The Process of Getting Pre-Approved for a Mortgage

When you're ready to buy your first home, it's essential to understand the process of getting pre-approved for a mortgage. A pre-approval is when you go to the bank, mortgage broker, or commercial bank and have them review your financial statements. This involves providing information such as two years of tax returns, pay stubs for at least a month, and an overview of your debt-to-income ratio.

The Pre-Approval Formula

When you get pre-approved, the lender will use a formula to calculate how much they're willing to lend you based on the sale price of the home, taxes, and other factors. The debt-to-income ratio is a crucial factor in determining how much you can afford. This means that if you have a high income but also a lot of debt, your debt-to-income ratio will be lower, which may result in a smaller mortgage amount. Conversely, if you have a lower income but fewer debts, your debt-to-income ratio will be higher, which could lead to a larger mortgage amount.

Tax Implications and Debt

The tax implications are also an essential factor in determining how much you can afford. If the taxes on a $500,000 home are $15,000, and your annual income is only $85,000, you may struggle to qualify for a large mortgage. In such cases, it's crucial to consider your debt-to-income ratio and ensure that it doesn't exceed 30% of your gross income. Additionally, some types of properties, like condos or co-ops with common charges, may require additional factors in the calculation.

Common Errors and Consequences

One critical mistake first-time homebuyers make is not disclosing all their debts or financial information upfront. This can lead to a pre-approval being denied, which could be devastating for someone who was counting on owning that home. To avoid this, it's essential to be transparent about your financial situation when applying for a mortgage.

Foreclosures and Their Implications

When browsing properties online, some buyers may come across listings with warnings like "pre-foreclosure" or "short sale." These terms can be misleading, especially for first-time homebuyers. A pre-foreclosure listing doesn't necessarily mean the property is in danger of being repossessed immediately. It often means that the homeowner has defaulted on their mortgage payments but is working with the bank to resolve the issue. On the other hand, a short sale occurs when the lender and homeowner agree to sell the property at a discounted price to avoid foreclosure.

Foreclosed Properties: Buyer Beware

Buying a foreclosed property can be attractive, especially if it's significantly cheaper than comparable homes in the area. However, buyers should exercise caution. Foreclosed properties often come with no warranties, and the seller may have outstanding liens, such as mechanic's liens for unpaid work done on the property. These costs can be passed on to the buyer, making homeownership more expensive.

Flipping Houses: A Different Story

Seasoned homebuyers who plan to flip houses or invest in real estate often take a different approach. They know that buying at any expense, particularly in areas with low demand or poor resale value, is not always a good idea. However, for those willing to take calculated risks, flipping can be a lucrative business. It's essential to have a deep understanding of the local market, including factors like school districts and property values.

Conclusion

Buying your first home can be an exciting but challenging experience. By understanding the pre-approval process, tax implications, debt-to-income ratio, and potential pitfalls like foreclosures and short sales, you'll be better equipped to navigate this journey. Remember to do your research, enjoy the process, and have fun exploring the world of homeownership. With the right approach, buying a home can be an incredible investment in your future.

"WEBVTTKind: captionsLanguage: enhi I'm Alex and I'm a real-estate broker in New York I'm here to talk about what it takes to buy your first home first thing the most important thing is is to find out how you financially capable the first thing you need to do is really check on your credit which means that you should have a credit score of 700 or above usually most banks wants you to have at least 3 credit cards and to be used not just just to possess them there are so many websites that you can go to check on yourself and not tell anybody keeping up with your credit cards your car payment whether it be school loans it could be anything that there's a catch to you you want it where you don't touch your credit enough you know a lot pay your bills and don't be late second thing is find out where do you want to live you want to live in the city you want to live in the suburbs before you even go out to find an agent find out where you work the commute and to make sure that you can keep where your distance of where you're not living in your car or transportation second thing is also to style of your home you want like a small little cottage brownstone or do you want to be in a co-op versus a single-family home do all your homework ahead of time by looking at style I give a summary sheet and something that basically helps you get there before you meet me at a showing at a house is all these facts that you want to make sure you give me so I don't waste your time that I actually know what you're looking for how many bedrooms how many baths you want a a man cave you want a lady cave you want something where you things are the most important things is always have your punch list with your agent as a real estate agent for first-time homebuyers I always try to make sure I understand really where you are like financially getting a pre-approval so that I don't have you get disappointed that's the most heartbreaking thing is to find out after you found your dream home that you can't afford it to find out by getting a pre-approval is to go to you either your local bank that you map your money in or you go to a commercial bank which is basically a mortgage broker but if you for instance don't have money saved because today as you know an average home on a single-family home is four hundred thousand and up so a single-family is just kind of where you have land and a house and you pay taxes towards it towards the school the county the town could be anything a condo is a building and basically it is an apartment but at the same time in that apart you own the building in itself where you are responsible for the taxes for the building the upkeep which is the common charges then you have a co-op a cooperative which is I don't own the land you don't own the building but you have a share with all the people that home that that building but it's just really an easy way to start your way up the ladder I'm ownership finding a real estate agent that is important find a full-time real estate agent somebody that is does this for a living and that's all she wants to know is real estate and that's where I came in for many many years doing real estate is that I educate my clients from the beginning to end and carry them through the process I don't wait until five o'clock at night we talk during the day the weekends so find an agent that specializes on where you want to live the style of the home that they could start their homework for you finding a real estate agent is where you want to make sure that person is educated on what's happening in the community and the costs and be able to do their due diligence to make sure that if you find a property that you really really love that she will do all the fiduciary duties of taking care of that house being what it says on the paper so make sure your real estate agent just doesn't just say here's your listing go to the open house tell me what you're thinking have an agent that goes with you and enjoys the time that they know at the end you're going to find your dream home a mortgage is where is when you go to the bank when you go to get a mortgage it's taking the sale price of the home what you're buying the home for like that's what you want and then whatever your down payment is on a mortgage there's a thing called PMI if you can't put up 20% of the down payment on a mortgage there's a private mortgage insurance tax well it's it's a penalty that will be included in the mortgage so a mortgage is a memorization chart so basically it's taking the interest rate that the mortgage you're taking on the house so you're buying a house of five hundred thousand you're putting down a hundred thousand this is hypothetical a hundred thousand so you have a four hundred thousand dollar mortgage so you're putting 20% down which is great so you don't have the PMI and then that whole process of where it's interest first which could be it now five percent and then what you're borrowing and then it's branched out and most people who are getting mortgages have a 30-year mortgage so it takes a whole process of going 30 years on an amortization chart so it's taking the interest the principle of what you're borrowing and spreading it out 30 years so it looks really bad at the beginning because you're paying more interest towards the purchase of the home which are borrowing and then add windle's and goes down by 30 years pre-approval is when you go to the bank to the mortgage broker or the commercial bank and have them go over your financial statements of who you are basically what they're gonna want is two years of your tax returns they're gonna want to see your pay stubs for at least a month they're gonna want to know what your debt-to-income ratio is because when you get a pre-approval they're going to put all those into a formula and that's gonna be based upon the sale of the home and also to the taxes you might find a house for five hundred thousand but the taxes are fifteen thousand but you only make eighty five thousand and you might have fifteen hundred dollars a month in debt so they got to pick your income - against all your basis of your debt to make sure that they also include the taxes to say it's got to be about thirty percent you can't go over 30 percent of your debt to income otherwise that you're gonna have to find a home that is five hundred thousand for a pre-approval but your taxes have to be under twelve and some condos have and coops have common charges which you got to include into the taxes - so all those things that have to do with it a pre-approval when you go there always make sure when you make the appointment you bring all the information show them your tax returns make sure that you give them what exactly you have in debt don't find out when they have to do a credit check on you and find out oh you didn't tell me about this debt you had and you forgot about it that will bring you sad in the sense because you can't find that home so make sure your when you go to the bank you bring all this information to the bank on a listing for instance if you have a you see one that says pre-foreclosure it doesn't mean that that house is in foreclosure it means that the homeowner is defaulted a couple of months it's not a warning sign for the buyer for instance for you but if you find a home that says a short sale a short sale means is that the bank and the seller the homeowner have come to an agreement that they're saying yes you have defaulted on your home you can't afford your home you want to walk away with good credit so we're trying to help you out by selling it together to pay off your debt and that means it's a timing so when you see for a short sale it means that there's a three-party situation it's a bank and the homeowner and you basically have to move quickly so that person doesn't go into foreclosure if you flood that home a foreclosure is buyer beware because that home gives you no warranties the seller and the bank says take this house as is we don't going to tell you whether they of mechanic's liens and the mechanic's lien means that maybe they had a plumber there maybe they had a roofer there and they never paid them that plumber that roofer will put a lien on that house and whoever buys it has to pay it if it's a foreclosure if it's taxes that are owed and the bank hasn't paid them because the bank hasn't gotten any money from you and they're just putting their hands up you own it you pay it as the buyer so a foreclosure is something where you might walk into that house and sometimes they won't even let you in the house you have to buy that house at an auction looking out the outside and projecting what could be inside which could be that they might have taken the pipes out the electric with the copper copper is you know they want to get the copper out of the house the appliances are missing things in that house could be even burst pipes foreclosures everybody thinks that's the steel of the century Oh get the house for you know for practically for nothing I work with a lot of people who are flippers and what happens with them is that they have to understand they're ready to go in at any expense knowing the neighborhood for instance and saying I'll take the chance but a first-time homebuyer that in itself is like the money pit you will regret it unless you're a seasoned buyer and this is not your primary residence and this is not something that you can you know lose money you know sometimes you can lose money because you could be the prettiest house in the worst neighborhood and you'll never get your money return on that well I hope you enjoyed what I've given you here on information on how to buy your first home and if you should need me for anything I'm there my name is Alex nymph yes and I know there's so many of me out there but the same time do your research enjoy the journey and have fun on just joying the concept of being a homeowner it's funhi I'm Alex and I'm a real-estate broker in New York I'm here to talk about what it takes to buy your first home first thing the most important thing is is to find out how you financially capable the first thing you need to do is really check on your credit which means that you should have a credit score of 700 or above usually most banks wants you to have at least 3 credit cards and to be used not just just to possess them there are so many websites that you can go to check on yourself and not tell anybody keeping up with your credit cards your car payment whether it be school loans it could be anything that there's a catch to you you want it where you don't touch your credit enough you know a lot pay your bills and don't be late second thing is find out where do you want to live you want to live in the city you want to live in the suburbs before you even go out to find an agent find out where you work the commute and to make sure that you can keep where your distance of where you're not living in your car or transportation second thing is also to style of your home you want like a small little cottage brownstone or do you want to be in a co-op versus a single-family home do all your homework ahead of time by looking at style I give a summary sheet and something that basically helps you get there before you meet me at a showing at a house is all these facts that you want to make sure you give me so I don't waste your time that I actually know what you're looking for how many bedrooms how many baths you want a a man cave you want a lady cave you want something where you things are the most important things is always have your punch list with your agent as a real estate agent for first-time homebuyers I always try to make sure I understand really where you are like financially getting a pre-approval so that I don't have you get disappointed that's the most heartbreaking thing is to find out after you found your dream home that you can't afford it to find out by getting a pre-approval is to go to you either your local bank that you map your money in or you go to a commercial bank which is basically a mortgage broker but if you for instance don't have money saved because today as you know an average home on a single-family home is four hundred thousand and up so a single-family is just kind of where you have land and a house and you pay taxes towards it towards the school the county the town could be anything a condo is a building and basically it is an apartment but at the same time in that apart you own the building in itself where you are responsible for the taxes for the building the upkeep which is the common charges then you have a co-op a cooperative which is I don't own the land you don't own the building but you have a share with all the people that home that that building but it's just really an easy way to start your way up the ladder I'm ownership finding a real estate agent that is important find a full-time real estate agent somebody that is does this for a living and that's all she wants to know is real estate and that's where I came in for many many years doing real estate is that I educate my clients from the beginning to end and carry them through the process I don't wait until five o'clock at night we talk during the day the weekends so find an agent that specializes on where you want to live the style of the home that they could start their homework for you finding a real estate agent is where you want to make sure that person is educated on what's happening in the community and the costs and be able to do their due diligence to make sure that if you find a property that you really really love that she will do all the fiduciary duties of taking care of that house being what it says on the paper so make sure your real estate agent just doesn't just say here's your listing go to the open house tell me what you're thinking have an agent that goes with you and enjoys the time that they know at the end you're going to find your dream home a mortgage is where is when you go to the bank when you go to get a mortgage it's taking the sale price of the home what you're buying the home for like that's what you want and then whatever your down payment is on a mortgage there's a thing called PMI if you can't put up 20% of the down payment on a mortgage there's a private mortgage insurance tax well it's it's a penalty that will be included in the mortgage so a mortgage is a memorization chart so basically it's taking the interest rate that the mortgage you're taking on the house so you're buying a house of five hundred thousand you're putting down a hundred thousand this is hypothetical a hundred thousand so you have a four hundred thousand dollar mortgage so you're putting 20% down which is great so you don't have the PMI and then that whole process of where it's interest first which could be it now five percent and then what you're borrowing and then it's branched out and most people who are getting mortgages have a 30-year mortgage so it takes a whole process of going 30 years on an amortization chart so it's taking the interest the principle of what you're borrowing and spreading it out 30 years so it looks really bad at the beginning because you're paying more interest towards the purchase of the home which are borrowing and then add windle's and goes down by 30 years pre-approval is when you go to the bank to the mortgage broker or the commercial bank and have them go over your financial statements of who you are basically what they're gonna want is two years of your tax returns they're gonna want to see your pay stubs for at least a month they're gonna want to know what your debt-to-income ratio is because when you get a pre-approval they're going to put all those into a formula and that's gonna be based upon the sale of the home and also to the taxes you might find a house for five hundred thousand but the taxes are fifteen thousand but you only make eighty five thousand and you might have fifteen hundred dollars a month in debt so they got to pick your income - against all your basis of your debt to make sure that they also include the taxes to say it's got to be about thirty percent you can't go over 30 percent of your debt to income otherwise that you're gonna have to find a home that is five hundred thousand for a pre-approval but your taxes have to be under twelve and some condos have and coops have common charges which you got to include into the taxes - so all those things that have to do with it a pre-approval when you go there always make sure when you make the appointment you bring all the information show them your tax returns make sure that you give them what exactly you have in debt don't find out when they have to do a credit check on you and find out oh you didn't tell me about this debt you had and you forgot about it that will bring you sad in the sense because you can't find that home so make sure your when you go to the bank you bring all this information to the bank on a listing for instance if you have a you see one that says pre-foreclosure it doesn't mean that that house is in foreclosure it means that the homeowner is defaulted a couple of months it's not a warning sign for the buyer for instance for you but if you find a home that says a short sale a short sale means is that the bank and the seller the homeowner have come to an agreement that they're saying yes you have defaulted on your home you can't afford your home you want to walk away with good credit so we're trying to help you out by selling it together to pay off your debt and that means it's a timing so when you see for a short sale it means that there's a three-party situation it's a bank and the homeowner and you basically have to move quickly so that person doesn't go into foreclosure if you flood that home a foreclosure is buyer beware because that home gives you no warranties the seller and the bank says take this house as is we don't going to tell you whether they of mechanic's liens and the mechanic's lien means that maybe they had a plumber there maybe they had a roofer there and they never paid them that plumber that roofer will put a lien on that house and whoever buys it has to pay it if it's a foreclosure if it's taxes that are owed and the bank hasn't paid them because the bank hasn't gotten any money from you and they're just putting their hands up you own it you pay it as the buyer so a foreclosure is something where you might walk into that house and sometimes they won't even let you in the house you have to buy that house at an auction looking out the outside and projecting what could be inside which could be that they might have taken the pipes out the electric with the copper copper is you know they want to get the copper out of the house the appliances are missing things in that house could be even burst pipes foreclosures everybody thinks that's the steel of the century Oh get the house for you know for practically for nothing I work with a lot of people who are flippers and what happens with them is that they have to understand they're ready to go in at any expense knowing the neighborhood for instance and saying I'll take the chance but a first-time homebuyer that in itself is like the money pit you will regret it unless you're a seasoned buyer and this is not your primary residence and this is not something that you can you know lose money you know sometimes you can lose money because you could be the prettiest house in the worst neighborhood and you'll never get your money return on that well I hope you enjoyed what I've given you here on information on how to buy your first home and if you should need me for anything I'm there my name is Alex nymph yes and I know there's so many of me out there but the same time do your research enjoy the journey and have fun on just joying the concept of being a homeowner it's fun\n"