Steps in the Home Buying Process
by "Feeling Nervous" in USA, Mary in New York, Matt in California
Ask Kate for steps in the home buying process: "Feeling Nervous" wants to know if she has legitimate worries after reading horror stories online from home buyers. Mary wants to buy a home using her parents as co-borrowers because her husband is going through a short sale. Matt wonders how to finance a ranch on 95 acres with 2 large barns.
Ask Kate continues...
Let's take a look at the different approach in the home buying process for each of them.
First Time Home Buyer Nerves! by "Feeling Nervous" from USA
Kate, I'm am starting out on my first time home buying experience and as I get closer to finding the perfect home, I have stumbled across online horror stories of financing falling through.
Am I just experiencing normal nerves or do I have something to legitimately worry about?
- I currently have worked at my job since May 2010, after my divorce was final.
- Before that I stayed at home with my kids.
- I have rented for almost 5 years.
- My credit scores are all well above 700.
- I have no collections or late payments on my credit report.
- I have about $5k in a savings account, a refund from my tax return.
- I did receive an overdraft in early January due to an oversight.
- My monthly house payments will take 34% of my income.
- My combined debt-to-income ratio is 42%.
My lender acts as though all is fine but I am really nervous. Do you see any issues? Any help is appreciated.
Ask Kate answer:
Hi "Feeling Nervous",
So much of the mortgage process is invisible to borrowers. A lot of trouble shooting goes on behind the scenes due to the number of parties that participate in bringing a real estate transaction to a close.
But just by saying that, I hope I did not increase your jitters!
I think from reading your letter, you may benefit from a detailed conversation with your lender. Make an appointment, hopefully face to face, to review your credit report and the conditions on your written loan approval.
Go point by point asking what you can do to help satisfy conditions. Bring along a calendar to record important dates for final loan approval, official loan documents for closing, signing appointment, and funding. Ask for other deadlines in your transaction.
Then call your lender representative for a progress report once a week until your transaction is completed.
You may know what I say: It's YOUR mortgage and YOUR home. You deserve the best.
But remember, no one will care about your home buying experience more than you. So track the progress and follow up with conversations. You'll be glad you did!
Learn to be the squeaky wheel that gets the grease at Ten Best Secrets to Low Mortgage Payments
Go here for details on locking your mortgage rate: Nitty Gritty Mortgage Interest Rate Lock
Mortgage Loan Help for Recently Unemployed Mom by Mary from New York, NY
Hi Kate, If I have a co-borrower, isn't there a way that I can bypass my husband's credit? I have been working full-time in NYC for the past 10 years.
With the birth of my second child, my husband and I have decided to move to New Jersey. He can be closer to his job and cost of living is a lot cheaper than NY.
I had put in my resignation at work and recently began looking to rent a home in the new area where we are relocating. The homes for rent are so pricey that it's like paying for a mortgage so I would like to buy a home vs. renting.
My husband bought a home before we were married and he is currently approved for a short sale. Obviously his credit is not good because of this. But my credit is excellent and my parents have agreed to co-borrow with me for a mortgage loan.
My goal is to move, get settled, find a new nanny, and a job. However I do want to purchase the home in my name to get the 1st home buyer benefits, etc.
I spoke with a mortgage company and they said that I will not be able to get a loan because I am going to be using my husband's income to help pay the mortgage.
Yes, my husband and I are happily married and he will be supporting our family until I can find a new job. But I hate to throw more money away in rent when we can purchase.
I have my own down payment and my parents' help as co-borrowers. Any advice?
Ask Kate answer:
Hi Mary, Conventional mortgages are less apt to require the addition of your husband's credit history to your mortgage package.
But in general, having a non-occupant co-borrower is less beneficial and sometimes not even allowed with minimal downpayment conventional mortgages.
On the other hand, FHA home loan requirements place less restriction on non-occupant co-borrowing. However, flipping the pancake, your husband's debt will probably be considered and credit report pulled.
FHA mortgage guidelines loosen and constrict depending on the economic conditions. I've seen the credit profile of the non-borrowing spouse take on less importance than at other times.
So ask your lender if FHA could help you qualify for a mortgage more easily than a conventional mortgage. Go here for more details: Introducing FHA Mortgage Loans
Ranch Mortgage Loan Financing by Matt from Arcata, CA
Kate, I am looking to purchase a ranch that is being offered at almost $600,000 for 95 acres and many outbuildings, 2 large barns. The ranch is being used for organic beef, which we would like to continue and possibly start a portion of the property for horse boarding.
We are interested in a 40 year loan with the first 10 years interest only. Our main goal is to find a way to make the payment as small as possible for the first 10 years which would allow us to bring the ranch to full scale operation and profitable, while allowing us the freedom of knowing that our payment would be met each month on time and in full.
We have A plus credit, and have a second home valued at $200,000, owned free and clear. Is it possible to make this happen? Any information would be greatly appreciated.
Ask Kate answer:
Hi Matt, In order to get residential mortgage financing, you have several hurdles to jump over.
1. Will you need income from the ranch to qualify for financing?
2. Is this type of property typical for the area?
3. Can you find a residential mortgage lender willing to finance 95 acres?
4. Is more value found in the home than the acreage, barns, and outbuildings?
Depending on the answers, you may be looking at commercial financing.
The loan you describe is similar in terms to many that were done before financial decline began ever so slightly back in 2005. Not that they disappeared, but those loans are limited in number and do not have the same aggressive terms, after being blamed as the cause of all ills we see today.
However, here is what I'd suggest. Find out which mortgage broker is responsible for financing properties near the ranch. Does he or she have a good reputation? That is where you can begin.
Then go to a few local banks and private money lenders next. You can read about this at Private Money Lender for Rural Properties
Here's one last idea if institutional lenders want you to have a greater stake in the property. If you are limited in cash, ask the seller to carry back a 2nd mortgage. Here is another Ask Kate question on Seller Financed Mortgages
Best home buying wishes to all,
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