by Utah Mortgage Expert on February 24, 2010
When Buying a New Car is NOT a Good Idea
Whether you’ve received a raise or have saved enough money to actually make a large purchase – it’s likely that you’re going to be affected by something that most individuals are affected with in the same situation – the desire to spend it. You might start going out to eat more often, buying clothes, gadgets and jewelry. You may even find yourself coveting a new vehicle. Some individuals think about purchasing a house, especially if they’re married or have children.
So, you decide to go ahead and purchase that home…or maybe move into a larger home if you already have one. You call your loan officer in order to get prequalified for a loan. You know about how much you want to spend and how much you want to put down on that home. You’ve given all your numbers (income, expenses, etc.) to your loan officer and you’re feeling pretty good about the impending purchase. The numbers are crunched and then your loan officer says the sentence you may not have been expecting…
“If only you didn’t have to worry about this car payment…”
This would come up because of your debt to income ratio. This means the percentage of your income before taxes that is already taken to pay debts – car payments, existing loans, etc. This is one of the things that every lender looks at when they’re determining whether or not to give you the loan you desire. A new car payment on your record will reduce the amount of money you have to purchase a house with.
While it may not seem like a lot (let’s assume your car payment is about $400 a month and you earn $5,000 a month), at an interest rate of 8.0% you would qualify for more than $50,000 less than you would if that car payment didn’t exist. Sure, you might tell your lender that you can handle the mortgage note and the car at the same time – but it doesn’t matter what you think – it’s what they think that determines the amount you’re prequalified for.
Now, this doesn’t mean that you shouldn’t get prequalified. You should. However, before you purchase that car you should think about that home. A home is more important when you’re considering your future, and especially if you’ve already got a car that’s nothing to sneeze at. You can always go for a new automobile purchase later after you’ve already purchased the home of your dreams.
In summary, while a new car purchase might be nice, the more important purchase (the house) will happen much more easily if you haven’t got the extra weight of a new car payment. Consider that and then make the wise choice on what to invest your money in.
About the Author:
I was born and raised in Central Toronto, spending my whole life in the neighborhoods that I now work, and in the Toronto Real Estate industry. I understand all the nuances of Toronto’s various communities & what Toronto real estate agents have to deal with.
I have dedicated my education to negotiating, marketing, business development and staying ahead of the curve with technology. I have attended international conferences, understand major agencies like Johnston and Daniel, all of which has helped me learn how I can provide more efficient, effective and thorough service.
by Corey on January 7, 2010
Lets talk about Roles.
My Friend Justin McHood over at Mortgages Unzipped humorously explained how most people end up choosing a title company when they purchase a home or refinance. In the end the answer is, they rarely do…choose that is.
This is something that has bothered me for a long time, so I wanted to take a moment and clarify REALLY who “GETS” to choose the title company.
YOU DO. The guy paying the charge for the services performed.
Not your Agent
Not your Agent’s Broker
Not your Mortgage Broker/Loan Officer
YOU.
Now having said that, how would you know which one to choose? Lets talk about that for a moment. This is where our discussion becomes about roles. See, sometimes how things ought to be, are often close to how they are…but like my 5th grade teacher used to always say (and I mean always) Close only counts in Horseshoes and Hand Grenades.
He also would say “You want me to turn you into a water buffalo?” Why a Water Buffalo you ask?, “Because a Water Buffalo’s hind quarters are up higher than its ears…after I kick your @** yours will be too”
Yeah, those were the days. When teachers could say that kind of stuff and not have the ACLU and the evening news there an hour later.
So back to how it ought to be. Professionals in the Real Estate industry are trusted advisers. We should know who you would want to use, not because we were “Bamboozled”, but because you will get the very best service you could get, for a reasonable price.
I will add as a disclaimer, that where you obtain title is a negotiable item in a contract. A seller can specify that if you wish to purchase their property you must use the specific title agency that they require. This is perfectly legal, and common when purchasing bank owned properties. However, in any other circumstance it is your right to choose as the buyer or seller. You might even ask your agent, or loan officer why they chose the agency they are recommending. A good loan officer or Agent will have done their homework and will be recommending someone based on Competency, Service, Communication, Efficiency and Speed, and of course price, but not at the expense of the other necessities…the last thing you want when dealing with the most expensive purchase you will ever make is the guy that is the cheapest just because they are the cheapest.
Someone other than my 5th Grade teacher said “The bitterness of poor quality remains long after the sweetness of a low price is forgotten” -Benjamin Franklin
When it comes to a good Title and Escrow officer, I couldn’t agree more with good old Ben.
Now, I’m off to Walmart…I need milk.
by Corey on December 28, 2009
*If they are within the same 30 day period.
This is due to the Fair Credit Reporting Act which was enacted to help protect consumers credit scores from erroneous facts being reported against peoples credit.
One can shop for a mortgage worry free as long as the inquiries happen within a 30 day period. This means you can visit multiple lenders and brokers to make sure you are getting the best rate possible and not have to worry that your credit will be going up and down as a result.
If you are looking for a Mortgage in Utah and are told by a mortgage lender not to have others pull your credit because it will lower your score, run. This is an old trick that some people use to discourage shopping and competitive rates and fee’s. You want the best deal possible and the credit laws enable you to find it!
Some important things to remember when you know you will be applying for a mortgage:
- Put off applying for any new credit until after the loan is closed not merely approved.
- Credit Cards, Auto Loans, Signature Loans, Satellite TV/Cable, Cell Phone Service
- Make sure all of your credit card balances are below 30% of the available credit limit.
- Maxed out cards are a score killer, pay all balances down to below 30% (10% is optimal). Carrying a small balance, no more than 10% of the available balance can actually help improve scores more than carrying a zero balance.
- Credit reporting can take 30-60 days on recently changed status’s. If you intend to pay down balances to help improve scores make sure to do it well ahead of time as it wont help at all if you do it a week before your credit is pulled for the application.
- If there are some credit issues that need to be resolved, have all of the documentation available that shows if debts were paid or reported in error ect.
- Gather up all the basic required documentation for a loan ahead of time to help speed up underwriting. You will need the following to begin the process (but you may need more once Underwriting starts looking at the file):
- 2 years tax returns
- 2 months pay stubs or profit and loss statements for self employed
- 2 months bank statements (personal and business for self employed)
- Most recent statement from Retirement accounts such as IRA, RothIRA, 401K
- Paper trail documenting the source of your down payment (Bank Statements, Letter of Explanation etc.)
- Personal Identification (Valid Drivers License, Social Security Card, Passport, W-2)
- If you are not 100% sure that you are a ‘perfect borrower’, look into what you qualify before you go house hunting. Nothing is more disappointing than finding out you don’t qualify for that beautiful home or ‘killer deal’ that you just found.
Remember that to get the lowest rate possible you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including a loan origination/discount/broker fee which can be negotiated with your lender representative. You may elect to pay less in fees but you will have to accept a higher interest rate. This is a good strategy for consumers not planning on keeping their home for more than 3 years. Discuss all available scenarios with your loan advisor
