In many markets across the country, the number of buyers searching for their dream homes outnumbers the number of homes for sale. This has led to a competitive marketplace where buyers often need to stand out. One way to show that you are serious about buying your dream home is to get pre-qualified or pre-approved for a mortgage before starting your search.
Even if you are not in an incredibly competitive market, understanding your budget will give you the confidence of knowing whether or not your dream home is within your reach.
Freddie Mac lays out the advantages of pre-approval in the ‘My Home’ section of their website:
“It’s highly recommended that you work with your lender to get pre-approved before you begin house hunting. Pre-approval will tell you how much home you can afford and can help you move faster, and with greater confidence, in competitive markets.”
One of the many advantages of working with a local real estate professional is that many have relationships with lenders who will be able to help you through this process. Once you have selected a lender, you will need to fill out their loan application and provide them with important information regarding “your credit, debt, work history, down payment and residential history.”
Freddie Mac describes the ‘4 Cs’ that help determine the amount you will be qualified to borrow:
Bottom LineMany potential homebuyers overestimate the down payment and credit scores necessary to qualify for a mortgage. If you are ready and willing to buy, you may be pleasantly surprised at your ability to do so
Mortgage rates have mostly stabilized this month and are now essentially at the same point they were last spring, but that hasn't yet given a boost to home sales, which declined over the same period.
“Given that the economy remains on solid footing and weekly mortgage purchase application activity has been strong so far in 2019, we expect the decline in home sales to moderate or even reverse over the next couple of months,” says Sam Khater, Freddie Mac’s chief economist.
Freddie Mac reports the following national averages for mortgage rates in the week ending Jan. 24:
When you get pre-qualifed your lender pulls your credit and collects a few documents form you and gives you a pre-qualification letter that states you still have other financial qualifications to meet. Once you find a home you want to purchase, you must then write an offer with a financing contingency period (usually 21 days). During this time is when you meet the rest of your lenders requirements for obtaining a loan. You will be submitting the remaining required documents and meet any other requirements the lender asks of you. Your loan will then go though underwriting and you will wait for an approval. If you do not meet the requirements you are allowed to terminate your agreement with out penalty.
During these 21 days sellers are on pins and needles wondering if the deal will fall apart. Often times they do fall apart. This is why CASH is king...or was considered king. Sellers like cash deals for two reasons. One, they close quickly. There is no financing to work on. Only title has to be done, so they can close in about 7-10 days. Two, there is no financing contingency. So sellers don't have to worry about the deal falling apart. Cash deals 99% of the time will beat any offer, even a higher offer that is getting a loan. Sellers just don't want the risk of a deal falling apart with an offer that is getting a loan.
In mid Feb our spring market is about to begin. When spring market begins, all of the buyers come out of the woodwork. It is a buying frenzy. Inventory is low, and there are substantially more buyers. This creates for multiple offers. Multiple offers means biding wars. Biding wars increase your chance of competing against a cash buyer. The cash buyers usually win. If a buyer getting a loan, knows they are competing against a cash offer, they often times have to ante up a much higher purchase price to attempt to beat out the cash offer.
So if you can't pay cash, what do you do to make your more aggressive? You get approved PRIOR to to making an offer. This means you must get approved prior to even looking at homes. To get approved you will submit ALL of your documents and meet all the loan requirements before you do any thing else. The lender will then send your loan through underwriting and you will be returned with an approval if you meet the requirements. Your lender will give you an approval with the address of the property you are buying, "TBD", to be determined.
How does this make our offer more appealing to a seller? You can now write an offer with a 0 (zero) day financing contingency. Which means, you don't have a financing contingency at all. JUST LIKE A CASH OFFER. You also have the opportunity to close quickly, 10 days on average. JUST LIKE A CASH OFFER! You are now able to compete on the same playing field as a cash offer with out having to necessarily offer a higher purchase price to try to win that bidding war.
What if I am not in a bidding war, then how does this help me? If you are the only offer, the seller may now accept slightly less than he was willing to accept because you have such an aggressive offer. To the seller you basically have a cash offer. Your offer is fully approved.
I would highly suggest finding a lender who is familiar with this process and has the ability to offer it to you. I have a list of lenders who offer this. Please contact me if you need a referral.
Below is a list of all the documents required for a loan. I would begin to gather these and prepare to give them to your lender ASAP.
-Social Security Number(s)
-Address of past two years
-Names and addresses of each employer for past 2 years
-Past 2 years W2's
-Full month of recent pay stubs
-account names and numbers of all checking & savings acct's
-Last 3 banking statements from ALL accounts
-Addresses and loan info of all other real estate owned
-Bankruptcy, forclosure & divorce paperwork if applicable
The facts of residential real estate have remained consistent in 2017. In year over-year comparisons, the number of homes for sale has been fewer in most locales, and homes have been selling in fewer days for higher prices. This hasn't always been true, but it has been a common enough storyline to make it an overarching trend for the year.
New Listings increased 8.1 percent to 10,956. Pending Sales were up 18.8 percent to 9,264. Inventory levels shrank 15.5 percent to 33,899 units. Prices continued to gain traction. The Median Sales Price increased 6.3 percent to $199,750. Days on Market was down 5.0 percent to 57 days.
Sellers were encouraged as Months Supply of Inventory was down 19.5 percent to 3.3 months. New tax legislation could have ramifications on housing. The White House believes that the tax reform bill will have a small impact on home prices, lowering them by less than 4 percent, and could conceivably boost homeownership.
The National Association of REALTORS® has stated that eliminating the mortgage interest deduction could hurt housing, as the doubled standard deduction would reduce the desire to take out a mortgage and itemize the interest associated with it, thus reducing demand. This is a developing story.
If you’re a first-time home buyer, you might think you’re not ready to purchase a house. Perhaps you’re concerned about your job situation, your previous credit history, or your high monthly expenses. Whatever the circumstances, every borrower and financial situation is unique.
Unless you’re a financial expert, it’s best not to self-diagnose your financial problems. You wouldn’t skip out on the dentist to fill your own cavities, so don’t try to solve your financial troubles yourself either. A loan officer can walk you through your options—and they won’t try to drill your teeth!
When you apply for home loans, mortgage loan officers look at your credit score, credit history, monthly liabilities, income, and assets. These officers see the entire financial picture, not just the investable funds. A reputable loan officer with experience can get you on the right track for buying a home..
Here are three common reasons people don’t want to apply for a mortgage and what you should do if you’re really serious about buying a home.
A less-than-ideal credit reportThe reality is that mortgage companies are required to pull a copy of your credit report, which includes scores from all three credit reporting bureaus. Your credit report is the most accurate representation of your credit available. Don’t let your messy credit report keep you from talking to a lender. After looking at your credit report, the lender can actually tell you what debts are the biggest drain on your borrowing power so you can start making smart financial decisions to improve your score..
Not enough incomeFind homes for sale on
Let the mortgage company review your pay stubs, W-2s, and tax returns for the last two years. If you were self-employed, let the loan officer look at your tax returns and evaluate your credit to determine what down payment you can afford and what you can buy. The lender can give you an idea of what you need to do to qualify, including how much more money you need to make to offset a proposed mortgage payment. With an action plan and a strategy in place, it may just take you a matter of months to button up your financial picture to qualify.
Too much debtDebt and liabilities definitely impact spending power. Every dollar of debt you have requires two dollars of income to offset it. So for example, if you have a car loan that’s $500 a month, you will need $1,000 a month of income to offset that monthly liability. If more than 15% of your income currently goes toward consumer debt, you’ll have to either pay off debt or get more income—perhaps via a cosigner—to qualify for mortgage financing. Again, let the lender look at your financial picture so they can tell you what it takes to make it work.
If you’re planning to buy a house in the future but aren’t financially ready, talk to a professional. Meet with them face-to-face, provide them with all of your financial documentation, let them run a copy of your credit report, and go through a pre-home buying consultation so they can either pre-approve you or tell you what to do to become pre-approved in the future..
Many times, potential buyers are not ready, but having a conversation with a professional—so you know where you stand and where you are going—can be tremendously beneficial.
Is a mortgage pre-approval letter necessary to make an offer on a house? The short answer is no. However, if you want your offer to be taken seriously and to stand out from any competing bids, this little piece of paperwork can really give you the edge.
"While you do not 'need' a pre-approval letter from your lender in order for your offer to be accepted, I highly recommend all of my buyers present it," says Denise Shur, a Realtor® with 1:1 Realty in San Jose, CA. In fact, "I do not look for homes with my buyers until they have a pre-approval letter from their lender. To me, it's that important."
What is mortgage pre-approval?Basically, a mortgage pre-approval letter is a guarantee from a lender that it's willing to finance your home purchase up to a certain dollar amount, based on financial info you've shared with it, such as your pay stubs and tax returns. Pre-approval should not be confused with pre-qualification.
"These terms are often used interchangeably, but there is a big difference," explains Scott Ricamore, a Realtor with Keller Williams Park Cities in Dallas. "A pre-qualification is provided based on info shared verbally that has not been verified. Pre-approval requires an underwriter to scrutinize your documentation and approve the income and assets for a loan."
For that reason, pre-qualification can be done instantly, while it can take up to five days to be pre-approved. So is seeking pre-approval a good idea for you?
2 times a mortgage pre-approval letter isn't necessaryThe only buyer who definitely doesn’t require a pre-approval letter is one paying in cold, hard cash. Since this buyer doesn't need a home loan, sellers know that they can move forward without fear that lack of financing might hold things up, says Jane Peters, broker and owner of Home Jane Realty in Los Angeles.
Another time when pre-approval might not be necessary is if you're the ideal home buyer—meaning you've got a stable job and a solid credit history. This suggests you'll have no problem getting approved for a loan, so in this case, mortgage pre-qualification may be enough to please the home sellers and their listing agent, at least at the outset.
3 times a mortgage pre-approval letter is a mustYet outside this thin sliver of all-cash offers and impeccable buyers lies a huge swath of people who really should get that mortgage pre-approval letter before they make an offer. See if you fall within any of these buckets below.
If you don't have a pre-approval letter, your offer should include a financing contingency, which binds you to this deal only if you can secure a mortgage. Such contingencies make sellers wary, since closing will hinge on a huge "What if...?" This is why you might want to strengthen your offer by arming yourself with this letter.
How to get mortgage pre-approvalIf you're convinced you must get a mortgage pre-approval letter, make sure you get the best one possible, by shopping around.
"All lenders are not created equal; you’ve got to compare and contrast to find the right one," Ricamore says. "If you need to close quickly, you need a lender that can get it done fast rather than drag their feet. If you need to win a multiple-offer situation, you need a lender that the listing agent trusts." So be sure to ask your lenders questions like how long it will take to get pre-approved, and whether they've worked with particular real estate brokerages in the area where you're hoping to buy.
"One misconception I hear a lot is that if you apply for a mortgage with multiple companies, they'll pull your credit, and that will hurt your score," Ricamore notes. While it’s true that applying for a mortgage will impact your score, "Companies know that rate shopping happens," he says, and "credit inquiries for a mortgage within 30 days are only calculated as one inquiry for the same type of loan."
In other words, there are very few downsides—and many benefits—to getting this helpful letter in hand.
For more smart financial news and advice, head over to MarketWatch.
Stephanie Booth's stories have appeared in magazines such as Real Simple, Cosmopolitan, Glamour, and Psychology Today.
President Donald Trump has long promised to cut taxes in a bid to help the middle-class and spur business growth, but will his newly unveiled tax plan achieve those lofty goals? In fact, some real estate experts express doubt that the changes proposed by the plan will be good for the housing market.
"Middle-class families will not see much tax relief in this plan," says Joseph Kirchner, senior economist at realtor.com®, adding, "In order to pay the large tax cuts to the wealthy, programs that help home buyers purchase homes and help builders bring homes to market will likely be drastically cut."
At issue are income-tax deductions, which reduce an individual's taxable income, and therefore one's overall tax bill. Currently, taxpayers can choose whether to itemize their tax deductions—writing off specific expenses—or take one big standard deduction instead. The new tax plan nearly doubles the standard deduction. Sounds good, right?
But by boosting the standard deduction, the plan renders the mortgage interest deduction nearly useless. Buyers can typically use the deduction to shave $8,000 to $10,000 off what they owe the government in their first year of homeownership, says Kirchner. Still, the bulk of taxpayers are more likely to opt for the standard deduction, which would total $12,000 for individuals and $24,000 for married couples who file jointly.
The plan also eliminates most types of itemized deductions, including payments for state and local taxes—which include property taxes. (It does retain the deduction for charitable gifts—but again, considering the size of the new standard deduction, this will mostly benefit wealthy people who write big checks for charity.)
The plan must still be approved by Congress.
"This proposal recommends a backdoor elimination of the mortgage interest deduction for all but the top 5% who would still itemize their deductions," National Association of Realtors® President William Brown said in a statement. "When combined with the elimination of the state and local tax deduction, these efforts represent a tax increase on millions of middle-class homeowners."
This could make it more expensive to own a home and could drive up prices in pricier, coastal cities, says Matthew Gardner, a senior fellow at the Institute on Taxation and Economic Policy, a liberal-leaning think tank based in Washington, D.C.
However, the mortgage interest deduction isn't really what pushes people buy a house, says Roberton Williams, senior fellow at the Tax Policy Center in Washington, D.C. Instead, it encourages those who have decided to buy to spend more money on a larger house, because they are likely to get some of that money back on their tax return.
Details of the proposed new tax code were scant. The number of tax brackets would shrink from seven to three: 12%, 25% and 35%. It is unclear, however, which income levels would be included in each. That's a boon to the ultrawealthy who are currently in a 39.6% bracket, but a fourth, higher bracket could be created. The plan would also raise the child tax credit for lower-income and middle-class families.
"With significant and meaningful tax reform and relief, we will create a fairer system that levels the playing field and extends economic opportunities to American workers, small businesses, and middle-income families," reads the plan crafted by the president and Republican leaders.
But the new tax code would ax personal exemptions, which provide breadwinners deductions of a little more than $4,000 per family member, including themselves. That could hurt parents with several children.
"Many households, particularly larger ones, will have higher taxable income even though the standard deduction is [nearly] doubled, because they're losing the personal deduction," says the Tax Policy Center's Williams.
Clare Trapasso is the senior news editor of realtor.com and an adjunct journalism professor. She previously wrote for a Financial Times publication and the New York Daily News. Contact her at firstname.lastname@example.org.
Hugh Hefner's death at the age of 91 marks the end of an era. And while many are rightly lauding the Playboy founder as a cultural force who helped revolutionize publishing and bring the sexual revolution to the masses, we'll pause to honor another, equally iconic part of his legacy: the Playboy Mansion. His 29-room home, a "Gothic Tudor"-style estate, set on 5 acres of the Holmby Hills area of Los Angeles, is an American phenomenon in its own right, sparking the fantasies of generations of men (and women).
So what will happen to the nation's second-most-famous mansion, a place where scantily clad playmates famously partied hard alongside actors, musicians, Nobel Prize winners, and other assorted A-listers?
Well before Hefner's passing, the home sold last year to Daren Metropoulos, a neighbor and co-owner of Hostess Brands, for $100 million. The catch was that Hef could live out the rest of his days in the mansion, and that major renovations would not take place while he was a tenant. Now Metropoulous is expected to move forward quickly on his plans to rebuild the place from the ground up, connecting it to the home next door, which he also owns, to create a 7.3-acre compound.
"I look forward to eventually rejoining the two estates and enjoying this beautiful property as my private residence for years to come," he said in a statement provided to The Wall Street Journal in April 2016, following the sale.
But before all of the Playboy memorabilia is carted off for good, we rounded up some surprising tidbits on the mansion that we thought readers should know.
1. The first Playboy Mansion, in Chicago, is still standing—but there's nary a bunny tail in sight. The original place, complete with a Playmate-ready fire pole leading directly into the basement-level pool, was purchased for $400,000 in 1959 in the Windy City, where Hef founded his mag. But as the editor found himself increasingly enamored with celebrities, he spent less and less time there, finally decamping to the West Coast in the 1970s. The Midwest hasn't been the same ever since! In 1984, he leased out the mansion to the School of the Art Institute of Chicago for $10 a year. A real estate company eventually bought the home in 1993 and divided it up into seven condos.
2. Hefner bought the current fortress—at the time dubbed "Playboy Mansion West"—from the famous chess player and engineer Louis D. Statham in 1971, for $1.05 million. Statham invented a device that helped NASA ensure that its spacecraft stayed on course. Hefner invented a mass-delivery system for disseminating pictures of naked women. You make the connection.
3. Don't get in the water! The bacteria that causes Legionnaires' disease, a bad form of pneumonia, was discovered in the whirlpools of the mansion's grotto in 2011. The Los Angeles County Department of Public Health had investigated after 120 guests suddenly fell ill.
4. Think the mansion was all fun and games? Think again. Hefner's former girlfriend Izabella St. James claims that the girlfriends had a 9 p.m. curfew every night—unless they were out with the man himself, according to her book "Bunny Tales: Behind Closed Doors at the Playboy Mansion."
5. The room where Elvis reportedly had a memorable night with eightPlayboy Bunnies back in the 1970s was later dubbed the "Elvis Suite." And in the King's honor, it has reportedly been closed to the public ever since.
6. Talk about famous guests misbehaving! John Lennon once put out a cigarette on one of Hefner's Matisse paintings. Hey, he and Yoko were separated at the time.
7. Hefner had the kind of private zoo on the property that may not have been appropriate for the kiddies. Rumor has is that at one time, the city removed several big game animals from Hefner's zoo, after a llama was mysteriously found dead after an all-night rager. The peacocks, macaws, and squirrel monkeys, however, were allowed to stay.
8. The Playboy founder was clearly a fan of wild animals, so much so that one of the special rooms of the mansion was done up in full-on safari motif. That included animal skin rugs, leopard print decor, and lots of safari-themed paraphernalia.
Clare Trapasso is the senior news editor of realtor.com and an adjunct journalism professor. She previously wrote for a Financial Times publication and the New York Daily News. Contact her at email@example.com.
It's a slow Sunday morning. You've just brewed your Nespresso and popped open your laptop to check out the latest home listings before you hit the road for a day of open houses.
You're DIYing this real estate thing, and you think you're doing pretty well—after all, any info you might need is at your fingertips online, right? That and your own sterling judgment.
Oh, dear home buyer (or seller!)—we know you can do it on your own. But you really, really shouldn't. This is likely the biggest financial decision of your entire life, and you need a Realtor® if you want to do it right. Here's why.
1. They have loads of expertise Want to check the MLS for a 4B/2B with an EIK and a W/D? Real estate has its own language, full of acronyms and semi-arcane jargon, and your Realtor is trained to speak that language fluently.
Plus, buying or selling a home usually requires dozens of forms, reports, disclosures, and other technical documents. Realtors have the expertise to help you prepare a killer deal—while avoiding delays or costly mistakes that can seriously mess you up.
2. They have turbocharged searching power The Internet is awesome. You can find almost anything--anything! And with online real estate listing sites such as yours truly, you can find up-to-date home listings on your own, any time you want. But guess what? Realtors have access to even more listings. Sometimes properties are available but not actively advertised. A Realtor can help you find those hidden gems.
Plus, a good local Realtor is going to know the search area way better than you ever could. Have your eye on a particular neighborhood, but it's just out of your price range? Your Realtor is equipped to know the ins and outs of every neighborhood, so she can direct you toward a home in your price range that you may have overlooked.
3. They have bullish negotiating chops Any time you buy or sell a home, you're going to encounter negotiations—and as today's housing market heats up, those negotiations are more likely than ever to get a little heated.
You can expect lots of competition, cutthroat tactics, all-cash offers, and bidding wars. Don't you want a savvy and professional negotiator on your side to seal the best deal for you?
And it's not just about how much money you end up spending or netting. A Realtor will help draw up a purchase agreement that allows enough time for inspections, contingencies, and anything else that's crucial to your particular needs.
4. They're connected to everyone Realtors might not know everything, but they make it their mission to know just about everyone who can possibly help in the process of buying or selling a home. Mortgage brokers, real estate attorneys, home inspectors, home stagers, interior designers—the list goes on—and they're all in your Realtor's network. Use them.
5. They adhere to a strict code of ethics Not every real estate agent is a Realtor, who is a licensed real estate salesperson who belongs to the National Association of Realtors®, the largest trade group in the country.
What difference does it make? Realtors are held to a higher ethical standard than licensed agents and must adhere to a Code of Ethics.
6. They're your sage parent/data analyst/therapist— all rolled into oneThe thing about Realtors: They wear a lot of different hats. Sure, they're salespeople, but they actually do a whole heck of a lot to earn their commission. They're constantly driving around, checking out listings for you. They spend their own money on marketing your home (if you're selling). They're researching comps to make sure you're getting the best deal.
And, of course, they're working for you at nearly all hours of the day and night—whether you need more info on a home or just someone to talk to in order to feel at ease with the offer you just put in. This is the biggest financial (and possibly emotional) decision of your life, and guiding you through it isn't a responsibility Realtors take lightly.