So you’re ready to go House Hunting…you have a Realtor, you have your down payment, and you’ve put on your favorite walking shoes…now what? Well first of all, congratulations! Today is a wonderful time to buy real estate. It’s truly a buyers’ market, so now more than at any time in the past decade, your dollar will really stretch nice and far. That’s the good news.

The challenging news is that because of a little sub-prime mortgage drama, obtaining a home loan now lies somewhere between “difficult” and “giving up your first child.” But rest at ease…lenders don′t really want your kids. And all of us at SANTAMONICA-REALESTATE.COM are here to help you. We have three great useful tips designed to not only help you get your loan, but also to make sure your offer looks as good as possible, so that you’ll soon be reading articles like this, in the home of your dreams!
 
TOP THREE THINGS YOU NEED TO DO

1. GET PRE-APPROVED

The first item of business is to get pre-approved! Pre-approval is basically finding out how much house you can afford, and how you’re gonna afford it. Time and again home buyers set their sites on a dream house only to find out they either can’t afford the home, or the home gets sold to another buyer who was pre-approved and could therefore move faster into escrow.

To get pre-approved, first pick a reputable mortgage lender. If you don’t have one, ask! At REALESTATE-SANTAMONICA.COM, we have a number of lenders we trust…we’re happy to point you in the right direction.
Now that you have a mortgage lender, you have the person who is gonna help make your home owning dream a reality. This person is almost as important as the Realtor. So give him or her all your financial information: how much money you earn, how much is in the bank, how much you owe, etc.

The mortgage lender will run your credit history, so all of this information will come up anyway, but it’s always nice to just be upfront with your lender during the initial conversation, so that he/she can begin helping you right from the start! You will soon know how much you can comfortably spend on a home…and you’re that much closer to going on your first House Hunt!

2. GO FULL-DOC

The next item of business is to ask your mortgage lender to pre-approve you with full financial documentation. In the real estate business, we call this “Full Doc.”

Before the sub-prime mortgage situation, many mortgages were given to home buyers based simply on their credit score (this is called your FICO score) along with their earnings statement (your W-2 tax form). These loan approvals are commonly known as “stated income” loans.
Many of the homes going into default now are owned by buyers who were “stated income″ and banks are understandably wary about approving loans this way.

To make sure you get your loan, and your perfect house, we are recommending that you go “Full Doc.” This process takes a little longer than just simply getting you pre-approved with your income, credit history and debt. Going full-doc actually requires the mortgage lender to go through your tax history for the past two years to determine your true actual income.

Why go “Full Doc”? When you start writing offers on homes, the listing agent and the seller will want the home to go to the most qualified buyer. They will not want the home falling out of escrow because the buyer really couldn’t get financing based on his/her pay stubs.
Time and again I’ve seen listing agents and sellers go with offers that were for less money, but were from “Full Doc” buyers. So go the extra mile…it may save you money when you buy your house!

3. PROOF OF FUNDS

We’ve saved the easiest tip for last…show “Proof of Funds.” In short, “proof of funds″ is showing both the listing agent and the seller that you truly have the money on hand that is necessary for the down payment and the closing costs.

Because many loans now require more of a down payment than loans of the recent past, it’s becoming more and more important to show that the buyer has available cash.

This “proof of funds” can be anything from a bank statement to a retirement account. It’s just anywhere from which you can draw the liquid cash available to complete the transaction.

To many experienced home buyers reading this article, this tip can seem really like a “so what″ type of thing. But the truth is, in today’s challenging real estate market, anything you (the buyer) can provide the seller to show that your offer is serious, and that you really have the money, will separate you and your offer from all the others.
And as I mentioned before, I have seen many offers that were for less money get accepted because the offer included full documentation, and proof of funds will only help strengthen your offer.

So remember, now more than ever offers are being accepted from buyers who may not necessarily have the highest offer, but from buyers who can close the deal!

Happy Hunting, and remember that REALESTATE-SANTAMONICA.COM is just a click a way!

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You can begin your real estate financing education by asking friends, family, co-workers, real estate agents, real estate brokers, mortgage brokers and real estate professionals for help and search the Internet for local lenders and get current interest rate quotes. First of all you’ll need to find a lender for your real estate financing and potential residential, home or other investment. Keep in mind when financing real estate that the lenders will be able to tell you only what you MIGHT be able to afford based on your salary and level of debt including credit card debt.

Most adjustable rate mortgage programs do offer “rate cap″ protection, which limits the amount the rate can be increased, both each year and over the life of the loan; all adjustable rate mortgages are amortized over 30 years. An adjustable rate mortgage may be a good choice because on the average, most people move or refinance within seven years. The FICO credit score is just one of many myriad factors that are considered in loan or mortgage applications; although it’s taken into account there are no minimum scores expected.

The 30-year loan is your best choice if you’re looking for a long-term stable loan; for instance, if you’re planning to stay in your house for a long time. A fixed-rate mortgage means the interest rate and principal payments remain the same for the life of the loan but the taxes may change. Interest rates can go up if a rosy picture is painted that the economy is flourishing – like more jobs being available; this can lead to inflation which will send the rates up.

Loan programs for down payments of 20% or less require you to purchase Private Mortgage Insurance (PMI). If you have a less-than-perfect or a ‘bad credit’ credit report don’t worry too much about it. A 20-year fixed rate mortgage term means higher payments, when compared to the 30-year fixed-rate mortgage.

If you’re buying a second home or second property, you’ll need to identify the sources for your down payment, since you will not be selling your current house and using the proceeds, and you’ll need to expect a larger monthly payments for housing or other expenses too. Your income and your debts will typically play the biggest roles in determining your house price range. Borrowers can submit information about income, assets and equity to determine how much a down payment should be, which is usually processed through an automated underwriting system.

Usually an adjustable rate mortgage is the best choice for homeowners who are purchasing their first home and plan to be in the property for just three to five years or for those people who plan to relocate in that period of time. Insiders know that the advertised mortgage rates you find are not always what you′ll get from the lender; it could be market fluctuations, economic news, any other of a dozen reasons, but interest rates can change throughout the day. If you′re having a problem getting a loan or home mortgage consider a lease-option on a property; a lease-option on the real property will allow you to set a good purchase price now, and then apply a portion of the rent each month toward your down payment, building equity in the process.

A range of mortgage options are available; some loans require little money down. You’ll also need to consider closing costs and the escrow account for taxes and insurance.

Before you finish any real estate financing read every real estate contract and loan or home mortgage contract thoroughly before you sign on the dotted line: every line is important – look for anything vague; don’t be afraid to question what you don’t understand. As I may have mentioned, rates can change fast, one way or another; this is true for residential, commercial and investment real estate financing – get current interest rate quotes–today’s rate. Make sure you can make the mortgage payments for a reasonable length of time to build up equity, so if you do get sick or lose your job you can easily sell your house or other real property before you get into a foreclosure situation; try to think ahead.

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You don’t want to jump into anything blindly or sign a real estate contract or home mortgage loan contract or any type of contract without giving it some serious thought. Watch out for anything that appears to be vague. You want to keep in mind when financing real estate that lenders will be able to tell you only what you might be able to afford based on your current not future salary and level of debt including your credit card debt. First of all you’ll need to find a lender for your real estate financing and potential residential, home or other type of investment.

The real estate financing situation for each buyer is going to be different of course. A 20-year fixed rate mortgage term will mean higher payments, when compared to a 30-year fixed-rate mortgage. The advantages of a fixed-rate mortgage include consistent principal and interest payments, which will make this loan stable – your rate won’t change; a good choice if you′re likely to stay in the house for a long time.

And if you have less-than-perfect credit or a ‘bad credit’ credit report don’t be too concerned about it. The disadvantages of an adjustable rate mortgage include the possibility of increasing monthly payments if interest rates go up and over the years this has happened many times and people have lost their homes. If you’ve applied to several lenders, when you finally do select a good lender you may have to explain why there are other inquiries from lending institutions on your credit report.

The disadvantages of a fixed-rate mortgage include the possibly higher cost. These loans are usually priced higher than an adjustable-rate mortgage. With adjustable rate mortgages the initial interest rate is usually lower than with a fixed-rate mortgage so the monthly payment would also be lower. An adjustable rate mortgage could be a good choice because on the average, most people move or refinance within seven years, but be aware of the fluctuating interest rate.

If the rates in the current market are high, you’ll probably get a better price with an adjustable-rate loan. Any money you receive from a lending institution will show up on your credit report and your payments will factor into your debt-to-income ratio. And a good or bad FICO credit score is not a requirement for most conventional or government loans like FHA loans or VA loans.

Reminder – an adjustable-rate mortgage (called ARM) means that the interest rate changes over the life of the loan, according to the terms specified ahead of time. Your income and debts will typically play the biggest roles in determining what price range you can afford when buying a house. Insiders know that the advertised mortgage rates you find are not always what you’ll get from the lender – it could be fluctuations in the market, good or bad economic news, any other of a dozen reasons, but interest rates can change even throughout the day.

A range of mortgage options are always available and some loans require little money down. And if you’re on a fixed income, an adjustable rate mortgage, especially a short-term ARM, may not be your best choice.

Keep in mind that low credit scores do not mean you cannot buy a home or other real property; continue to explore the options and you’ll come up with the best real estate financing. Ask other homeowners what real estate and mortgage problems they’ve encountered – everyone has stories to tell. Rates can change fast, one way or another, day by day; this is true for residential, commercial and investment real estate financing. Always get the most current interest rate quotes. The rate won’t last long.

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Well, this weekend marked the official end of the 2008 NFL season with the NFC defeating the AFC in the Pro Bowl in Hawaii.  NOW what am I going to do on Sundays???  I guess I’ll have to find some useful things to occupy my time … like tennis, martial arts, biking, skiing … It is going to be HARD until the end of summer, but I’ll think of SOMETHING.  I can always fund some commercial loans, which is our specialty!  I’ve heard that even Fannie Mae and Freddie Mac are limiting cash out now … to ZERO dollars.  Which make sense, since they are losing money faster than the Fed can print it.  We still have some portfolio sources for multifamily.  If you have a scenario, give us a call!

Commercial Financing Tip

Who Controls The Third Party Reports?  In light of recent “events” in the mortgage markets, it comes as no surprise that lenders are changing how they handle third party reports.  After the S&L meltdown in the late 1980s, FDIC insured lenders were required to order appraisals and not accept borrower or broker provided ones.  Eventually, most lenders followed suit. 

Now that requirement has been extended to all third party reports, particularly Environmental Phase 1 & 2 reports.  New EPA guidelines and rules are making it harder to avoid liability in environmentally “challenged” properties where it can be shown that the lender did not exercise proper “due diligence” with regard to its environmental investigation.  Save your money for third party reports until you have applied for a loan, otherwise you will be ordering your reports twice.

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