Buying a Home? Legacy Home Loans gives you some helpful tips…

How much money will you need?

As little as $500 in a savings account.  Generally, the more you can put down, the better loan you can get.  There are some 100% financing options, but it is always good if you can put down 5-20% of a home’s purchase price.  You will also have to account for closing costs which can range from 2-5% of the purchase price.  In many cases, the seller can pay the closing costs on your behalf.

What kind of credit score is required?

You should have three credit scores and most all lenders will use your score that falls in the middle.  Your middle credit score will need to be at least a 620 to qualify for a fair home loan.  The higher your score the better loan you can get.  Scores range from 350 to 850 and anything over 720 is really good.

What else will you need to provide?

You must have a qualifying income from a job, disability or retirement. The goal is for the monthly payments on your credit report plus your new mortgage payment to equal 45% or less of your gross monthly income.  This is your income before taxes and other deductions are taken out.  You will also need:

• 30 days of most recent pay check stubs

• Previous 2 years of full tax returns and W-2 or 1099 forms

• If you are a W-2 employee it is not necessary for you to have had your job for a full two years and in some cases you may only need 30 days of work history.  If you will receive a 1099 for your job, are self-employed, or paid more than 25% of your income as bonus or commission then it will be more difficult for you to get a mortgage without 2 years of work history.

• 60 days of recent full bank and/or retirement statements showing your saved funds

• Name and number of your preferred insurance agent

• Copy of your driver’s license

How does the process work of actually closing on a new home loan?

Great question!  In summary, you will first talk to an honest lender (pick me!) and allow him/her to take a simple loan application which should only take about 15 minutes.  Within 24 hours the lender will call you back and, if approved, send you a pre-approval letter.  At this point, you can begin the house search with your Realtor.  You find a home, negotiate a contract, and set a closing date that is usually about 30-45 days away.  Your Realtor will give a copy of the contract to the lender.  The lender will call you to lock in an interest rate and make sure you are clear on the monthly payment and amount that will be needed at closing.  You then sign some loan disclosures and provide the information listed above along with anything else the lender may require.  An appraisal and title work are ordered for the home and the file is then submitted to an underwriter.  This person reviews all of the information and makes any additional requests to make sure that the loan meets all of the pertinent guidelines.  Your lender will call you to request some final conditions of the loan.  You will turn in these items as soon as possible to satisfy the underwriter.  At this point the file is reviewed one final time along with the appraisal to make sure the home is worth what you have agreed to pay for it.  Ideally, a “clear to close” is issued by the underwriter which means that closing paperwork can be sent to the title company.  Your lender will contact you to confirm the closing date and time and ensure the monthly payment and amount needed at closing are in line with your expectations.  From that point, you show up at the closing with your money (cashiers check) and sign about 50-100 pages. Now you own your very own home!

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10 Commandments When Applying for a Mortgage

1. Thou shalt not change jobs or become self-employed

2. Thou shalt not buy a car, truck, or van…unless you plan to live in it.

3. Thou shalt not use credit cards for anything out of the ordinary or let payments fall behind

4. Thou shalt not spend the money you saved for a down payment

5. Thou shalt not buy furniture or appliances before you close on your home

6. Thou shalt not allow anyone to pull your credit

7. Thou shalt not deal in cash or make any large deposits into your bank account (payroll okay)

8. Thou shalt not change bank accounts

9. Thou shalt not co-sign for anyone

10. Thou shalt not purchase ANYTHING until after the closing

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Buying a house can be so much fun and an unforgettable life accomplishment.

Shawn Meehan
Mortgage Loan Originator
MLO License No. 113205
NMLS ID No. 658750
www.mylegacylender.com