, qualified and seasoned agent can help you get there.

A lot of times you can simply move money from one house to the other making your out-of-pocket costs very minimal. You may have to pay for a home inspection out-of-pocket, which can run anywhere from $300-$800. But, closing costs, and down payments may be able to come from the sale of your existing house. You may need to come up with an earnest money deposit, which is typically 1% to 3% of the purchase price of the home you are buying.

Upgrading because you need it is a necessity for your family. Finding the right home and pulling the trigger at the right time is something that you, your lender and your real estate agent can all discuss.

Thinking of selling and moving up? Give Preferred Properties a call today for all Stephenville, Texas and surrounding area properties.

Getting a Mortgage When You’re Self Employed

May 1, 2020 by chorton Leave a Comment

mortgage self employed

Getting a mortgage can be a difficult process, and getting a mortgage when you’re self employed even more so. Lenders look at a number of different factors when determining whether to offer you a loan and what the terms of that loan should be. And one of the biggest factors is the reliability of your income. If you’re a business owner, freelancer, or other type of self employed worker, you’ll have to be able to prove to the bank that you’re not a risky investment—and that’s sometimes easier said than done.

Still, getting a mortgage when you’re self employed is far from impossible. Here’s what you’ll need to know to navigate the mortgage process without a W2.

What Lenders Are Looking For

The reason that getting a mortgage when you’re self employed is often such a tough hill to climb is that, on its face, a self employed income isn’t as verifiable as one that’s backed by a contracted salary. Banks will have questions about just how secure your prospects are, as well as what they can expect from your income moving forward.

A major determining factor here is your credit score, which isn’t affected by your self employed status. However, it’s not the only thing lenders are looking at. Your income is just as crucial, and can make the difference between getting a good loan at a good rate and not getting a loan at all.

When it comes to proving the viability of your income, lenders are looking at a few major factors:

- The demand for your business (The state of the industry, including unique variables like location and profit potential)
- The financial history of your business (How much money have you made from your business in the past?)
- The financial stability of your business (Do you make relatively the same amount year to year, or is your annual take-home pay extremely variable?)

The big question they’re getting at here: Will your business enable you to pay back your loan? That is, after all, their primary concern.

Also taken into account will be your debt-to-income ratio, which is the amount you make versus the amount that you owe toward things like credit card debt and student loans. (Or more specifically: monthly debt-related payments divided by monthly income.) If your ratio is favorable—43% or less—then you’re in a much better spot for getting a mortgage.

How to Prove Reliable Income

A full-time salaried worker gets an annual W2 that states, in clear terms, how much they’ve made in each of the years leading up to their loan application. A self employed worker on the other hand is usually juggling multiple 1099s, as well as clients with whom they don’t file a 1099 at all and record income manually. And so when it comes to getting a mortgage when you’re self employed, instead of just one tax form it’s a whole cache of documents that need to be produced showing not just current wages but enough information to predict future wages as well. It’s a lot; but hey, nobody ever said that mortgage applications are fun.

To prepare for your application, gather the following documents:

Income documents: 1099s, state and federal tax returns, bank statements.

Asset documents: Any documentation of investments and other assets, including retirement, savings, and stock accounts.

Debt documents: Federal 1098 student loan tax forms, credit card statements, auto loan statements, credit scores, rent or mortgage checks, etc.

For most lenders, you’ll need to show at least two years’ worth of documentation. This helps with proving the stability of your income, since if you’ve made a consistent amount for two years or more then they can have more faith you’ll continue to make the same.

Keep in mind that only taxable income will be considered. If you’re telling a potential lender that you’re bringing in $5,000 a month but your bank statements and tax forms only show $4,000 a month in income, it’s the latter number that’s going to count. Likewise, they might not consider “windfall” income like an inheritance, because even if it was taxed it’s still not something you—or they—can expect you to earn every year.

The Process for Getting a Mortgage When You’re Self Employed

Extra documentation aside, the process for getting a mortgage when you’re self employed is the same as it would be if you were employed by someone else. As always, we recommend that you start this process early and that you get a mortgage pre-approval, which makes you much more attractive as a buyer.

It all starts with your application. This is usually done either online or in person, and includes a series of questions designed to answer all of those questions the bank wants to know about your income, credit history, and debt. In most cases, your answers are fed into an automatic underwriting system, which, in a matter of just minutes will either say you’re approved for a loan, unapproved for a loan, or need to go through a more intensive human underwriting process.

Whether it’s by a person or by a machine, you’ll need underwriter approval in order to move on to the next step, which is when your supplied documentation is used to “prove” your answers to the questions asked. This is always done by a real human, and may include requests for even more documents, such as a business license or specific certifications. Once you pass this step you’ll have full mortgage approval and will be able to close on your loan.

Getting the Best Terms

As for what terms you’ll face, you can still get competitive interest rates when you’re self employed. So long as your income is verifiable and consistent and your debt-to-income ratio is in a healthy place you should have no trouble tapping into the same rates that everyone else with similar financial credentials gets.

If you’re struggling with getting a mortgage when you’re self employed, you may want to consider working with a mortgage broker. While they’re not free to use (expect to owe about 1% to 2% of your final loan amount), a mortgage broker can help you figure out exactly what you need to do and how to do it, and may be able to get you better terms.

Another way to get better terms on your mortgage is to put more money down to start. And of course, a great credit score certainly doesn’t hurt. You may also want to—or be required to—bring on a co-signer.

Get in as good of a financial spot as possible before applying for your mortgage. Taking the time to pay off debt, build up savings, and establish consistency in your income will go a very long way toward making you a less risky investment with a mortgage provider. The more you can do to show that you’re a capable self employed borrower the easier the process is going to be.

Altogether, set aside at least a week for getting an approved mortgage. That includes the time that you’ll need in order to get all of your documents in order, as well as the time spent working with an underwriter. If you’ve got a good business and the documentation to prove it, you won’t have anything to worry about.

If you have any questions on how to get started give our office a call, our agents are here to help!

How Interest Rates Can Impact Your Monthly Housing Payments

March 25, 2020 by chorton Leave a Comment

Interest Rates and Home Payments

Spring is right around the corner, so flowers are starting to bloom, and many potential homebuyers are getting ready to step into the market. If you’re thinking of buying this season, here’s how mortgage interest rates are working in your favor.

Freddie Mac explains:

“If you’re in the market to buy a home, today’s average mortgage rates are something to celebrate compared to almost any year since 1971…
Mortgage rates change frequently. Over the last 45 years, they have ranged from a high of 18.63% (1981) to a low of 3.31% (2012). While it’s not likely that the average 30-year fixed mortgage rate will return to its record low, the current average rate of 3.45% is pretty close — all to your advantage.”

To put this in perspective, the following chart from the same article shows how average mortgage rates by decade have impacted the approximate monthly payment of a $200,000 home over time:

Clearly, when rates are low – like they are today – qualified buyers can benefit significantly over time.

Keep in mind, if interest rates go up, this can push many potential homebuyers out of the market. The National Association of Home Builders (NAHB) notes:

“Prospective home buyers are also adversely affected when interest rates rise. NAHB’s priced-out estimates show that, depending on the starting rate, a quarter-point increase in the rate of 3.75% on a 30-year fixed rate mortgage can price over 1.3 million U.S. households out of the market for the median-priced new home.”

Bottom Line

You certainly don’t want to be priced out of the market this year, and waiting may mean a significant change in your potential mortgage payment should rates start to rise. If your financial situation allows, now may be a great time to lock in at a low mortgage rate to benefit greatly over the lifetime of your loan.