1. What
is the Projected Cost of a New Home? On-line research and open houses can be reliable
sources for projected purchase prices on single family homes, townhomes and
condominiums.
2. Are
you purchasing an existing or newly constructed home? If
you are purchasing an existing home, this means the home is already built. However, you should also factor in any
additional improvement costs such as landscaping, decorating and
furnishing. If you are purchasing a new
construction home, it is important to include the “extras” (costs over and
above the base home price). It is also
important to know if you are purchasing a new construction home from a
developer/builder or if you are building a custom home which requires a
construction loan (which is a completely different loan type not contemplated
in this article).
3. What
is the market value of your current home?
Although there are plenty
of real estate search sites available, they may not always contain exact
“comparable” sales and their estimated market value could be high or low,
depending on how your home compares to the other recently sold properties. The most accurate source for current market
value is an appraisal or a CMA (Comparative Market Analysis). A comparative market analysis is an
examination of the prices at which similar properties in the same area recently
sold. Since you are thinking about selling anyway, this is a good time to
contact a highly respected real estate agent to ask them for a CMA to help determine
your home’s market listing and sale price.
4. What
is the estimated net sales proceeds from the sale of your current home? The
net sales proceeds differ from one geographic area to another. In the Chicago, IL area, the estimated net
sales proceeds calculation is:
Estimated sales price
- 8% (closing
costs)
- Mortgage
balance(s)
= Net Sales Proceeds
5. What
is your projected down payment for your new home? This is a customized amount depending on the amount of
mortgage (if any) you intend to obtain.
The mortgage amount will take into account some of the following
factors:
► The monthly housing expense that is most
comfortable for you: Your mortgage
professional will be able to calculate the maximum mortgage amount that will
result in your desired monthly housing expense.
► Loan to Value and Current Rates: Different down payment percentages can result
in higher or lower rates. It is
important to work with your mortgage professional to determine the down payment
percentage that will result in the lowest possible rate.
► How much of your assets can be invested
toward your home while still leaving sufficient retirement funds: Your financial advisor will be able to assist
you in determining how much of your liquid assets can be applied to your down
payment.
6. If
still employed, how long will you continue your employment? The number of years you plan
to be employed might be under your control or possibly not. If you are in a down sizing industry, your
employment future may be uncertain, in which case it is important to consider
projected retirement income. If you plan
to sell your current home and purchase another home, it is best to do so while
you are still employed full time. There
are so many variables and logistics with selling and buying, it’s best to
eliminate the largest variable which is income.
7. When do you
plan to retire, and will it be before or after your purchase? If you
plan to retire before purchasing a new home, it is extremely important to
evaluate your retirement income with a seasoned mortgage professional such as
myself to verify if you have “qualified” retirement income to support your new
mortgage loan. Acceptable retirement
income sources include: Social Security,
pension, annuity, 401k and IRA distributions, real estate income, and other
similar benefits. I can let you know
what documentation is required to support various retirement income
sources.
8. How to structure
your distributions from non-retirement vs. retirement accounts? To qualify as income, all
distributions from investment accounts must be from IRA, Roth IRA, or 401(k) accounts. If the distributions are from non-retirement
accounts, they may not be counted as income (for mortgage underwriting
purposes). Other valuable information
about distributions:
►Minimum distribution
history: Sometimes mortgage underwriters
require a minimum number of years for receiving retirement distributions. This is up to the underwriter’s
discretion. Most underwriters allow the
distributions to be recent; in which case, the first distribution needs to be
made before the mortgage loan closes and the amount and frequency needs to be
verified in writing by the financial advisor.
►Frequency of IRA
distributions: Monthly, quarterly or
yearly – most underwriters prefer monthly.
►Minimum age to receive
IRA distributions: 59-1/2 (minimum age
for penalty-free retirement account distributions).
►Minimum # of years
distributions will continue: Divide
total asset amount by yearly distribution amount. Net result must be at least three years. For stocks/equities, use 70% of total asset
value divided by monthly distribution amount.
Underwriting requires a minimum of 3 years continuance for distributions
to be counted as income.
9. After you retire from full-time employment, do you
plan to work part-time, consult or freelance?
It is very common for
salaried professionals to provide free-lance consulting services after retiring
from full-time salaried jobs. If you
plan to receive income from a source other than full-time salary, you will need
two full, consecutive tax returns showing your freelance, consulting, part-time
or commission income before being eligible for mortgage financing. Your mortgage process will be more successful
if you obtain your new mortgage before retiring from your full-time, salaried
position.
10. How do you know the
number of years to repay your new mortgage?
There are rate advantages
for repaying mortgages in 15-20 years vs. 30 years. However, the monthly payments will be higher
with the shorter terms. Also, if
mortgage rates are low, financial advisors typically recommend a longer
amortization to hedge against inflation.
Longer terms with lower monthly payments are often an advantage with
financial planning and monthly expenses.
This is something to discuss with your financial advisor and mortgage
professional.
Please contact Diane Pyshos for more details and your
free consultation!
Diane Pyshos, Senior
Mortgage Consultant
NMLS #137800 - Company ID
#19291
A&N Mortgage
Services
1945 North Elston Avenue,
Chicago, IL 60642
312-909-9718
THIS IS AN ADVERTISMENT. This is not a commitment to lend. A and N Mortgage Services, Inc. is an
Illinois Residential Mortgage Licensee and Equal Housing Lender. 1945 N. Elston Ave., Chicago, IL 60642 P:
773.305.LOAN (5626) www.anmtg.com NMLS #19291 IL MB.0006638. Serving IL, IA,
IN, FL, MA, MI, MN, TX, WI
