How Income Affects Mortgage

Making Income Changes While in the Process of Obtaining a Mortgage

                  What happens if you have to change jobs while you are in the middle of getting a mortgage? Lenders typically recommend that you do not make major changes if you are in the middle of trying to get a mortgage, because lenders look for continuity, and will have to re-verify information if major changes are made. However, many folks do not have a choice: sometimes a new opportunity comes up, or are forced to change jobs. The good news is that lenders can work with you, and use the new information (income, salary, etc.) from your new position for your qualifying. This process can be started with just an offer letter, so the terms (salary, start date, etc.) are known to get the process started. Typically, at least one pay stub will be required before closing to show that you have…

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Down Payment: Where Are The Funds Coming From?

                  One of the issues we see arise during the loan process happen while verifying down payment.  Down payment funds may come from several sources, and all of them have their own unique documentation requirements.  If the underwriter is unable to easily see where the money came from it can cause a huge headache for everybody, including you. Luckily, there are things you can do to help ensure that this part of the process is as smooth as possible.  When reviewing the bank/investment account from which the Down Payment will be coming from, the underwriter is looking over the most current 60 days in the transaction history.  Any deposits into the account, besides payroll direct deposits, will need to be explained. This makes the easiest way to avoid frustration is to have your down payment funds already in a separate account with…

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How Much of A Home Can I Afford?

                    One of the first steps in purchasing a home is considering how much of a home you can afford to buy. Before you start searching for homes on the Internet or with the help of a realtor, you should have a good idea of what kind of mortgage you can qualify for, and what size payment you can comfortably afford. To help figure this out, you can start by talking to a qualified loan officer. Questions to Consider To start the process, we often ask about your goals, and try to assess your financial picture to help determine what you can afford. For example, we may discuss your work history, your employment income, any debt you may have, and your credit score. This conversation will help determine what you may qualify for, and the best options for your unique situation….

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The Benefits of Having a Larger Down Payment

Consumers face many decisions when looking to purchase a home. One of these many decisions include how large of a down payment to put down. Their down payment is the sale price less the loan amount. In the vast majority of cases, the potential home buyers must have their financial assets, at a bare minimum, be as large as the down payment they will make. Many consumers, despite having the capacity to put down more, put down as little as they can because they view a down payment as a loss instead of looking at it as the investment that it is. The nice thing about down payments is that the return on investment is 100 percent risk free. It is an investment that yields a return far surpassing anything else available to consumers. For Example: If Bob is planning on purchasing a home for $200,000 financed, a mortgage of…

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10 Things all Naperville First Time Home Buyers Should Know

1. Visit a housing counselor at a nonprofit organization Because owning a home requires a substantial investment of money, time, and energy, this decision should not be made quickly. A housing counselor would be able to provide objective unbiased advice and recommendations to specifically meet your needs of being a first time homebuyer in the Chicago area. 2. Get your finances in order Find out what your credit report and credit score is and correct any issues. A credit score will show how often you use credit, how timely your bills and paid, and how much money you owe so this will determine your ability to borrow money. Lenders look at four factors called the four Cs of credit. Credit history, (timely bill paying), capital (money available for a down-payment), capacity (income versus debt), and collateral (the value and condition of the house). You need to make sure that you…

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Some Things to Avoid Before Closing on a Mortgage

Once you’ve been pre-approved, you are ready to buy as long as there are no major changes in your financial situation. These are some things you need to avoid before you’ve closed on your new home. Don’t buy or lease a car – Unless you have to, it’s better to put off any big purchases until after you’ve closed on your new home. A large increase in your debt-to-income ratio could be a problem. If you have to buy something, call your loan officer before making any major purchase so they can see how this will affect your mortgage approval. Don’t move assets from one bank account to another – If you do, we will need to have a paper trail to document the source of funds for each new account or large deposit. If you want to consolidate accounts, it’s better to wait until after you have closed. Either…

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Qualifying for a Mortgage: A Look At Assets

Assets Qualifying:  This is the third major area we look at, and here we mostly want to make sure you have enough money for your down payment and closing costs, and in some cases, money in reserve. Again, we get back to the idea of risk. The lender as a rule wants you to have your own money invested in the property you’re buying. The thought behind this is that if you have your own money at stake, you’re more likely to take care of the property and make sure you make your payments on time. It used to be that in order to get a mortgage, you needed to have 20% of the purchase price as a down payment. That’s not the case anymore. There are loan programs that let you buy with low down payments, or in some cases no money out of your own pocket at all….

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Housing and Debt Ratios: How Large of a Mortgage Do You Qualify For?

Ratios are a big factor in the size of the mortgage you qualify for. There are actually 2 ratios we look at. The first, the housing ratio, is a measure of your total housing cost compared to your monthly income. The housing figure includes all the normal monthly costs of owning a home: the principal and interest payment, the monthly taxes and insurance, mortgage insurance, and the association fee if it’s a condo or townhouse (we’ll get into this more, later). The second ratio is the total expense ratio. This measure includes not only your housing expenses, but all your other monthly debts, too. So this takes into account all your minimum credit card payments, car payments, student loans, any alimony or child support, and the like. (There are some obligations that you are required to pay, things like car insurance and day care for children, that don’t count in…

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Proving Income Stability When Applying for a Mortgage

When people are trying to figure out how much they can afford, Income Stability this one area where it’s easy to get bad information. First we need to determine how much you make each month. We use gross income, not your take home pay.  If you’re in a job where you get the same amount of pay each month, it’s pretty simple. But if you have a job where your income fluctuates from month to month, like commissioned sales or construction, or if part of your pay comes from bonuses, it gets more complicated. The same thing applies if you are self-employed or have your own business. In these cases we need to go back and look at the history of your income over the last two years and make sure that this income is likely to continue. In any event, lenders look more favorably on someone who has been…

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