How Can I Get The Best Deal On A Home? Where Do I Start?

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How Can I Get The Best Deal On A Home? Where Do I Start?

Posted On : Sep-24-2010 | seen (624) times | Article Word Count : 989 |

Once you have made the decision that you would like would like to own a home you should start your research. There are literally thousands of property search web sites that you can use. You can select any of them but don’t put the cart before the horse.

The prudent move is to address the financing BEFORE you do the shopping. Most good real estate related web sites have a calculator to let you calculate what the payments on any particular property are going to be. Unfortunately, it is not that simple. Most of them calculate payments for people with the very best credit record and with an ideal down payment. Congratulations if you are one of the very small percent of buyers who can actually qualify for those loans. Most of us can not.

Loan Payment Calculator

For a moment, put yourself in the lender’s place. If you were going to loan your hard earned cash to a buyer what kind of buyer would you accept? What kind would you reject? As with any investment, the greater the risk the greater the reward.

Since most loans are sold on the secondary market, Freddie Mac and Fannie Mae are the largest government sponsored players, most lenders use these corporation’s guidelines for their loans in order to make it easier to sell the loans.

There are also portfolio lenders, those that keep and service their loans for the entire term of that loan. They usually have a niche market and specialize in a specific kind of loan, one that allows them to maximize their investor’s return.

In any case, you as the borrower are going to have to meet lender guidelines in order to qualify for any loan. There are several key factors, or cornerstones of any loan. Each is discussed in some detail below:

First, the borrower’s credit score and credit payment history: There are three major credit repositories, Experian, Trans Union and Equifax. Each apply their version of the FICO formula to create your credit score (Fair Isaac Corporation mathematical formula applied to your reported credit history. The goal of this score is to predict the likelihood of your having a 90 day late mortgage payment in the future. Scores range from 350 to 850. Buyers with scores under 500 can not qualify for a home loan. It is difficult to qualify for a loan if your score is under 620. People with scores over 740 have less trouble if all other factors in their loan scenario are in line with lender guidelines. In general, the higher the credit score the lower your interest rate and payment.

Late payments, especially late mortgage payments have a negative impact on your score. Foreclosures, bankruptcies, judgments and tax leans are also major problems on your credit report.

The second key factor is your debt-to-equity ratio. There are two ratios here. The first is the ratio of your total housing costs as a percentage of your gross income (income before taxes and deductions). The second is the ratio of all reported debt—minimum payments only—of your credit card, charge card, vehicle loans. student loans and other reported debt, along with your housing costs–principal, interest, taxes, homeowner’s insurance and Home Owner’s Association Dues, if applicable—as a percentage of your gross income.

Lenders like your ratio to be a low as possible. Most people have little trouble with this factor if their ratio is under 38%. Some lenders will allow up to 55%, but with a higher risk the cost of funds is much higher. You also have to be comfortable with the payment and the effect it will have on your lifestyle.

The third factor is the debt-to-equity ratio. The percentage of the value of the property the loan or loans will represent. The larger the buyer’s down payment, the safer the loan is for the lender. Most lenders want a buyer to put 20% or more down, resulting in an 80% loan-to-value. The cost of funds increases sharply as this ratio increases. The increases come in exactly 5% increments, so a ratio of 80.1% to 85% comes with a higher interest rate and payment; a ratio of 85.1% to 90% is higher yet; a ratio of 90.1% to 95% costs even more. Loans for ratios over 95% are much more difficult to obtain in the post “mortgage meltdown” market. A few are available for a very few borrowers, but the cost is usually very high.

The final factor is the subject property itself. The lenders are loaning money to the borrower, but the collateral is the home. Every purchase loan application must be accompanied by a property appraisal. The appraiser must determine the market value of the property and that appraisal must be acceptable to the lender. If a buyer agrees to purchase a home at a price over market value they will have to pay the difference out of their own pocket as part of the transaction before the lender will approve and fund the loan.

If you are still reading you must be really interested in making a purchase. This can all be very confusing.

The easiest way to wade through the process is to select a loan consultant, discuss the process with them, provide them with the requested documents and have them get you pre-qualified for a loan amount. Once you are armed with that information, you will know what price range in which to shop and what kind of a bite the payment is going to take out of your wallet.

If you are serious, your loan consultant can verify your financial data and get you pre-approved for a loan. It will not take very long. A pre-approval letter carries considerable weight when it is added to a purchase offer on any home. Many sellers even required one before they take an offer seriously.

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<h1>How Can I Get The Best Deal On A Home? Where Do I Start?</h1> Author: <a href='http://www.articleseen.com/profile_Liamk Gardner.aspx'>Liamk Gardner</a> Once you have made the decision that you would like would like to own a home you should start your research. There are literally thousands of property search web sites that you can use. You can select any of them but don’t put the cart before the horse.

The prudent move is to address the financing BEFORE you do the shopping. Most good real estate related web sites have a calculator to let you calculate what the payments on any particular property are going to be. Unfortunately, it is not that simple. Most of them calculate payments for people with the very best credit record and with an ideal down payment. Congratulations if you are one of the very small percent of buyers who can actually qualify for those loans. Most of us can not.

Loan Payment Calculator

For a moment, put yourself in the lender’s place. If you were going to loan your hard earned cash to a buyer what kind of buyer would you accept? What kind would you reject? As with any investment, the greater the risk the greater the reward.

Since most loans are sold on the secondary market, Freddie Mac and Fannie Mae are the largest government sponsored players, most lenders use these corporation’s guidelines for their loans in order to make it easier to sell the loans.

There are also portfolio lenders, those that keep and service their loans for the entire term of that loan. They usually have a niche market and specialize in a specific kind of loan, one that allows them to maximize their investor’s return.

In any case, you as the borrower are going to have to meet lender guidelines in order to qualify for any loan. There are several key factors, or cornerstones of any loan. Each is discussed in some detail below:

First, the borrower’s credit score and credit payment history: There are three major credit repositories, Experian, Trans Union and Equifax. Each apply their version of the FICO formula to create your credit score (Fair Isaac Corporation mathematical formula applied to your reported credit history. The goal of this score is to predict the likelihood of your having a 90 day late mortgage payment in the future. Scores range from 350 to 850. Buyers with scores under 500 can not qualify for a home loan. It is difficult to qualify for a loan if your score is under 620. People with scores over 740 have less trouble if all other factors in their loan scenario are in line with lender guidelines. In general, the higher the credit score the lower your interest rate and payment.

Late payments, especially late mortgage payments have a negative impact on your score. Foreclosures, bankruptcies, judgments and tax leans are also major problems on your credit report.

The second key factor is your debt-to-equity ratio. There are two ratios here. The first is the ratio of your total housing costs as a percentage of your gross income (income before taxes and deductions). The second is the ratio of all reported debt—minimum payments only—of your credit card, charge card, vehicle loans. student loans and other reported debt, along with your housing costs–principal, interest, taxes, homeowner’s insurance and Home Owner’s Association Dues, if applicable—as a percentage of your gross income.

Lenders like your ratio to be a low as possible. Most people have little trouble with this factor if their ratio is under 38%. Some lenders will allow up to 55%, but with a higher risk the cost of funds is much higher. You also have to be comfortable with the payment and the effect it will have on your lifestyle.

The third factor is the debt-to-equity ratio. The percentage of the value of the property the loan or loans will represent. The larger the buyer’s down payment, the safer the loan is for the lender. Most lenders want a buyer to put 20% or more down, resulting in an 80% loan-to-value. The cost of funds increases sharply as this ratio increases. The increases come in exactly 5% increments, so a ratio of 80.1% to 85% comes with a higher interest rate and payment; a ratio of 85.1% to 90% is higher yet; a ratio of 90.1% to 95% costs even more. Loans for ratios over 95% are much more difficult to obtain in the post “mortgage meltdown” market. A few are available for a very few borrowers, but the cost is usually very high.

The final factor is the subject property itself. The lenders are loaning money to the borrower, but the collateral is the home. Every purchase loan application must be accompanied by a property appraisal. The appraiser must determine the market value of the property and that appraisal must be acceptable to the lender. If a buyer agrees to purchase a home at a price over market value they will have to pay the difference out of their own pocket as part of the transaction before the lender will approve and fund the loan.

If you are still reading you must be really interested in making a purchase. This can all be very confusing.

The easiest way to wade through the process is to select a loan consultant, discuss the process with them, provide them with the requested documents and have them get you pre-qualified for a loan amount. Once you are armed with that information, you will know what price range in which to shop and what kind of a bite the payment is going to take out of your wallet.

If you are serious, your loan consultant can verify your financial data and get you pre-approved for a loan. It will not take very long. A pre-approval letter carries considerable weight when it is added to a purchase offer on any home. Many sellers even required one before they take an offer seriously.About the Author: Mike West is the Real Estate marketing director whose informative website covers <a rel="nofollow" href="http://www.buyyourvilla.com/">El Dorado Hills Real Estate</a> where you can find more information on <a rel="nofollow" href="http://www.buyyourvilla.com/search-properties/">El Dorado Hills Homes</a>. Article Source: <a href='http://www.articleseen.com/Article_How-Can-I-Get-The-Best-Deal-On-A-Home-Where-Do-I-Start_34557.aspx'> http://www.articleseen.com/Article_How Can I Get The Best Deal On A Home? Where Do I Start?_34557.aspx</a>

Article Source : http://www.articleseen.com/Article_How Can I Get The Best Deal On A Home? Where Do I Start?_34557.aspx

Author Resource :
Mike West is the Real Estate marketing director whose informative website covers El Dorado Hills Real Estate where you can find more information on El Dorado Hills Homes.

Keywords : El Dorado Hills real estate, El Dorado Hills CA real estate, Cameron Park homes for sale, Cameron Park real estate listings, ,

Category : Finance : Real Estate

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