The Money

• Buying vs. Renting
• Initial Consultation
• How Much Can You Afford
• Choosing A Lender
• Getting Pre-Qualified

Buying vs. Renting

Initial Consultation with Team 510 Realty

At Team 510 Realty, we offer all our clients a free consultation. During our time together we will discuss the specifics of what you are looking for, how the process works, and the road we will take to get there. By learning a little more about you, we can tailor a plan that is specific to your needs and will prioritize what’s important to you. By taking this time to talk with us and put your ideas and concerns down on paper, you will have the clarity to move forward to the next steps.    

How Much Can You Afford

The price you can afford to pay for a home will depend on six factors:

1. Gross Income
2. The amount of cash you have available for the down payment, closing costs and cash reserves required by the lender.
3. Your outstanding debts
4. Your credit history
5. The type of mortgage you select
6. Current interest rates
   

Another number lenders use to evaluate how much you can afford is the housing expense-to-income ratio. It is determined by calculating your projected monthly housing expense, which consists of the principal and interest payment on your new home loan, property taxes and hazard insurance (or PITI as it is known). If you have to pay monthly homeowners association dues and or/private mortgage insurance, this also will be added to your PITI. This ratio should fall between 28 to 33 percent, although some lenders will go higher under certain circumstances. Your total debt-to-income ratio should be in the 34 to 38 percent range.

Knowing what you can afford is the first step toward home ownership. It pays to check with several lenders before you start searching for a home. Most will be happy to roughly calculate what you can afford and prequalify you for a loan. Team 510 has several lenders that we can recommend if you don’t have one already.  back to top

Choosing a Lender

When you buy a home, one of your primary concerns will be finding a lender who can provide the financing you need. So what should you look for? Calling around and asking for interest rate quotes is not the best way to select a lender. Here’s why:

1. Interest rates change daily so today’s quotation may not be available tomorrow.
2. The lender knows nothing about your situation or needs so the interest rate they quote may or may not be a program that will fit you.
3. Often the rates quoted over the phone are not locked prices and the lender just wants to get you in the door. This means that the rates would be subject to change until the day your loan closes, instead of being pre-determined for a certain period of time.
4. You won’t know what other programs the lender has to offer you.
   

Competitive rates are important, but when you consider the fact that most lenders get their money from the same source, you must look at some other factors before choosing a lender. You want a lender who will work with you and your real estate agent as a team with the same goals-to get your loan closed in a timely and professional manner. Some questions to ask include:

1. Are they a mortgage broker? A mortgage broker originates and processes the loan, then submits the complete loan package to the wholesale lender that underwrites and funds the loan. Since they can send the loan to many different lenders you can sometimes get more competitive rates. Although it costs a little more up front to use the services of a broker it can sometimes save you in the long run by having a lower monthly interest rate.
2. Do they lock-in their interest rates and for how long?
3. How long has the company been in business? Lenders come and go. Make sure that the company you are dealing with has been around a while.
4. What is their reputation within the community and with other agents?
   

We have worked with many Direct Lenders, Mortgage Brokers and other approved institutions in the Bay Area, so feel free to call or e-mail us for a few recommendations if you don’t already have a lender.  back to top

Getting Pre-qualified

Getting pre-qualified is a MUST before you spend the time and energy looking for your home….here’s why:

1. It determines how much home you can afford - This is essential as you don’t want to find the home of your dreams only to realize afterward that you don’t qualify for that purchase price. Getting a pre-qualification first gives you the knowledge to move forward and second your offer the power to be ready immediately which ultimately makes your offer stronger.
2. It lets you know what your monthly payment will be - You will have an idea of what your monthly principal, interest, taxes and insurance (PITI) payment will be.
3. It shows you what your down-payment will be -- You will know approximately how much money you will need for a down-payment and closing costs.
4. It identifies the loan programs for which you qualify -- With the wide variety of loan programs available, it’s key to know which types you qualify for and which will best suit your needs.

At this point, the lender can also help you decide alternatives and strategies that can help you buy the house of your dreams. Several examples include:

1. Special First-Time Home-Buyers Program -- With low down-payment requirements.
2. Co-Mortgagor Financing -- If you feel you can afford a higher mortgage payment but can’t meet standard qualifying rations, a co-mortgagor may work for you.
3. Debt Consolidation Counseling -- By reforming your debt, you may be able to afford a larger purchase price.
   

In order to be pre-qualified, the lender will need the following information:

1. Your income and employment history
2. Your monthly debt and obligations
3. The source and amount of cash available for down-payment and closing costs

    

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• Finding Your Home - The Wish List
  
• Choosing a Neighborhood
  
• How To Choose A Home
  
• Home Tour Notes

• What Is An Offer?
  
• Contingencies

• The Loan Process
  
• Home Inspections
  
• Closing