How To Buy A House In A Seller’s Market

Chances are unless you have several hundred thousand dollars sitting around, you’re going to need financing buying a house. Biggest concerns potential home buyers tell us:

How much money do I need for a down payment?
What does my credit score have to be?
How much income do I need to buy a house?
What is my payment going to be?

Payment Scenarios You will want to do this the right way, using a good accurate mortgage loan payment calculator, to determine what type of house you can purchase for XYZ down payment. When buying a house you will need some sort of down payment funds. These monies can be as little as 3.5% of the purchase price and can come in the form of a gift. You can also try our loan qualifying calculator, which will determine how much house payment you could potentially take on given your income and monthly payment liabilities. This is the exact calculation a loan officer would do in getting you pre-approved to start looking at homes. *As a general rule of thumb- you can expect a total monthly house payment of $725 per month for every $100,000 in purchase price. This should help give you a barometer of purchase price to mortgage payment when you’re doing your initial research. Qualifying For The Liability Payment

A mortgage company will look at the following characteristics of your financial picture:

Income-lender will be looking for enough income to offset current liability payments as well as potential new housing payment. *Tip: Most lenders want the total liabilities to be no more than 45% of your gross income

Credit Score- you will need at least a 620 credit score to get a mortgage loan these days. Credit Score not high enough? Here are some tips on getting your credit score high enough to qualify.

Debt Payments-examples include car loans and credit card payments, takes double each dollar of debt in income to offset the liability.

Down Payment-this is the difference between the purchase price and the potential loan amount. There is also going to be closing costs which are approximately 3% of the purchase price. Down payment needed is at least 3.5%, so a total of 6.5% of the purchase price would be needed for total cash to close. Yes closing costs and down payment can come in the form of a gift depending on the mortgage loan programs sought.

Finding A Home To Purchase

With a pre-approval letter in hand, down payment monies ready to go, now you’re off to searching for homes.you’ll want have a conversation with your real estate agent about bedrooms, bathrooms, square footage, lot size, the facts surrounding your specific search criteria. The main objective: get into contract. In a sellers market, this becomes ever more challenging as the seller has the opportunity to choose whichever offer they want.

Does your real estate agent have connections with the local real estate community in the area in which you are thinking about buying a home in? This is huge.

Have your loan officer contact the listing agent of the property you’ve identified to potentially purchase, and have them discuss how strong you are financially with the listing agent. Every little bit of communication to tip the scale in your favor does help.

The Loan Process & Closing Escrow

The loan process is a series of steps the lender takes in making sure every I is dotted and every T is crossed so you can be rest assured your loan will go as smoothly as possible with minimizing any potential pickups that sometimes inevitably pop up along the way. In most cases, the lender will send in your loan package to their underwriting department. Underwriting department will ask for any updated financial documentation and/or explanations of the information they’ve been provided. Providing this back to the lender within a 24 hour business response time is paramount as time is of the essence and there’s a contract to perform on. After the lender receives whatever updated documentation was needed, they will send the documentation into underwriting for review and final signoff, at which point, loan documents will be ordered for you to sign. Transaction then will record and you get your keys and everybody is happy.

Tips To Successfully Buying A House

Research, Research, Research, but not to the point that you research yourself out of actually getting into contract. During the entire process you want to be in regular communication with your mortgage company and real estate agent about any potential issues are challenges that inevitably arise.

Common challenges on the real estate side

Can the sellers sign documents on time? Have they provided any entity information work executed signatures to the title company necessary to commence the sale of the property? If not, make sure your buyers agent is aware of this.
Will the property pass the pest report and if yes, will the work be required to be fixed prior to closing escrow, who pays for it- you or the seller?
Make sure there is no personal property such as a table and chairs for example, included in the purchase contract otherwise lender will require a bill of sale between you and the seller stating there is no value for the additional items being transferred in the contract

Common challenges on the financing side

Using gift funds in your home purchase transaction? Make sure the other party you’re getting the gift funds from deposits the money directly into escrow, not in your bank account.
Any irregular deposits going into your bank account independent of your normal job will have to be documented and/or explained otherwise these sources of money will not be permitted for use in the transaction.
Student loan payments- even though they might be deferred these will have to be accounted for as though they’re doing payable now
Owner in multiple different businesses reporting on your income tax returns? Make sure to provide all corporate returns of any other additional business entity you are affiliated with.
Any Liability showing up on your credit report have to be documented that there paid by somebody else or a business if a business or another party actually pays the liabilities showing up on your credit report.
Don’t do anything with your credit report in the loan process including but not limited to the following:

Don’t close out credit cards or any other credit account without first consulting with your loan officer
Don’t dispute any credit obligations
Don’t consolidate debt
Don’t payoff old collections

If you’re looking to buy a house, for a complementary -no obligation mortgage rate quote to see what payment scenarios might look like for your situation, start with us online today. We are a local Sonoma County Mortgage Lender successfully helping people purchase and finance real estate since 2005.