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Setting the Right Expectations for House Hunting

Buying your next home is an exciting prospect. Sometimes we can get swept away with the features we want in our new homes. So, let’s bring things back to reality and think about what you NEED your new home to have. Check out the tips below to help keep you on track when you start house hunting.  

Create a Budget

One important thing to do before you start is to find out how much you can spend on a house. Once you figure this budget out, you can use a mortgage calculator to better understand your mortgage monthly payments (see Texas Loan Star for more information).

Using some kind of budgeting program will help give you a clear picture of how your mortgage payment fits into your monthly expenses. You’ll want to make sure you have plenty of money left over at the end of the month for savings, improvements, and m other miscellaneous items.

Prioritize what you need, what you want and what you can live without

Sit down and think about what your new house absolutely must have. We’re not talking about a bathroom, kitchen or bedroom either. Those are fairly standard for the vast majority of homes. Think about whether you need to be closer to work to have a better work-life balance. Is the house close to a good school? We’re talking about essentials – things you cannot live without.

Next think about what you want your new home to have that your current home doesn’t have. Think of these as upgrades.

Cut out the what can you live without

The pie-in-the sky stuff, like your own personal basement bowling alley, would be nice; however, you can probably continue to live perfectly fine without it. Is it worth it to spend thousands of dollars more on those luxury items when you could use that money elsewhere?

Take your list and start house hunting

Make a plan with your real estate agent and start looking at homes online to see what homes are out there and compare them with all of the items on your list. This will help you see if you can get everything on your list within your budget. If you can’t find a home you can afford with everything you want, it’s time to re-evaluate.

Re-Evaluate your list

Look back at your list and see where you can cut. Remember, you can always change things like flooring, carpet, paint, cabinets and appliances.

An updated, ready-to-use kitchen, for example, would be great, but maybe you can use the money you save on a lower priced house to update the kitchen later. You might even save money by doing the work yourself.

Finding the right home might take a little time. Preparing ahead of time, knowing what you really want in a house and having the right expectations makes the process easier and less stressful. Good luck!

Call Texas Loan Star at 713-802-0606 for more information!

Conditional Approval vs. Pre-Approval?

What you inquire about qualifying for a home loan, you’ll likely hear the term “conditionally approved” but might not be sure what that means or how it differs from a pre-approval. A conditionally approved loan is closer to closing than a pre-approved one but it comes with a few conditions, usually concerning documentation and income, that must be met before a client can be pre-approved to close.

A conditional approval occurs once the client has provided the necessary documentation to get their loan set up, such as supplying the following documentation:

  • Employment and income verification
  • Pay stubs
  • Tax returns
  • Bank statements
  • Debt obligations (credit cards/other loans)
  • Utility bills
  • Asset statements

All this information is required before the loan is completely approved.

Conditional Approval vs. Pre-Approval

People often confuse conditional approval and pre-approval when talking about mortgages. Loans are pre-approved by a lender who has reviewed your income and credit information. Your information must be verified and approved before a final decision can be made.

The pre-approval is based on what the client tells the banker and their credit report information. Conditional approval differs from pre-approval in that the loan may not have been reviewed by an underwriter when pre-approved. After your information is reviewed, you’ll receive a pre-approval letter stating your eligibility for a loan up to a specified amount.

Conditional approval comes after pre-approval and involves going a little deeper. An underwriter conducts a strict documentation review before your loan is conditionally approved. This documentation is reviewed by an underwriter, and provided the client’s information matches up with what was initially stated to the mortgage lender, they are conditionally approved. This means the loan is moving forward, but there are or may be additional conditions that will need to be met in order to finalize and close the loan. If the conditions aren’t met, the client might not be able to close on the loan.

Conditions on a Conditional Approval

There are a few common conditions attached to a conditional home loan approval. Additional documentation, such as pay stubs, paperwork for business income and tax documentation, is often required for final approval. This might also include written verification of employment from your employer or additional asset statements, depending on what’s needed for your loan.

Conditional approval can also require purchase agreement addendums. Title verification, an appraisal, an inspection and home owners insurance are usually needed to verify the market price of the home, the loan-to-value ratio and other details. This can also include confirmation that there are no unexpected liens or judgements on the home.

Denial of a Conditionally Approved Loan

Clients with a conditional approval for a home loan are at risk for denial if they fail to meet any of the conditions laid out by the lender.

Here are a few reasons why a client might be denied:

  • The underwriter is unable to verify the data provided by the client
  • The home the client is trying to purchase has an unexpected lien.
  • The client has a judgment on their record
  • The home inspection or property appraisal came in with unexpected issues
  • The client experienced a decrease in income
  • The client had negative entries on their credit report

Call us today for more information or if you want to start the process to get pre-approved!