
	Home Buyer Newsletter Prepared for $full_name		Courtesy of: $client_name $company_name $company_phone $website

	What NOT to Do Before You Buy a Home Mortgage lenders look at something called your debt-to-income ratio. Here is how not to mess it up.

When determining your ability to qualify for a mortgage, a lender looks at what is called your "debt-to-income" ratio. A debt-to-income ratio is the percentage of your gross monthly income (before taxes) that you spend on debt. This will include your monthly housing costs, including principal, interest, taxes, insurance, and homeowner’s association fees, if any. It will also include your monthly consumer debt, including credit cards, student loans, installment debt, and car payments. Buying a new car before you buy a home can greatly reduce the maximum price of a home you can qualify for. For example, suppose you earn $5000 a month and you have a car payment of $400. Using an interest rate of 8.0%, you would qualify for approximately $55,000 less than if you did not have the car payment. Even if you feel you can afford the car payment, mortgage companies approve your mortgage based on their guidelines, not yours. Thus, put off buying a car until AFTER you go to settlement on your home. Don’t Move Money Around When a lender reviews your loan package for approval, one of the things they are concerned about is the source of funds for your down payment and closing costs. Most likely, you will be asked to provide statements for the last two or three months on any of your liquid assets. This includes checking accounts, savings accounts, money market funds, certificates of deposit, stock statements, mutual funds, and even your company 401K and retirement accounts. If you have been moving money between accounts during that time, there may be large deposits and withdrawals in some of them. The mortgage underwriter (the person who actually approves your loan) will probably require a complete paper trail of all the withdrawals and deposits. You may be required to produce cancelled checks, deposit receipts, and other seemingly inconsequential data, which could get quite tedious.	Perhaps you become exasperated at your lender, but they are only doing their job correctly. To ensure quality control and eliminate potential fraud, it is a requirement on most loans to completely document the source of all funds. Moving your money around, even if you are consolidating your funds to make it "easier," could make it more difficult for the lender to properly document. So leave your money where it is until you talk to a loan officer. Don't Change Jobs For most people, changing employers will not really affect your ability to qualify for a mortgage loan, especially if you are going to be earning more money. For some homebuyers, however, the effects of changing jobs can be disastrous to your loan application. If you are a salaried employee who does not earn additional income from commissions, bonuses, or over-time, switching employers should not create a problem. Just make sure to remain in the same line of work. Hopefully, you will be earning a higher salary, which will help you better qualify for a mortgage. Hourly Employees If your income is based on hourly wages and you work a straight forty hours a week without over-time, changing jobs should not create any problems. Commissioned Employees If a substantial portion of your income is derived from commissions, you should not change jobs before buying a home. This has to do with how mortgage lenders calculate your income. They average your commissions over the last two years. Changing employers creates an uncertainty about your future earnings from commissions. There is no track record from which to produce an average. Even if you are selling the same type of product with essentially the same commission structure, the underwriter cannot be certain that past earnings will accurately reflect future earnings.	Bonuses If a substantial portion of your income on the new job will come from bonuses, you may want to consider delaying an employment change. Mortgage lenders will rarely consider future bonuses as income unless you have been on the same job for two years and have a track record of receiving those bonuses. Then they will average your bonuses over the last two years in calculating your income. Changing employers means that you do not have the two-year track record necessary to count bonuses as income. Over-Time Since all employers award overtime hours differently, your overtime income cannot be determined if you change jobs. If you stay on your present job, your lender will give you credit for overtime income. They will determine your overtime earnings over the last two years, then calculate a monthly average. Self-Employment If you are considering a change to self-employment before buying a new home, don’t do it. Buy the home first. Lenders like to see a two-year track record of self-employment income when approving a loan. Plus, self-employed individuals tend to include a lot of expenses on the Schedule C of their tax returns, especially in the early years of self-employment. While this minimizes your tax obligation to the IRS, it also minimizes your income to qualify for a home loan. If you are considering changing your business from a sole proprietorship to a partnership or corporation, you should also delay that until you purchase your new home.		About My Services I would like to help you with the task of buying a home. To do this, I am able to do the following for you: Evaluate your credit and rental payment history Advise you on the various types of mortgage programs Resolve any issues on your credit report that can affect your mortgage. Determine the largest mortgage for which you qualify Make sure you have all the required loan documents Provide you with a Good Faith Estimate of closing costs Keep you informed as to changes in mortgage interest rates Determine any seller assist that you may ask from a property seller Co-ordinate all aspects of settlement or escrow, including title search, appraisal, paperwork and other services At $company_name, we offer mortgages for most buyers, including ones who are self-employed or who have damaged credit. We have lenders who offer 100% financing meaning no down payment for qualified buyers. We also offer mortgages with start rates as low as 1%, making it easier to get into your home. If you have any questions about how I can help you purchase your home, please call me at $company_phone.