Why Get Pre-Qualified?
1. Pre-qualification is the beginning of the loan application process. The mortgage lender will use details you provide about your credit, income, assets and debts to arrive at an estimate of how much mortgage you can afford. The whole process may take only minutes or a few hours at most, and is free.
2. While a "pre-qual" is non-binding to the lender (because the information you provide has not been verified), it does serve as a good indication to potential sellers of your general creditworthiness.
3. These days sellers will NOT accept an offer without a a pre-approval letter and buyers documents submitted, so if you are serious about buying this is the first step towards getting you in your new home.
I am providing you with most (not all) of the out of pocket costs that you may have to pay. This is with the assumption the seller will not pay anything. This is also based on a loan amount of approximately $100,000 (*Starred items are loan specific*) Your total home purchase out of pocket expenses will be between $7,000 and $10,000. Lender will also want you to have approximately 6 months’ worth of payments in the bank after your purchase expenses are paid.
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PART A - (Overall Escrow Costs)
These are out of pocket expenses at the time service is performed,
which have NOTHING to do with the type of loan you will be getting. Listed in typical order due
$500 - $1,000 - Earnest Money - At time of contract acceptance. This can come from anyone.
It gets cashed and held at escrow. This can be personal check, or cashiers check, wire transfer, NOT Credit card
$275 - $325 - Home Inspection - Within 2 weeks of opening escrow. Paid at time of inspection.
This can come from anyone. Paid with cash/check or credit card
$75 Approximately - Pest inspection - Could be paid though escrow. This can come from anyone. Check, Credit card
$400 - $600 Appraisal - This is paid within about 2 weeks of opening escrow. Must come from buyer*****
$2,000 - $5,000 - Escrow/Title fees - This is due about 5 days prior to close of escrow.
$1,500 Escrow & Title Insurance costs
$2,500 Approximate loan costs (this is about 2% of the loan)******
These are typically 1% origination fees & 1% processing, underwriting and other office costs
This must come from buyer. MUST be certified funds: Cashiers Check, Money Order, Wire Transfer
$1,200 - The first year of homeowners insurance is part of these costs.
After that they are typically included in your monthly mortgage
$1,000 prorated property taxes typically just under 1% of the sale price. Based on a calendar year.
$200 - $1,000 HOA Transfer fees (if applicable)
$500 - $600 - Home Warranty - Usually included in closing costs. We will TRY to get the seller to pay for this
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PART B (Loan Items)
Basic money down for various loans. This has nothing to do with Part A
These have to be certified funds (cashiers check/wire transfer)
These are due about 5 days prior to close
0.0% for VA Loans
3.5% of sales price for an FHA loan - Based on $100k loan = $3,500
10% of sales price for some other loans - Based on $100k loan = $10,000
20% of sales price for most conventional loans - Based on $100k loan = $20,000
CASH PURCHASE
IF you are buying cash, then you will have to provide 'Proof of Funds’ when the the contract is submitted.
This is showing proof from your bank account you have the money/funds to buy the house
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PART C (Possible Seller Concessions)
Requesting seller’s assistance can be as much as 3.5% of the sale price.
The typical seller's assistance may cover all or part of the:
Appraisal, Escrow/Title Fees, Home Warranty, Misc. Costs.
Additional costs can include things such as engineering certification for anything
attached to the manufactured home such as patio, az room, awning - $600****
Tie downs/Retrofitting the under carriage up to about $2,000******
Asking the seller for sellers assistance (concessions) for cash purchases you will need about 1.5 - 2%
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PART D (immediate after escrow costs)
The fees you have after your purchase are typically: Internet connection
Gas turn on OR propane and propane tank deposit Cable or Satellite
Water turn on deposit of about $100 Moving truck
Electric turn on deposit of $600: get a letter of good standing from your current electric company and this is waived
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LENDER INFORMATION
I would prefer you to use one of our many local lenders located
in the area due to the local idiosyncrasies, customs and courtesies.
Submit the following items to the lender you are going to be using:
This is a basic list. The lender may ask you for other paperwork.
- A. The most recent copy of mortgage statements or
Rental information for borrowers who are purchasing
- The 2 most recent months bank statements on ALL accounts
-All pages (checking, savings, 401K, stocks,
i.e.: anything else of value)
- The 2 most recent copies of W-2’s (2017 - 2018)
If self-employed, then bring the complete tax returns & 1099s
- The most recent month worth of paycheck stubs (30 days) & award letters
- Copy of homeowner’s insurance and Homeowners Association Information (as applicable)
(Renter’s Insurance, etc.)
- Bankruptcy Papers, if applicable
- Divorce Papers, child custody papers, etc. if applicable
- Your first born (humor)
WHY SHOULD YOU GET LOAN APPROVAL
EVEN MONTHS PRIOR TO BUYING:
- The lender provides you with the REAL scenarios for your purchasing power after you have submitted all your required documentation. I could give you different monthly costs, which don't mean anything till you get that lenders approval.
- None of the sellers are accepting a purchase offer without the buyer having
submitted all the necessary documentation to the buyer’s lender.
- As a buyer you will not know how much or how little house you can buy
without going to the lender first.
- Unknown bad things can be on your credit report that can take up to 3, or 6
months or even longer to fix.
- You are wasting your time by looking at homes that might be outside your budget.
REQUESTING MAXIMUM LOAN AMOUNT
Please ask your lender for as much as possible, here is why:
Scenario ONE:
The buyer (you) gets approved for $100,000
We will be looking at properties up to about $125,000
Why you ask, because we will try to negotiate them down to the $$100,000
We start negotiations and are able to bring the sale price down to $105,000
Now the buyer (you) needs to get COMPLETELY re-qualified. This takes a long time
Scenario TWO:
Buyer gets qualified for the maximum amount, which is $500,000
Buyer still only wants to spend up to $100,000
We will still look at up to $125,000
Same negotiations, same reduction to $105,000
Now we can move forward comfortably since you, the buyers, are
already approved for $500,000.