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
View Livermore Listings
Visit My Website

One of the most common questions I hear from Livermore Valley home buyers are, “What does it take to qualify for a mortgage these days?

Good question! Here’s an answer…

Each bank and loan program has its own set of criteria.  There is no one-size-fits-all when it comes to mortgages.  While the underwriting process is more exacting than it was a few years ago, good mortgages at great rates are available.  Banks are lending money for home purchases in Livermore Valley!

That said, it pays to have your finances in order.  Prepare yourself for financing your Livermore Valley Home by reviewing your credit report before the bank does.  You are entitled to one free credit report per year.  You can obtain it by visiting annualcreditreport.com.  As an option, you can also obtain a copy of your credit score.

Once you have a copy of your credit report, look for any negatives like late payments or collections and address any errors in reporting.  If you disagree with a reported item, you can file a dispute.  The FAQ’s on annualcreditreport.com can help you through the process.

If there’s a legitimate blemish on your credit history, don’t let it stop you from moving forward.  The nature of the negative item, along with the age of it, and any mitigating circumstances, are considerations that your lender will review during underwriting.  Just be prepared and have an explanation ready.

It’s also worth noting that some aspects of your credit history have more impact than others.   While the credit bureaus won’t tell us how they calculate a credit score, here are the basic categories:

• Payment History: 35%
• Amounts Owed: 30%
• Length of History: 15%
• Types of Credit: 10%
• New Credit: 10%

As you can see, paying your bills on time, and using your credit wisely, are big parts of the picture.

Knowing your credit history is only one  factor in the mortgage process, but it will help you prepare financing for your Livermore Valley home purchase.

The best place to start your Livermore Valley home buying experience is right here.  Simply contact me for help with your home buying questions.  Let’s get past the initial requirements and find you the perfect home in Livermore Valley!

John Kurtzer
Your Livermore Real Estate Expert
RE/MAX Accord

Livermore Real Estate
View Livermore Listings
Visit My Website