Mortgage Tips for Livermore Valley!

In my prior blogs about credit and home purchasing, I’ve shared ideas to help home buyers in Livermore Valley. Today I’m going to share insights that will help you prepare for the mortgage process.

It’s true that mortgage underwriting is more stringent today than it was a few years ago. The thing to remember is that mortgages became abnormally easy during the market peak, and we’ve now returned to traditional lending environments.

It takes patience to get a mortgage these days. But with interest rates holding low and home prices being reasonable in Livermore Valley, it’s certainly worth the effort!

I’ll start by explaining the difference between a mortgage pre-qualification and a pre-approval:

Pre-qualified = Lender provides an estimated mortgage amount that you would qualify for, if you meet the underwriting conditions. This enables you to know the price range that suits your budget. It is not a promise of a mortgage.

Pre-approved = Lender agrees to a specific mortgage amount. In this case most of the underwriting has already been performed. The pre-approval usually includes an expiration date and any stipulations that pertain to the mortgage offer.

A pre-qualification is fine if you just want to see what your money could buy. However, if you’re serious about buying a home in Livermore Valley, a pre-approval is wiser. You’ll have more confidence in your buying power and a stronger purchase position.

Either way you go, eventually you need to provide documentation to the lender. Criteria will vary by lender and loan type. Bear in mind that we’re painting with a broad brush for now.

Here are the basics:

Credit score – while some mortgages accept FICO scores in the low 600’s, many lenders are looking for a FICO of 680 and above. See my prior blog about credit for more tips. Normally, the better credit scores get the lowest interest rates.

Income – consistent work history of 2 years or more at the same job is desired. You may be asked to explain any gaps in your employment history. Your pay check stubs, copies of W-2’s and/or tax returns will be requested.

Self-employed income – income tax filings for the prior 2 years will be required. The length of time of self-employment and the consistency of income will be significant factors. Good accounting records will be essential.

Spending habits – your recent bank statements may be requested to verify your average account balances and screen for overdraft activity.

Savings habits – regular contributions to a retirement account, investment account, or basic savings account are admired by lenders. Modest contributions are better than no contributions, and consistency is golden.

Down payment – depending on the type of mortgage, your down payment will need to be from three percent to twenty percent of the home purchase. Down payment assistance in the form of a gift can still be accepted in some cases. We also have several types of mortgage assistance available for first-time buyers in Livermore Valley.

Character – this is the summary of your financial life and a projection of the lending risk. In addition to your income and credit, your lender may review public records. The payment patterns of your utility bills may be considered. The history of your employment may be considered.

Preparing for the mortgage puts you closer to buying a home in Livermore Valley. Rates are low and home prices are reasonable, so there’s no better time to get started. Contact me today to see the wonderful homes available in Livermore Valley!

John Kurtzer
Your Livermore Real Estate Expert
RE/MAX Accord

Livermore Real Estate
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