Pre-Approval - Find Out How Much Home You Can Afford

Save yourself time and hassle, get pre-approved and know exactly how much home you can afford. Generally, a lender will want your monthly mortgage payment to total no more than 31% of your monthly gross income (that’s your monthly income before taxes and other paycheck deductions are taken out.) You also need to consider current loan interest rates. The lower the interest rate, the more expensive the home you’ll be able to afford.

Scoring Your Credit, How's Your FICO?

In today’s increasingly automated society, it should come as no surprise that when you apply for a mortgage, your ability to pay can be reduced to a single number. All the years you’ve been paying your mortgage, car payments, and credit card bills can be analyzed, sliced, diced, spindled and mutilated into a single indicator of whether you’re likely to meet your future obligations.

All three of the major credit reporting agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at a score. The best known is called the FICO score, based on a model developed by Fair Isaac and Company (hence the name) and used by Experian. Equifax’s model is called BEACON, while TransUnion uses EMPIRICA. While each of the models considers a range of data available in your credit report, the primary factors are:

Credit History – How long have you had credit?
Payment History – Do you pay your bills on time?
Credit Card Balances – How much do you owe on how many accounts?
Credit Inquiries – How many times have you had your credit checked?

Each of these, and other items, are assigned a value and a weight. The results are added up and distilled into a single number. FICO scores range from 300 to 800, with higher being better. Typical home buyers likely find their scores falling between 600 and 800. FICO scores are used for more than just determining whether or not you qualify for a mortgage. Higher scores indicate you are a better credit risk, and thus may qualify for a better mortgage rate.

What can you do about your FICO score? Unfortunately, not much. Since the score is based on a lifetime of credit history, it is difficult to make a significant change in the number with quick fixes. The most important thing is to know your FICO score and to ensure that your credit history is correct. Conveniently, Fair Isaac has created a web site www.myFICO.com) that let’s you do just that. For a reasonable fee, you can quickly get your FICO score from all three reporting agencies, along with your credit report. Also available is some helpful information and tools that help you analyze what actions might have the greatest impact on your FICO score. Each of the credit services offers similar services on their web sites: www.equifax.com, www.experian.com, and www.transunion.com.

Mistakes That Can Cost You Money When Buying A Home on Cape Cod

1. Failing to use the services of an experienced REALTOR.
Many times buyers avoid using the services of a REALTOR under the mistaken belief that it costs them money – or that they will be able to negotiate a better deal directly with the seller or seller’s agent. This can be an expensive mistake.

When buying a home, if you are negotiating directly with the seller or seller’s agent, you may not be taking advantage of the best deal available in the marketplace today! You can have your own REALTOR, a Buyer Broker or Purchaser’s Agent, who is committed to using the experience gained through hundreds of successful negotiations for your benefit – at no charge to you! Your agent can be paid from the same commission that the seller’s agent is paid from – by the seller.

Real Estate is a unique business, where an agent with one day’s experience and no sales gets paid the same as an agent with several years experience and hundreds of successful sales. An experienced agent can help you avoid the other costly mistakes outlined here, and make your home buying experience an enjoyable, stress-free one!

2. Not knowing who the agent is really working for.
It is important for buyers to know and understand for whom the agent helping with the house hunting is actually working. The agent may be working as a sub agent – representing the seller’s best interests during negotiations – or as your agent representing your best interests during negotiations. If you are not sure who your agent is working for – ask for clarification. Your REALTOR must fully explain the new agency laws. When negotiations commence, wouldn’t you want to know whether information you divulge will be used for the seller’s benefit – or your’s?

3. Failing to have a Comparative Market Analysis prepared before offering.
Before you make an offer to purchase that special home, you must have a good idea what the market value is to ensure you do not overpay. Your agent can prepare a Comparative Market Analysis showing what similar homes have recently sold for, and the difference between the asking and selling prices. This is the same type of report the seller receives when deciding on an asking price. Wouldn’t you like to have access to the same information as the seller?

4. Failing to recognize different negotiating styles and strategies.
Many buyers think that the way to achieve a fair purchase price is by offering low. This is the strategy of the buyer who is not in possession of all the facts essential to negotiating the best possible deal. Many times that type of strategy will polarize negotiations and lead to inflexibility on part of the seller – or worse yet – failed negotiations!

If you have chosen your REALTOR wisely, the most effective strategies for this particular situation will be revealed to you. Remember, in the real estate business, an agent with many successfully closed transactions usually costs the same as someone who is inexperienced. That experience could mean a better deal at the negotiating table with a minimum amount of hassles.

5. Failing to have the home inspected by a competent home inspection company.
Buying a home is a major purchase usually made after spending just half an hour looking at the home. Isn’t it worth ensuring you will not be surprised later with deficiencies costing thousands? Your REALTOR can recommend several reputable companies for you to choose from, and will ensure the appropriate home inspection clause is inserted in the offer.

6. Not knowing and understanding your rights and obligations set out in the Offer To Purchase.
It is important to understand completely the terms of the Offer to Purchase. Wrong assumptions, poorly written or missing clauses, and not understanding how the clauses affect the purchase, can lead to increased costs or a void contract. An experienced REALTOR can thoroughly explain the agreement to you and help you to fulfill your contractual obligations.

7. Letting emotion blind reason.
Buying a home is an exciting time and is usually an emotional decision.
It is important that those emotions be validated by facts and reason. An experienced agent will help to remove the emotion from the negotiating process and provide you with the information you need to make the right decisions.

8. Failing to take the steps to be financially pre-qualified, and having an interest rate guarantee before looking at homes.
Knowing how much you can comfortably afford before looking at real estate for sale will ensure you are looking in the right price range and prevent you from buying a home that will strain you financially and emotionally. Having an interest rate guarantee will protect you in times of fluctuating rates and ensure that your initial projected payments do not suddenly escalate, resulting in extra interest charges. An experienced REALTOR can help you initiate this process and can also recommend alternative sources of financing.

Being aware of these mistakes will help ensure you receive best value for your dollar when the time comes to buy your new Cape Cod home.