Month: April 2020

The two words that best describe how to prepare yourself for home ownership from a financial perspective are these: plan ahead.

Before anything else, the first thing you need to do is figure out, regardless of what prices are doing in your chosen area, what you can realistically afford for housing, month after month and beyond. You and only you will be making the mortgage payment, and you need to enter into a purchase that truly works for you.

Once you are at that point, you then reach out to a mortgage professional, we here can help, to see how much house you can afford with your realistic housing budget.

In addition to the monthly payment that you’ll be taking on, there are other considerations, such as the amount of money you’ll need to close the transaction. Beyond your down payment, there are other expenses, such as closing costs, lender fees, interest expenses, and asset reserves.

Saving money for a home purchase can take time, and in keeping with our plan-ahead theme, having at least some idea of how much you’ll need for it sooner rather than later is a good thing.

There are other considerations that will factor into the transaction and determine what interest rate you’ll pay. One of these is what your credit report looks like.

If you are carrying too much debt or the debt you have (such as credit cards) is maxed out, your lender may ask you to either pay some of it down or pay it off completely.

Are there items on your credit report that are incorrect or shouldn’t be there at all? Just as with paying off debt, this can be managed but may take time to complete.

Give us a call so we can help you get in the best buy-ready position you can be in when you start looking at homes.

What lenders mean by assets are funds that you are able to put into your home purchase transaction. These are funds to be used for the down payment, closing costs, asset reserves, and so forth.

What lenders like more than anything are what are called “liquid assets.” “Liquid” means cash or a cash equivalent, such as money sitting in a bank account. This also includes available money from a retirement account that could be transferred into a bank account.

People often ask whether cars, motorcycles, jewelry, and other items they own could be considered assets.

The short answer is no. One challenge here is that in those forms, they aren’t considered liquid. Another is that the lender would have no way to determine their true value without having them appraised, and this would make financing your home much more complex.

If you have items you plan on selling to put money into the transaction, that’s fine. What needs to happen, though, is the source of those funds and where the proceeds went need to be fully documented.

An example of this would be your selling a car on March 14 for $3,500 cash and putting the money into your bank account a day later. A lender may ask for a copy of the bill of sale and bank statements showing the deposit.

If you have questions about how assets work in the mortgage process, please give us a call, and we would be happy to answer them.