The Home-Buying Process is NOT One-Size-Fits-All

Different life situations call for different mortgages and strategies for home buyers. Here are a number of life circumstances that may occur and how to help smooth out the mortgage and home buying process.

Self-Employed

Being self-employed has a great amount of perks but one of the biggest hurdles is proving your income. When applying for a mortgage, lenders look at the income after business expenses are deducted. Self-employed people generally have a long list of business expenses so therefore the income the lender sees is much less than the borrower actually makes. To combat this, a self-employed borrower needs to prepare themselves a couple years in advance and write off less deductions on their taxes. This will show the lender they have a higher income after expenses. Finding a good mortgage lender or broker that knows how to handle special situations will do well to ensure a successful mortgage process.

Sometimes when a borrower like this has exhausted all options in proving their income, it may be time for a co-signer. It is also important to note that different types of mortgages may have different criteria to be met by a self-employed borrower. In FHA loans, if a borrower has only 1 year of self-employment, it can not be used as business income when applying for a mortgage. The borrower must have more than 1 year under their belt.

Using Gift Money For a Down Payment

If a home buyer is fortunate enough to have a lump sum gifted to them, it seems natural to use it for a large investment like buying a home. This can be done but there are certain ways to go about doing it correctly, so that the lender identifies that though the borrower has a large amount gifted, they can afford the home on their own. To do this a gift letter must be written up from the donor to the lender stating that the money is not a personal loan to the borrower and that it is indeed a gift. Lenders will have the specifics of what exactly the letter must consist of (name, address, dollar amount, etc…) FHA loans also require the donor to provide bank statements as well so keep this in mind when gathering documents for your lender.

But My Home Hasn’t Sold Yet

A perfect scenario would be to sell a home at the exact time a new home is found and the mortgage works out perfectly. However this is far from a perfect world! There are a couple common strategies to use when a sellers current home hasn’t sold yet but they have found the perfect home for their family. A simple but feasible plan is to add a contingency to the offer on the new home. This would mean the seller’s new home sale would only go through pending the sale of the current home. Another option is to take out a bridge loan. This loan covers the gap between the sale of the current home to the mortgage of the new home.

Unmarried Couples

Long-term couples may want to invest their money together on a home but it’s important when doing so to plan for the future. Have a real-estate lawyer draft up a home buying prenup in the event the couple parts ways. Be sure to put both names on the mortgage because adding a name after the fact isn’t always possible and a refinance may have to be done to make that possible. Most importantly keep good financial records of what person paid what towards the sale of the home. This will save time and effort and back tracking if the couple goes their separate ways. Lastly a couple must also think about how they will title the home. There are three options, one may be sole owner, they can jointly (equally) hold the title or be tenants in common (percentage based).

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Thanks for reading my blog! It is my goal as your full service real estate Realtor specializing in the Richmond Hill, Savannah, Pooler, and Hinesville – Georgia areas, to provide you with exceptional service at all times. My promise to you is to openly and honestly answer all your questions, help you navigate through the process and to make myself available to you day and night. I work for you and you are my priority. My local expertise and extensive real estate training and experience will benefit you whether you are serious about buying or selling a home at this time, or are a returning client checking out the many homeowner resources I offer. I am a “real” person and my reputation depends on every client, every deal, every day. I LOVE my job and it shows! You can also connect with me on my Facebook Page and/or Google Plus for area info and events, things to do, real estate news, home ownership tips, tips for both buyers and sellers, and so much more! I’m also on Pinterest!