Top 10 Mortgage Tips for 2015: Real Estate Questions Answered

AJ Team Realty has gathered the top 10 mortgage tips for 2015. These tips will help home buyers understand how to navigate the mortgage process and get the lowest rate possible.

1. Keep Your Money Still - Once you begin your home search, avoid moving money around, such as taking money out of your savings and putting it into a CD. Also, avoid cashing in on anything - retirement accounts, stocks, or the like. Paying off debts with savings is also a big no-no. Moving money around, making large purchases, or paying off debt all create money trails that can become a pain when it comes to showing where the money came from. This mortgage tip will help you buy that dream home!

2. Prepare to Explain - Lenders are nosy and suspicious. They'll question anything - I mean, anything - that looks slightly suspicious. Store credit cards pull your credit, making the lenders suspicious. Relatives know you're looking for a new home and write some generous checks that you, of course, deposit? Suspicious. Change jobs? Suspicious. Move around a lot? Suspicious. Lenders will ask you about all of these, requesting letters to explain why. Relax, write the letters, and move on. Don't let it frustrate you - lenders are looking out for their interests and are usually more than happy to answer any questions that you have. 

3. Deposit Gifts Early - Remember those generous relatives? Make sure to deposit that monetary gift at least 2 months early. If the deposit of a large monetary gift is within 2 months of the purchase, the gifter will have to write a letter saying that the money is intended as a gift, not a loan. They'll have to provide the bank with a copy of the check before you go to closing, and they'll have to provide verification that they can afford this gift by providing their own bank statements/letter from their bank. Poor Nana. Keep this mortgage tip in mind so both you and Nana can avoid an unnecessary headache. 

4. Self-Employed? Get Planning EARLY - Thank you, 2014, for making self-employed life difficult. Rules now require extra documentation for you self-employed folks. You'll need 2 years of tax returns, which is by nature considered rather unreliable, so loans can be difficult to secure. Alternatively, you can take less of a deduction each year, boosting your annual income, or you can have someone co-sign with you that has income documentation in the form of  W-2 statements. An unfortunate mortgage tip for you self-employed folks, but one you really need to be aware of so as to plan early!

5. Organization - Get some sort of filing cabinet and keep hold of any and all financial papers that are within 2 months of buying your new home. This papers include W-2s, tax returns, pay stubs, bank statements, checking/investment accounts, property tax statements, and any cancelled checks (for rent or mortgage). Also, save your bank and yourself headaches and put them in PDF format - makes life much easier!

6. Keep Your Credit Profile Stable - No big purchases (like a car) within a few months of buying your new home! New large payments = high rates and fees on your home loan. Don't change your credit obligations. Don't close or open an credit lines. Keep your credit within its normal rate. Unusual activity can cause high rates, fees, and even cause you to not qualify, even if you are financially secure. 

7. How to Pay Less Mortgage Insurance - Don't have enough to pay a 20% down payment? You're not alone. Unfortunately, that means you have to pay mortgage insurance every month. This rule protects lenders in case buyers defaults on their loans. 

Federal Housing Administration-insured loans only require a 3.5% down payment, but FHA premiums are costlier than private mortgage insurance. 

Good news is that qualified home buyers can attain Fannie and Freddie- backed loans, which require only a 3% down payment. Generally, these premiums are not as costly, but they do vary depending on the down payment and buyers' credit scores. 

Talk to your bank, real estate agent, and lender and make sure you are not buying beyond your means. You want to pay as large a down payment as possible, but you also don't want to go bankrupt. Be smart. 

8. Get Pre-Approved - Sellers prefer buyers who are pre-approved, so this mortgage tip will help you right off the bat. Pre-approval will also help you with much of your home-buying process. Your lender will submit documentation and pull your credit score. This information helps you understand what you can afford more accurately than relying on estimates. It also leads to a faster closing. The AJ Team will make sure that this is one of your first steps when you begin your home search, putting you ahead of other buyers and making the process quicker for you. 

9. Refinancing? - So many factors go into refinancing a home. What rate do you need? How long have you been financing? Talk to mortgage professionals before jumping into a process you've never gone through before. They'll help you understand what you need and help you reach your goals. Refinancing can be a great option, especially if you had to begin the home-buying process with a lower down payment than ideal. 

10. Reverse Mortgage for Older Buyers - Don't want to drain retirement funds? Consider a reverse mortgage on your home. You need to be at least 62 years old to qualify. The reverse mortgage lender will pay up to 52% of the new home's sales price. The home buyer gets the title, but the lender retains a security interest in the home. Bankrate writes, "There are no monthly payments, and when the home is sold or no longer the borrower's primary residence, the reverse mortgage must be repaid. Any remaining equity belongs to the borrower, heirs or estate." 

Keep these mortgage tips in mind as you start your home buying process. One of the great things about the AJ Team is that we make sure you know these things and stay on top of them throughout the home buying process. You're not alone with a team like ours- we really do make sure that you are taken care of during this process.

Questions? Give the AJ Team a call at 703-562-1820 or email us at info@ajteamrealty.com. We are MORE than happy to help. 

AJ Team Realty/ Keller Williams
SellMyHomeNOVA.com
info@ajteamrealty.com
703-562-1820