Looking to simplify your home buying process? It is important to work on getting your financing ducks in a row before looking for a home.

Check out the latest “One Cool Thing” from the California Association of Realtors about seeking financing when buying a home:

Most home buyers are following their realtors advice and seeking financing first in their home buying journey. They also want greater speed, simplicity and communication from their providers.

• 73.5% sought out home financing options before looking for a home.
• 75.4% said their agent and lender communicated with each other about their home buying process.
• 49.5% desire a faster or easier home buying experience.
• 34.1% had trouble understanding mortgage fees.

Source: loanDepot and mellohome

In the event a friend or relative comes to you and asks you to co-sign a home loan for them, what should you do?

Perhaps you want to be supportive and stay on good terms with them or maybe you just like doing favors. However, when you co-sign on a loan, you must understand what you are getting yourself into. Even if you completely trust the person you’d co-sign for, accidents happen that one cannot plan for. The last thing you want to happen is to compromise your own financial status if the debtor cannot make the payments.

Whether the person you are interested in co-signing for doesn’t have bad credit nor has no credit at all, keep in mind the lender doesn’t trust his ability to pay the loan back, thus requiring you to co-sign. Did you know the Federal Trade Commission reported that 75% percent of all co-signers end up having to repay the loan? Think twice before co-signing.

You may be tempted to co-sign on a home loan to support a friend or relative who is in the process of buying a home.  Suppose you co-sign and the debtor misses a payment.  In many cases, the lender will approach you, the co-signer, first to collect the payment without attempting to collect from the borrower. With this being said, you may have to pay fines such as late charges or legal fees. You may have to disclose your assets and you could possibly lose your property. In the worst case, you can also be sued.  This will not only scar your credit record but prevent you from getting future credit for your own personal needs.

In many cases parents will help out their children who are buying a home and have not yet established credit. No matter what the reason, make sure you will be able to afford to pay back the money if the borrower defaults on the loan. Don’t jeopardize your own financial security and credit record.

If you do decide to co-sign the loan, request documentation from the lender which states you will only have to pay the principal balance of the loan if the borrower defaults. By doing this you avoid having to pay an attorney’s fees if the lender wants to sue.

Another good idea is to have the lender agree in writing to tell you when the debtor is behind on a payment. This will give you a head start in preventing a possible default situation from snowballing.

The Lawhead Team came across a great article from Khon2 News about the necessary steps to take before buying a new home.  Check it out:

When you are getting ready to purchase a new home, there are at least two steps that you must take. The two basic steps are becoming pre-approved and pre-qualified.

Danielle Leong with Central Pacific Bank said, “pre-qualified is basically the first step. That’s someone who’s interested in purchasing a new home. That’s the first step that’s taken. You want to get together with a loan consultant. You want to ask them what they qualify for….they want to know what they qualify for.”

The first questions involve monthly income – leading up to how much you can afford for a monthly mortgage. It’s really more of a conversation. After that, there’s pre-approval.

“A pre-approval takes it a step farther. What we”re doing is we’re gathering that documentation and we’re reviewing it for accuracy and we’re making sure that the numbers all work. We’re also running a credit report because we want to make sure their credit allows them and has the ability to allow them to purchase,” said Leong.

When pre-approval is done, the lender knows all it needs to know. You will virtually be ready to buy a new home…and that is good news when you’re in the market.

“We’ve gone through all their taxes and we’ve outlined all the questions. They’re ready to buy. They actually have an idea of what they can purchase and they can go out and start looking which is very attractive to a seller,” said Leong.

Following pre-approval from the lender, the field is wide open. Your realtor and the seller’s realtor can begin negotiations on the home buying adventure and you are closer to buying your new home.

“And then we basically give you your idea of what you have in the way of purchase power to go out and start shopping which really gives your realtor an edge to start honing in on what you’re able to buy,” said Leong.

Danielle says the main thing to remember when getting ready to buy a new home is 2-2-2-2. You will need two years of tax returns, two years of w-2’s, two years of bank statements and your last two pay stubs. These things will all help you get pre-approved.

Article on the steps to purchasing a new home found at: http://www.khon2.com/news/local/story/Dollars-Sense-Necessary-steps-before-buying-a-home/AfwzZPGli0SD7_To69Ltww.cspx

Mortgage interest deductions and deductions for property taxes are a way to encourage home ownership.

Mortgage Tax Credit – The Mortgage Credit Certificate (MCC) program allows some first time home buyers to benefit from a mortgage interest tax credit.  An MCC, which you first must obtain from your local housing department before you get a mortgage, gives a qualified first-time home buyer a federal income tax credit of up to 20 percent each year the buyer keeps the same loan and lives in the same house.  You can see the tax credit’s benefit immediately in your paycheck by adjusting your W-4 exemption status to reflect the credit.  In some cases, lenders will qualify you for a loan based on the monthly mortgage payment minus the tax credit, enabling you to qualify for a bigger loan.

Mortgage Interest Deduction – With Mortgage Interest Deduction, all but the very wealthy homeowners deduct all the mortgage interest they pay and consider that the primary tax benefit to home ownership.  IRS Publication 936 “Home Mortgage Interest Deduction” says, in general, joint tax filers can deduct all the interest on a maximum of $1 million in mortgage debts secured by a first and second home, plus the interest paid on a maximum $100,000 in home equity loans.  The maximums are halved for married tax payers filing separately.

Points – Home buyers also get to fully deduct all points associated with a home purchase mortgage.  Sometimes called “origination fees,” “loan discounts” and “broker discounts,” each point is one percent of the financed amount.  In many cases, the buyer can also deduct points on the buyer’s mortgage that are paid by the seller.  Points on refinanced mortgages are also deductible, but over time.

Selling Your Home – Even when you sell your home, it continues to be a tax shelter, for a few homeowners.  Your gain is your home’s selling price, minus deductible closing costs, minus your basis.  Thanks to the 1997 Taxpayer Relief Act, many home sellers no longer suffer a taxable gain.  That’s because, under the act, sellers get to keep, tax free, up to $250,000 in capital gains ($500,000 for married sellers who file taxes jointly) on sales of homes used as a principal residence for two of the prior five years.

The importance of choosing a good mortgage lender is a point which cannot be overstated.

Just as choosing the proper loan program is essential to your financial well-being, selecting a good lender can go a long way toward saving you thousands of dollars and untold hours of anxiety. Finding the right lender isn’t necessarily a difficult task, you just need to do your homework.

While many home buyers and homeowners continue to rely on traditional mortgage lenders (banks, credit unions, etc.), you do have a choice. Mortgage brokers differ from the traditional mortgage bankers in that brokers do not fund or even approve any type of financing. Whereas mortgage bankers will approve or disapprove your loan application and also fund the loan, the broker’s job is to match prospective borrowers and lenders together according to their needs.

Because not all lenders offer the same loan programs, a broker will usually have affiliations with several different lending entities. This generally makes it much easier to find a suitable loan that’s tailored to your individual needs through a mortgage broker, especially if you have less-than-perfect credit. Banks and credit unions typically do not make loans to credit-impaired applicants. However, borrowers still use them frequently because they’ve built a relationship of familiarity and trust there.

Online mortgage brokers are still another option that you might consider in your search. Online broker sites offer speed and convenience. You fill out one application or request for a quote, and usually several lenders will contact you with an offer. Another advantage of this system: your credit is pulled only once, if at all, during this process, as several credit inquiries in a short period of time can damage your credit score.

So, how do you choose? Some of the best resources for finding good lenders are family members, friends, or co-workers who have recently financed a home. Be sure to ask how they’ve been treated since the closing. What type of service have they received? Find online brokers of good reputation. A good track record is vital. Contact the brokers that are recommended. Research the broker sites and review their terms of service carefully. Of course, look for a lender that also has a program which meets your needs. Ask about the brokerage fees and who customarily pays them.  Keep in mind that everything is negotiable.

Be sure to get pertinent information about the loan, such as interest rate and annual percentage rate (APR). How many points will you be required to pay? What are the closing costs? How long will it take to process the loan, and what’s the lock-in policy for the interest rate? Is there a prepayment penalty? Does the lender have a first-time buyers program? What is the lender’s track record on closing loans?

As always, the key is to gather as much information as you can, both about the lender and the programs that he or she has to offer. Once you’ve done your homework, you’ll be well able to choose a lender that, as a standard of business, will not overcharge you and will treat you as a valued customer.

Have you heard of the phrase “one person’s misery is another person’s opportunity”?  For house purchasers in today’s market, repossessed property definitely falls into this case.

It isn’t hard to notice the rise in number of repossessed property coming on the market as of late.  These can be great bargains to pick up, however there are certain issues which you must be aware of when buying a repossessed house.

Once the home has gone through the long process of going back to the lender, they must take responsibility to sell it for the best price possible in the shortest amount of time possible.  This is because it is only until the property has been sold that the mortgage debt is cleared.

With a repossessed property, the purchase process is similar to a normal purchase.  However, it is likely that you will not be able to get as much information about the house as you would from a standard sale since the lender has never lived in it.  For example, if changes were made to the house or repairs for a leaky roof were completed, you may not be able to obtain all the paperwork pertinent to these changes or improvement.  Because of this, it is important to do thorough research on the property before committing to buying it.

Unfortunately, the lender has the ability to pull out of the sale at any time until the contract is legally binding should a better offer come in.  Remember, once you purchase a repossessed property, you will have to arrange for services to be reconnected, such as electricity, water, etc.  When this is done, more problems may arise that you were not at first aware of, such as leaking pipes.