7 Things To Avoid After Applying for a Mortgage!

7 Things To Avoid After Applying for a Mortgage! | MyKCM

Congratulations! You’ve found a home to buy and have applied for a mortgage! You are undoubtedly excited about the opportunity to decorate your new home! But before you make any big purchases, move any money around, or make any big-time life changes, consult your loan officer. They will be able to tell you how your decision will impact your home loan.

Below is a list of 7 Things You Shouldn’t Do After Applying for a Mortgage! Some may seem obvious, but some may not!

1. Don’t change jobs or the way you are paid at your job!  We must be able to track the source and amount of your annual income. If possible, you’ll want to avoid changing from salary to commission or becoming self-employed during this time as well.

Now that being said – if you get an opportunity to obtain another job to improve your financial situation – do not over look this and give us a call to discuss before passing on this. not everything is always clear cut and we understand this.

2. Don’t deposit cash into your bank accounts. Lenders need to source your money and cash is not really traceable. Before you deposit any amount of cash into your accounts, discuss the proper way to document your transactions with us. Normal payroll and other sorts of income that are typical are not what we are discussing here.

3. Don’t make any large purchases like a new car or new furniture for your new home. New debt comes with it, including new monthly obligations. New obligations create new qualifications. People with new debt have higher debt to income ratios… higher ratios make for riskier loans and more difficult to get approved… and sometimes qualified borrowers no longer qualify.

4. Don’t co-sign other loans for anyone. When you co-sign, you are obligated – YES a cosigner is equally obligated to pay as the main borrower – no difference. As we mentioned, with that obligation comes higher ratios as well. Even if you swear you will not be the one making the payments, your lender will have to count the payment against you. Also understand that in some cases if a history of payment from another party can be documented for an extended period of time – there may be some flexibility.

5. Don’t change bank accounts. Remember, lenders need to source and track assets. That task is significantly easier when there is consistency among your accounts. Before you even transfer money between accounts, talk to us.

6. Don’t apply for new credit. It doesn’t matter whether it’s a new credit card or a new car. When you have your credit report run by organizations in multiple financial channels (mortgage, credit card, auto, etc.), your FICO score will be affected. Lower credit scores can determine your interest rate and maybe even your eligibility for approval.

7. Don’t close any credit accounts. Many clients have erroneously believed that having less available credit makes them less risky and more likely to be approved. Wrong. A major component of your score is your length and depth of credit history (as opposed to just your payment history) and your total usage of credit as a percentage of available credit. Closing accounts has a negative impact on both those determinants of your score.

Bottom Line

Any blip in income, assets, or credit should be reviewed and executed in a way that ensures your home loan can still be approved. The best advice is to fully disclose and discuss your plans with your loan officer before you do anything financial in nature. They are there to guide you through the process.

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Home Buying earlier in life is one of the Best ways to Building Wealth

Buying a Home Young is the Key to Building Wealth | MyKCM

Homeowners who purchase their homes before the age of 35 are better prepared for retirement at age 60, according to a new Urban Institute study. The organization surveyed adults who turned 60 or 61 between 2003 and 2015 for their data set.

“Today’s older adults became homeowners at a younger age than today’s young adults. Half the older adults in our sample bought their first house when they were between 25 and 34 years old, and 27 percent bought their first home before age 25.”

The full breakdown is in the chart below:

Buying a Home Young is the Key to Building Wealth | MyKCM

The study goes on to show the impact of purchasing a home at an early age. Those who purchased their first homes when they were younger than 25 had an average of $10,000 left on their mortgage at age 60. The 50% of buyers who purchased in their mid-twenties and early-30s had close to $50,000 left, but traditionally had purchased more expensive homes.

Buying a Home Young is the Key to Building Wealth | MyKCM

Many housing experts are concerned that the homeownership rate amongst millennials, those 18-34, is much lower than previous generations in the same age range. The study results gave a great reason why this generation should consider buying instead of signing a renewal on their lease:

“As people age into retirement, they rely more heavily on their wealth rather than their income to support their lifestyles. Today’s young adults are failing to build housing wealth, the largest single source of wealth, at the same rate as previous generations.

While people make the choice to own or rent that suits them at a given point, maybe more young adults should take into account the long-term consequences of renting when homeownership is an option.”

Bottom Line

If you are one of the many young people debating whether buying a home this year is right for you, let’s get together to discuss your options!

Homeowners & Appraisers See the Most Eye-to-Eye on Price in 3 Years

Homeowners & Appraisers See the Most Eye-to-Eye on Price in 3 Years | MyKCM

In today’s housing market, where supply is very low and demand is very high, home values are increasing rapidly. Many experts are projecting that home values could appreciate by another 5% (or more) over the next twelve months. One major challenge in such a market is the bank appraisal.

When prices are surging, it is difficult for appraisers to find adequate, comparable sales (similar houses in the same neighborhood that recently closed) to defend the selling price when performing the appraisal for the bank.

Every month in their Home Price Perception Index (HPPI), Quicken Loans measures the disparity between what a homeowner who is seeking to refinance their home believes their house is worth and what an appraiser’s evaluation of that same home is.

March 2015 marked the first month of a three-year gap between what an appraiser and a homeowner believed a home was worth. That gap widened to 2.65% in September 2015 and had consistently hovered between 1.0% and 2.0% through November 2017.

The chart below illustrates the changes in home price estimates over the last three years:

Homeowners & Appraisers See the Most Eye-to-Eye on Price in 3 Years | MyKCM

In the latest release, the disparity was the narrowest it has been since March 2015, as the gap between appraisers and homeowners was only -0.33%. This is important for homeowners to note as even a .33% difference in appraisal could equate to thousands of dollars that a buyer or seller has to come up with at closing (depending on the price of the home).

Bill Banfield, Executive VP of Capital Markets at Quicken Loans urges homeowners to find out how their local markets have been impacted by supply and demand: 

“The appraisal is one of the most important, although sometimes least predictable, parts of the mortgage process. The Home Price Perception Index is a way to illustrate the differences of opinion, and these differences affect everything from the type of mortgage a borrower can get to the expectations a seller has about the proceeds available upon sale of their home.”

Bottom Line

Every house on the market must be sold twice; once to a prospective buyer and then again to the bank (through the bank’s appraisal). With escalating prices, the second sale may be even more difficult than the first. If you are planning on entering the housing market this year, let’s get together to discuss this and any other obstacles that may arise.

Parents Say Kids’ Opinions Matter Big When Buying a Home

Parents Say Kids’ Opinions Matter Big When Buying a Home | MyKCM

A recent survey conducted by Harris Poll and released by SunTrust Mortgage found that “55% of homeowners with a child under the age of 18 at the time when they purchased their home said that the opinion of their offspring played a major role in their home buying decision.”

When the results were broken down by the parent’s age, millennials (those 18-36) led the way with 74% of homeowners saying that their child’s opinion was a factor in choosing which home to buy. Eighty-three percent of renters believe that their child’s opinion would be a deciding factor when looking to purchase a home.

So what features in a home are most important to kids?

Parents Say Kids’ Opinions Matter Big When Buying a Home | MyKCM

Coming in at 57%, it should come as no surprise that gaining their own bedrooms was the top most-desirable feature of any home for kids, followed by a large back yard to play in at 34%.

Todd Chamberlain, Head of Mortgage Banking at SunTrust explained the reasoning behind the survey,

“As a parent of two kids, I know from experience that including children in the home buying process is not only fun for the whole family, but also educational for our homebuyers of tomorrow.”

Bottom Line

If you’re thinking about selling your home this year, make sure to highlight all the kid-friendly features your home has to offer so that you can sway the real decision makers.

Do You Know How Much Your Home Has Increased in Value?

Do You Know How Much Your Home Has Increased in Value? | MyKCM

Last year we saw headlines about a possible housing market bubble, and many wondered if Americans still felt confident about the value of their homes. Recently, the 2018 Houzz & Home Study revealed:

Homeowners with mortgages have seen their home equity more than double since 2011, increasing to a record-setting $8.3 trillion in 2017.”

The average homeowner gained $16,200 in home equity between Q2 2017 and Q2 2018 according to the latest release of CoreLogic’s Home Equity Report.

Since 2011 home values have increased significantly throughout the country, with prices rising by 5.1% in 2018 alone. When surveyed, homeowners revealed the top four reasons why they felt their homes had increased in value.

  1. Desirable Location
  2. Improved National Economy
  3. Improved Local Economy
  4. Low Home Inventory in My Area

As we can see, not only does the data show that the homes have appreciated, but homeowners also believe they know why. Many have taken advantage of the opportunity to use their newly found equity to sell their current house and move up to their dream home!

2019 will be a good year for the homeowners that still want to take advantage of their home equity! CoreLogic forecasts that home prices will increase by 4.8% by the end of the year.

Bottom Line

If you are a homeowner who would like to find out your current home value, let’s get together to discuss the hidden opportunities in your home!

You DO NOT Need 20% Down to Buy Your Home NOW!

You DO NOT Need 20% Down to Buy Your Home NOW! | MyKCM

The Aspiring Home Buyers Profile from the National Association of Realtors (NAR) found that the American public is still somewhat confused about what is required to qualify for a home mortgage loan in today’s housing market. The results of the survey show that the main reason why non-homeowners do not own their own homes is because they believe that they cannot afford them.

This brings us to two major misconceptions that we want to address today.

1. Down Payment

A recent survey by Laurel Road, the National Online Lender and FDIC-Insured Bank, revealed that consumers overestimate the down payment funds needed to qualify for a home loan.

According to the survey, 53% of Americans who plan to buy or have already bought a home admit to their concerns about their ability to afford a home in the current market. In addition, 46% are currently unfamiliar with alternative down payment options, and 46% of millennials do not feel confident that they could currently afford a 20% down payment.

What these people don’t realize, however, is that there are many loans written with down payments of 3% or less.

Many renters may actually be able to enter the housing market sooner than they ever imagined with new programs that have emerged allowing less cash out of pocket.

2. FICO®Scores

An Ipsos survey revealed that 62% of respondents believe they need excellent credit to buy a home, with 43% thinking a “good credit score” is over 780. In actuality, the average FICO® scores for approved conventional and FHA mortgages are much lower.

The average conventional loan closed in May had a credit score of 753, while FHA mortgages closed with an average score of 676. The average across all loans closed in May was 724. The chart below shows the distribution of FICO® Scores for all loans approved in May.

You DO NOT Need 20% Down to Buy Your Home NOW! | MyKCM

Bottom Line

If you are a prospective buyer who is ‘ready’ and ‘willing’ to act now, but you are not sure if you are ‘able’ to, let’s sit down to help you understand your true options today.

Pre-Approval: Be Smart – The First Step to Home Buying

Pre-Approval: Your 1st Step in Buying a Home | MyKCMIn many markets across the country, the number of buyers searching for their dream homes outnumbers the number of homes for sale. This has led to a competitive marketplace where buyers often need to stand out. One way to show you are serious about buying your dream home is to get pre-qualified or pre-approved for a mortgage before starting your search.Even if you are in a market that is not as competitive, understanding your budget will give you the confidence of knowing if your dream home is within your reach.

Freddie Mac lays out the advantages of pre-approval in the ‘My Home’ section of their website:

“It’s highly recommended that you work with your lender to get pre-approved before you begin house hunting. Pre-approval will tell you how much home you can afford and can help you move faster, and with greater confidence, in competitive markets.”

One of the many advantages of working with a local real estate professional is that many have relationships with local lenders who will be able to help you through this process. Once you have selected a lender, you will need to fill out their loan application and provide them with important information regarding “your credit, debt, work history, down payment and residential history.” Aside from the application information it is very important to obtain some upfront expectations on price point, payment amount and cash to close.

Freddie Mac describes the ‘4 Cs’ that help determine the amount you will be qualified to borrow:

  1. Capacity: Your current and future ability to make your payments
  2. Capital or cash reserves: The money, savings, and investments you have that can be sold quickly for cash
  3. Collateral: The home, or type of home, that you would like to purchase
  4. Credit: Your history of paying bills and other debts on time

Getting pre-approved is one of many steps that will show home sellers that you are serious about buying, and it often helps speed up the process once your offer has been accepted.

Bottom Line

Many potential homebuyers either underestimate or overestimate the down payment and credit scores necessary to qualify for a mortgage today. If you are ready and willing to buy, you may be pleasantly surprised at your ability to do so.  Ask us about our Home Express Mortgage Plan and how this can save you time and money in the home buying process.