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Category: Mortgage

How to Buy a Home When You’re Self-Employed

How to Qualify for a Mortgage When Self-Employed

Buying a home is daunting for anyone, but it is notoriously hellish if you’re self-employed. While being your own boss has plenty of benefits, it can also bring periods of no work and unstable income. As a result, it can be hard to prove to a mortgage lender that you can pay back a loan for a home. The key to making it all easier is to plan ahead.

Make sure you can verify your income.

Lenders want to know how much money you earn before they decide whether or not to give you a loan. It makes sense – they want to know you’ll be able to pay them back. When you’re self-employed, you’ll have to hand over your last two tax returns. To do this, you’ll fill out IRS 4506-T, giving the lender access to your tax records. Lenders may also ask for your business license.

Be aware of large deposits.

If you’re self-employed, your income may be irregular and unstable at times. When you have a large, irregular deposit during the mortgage process, it can be a problem. The deposit often has to be part of the borrower’s regular income, matching ‘common or usual activity’ in your account. Be prepared for this, as you may need to provide even more documentation.

Improve your credit score.

A good credit score is important for anyone applying for a mortgage, but it can be especially important for those who are self-employed. Typically, lenders like to see scores of 740, and higher. To keep your credit in check, don’t take out new loans or add more debt to your credit card, keep accounts in good standing open, and pay accounts on time.

When you need help obtaining a smart mortgage for your needs, contact Dean Rathbun. We can help you determine the right plan of action for your real estate needs.

What to Look for When Choosing a Loan

Are you shopping for a loan? Here’s what you should note.

Are you toying with the idea of becoming a homeowner? Perhaps you’re steadily saving for a down payment or you’re already looking into home loans. Before you do start comparing loans, there are a few things you need to keep an eye out for to make sure you’re getting the best deal possible for you.

APR

It’s important to get a loan with a good APR (Annual Percentage Rate), especially if you’re looking for a longer repayment term. The longer you take to pay back a loan, the more interest you’re going to have to pay. Your credit score will largely impact how good of a rate you end up getting. Be sure to read the fine print, too, as lenders may lure you in with a great APR, but then pile on fees and charges.

No Repayment Penalty

If you believe you can repay your loan before the period ends, you’ll want to look for loan with no repayment penalty. If you don’t have a flexible payment option with your loan, early re-payments (or paying off your entire loan before the loan term is up) may result in a penalty fee.

Hidden Fees

Loans can often come with hidden fees, such as origination fees (fees for taking out the loan), loan application fees or disbursement fees (charges when you have received the loan). If you aren’t aware of the extra fees that you’re locked into paying, your loan may be a lot more expensive than you had desired.

Of course, with any form of borrowing, it’s crucial that you can afford it and make the required payments. Contact Dean Rathbun when it comes time to finding the perfect plan of action to buy your home. We are happy to help you.

How to Protect Yourself When Buying a Home

Tips to help you stay safe when purchasing a property.  

Owning a home is the American dream, but for some people, the financial aspect is a daunting process. There is a lot to consider when purchasing a home, from the mortgage, to finding the right property, to predicting that you’ll have stable finances for years to come. Fortunately, there are some ways in which you can protect yourself when buying a home.

Research and understand the buying process.

Buying a home is such a unique investment. In fact, purchasing a home isn’t like any other purchase. Whether you’re planning to make the house your forever home or use real estate as an investment, you need to know how to buy. Along with securing a good real estate agent, you should know the process of home buying and the responsibilities that lie with you.

Perfect your credit score.

These three little numbers make a huge impact on your mortgage, so it’s worth taking the time to perfect your credit score. Having a good credit score could increase your chances of qualifying for the best mortgage rates. Work on paying all bills on time, not taking on any more debt, and paying off debts as much as you can afford.

Know before you sign.

Always ensure that you know what you’re signing. Understand all the terms of your loan – is it a fixed rate, adjustable rate, balloon rate, etc.? These terms all mean different things so it’s well worth to take the time to read through the papers before you agree to anything. If a deal sounds too good to be true, it probably is.

Work with the right professionals.

Working with the right mortgage corporation can help ease the process of buying your dream home. From start to finish, professionals can ensure that you understand all of your contracts and can help you get the best rate on your home loan.

When in doubt, ask a professional for advice. Contact Dean Rathbun when it comes time to finding the perfect plan of action to buy your home. We are happy to help you.

How to Save Money for a Down Payment on a Home

With the rising cost of renting, you may consider saving up for your own mortgage.

Whether you have been considering the idea of getting a foot on the property ladder or if you check the new home listings daily, you’ll know that buying your own home is a big move. Not only is it a chance to put shelves where you want in a room, but it’s also a great way to get started in the property market. The catch is that you should have enough saved up to afford a sizable down payment on the home of your choice.

Saving up for a down payment to buy your first house can seem pretty daunting, especially if you’ve never had more than a few thousand dollars in the bank at any given time. Setting aside five figures or more may seem impossible – but it’s not! If you go about it the right way, it can be quite simple.

Set a Savings Plan

Once you know how much you need to save, the next step is to figure out how much you can set aside each month. For example, if you plan to save $45,000 for a down payment, setting a time frame of five years to save $45,000 means you’ll need to save about $9,000 per year, or $750 per month, to make it happen.

Look at your total monthly earnings and outgoings so that you can set up a budget – and stick to it! Find out where you’re splurging every month and aim to cut back, whether this means you eat fewer meals in restaurants, cancel your TV subscription, or pause your housecleaning services.

Check Your Credit

Your ability to borrow, and the rate you pay, are closely dependent on your credit score. Lenders may be willing to originate a mortgage for you with a smaller down payment if you have a strong credit score. Based on how much you’ve borrowed, your total debt, and any missing payments, your credit score is a financial snapshot. Get a copy of your report and scan it for errors, correcting any immediately. Even though you are on a tight budget, ensure that you still make debt payments on time every month.

Review Interest Rates

Interest rates on your credit cards, savings accounts, and car loans can fluctuate readily. Go through every bill and account and check the interest rate. If you’ve been making full and prompt credit card payments, call up the credit card company and tell them you want a lower rate. You may get a lower interest rate simply by asking!

When you need help obtaining a smart mortgage, contact Dean Rathbun. We can help you determine the right plan of action for your real estate needs.

Questions to Ask When Viewing a Property

These questions allow you better insight into the home you’re viewing.

If you’re looking for a new home, you may have a couple of home viewings booked. As soon as you step into a house, it’s easy to forget everything and soak in the property. However, it’s important to remember that you’re looking for the good and the bad. After all, you want to know what you’re getting into if you decide to buy it. Be sure to ask these questions when you view a property.

How long has it been on the market?

You should know how long the property has been on the market. If it’s a new listing, don’t expect sellers to make a bargain with you. However, if it’s been sitting on the market for some time, the seller may be willing to negotiate their asking price. It’s also worth noting if a good-looking home in a good location hasn’t sold in some time, there could be an issue that you aren’t aware of.

Are there any repairs needed?

This is always important to ask! Look past the beautiful kitchen and crown moldings to assess the overall condition of the home. The sellers will disclose all of the known issues about the home after you’ve reached an agreement on the price and terms of your offer. They may disclose these issues in advance. Either way, it’s best to know what work is needed on the home before you get in too deep.

What are the boundaries of the property?

You may fall in love with the backyard, and you may be disappointed to realize that part of it is the neighbors’. Don’t land yourself in a boundary dispute. Ensure that you know what would belong to you.

What is the age of the roof?

Putting on a new roof is expensive. Depending on the type of roof, it could last from 15 to 50 years. In general, asphalt shingles last 20 years, wood shingle roofs last between 20 and 40 years, and tile roofs can last over 50 years.

Being prepared for a home sale or purchase is critical. Ensure that you know how to handle it by relying on the expertise of a professional mortgage corporation. Contact Dean Rathbun when it comes time to finding the perfect plan of action to buy your home. We are happy to help you.

What You Should Know About Getting Low Mortgage Refinance Rates

When you refinance you’re hoping you get the lowest mortgage refinance rates around, here are a few tips on how to get those rates.

If you’re considering refinancing your mortgage, you are likely on the edge of your seat wondering if you landed the lowest possible mortgage refinance rates. Before you start shopping for the lowest rates, there are some things that you should take care of first. You need to establish your objectives and prepare your financial situation to improve your chances of qualifying for the lowest interest rate possible.

  1. Raising your credit score

A credit score of 740 or higher puts borrowers in the best tier for a conventional loan. Most lenders require a minimum score of 620 to 640, but you’ll pay a higher mortgage rate unless your score is above that magic 740 score.

  1. Save cash for closing costs

Closing costs average about 2 percent of the home’s loan amount. You can save up and pay in cash or you can use your home equity to roll over these costs. Another option that some lenders offer is to pay a higher interest for a “lender credit” to cover these costs. This will help keep your cash to close amount lower.

  1. Lower your debt

One of the reasons that your credit score may be low is because you may have accumulated some debt over the years, and have not been yet paid it down. Lowering your debt is a good sign to lenders that you are taking financial responsibility and could positively affect your credit score.

Don’t let these three factors get in the way of the lowest mortgage refinance rates. Contact Dean Rathbun when it comes time to finding the perfect plan of action to buy your home. We are happy to help you.

The Loans That Can Affect Your Mortgage

If you feel like you’re drowning in debt, remember that not all loans are necessarily a bad thing—you can use them to prove you’re capable of making timely payments.

Different types of debt can actually boost your credit score, but overdoing it can, and will, hurt you. When you’re shopping for a mortgage, your credit score is the talk of the town. It can make or break your application and ultimately determine whether or not you’re going to get the home you’ve always dreamed out. There’s a lot of power within those three digits. The following consumer loans affect your mortgage worthiness in different ways. Here are some steps you can take to improve your credit if you have these loans, so you can qualify the best possible mortgage.

  1. Student Loans

Student loans are unsecured debt, but they won’t harm you if you pay your bills on time. Because they take decades to pay off, student loans can actually help your score. Student loans will figure into your overall debt-to-income ratio, but a large student loan you consistently pay might help you qualify for a mortgage.

  1. Auto Loans

Auto loans are secured debt, because the lender can always repossess the car if you don’t pay. In some cases, auto loans can help your credit score by raising your score since you’ve diversified the types of debt you carry. Because auto loans are easier to acquire than credit cards, mortgage lenders may look favorably on you because you’ve already qualified for a car loan.

  1. Existing Mortgage Loans

Mortgages are the classic example of secured debt because the bank actually owns your house, thus, has the ultimate collateral. When paid on time, mortgages are great for your credit score. A missed payment on previous mortgages, however, will wave a red flag to your potential lenders.

Loans don’t have to be the life-sucking entities you fear! Contact Dean Rathbun when it comes time to finding the perfect plan of action to buy your home. We are happy to help you.

What to Do When Your Partner Has Bad Credit

Here’s how to handle a mortgage when your partner has less-than-ideal credit.

Whether you’ve taken the plunge with your high school sweetheart, or you’re finally checking your credit score after months of marriage, you may find that your partner’s score is less than ideal. Whether it’s extremely low or just short of “excellent,” a bad credit score doesn’t have to hinder your home purchase.

When applying for a home loan together, both of your credit scores will be taken into account. If your partner’s score isn’t great, you may not get approved for a mortgage. However, if you do get approved for a mortgage, you may end up having to pay a higher interest rate. In turn, your mortgage will be difficult to pay off.

If your partner has bad credit, consider these solutions:

Improve your credit. This is an obvious one; if you have bad credit, fix it. Decrease the debt-to-income ratio to your name, and never land yourself more debt during the mortgage application period. Pay off bills on time and don’t splurge on new items!

Correct credit report errors. When was the last time you checked out your credit report? Look it over to spot any errors or alimonies that may be present. Errors may include a wrong Social Security number, address, or late payment.

Apply individually. If you’re the partner with the higher credit rating, apply for the mortgage yourself. Keep in mind that if you do apply alone, only your income is factored into the equation. In turn, your mortgage allowance may be significantly smaller than what you originally wanted.

Add a parent to the loan. Consider adding a parent to the loan or deed. While it’s not as romantic as getting the new mortgage as a married couple together, it still allows you a chance to get that fairytale home.

The mortgage process doesn’t have to be confusing for you and your partner. Contact Dean Rathbun when it comes time to finding the perfect plan of action to buy your home. We are happy to help you!

Reasons Why a Mortgage Prequalification May Not Be Enough

Mortgage prequalification is important, but you may find out—the hard way—that this may not be enough to buy a home.

Homebuyers are often told they need to prequalify for a mortgage. This is not bad advice—in fact, it’s rather good advice…up to a point. A prequalification is only a baby step toward getting a loan. What you would like to be is preapproved, which is why many homebuyers confuse the two similar-looking terms. You may be asking, “Well, what’s the difference?” Here are three reasons as to why a mortgage prequalification is not enough to purchase a home.

  1. Your loan might not be approved.

A prequalification is usually based on information about your employment and income that you provide verbally to the lender. It may, or may not, also be based on your credit score, which is what actual mortgages are approved on.

  1. You may look for the wrong home.

Without a proper preapproval, you may be setting your sights too high, or too low. Shopping for a home takes a lot of time, and that could mean a lot of wasted time and effort. Realtors won’t spend much of their time with prequalified buyers; get preapproved on the other hand, and they’ll be eating out of the palm of your hand.

  1. Sellers may not accept your offer.

Sellers are very conscious about those that bid on their homes. Place an offer with a prequalification, and the seller may insist you have a preapproval. Dean Rathbun can help make that happen.

Contact Dean Rathbun when it comes time to finding the perfect plan of action to buy your home. We are happy to help you.

Top Questions to Ask Your Mortgage Lender

A little research to compare your options for a mortgage can help you get the best mortgage rate.

Use the power of choice to call two different lenders to apply for a mortgage—they may give you a different interest rate, and you can use this to your advantage. Even though information like your credit score and salary is set, financial institutions can interpret this information differently. And that can mean scoring a lower interest rate merely because of your choice in lender. Many borrowers don’t compare interest rate rates before selecting their mortgage, which possibly ends up costing them many years of a debt-free life. When you’re comparing lenders, here are a few questions to ask.

Will the size of my down payment impact the interest rate or fees on the loan? If you put down less than 20 percent when you apply for a mortgage and buy a home, you’ll likely end up having to pay for private mortgage insurance. Be sure to understand the minimum down payment and how it can affect the rest of your fees.

Are points included in the quote? A quote with an interest rate from your mortgage lender may or may not include points. Points are fees that you can pay to your lender when you decide on a home in exchange for a lower interest rate.

How can I lock the interest rate? When you get quotes for your interest rate, you need to ask how you can lock that quoted rate. If you wait too long between getting the quote and actually applying for the mortgage, the rate the lender gave you may expire, leading you to pay more in interest down the road. By locking in a rate, you’ll get what you budgeted for and can avoid having to ask for another quote with a potentially higher rate.

There is no such thing as a stupid question, especially when it’s something as important as the mortgage that’ll be with you for three decades. Contact Dean Rathbun when it comes time to finding the perfect plan of action to buy your home. We are happy to help you.