How long the mortgage approval process takes will vary based on your situation and the type of mortgage product you’re applying for.
Buying a Home after Divorce
Do's and Don'ts of Buying a New Place to Live When You're Newly Single
By JASON RICH
Now that you’re single, perhaps you’ve begun to think about buying a new home, apartment or condo. But, unless you have the funds to pay for the purchase outright with cash, chances are you’ll need a mortgage. Until recently, getting approved for a mortgage was a pretty straightforward and easy process, especially for someone with average or better credit, a good paying job, and enough money for a down-payment to cover 20 percent of the purchase price. Even without being able to show a steady income, possessing a below average credit score, or not having the funds for a down payment, it was still possible to get approved for a mortgage.
With resent changes and dips in the real estate marketplace and mortgage industry, however, getting that all-important approval has become a significantly more difficult process. Today, if you want to obtain a mortgage, having a good credit score is a must. Being able to show a stable income and being able to cover a 20 percent down payment is also helpful.
Assuming you meet a lender’s approval criteria, you still need to determine if, from a financial standpoint, owning a home, apartment or condo is a more viable option for you than renting. This is a question an accountant or financial planner can help you answer, based on your unique situation. If you’ll be getting remarried within two or three years, for example, buying a small home, apartment or condo that you’ll ultimately wind up selling might not make financial sense for you right now. Prior to pursuing a mortgage and shopping for a home, you’ll want to consider the following:
WHAT'S YOUR SCORE?
Your credit score and the information on your credit report. Is your credit score high enough for you to obtain an approval in today’s market? If your score is in the high-600s or better (ideally in the mid-700s), you should be in good shape. You can show a steady income and be able to provide tax returns, W-2 forms and/or pay stubs that document your income, investments and assets. You have enough savings to afford and down payment, plus cover the costs of purchasing a new home. You’ll be able to cover the ongoing costs of ownership on a month-to-month basis, including your mortgage payment, insurance, real estate taxes, utility bills, maintenance, repairs, and homeowner’s association/condo fees (if applicable).
RENT OR OWN?
From a financial standpoint, there are many reasons why it’s better to own a home, as opposed to renting. For example, as you make your monthly mortgage payments, you’ll be building up equity in your home and increasing your overall net worth. Making monthly rent payments to a landlord is simply making that landlord richer, but not providing you with any financial benefits. You’ll also receive significant tax breaks as a homeowner with a mortgage. The interest you pay on your mortgage each year is tax deductible.
Once you’ve purchased your home and have acquired a fixed rate mortgage, for example, your housing costs will remain constant for the life of the loan. If you’re paying rent to a landlord, you could have to deal with annual rent increases. The best incentive for purchasing a home is that hopefully, over time, its value will increase. When you’re ready to start the home-buying process, following these strategies will save you time and money:
WORK WITH A REALTOR
Work with a reputable Realtor® to help you find the perfect home, condo or apartment that meets your needs and budget. “The National Association of Realtors® is the largest professional association in America, with over 1.2 million members. What we do is provide support, training and a code of ethics that our Realtors® subscribe to. We also provide a vast amount of information to consumers through our Web sites,” explained Tom Stevens, a former president of the National Association of Realtors® (www.realtor.com).
“In addition to making sure your Realtor® knows the area where you want to move, I suggest asking about their experience and how long they’ve been working in real estate. Determine if the agent knows and understands the current real estate market, and is willing to take the time necessary to truly understand your own unique wants and needs. The Realtor® you hire will be able to help you find the perfect home, based on your needs and finances. Also, make sure the Realtor® you work with represents you, not the seller.”
