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Saturday, August 23, 2008

What It Takes To Purchase A Home

Over the past two years I've been really working to develop relationships with Professional Realtors in all 50 states. No one knows better what it takes to facilitate a Purchase for a client than I do.

Clients need to know what it takes to purchase a home in this market. First of all, the market today requires more from the buyer and the mortgage professional than ever before. 100% financing is no longer available in this market. A buyer needs to be prepared to bring at least a 3% deposit as well as closing costs. A professional realtor can often negotiate a seller's concession with a motivated seller. These concessions allow a buyer to pay slightly more for a property than the agreed upon sales price. The seller then kicks back to the buyer the difference between the original agreed upon sales price and the final sales price. That difference is no more than 6%. The sellers concession will not allow the buyer to get cash back in the purchase of the home, but if structured properly, it will allow the borrower to get into the home by only bringing money to pay the closing costs for the mortgage.

Now lets talk about documentation. Mortgage companies are requiring more documentation and reviewing it more thoroughly than ever before. Programs that require no income documentation, or stated programs are challenging in this market. If you want to buy a home with a stated mortgage, you need to be prepared to bring at least 20% to the table in addition to the closing costs of the mortgage. With a stated mortgage, you will still have to have plenty of liquid assets and be able to verify their existence with account statements. Borrowers should know that stated mortgages have higher interest rates than those that call for full disclosure of income and assets.

If you're OK with verifying your income to get the best deal, you need to have the following: 2 years tax returns and W-2's, 2 months bank/financial statements, and 2 months of pay stubs. Be prepared to answer questions about how much your property taxes will be, how much your homeowners insurance will be.

Just remember that buying a home isn't a snap decision or a process. If you're considering it, make sure you've taken steps to get your financial house in order. Lender's look at your debt to income ratio, so you need to make sure that all of your credit cards, loans, car loans and your new home payments (mortgage, insurance, and taxes) don't cost more than 50% of your overall income. If you can keep it under 40% the lender will be extra happy. Some borrowers make costly mistakes by applying for and taking on additional debt (new credit cards, cars, etc.) at the same time they are trying to acquire a mortgage. This could potentially derail the entire mortgage process by throwing off your debt to income ratio.

Make sure you have a power team of professionals in place. By consulting with a mortgage professional such as myself and a professional realtor well in advance, you will receive assistance in navigating through the entire process I outlined above.

Good luck guys! I'll look forward to talking to you soon!