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NEW RULES to DO NOW if You Want to Buy a House

Here are some "how to buy a house now" steps to keep in mind as you prepare to package yourself to win a home in any of our Front Range areas (Denver Metro especially).

With the best homes flying off the shelf-- often under contract the day they are listed or within days after, you want to be completely ready.

FIRST, it's best to...

... have a plan in mind for what kind of house you're looking for, what area, what you want the house to do for you, a time frame, and an exit strategy too.

Also, remember that buying a house takes more than the cash upfront..., "job, money and credit"-- it's a complexity of factors.

Here's a strategy list to keep in mind as you go forward:

(There are OTHER STRATEGIES for all this...VA loans, current equity on a home you want to sell, stocks/bonds income, 401k usage for your new home, new rules about renting out your current house to buy the next one (need to qual for two payments), current number of other properties you already have financed in your name etc, etc....but here is ONE strategy):

1. Be sure all the money you want to count toward your down payment AND closing costs AND qualification reserves AND inspections (maybe $500 worth) are in a US depository bank account or stocks/401k account (not a safe deposit box...a regular account) for at least 60 days before application.

....or in final escrow on a current house that you are planning to sell first. You will need to show the current house sale HUD-1 settlement statement at closing of the new house.

Any "unusual" dollar amounts of deposit must show in your accounts for at least 60 days upon application of a mortgage.

These "cash reserves assets" can be a gift from an immediate family member but the gift donor must also have these funds in a qualifying account AND they must be willing to present copies of such an account to your mortgage bank on your behalf and a signed formal one page "gift letter" loan document (they cannot borrow the funds on your behalf).

FHA loans need 3.5% of the purchase price in money. Most of the banks are bringing the closing fees on these loans. The monthly payment will be high because of high mortgage insurance on these but you don't need as much money to get in.

2. Be sure you have secured a US "W-2" regular income job (or pension/retirement/social security income) in/near the city where you want the house with as much pay as you can muster per month.

2nd job/part time work/contract work/self employment work that you can prove continues for at least 3 more years/bonuses/sales commission and self-employed ADJUSTED income has to be in place for a full two years of tax returns (with minimal deductions!) to count towards the monthly income, AND you will need to show the most recent two years of tax returns PROVING this type of income when you apply for a mortgage...there are no stated income loans anymore. LOSSES of this type income are taken away from other qualifying income reducing your qualifications.

3. Keep revolving monthly debt (car/truck payments, credit cards, student loans etc) as LOW as possible (have some debt because you need to show a good history of being paid on time...but use only about 10% of any "line of credit" amount. Get secured or otherwise low balance credit cards if you need to NOW.

Any collections or judgements need to be paid with a zero balance showing on your reports.

Keep all payments exactly on time!

4. Fix ANYTHING on your credit reports before you start...the best conventional loan rates are now mid qualifying FICO scores above 740. For an FHA or VA loan you will need the middle qualifying score to be at least 640.

Self pulls of credit are great to keep an eye of where you are without affecting your scores BUT keep in mind a real mortgage application pulls from all 3 bureaus and the score calculations are more strict. The only way to tell if your score quals is to do an actual mortgage application (often no upfront fee).

5. So-- "job, money and credit". Please call me for your personal scenario questions.


This page contains a single entry from the blog posted on March 28, 2016 9:28 AM.

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