October 18th, 2014 by Gary Mawson Jr.
This is the process of buying a home here in NJ. Having a great agent to help navigate all of this is going to make your life easier and this is what an agent is getting paid to do. Real estate agents dont just simply find a home for a buyer there is so much more!
- This is when you call a mortgage banker to find out how much you can afford to borrow from the bank in order to purchase a home
- what you will need to get started – Last 2 years of w2’s, last 2 months of bank statements, and 1 month of paystubs. This is the basic stuff to get started, you may be asked for more information and if you are self employed there will be more to get started)
- The initial offer is the beginning of negotiations and can either be countered, accepted or rejected by the seller
- Upon acceptance of an offer which must be signed by both buyer and seller the contract is submitted to your attorney and the sellers attorney. (Known as attorney review period)
- Your initial deposit will be due to the attorney’s trust account
- Your contract is not legally binding until the attorney review process is concluded. It typically takes three business days in order to conclude the attorney review process, but can take longer if things are not agreed upon.
- During attorney review the home can still legally be shown, and another offer can be negotiated and accepted during this process. (Some agents will not show during this period)
- Upon conclusion of attorney review the home cannot be shown anymore, and your second deposit will be due
- Contract typically states that you have fourteen days in order to complete the home inspection. (this can change during the attorney review period based on the attorneys, but will be outlined before the attorney review process is over)
- A termite inspection will also be done at this point to make sure that there is no termite damage in the home too.
- Once completed you can either submit for things to be repaired or negotiate a lesser price for the home based on the findings of the home inspector.
- All of these negotiations will take place through the attorneys and will be signed off by you and the seller once an acceptable outcome is reached.
- The appraisal is ordered through the bank and this is typically why you have to pay for an application fee when your loan goes into process
- The appraisals are usually appraised for the value of the purchase price. The home may be worth a bit more at the time of closing based on the other comps, but a home is ultimately worth what someone is willing to pay for.
- Once completed this will be turned back into the bank so that the loan can be approved. At this point you are almost done, but you are not completely out of the woods.
- Once the appraisal is turned in they should issue a commitment or loan approval for the buyer of the property. There are typically some items that they still need but it is usually in reference to title and closing documents. They may ask for some items from you, if there are any unusual findings but is unlikely.
- Title is ordered through the attorney once all of this has been completed.
- Title makes sure that there are no liens on the property and can tell us if there are any easements on the property as well.
- Closing will typically happen within ten days of the agreed upon closing date as stated in the contract.
- Upon closing you will need certified check for the remaining deposit on the loan.
Real Estate Terms
- Loan to Value – how much money you are financing compared to the value or purchase price of the home.
- debt to income ratios – how much monthly debt you are obligated to pay each month as compared to your monthly income.
- Pre-Foreclosure – The bank has filed foreclosure papers to begin taking back the note on the home.
- REO or Bank Owned Homes homes that have already gone through the foreclosure process.
- Short Sale – Home that is currently on the market and is in pre-foreclosure where the owner owes more than what is owed to the bank.
- HUD homes – this is the same as a bank owned, but it was a financed through a government program (FHA or VA) so it is government owned instead.
February 4th, 2014 by Gary Mawson Jr.
When I started writing mortgages all of the mortgage loan officers had an HP mortgage calculator. I was not fortunate enough to have one, so I had to go with an alternative way of calculating what the payment was. So I turned to the computer to help me out. When I started all of the interest rates were above 6%, so when I was looking at a price per $1000 chart I quickly realized that 6%=$6.00/$1000. So simply put if you have a home that you were going to mortgage 100K, you would have a principal and interest payment of $600. Pretty easy right?
So how do I calculate the rest of the interest rates? This is very easy too but may require some quick notes in the beginning. For each 1/8(.125) of a point it equates to .08 cents in payment per $1000. So an example is if the rate was 5.875% for the same 100K mortgage than the payment would be based $592 per month. ($5.92 x100K). So from there you can simply take that and apply .08 for each number and figure it out. Since the mortgage rates go in one eigth increments, it is easy to figure out. See chart below as example all are per $1000 mortgaged.
6% – $6.00
5.875% – $5.92
5.75% – $5.84
5.625% – $5.76
You got the trend now?
So what if my interest rate is 5%?
simple…. you know that there are 8 parts, so you simply multiply 8 by .08 cents which .64 cents. Than subtract that from $6.00 to come to $5.36/$1000.
This is how you can quickly figure out mortgage calculations on the go with a simple calculator. I kept round numbers, but you can figure out all of the results simply by following this diagram and just memorizing that 6% =$6.00, and that each 1/8=$.08!
Please note: This is not an exact science to coming up with the mortgage calculations, but it will get you within a couple dollars every time.
Let me know if you have any questions or feel free to comment.
January 29th, 2014 by Gary Mawson Jr.
When you are getting ready to purchase a home the first thing that you have to do is get a pre-approval letter from your local bank or mortgage lender. This can be accomplished simply by picking up a phone and calling your local lender. There is no need for you to go and visit them in person. So the first thing that will happen is the mortgage lender will take what is known as the 1003 form (simply put a mortgage application). This consists of your name, address, SSN, Date of Birth, employer info, and bank information. Don’t be shy on this, they are going to get the information either way because they are going to ask for verification of all of this. They will than take this information and run a credit report on you, with your permission of course.
Your credit report will tell your story. It really has a lot of pertinent information for the mortgage lender to make a preliminary decision on whether or not you can truly qualify for a mortgage. If you have never seen a credit you can request a free copy of your credit report by clicking here. Your report will show all of your current debt as well as past accounts in the last seven years that may be inactive or closed. Your score is determined by your length of credit and good standing (this is very basic explanation). All of your creditors such as credit cards, car loans, student loans, etc… report what the credit limit is, how much is owed and also what your minimum monthly payments are. They use these numbers in conjunction with what your income is to determine what is known as the debt to income ratios are.
Your debt to income ratio will greatly determine what you can afford. The guideline for this is 25% front end ratio, which is the payment of what the mrotgage would cost you compared to your monthly gross income (before tax payments). The back end ratio is 36%, which is the mortgage payment with all of your debts included compared to your monthly debt. Although some lenders have flexibility on both of these numbers with exceptions, these are what the guidelines are for debt to income ratios.
Once they determine what you can afford than they will ask you for a series of documents. Last two years of w2’s and tax returns (this will determine an exact salary number), 2 months of bank statements (this is where your down payment money will come from), and 1 month of your most recent paystubs (verifies that you still make what you did the previous year. After all of this is compiled the bank may ask you for additional information as they deem necessary. If you are self employed be ready to supply much more paperwork in addition to all of this. For instance they are certainly going to ask you for your schedule C.
So some common things that you should avoid doing are making large purchases. If you are planning on buying or trading in your car, contact your mortgage rep first to make sure how it can affect your mortgage. Any large deposits that you make from two months prior to application to the end will have to be accounted for, where it came from and shown. This would include if you get bonuses that vary from month to month.
I understand that this is a lot of information, but this is more so that you can be prepared and informed as you navigate through the process of purchasing a home. If you are still confused we can help make this process less stressful for you.