Preparing to Buy a Home

Pre-qualification means that you loan application has been taken and pre-approval means the application has gone through underwriting. NASB offers a special program called Home Buying Advantage that shows sellers you are serious about buying a home and could help you stand out from other buyers in a competitive market. You’ll essentially be 75% through the loan process and ready to buy. For full details and more information about the Home Buying Advantage program please click here.

There a are a number of factors that come into play for getting pre-approved, including how much of a down payment you can make, what your credit score is, if you have a good-debt-to-income ratio, and have proof of income. 

One thing you never want to do is buy more house that you can afford. Here's a tool that calculates the maximum home price and mortgage loan that you may be able to afford with a given down payment, loan-to-value ratio, and total monthly loan payment.

Here are a couple of steps you’ll need to take during the preliminary “grunt” work of first-time home buying:

• Sit down and make a detailed budget with your monthly expenses against your income. This will show you how much room you have in your monthly budget for a new house payment.
• Gather all information related to your credit history, including any possible bankruptcies or foreclosures. You can be approved for some loans, like an FHA-backed or VA-backed loan, even if your credit history has been a little rocky. The important thing to remember while buying your first home is to be honest about your credit history. What you don’t disclose immediately will show up later and potentially slow the entire process.
• Understand your credit score. Allowing a bank to pull your credit and discuss your credit score can help you understand what programs are available to you. The majority of banks will do this at no charge. Making changes to your credit bureau takes time. If you need to improve your credit by 10 or 20 points to acquire a lower interest rate, the sooner you know that, the better.
• Once you’ve organized all the information pertaining to your financial history and income, it’s time to do some research on the house that will fit your budget. As a first-time home buyer, you’ll have options that seem attractive, but may not fit within your projected plan for a mortgage payment. It’s also important to research which type of mortgage you’ll apply for. If you need help, most lenders will help you fill out a pre-qualification form. 
  
  Here's an eBook that help you get started.

Student debt doesn't have to stop you from purchasing a home. There are mortgage loan options that require less than 20% down, and some no down payment at all. An FHA loan allows a down payment of 3.5% in all U.S. markets, and HomeReady loans through Fannie Mae require only a 3% down payment. The credit requirements for an FHA loan are less stringent than a conventional loan, but the front-end ratio (mortgage payment plus homeowner’s association fees, property taxes, mortgage insurance, home insurance) will need to be less than 31% of your gross monthly income to qualify. Here's a blog that explains more.

A debt-to-income ratio is monthly debt payments divided by gross monthly income. Lenders use this to measure your ability to repay the money you have borrowed based on the payments you make every month.

The housing ratio looks at housing-related debts only (monthly mortgage payments, property taxes, etc)

The back end number considers all recurring monthly debts such as mortgage, car loans and credit card debt.

A pre-approval letter shows that you are a serious buyer. While a pre-approval letter isn't required to tour a home, most real estate agents prefer buyers have a pre-approval letter to show they are financially capable of purchasing a home. The pre-approval letter will show the maximum amount you are approved for so you can view homes that are within your budget. A pre-approval letter also allows you to make an offer on the home you want as soon as you find "the one". This can help prevent a bidding war or losing the home while you are getting pre-approved.

The two most significant factors that affect your credit score are your payment history and keeping your credit utilization under 20%. Maintaining a great credit score shows lenders that you are creditworthy and would be a good candidate for a lower interest rate. Check your credit history for free by going to www.annualcreditreport.com and requesting a copy. Here's a blog with more ways to reduce your interest rate.

An interest rate is the monthly cost you pay on the unpaid balance of your home loan. An annual percentage rate (APR) includes both your interest rate and any additional costs or prepaid finance charges such as points, origination fee, private mortgage insurance and underwriting and processing fees.

A fixed-rate mortgage is a loan in which the interest payments and principal never change during the life of the loan. A fixed-rate mortgage is beneficial to borrowers who are on a fixed income, and like the security of knowing that their rate and payments will stay the same. An adjustable-rate mortgage is generally preferred by borrowers who do not plan to stay in their home for a long time, who don't qualify for a fixed-rate mortgage, or are able to handle fluctuating payments.

At NASB, we have several loan programs to help people achieve their financial goals. Here's a list of some of the programs we offer:

• FLEX Program - If you're self-employed or don't fit inside standard loan guidelines.
• Dream Possible Home Loan - Features a waived fee plus a down payment or closing cost assistance to eligible Kansas City applicants.
• Bank Statement Loan—This is a loan solution for small business owners who can use bank statements rather than tax returns to qualify for a home loan.
• 1099 Mortgage Loan—This loan allows self-employed borrowers to use their 1099 forms instead of W-2s to qualify for a home loan.

There are many state and local programs that offer financial assistance for home buyers.  Here's a guide to tell you more. 

There are a number of factors that come into play to ensure you get the best interest rate on a mortgage loan, but the most important are having a high credit score, shopping around different lenders, putting down a large down payment, and shortening the term on your loan. Here's a blog that can tell you more about how to get the lowest interest rate.

The credit score needed to buy a house depends on the type of mortgage loan you are applying for. For instance, to get a conventional loan, you typically need a credit score of 680 or higher. VA loans don't have a minimum credit score requirement, but some lenders may still require at least a 680 score or higher.

The maximum loan amount you can borrow depends on your credit score, your debt-to-income ratio (DTI) and profile in the underwriting process. The lender basically wants to have an understanding of how much you will be able to repay, taking into consideration all risk factors. Here's a tool to help you calculate how much you can borrow. 

A minimum loan amount of $175,000 is required to apply. Exceptions include mortgage products for properties located within the Greater Kansas City metro and surrounding areas. Contact a NASB Loan Officer for details on the excluded areas and/or zip codes.