Informed Homebuyers are More Effective Consumers

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posted 4/25/2013 in Realtor News

Today, there are a growing number of obstacles for homebuyers, including a higher credit score standard and more restrictions on credit. Consumers should have a thorough understanding of the changing market when shopping for a mortgage. To find the right product, the American Bankers Association recommends that buyers:

  • Be aware of first-time homebuyer programs. Home buyers can call Northwest Bank or a housing agency in their state, county and city to see what they offer. Sometimes these programs offer better interest rates and terms than for previous owners.
  • Get pre-approved. Know the difference between "pre-qualified" and "pre-approved." Getting pre-qualified is a casual process where the lender tells the homebuyer how much they should be able to borrow based on how much money they make, how much debt they have and how much they have to put down on a house. Pre-approval occurs only after they actually apply for the loan and the lender gives them in writing the amount they can borrow. A buyer who is pre-approved is more attractive to sellers and their agents than one who is only pre-qualified. Once they find a mortgage that is best for them, they can get pre-approved before they start making offers on a home.
  • Be honest with the lender and themselves. Homebuyers don't want to borrow more than they can afford. Northwest Bank can provide a calculator to determine if they can afford to borrow and if so, how much.Click here to visit our financial calculators .
  • Choose the type of loan that makes the most sense for them. They can use financial calculators to determine if they should go with a fixed rate mortgage or an adjustable rate mortgage.
  • Know their credit situation. Homebuyers should obtain a copy of their credit report and FICO score at least six months before they apply for a mortgage. This should give them enough time to challenge and remove any errors on their credit report and take care of anything that's hurting their credit score.
  • Consider all the costs. A Northwest Bank lender will review costs like fees, closing costs, points, homeowner insurance, and taxes. But consumers should also consider repairs and maintenance costs. As a homeowner, they are responsible for those additional costs – there won't be a landlord to call.
  • Organize their finances before they go to the bank. While each bank may require different documentation, at a minimum they will need:
    • Pay stubs.
    • Tax returns.
    • Financial statements (one that is less than 60 days old).
    • Copies of additional monthly payments such as car loans, credit cards, student loans, etc.
    • Any additional information (such as proof of additional income) that they think will help their banker to positively evaluate their credit request.