Buying A Home in Farmington Hills: 7 Things to Do Before Applying for a Mortgage

Buying A Home in Farmington Hills: 7 Things to Do Before Applying for a Mortgage


Buying A Home in Farmington Hills: 7 Things to Do Before Applying for a Mortgage

If you’re thinking about buying a home in Farmington Hills MI, applying for a mortgage is never simple, but it’s even trickier when you don’t know what to expect. If you are a first-time homebuyer, you can make the process easier by learning as much as you can ahead of time, before you’ve found your dream house.

Knowing what to expect allows you to plan ahead and improve your chances of getting a home loan with favorable terms. Here are 7 things to do before applying for a mortgage:

1). Review your credit report

Review your credit report to ensure there are no surprises long (several months) before you begin the mortgage process. Put simply, a low credit score will lead to a much higher mortgage rate, and even disqualification if it drives your monthly mortgage payment high enough.

When you submit a mortgage application, they’ll check your credit reports maintained by one or more of the three national credit bureaus (Experian, TransUnion, and Equifax), and the credit scores derived from those reports.

Lenders use credit information to help decide whether they’re willing to issue you a home loan and, if so, how much they’re willing to lend you and how much they’ll charge you in interest.

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Once a year, you can obtain a free credit report from all three credit reporting agencies at You’ll want to review each credit report carefully to make sure it accurately reflects your credit history and be ready to dispute anything on the report that isn’t accurate.  

2). Get familiar with basic mortgage terms

“Amortization,” “origination fee,” “earnest money” and other common terms used in mortgage lending might be phrases you’ve never even heard before. Since we are talking about your money and 10 to 30 years of your life, you’ll want to familiarize yourself with basic mortgage terms before speaking to lenders.

Everything you learn will position you to make the best choices for your finances and your future. Also, don’t be afraid to ask your lender or even your Farmington Hills REALTOR® lots of questions about the mortgage process, including mortgage terms you don’t understand.  

3). Know your budget

You don’t want to wind up with a mortgage you can’t pay – so it’s important to be realistic about your monthly income and expected expenses, and to leave some breathing room in your budget for emergencies or unexpected costs that might come up.

Most financial advisors agree that you should spend no more than 28% of your gross monthly income on housing expenses and no more than 36% on total debt. That includes housing as well as things like student loans, car expenses, and credit card payments.

The 28/36 percent rule is the tried-and-true home affordability rule that establishes a baseline for what you can afford to pay every month. To calculate how much 28% of your income is, simply multiply your monthly income by 28.

If your monthly income is $6,000, for example, the equation should look like this: 6,000 x 28 = 168,000. Now divide that total by 100. 168,000 ÷ 100 = 1,680.

Knowing what you can afford can help you take financially sound next steps. The last thing you want to do is jump into a 30-year home loan that’s unrealistic for your budget, even if you can find a willing lender.

If you want to qualify for a mortgage on your first try, it’s important to know how big of a loan you can reasonably afford. You can speak to a lender and go through a quick pre-qualification process to find out how much you can qualify to borrow and determine your budget for a home.

4). Improve your debt-to-income ratio

A high debt-to-income ratio (DTI) is the #1 reason why mortgage applications get rejected. Your DTI is all your monthly debt payments divided by your gross monthly income.

Most lenders typically offer loans to creditworthy borrowers with DTIs as high as 43-47%. That limit is based on policies by government-backed lenders like Fannie Mae, put in place to protect customers against predatory lending practices.

Simply put, the lower your DTI, the more financing options will be available to you.  If you have some flexibility on when you plan on buying, taking time to lower your DTI (and improve your credit score) can save you a lot of money over the life of your loan. 

A few DTI reduction strategies to consider:

  • If possible, pay off your car loan before applying for your mortgage.
  • If you plan on purchasing a car, considering waiting until after you’ve bought your home.
  • Start paying off your credit cards in full, one by one, but don’t close them out. 
  • If possible, refinance or consolidate current loans to reduce your monthly payments.
  • Consider adding a co-borrower with a low DTI and good credit history to your loan 

5). Consider various loan options

Not all home loans are the same. Knowing what kind of loan is most appropriate for your situation prepares you for talking to lenders and getting the best deal.

Understand how these choices affect your monthly payment, your overall costs both upfront and over time, and your level of risk. A loan “option” is always made up of three different things: loan term, interest rate type, and loan type.

Loan term 

Interest rates come in two basic types: fixed and adjustable. This choice affects whether your interest rate can change, whether your monthly principal and interest payment can change and its amount, and how much interest you will pay over the life of the loan.

With a fixed-rate loan, your interest rate and monthly principal and interest payment will stay the same. Adjustable-rate mortgages (ARMs) offer less predictability but may be cheaper in the short term. In the later years of an ARM, your interest rate changes based on the market, and your monthly principal and interest payment could go up a lot, even double.

Explore rates for different interest rate types and see for yourself how the initial interest rate on an ARM compares to the rate on a fixed-rate mortgage.

Interest rate type 

Interest rates come in two basic types: fixed and adjustable. This choice affects whether your interest rate can change, whether your monthly principal and interest payment can change and its amount, and how much interest you will pay over the life of the loan. 

With a fixed-rate loan, your interest rate and monthly principal and interest payment will stay the same. Adjustable-rate mortgages (ARMs) offer less predictability but may be cheaper in the short term. In the later years of an ARM, your interest rate changes based on the market, and your monthly principal and interest payment could go up a lot, even double. 

Explore rates for different interest rate types and see for yourself how the initial interest rate on an ARM compares to the rate on a fixed-rate mortgage.

Loan type 

 Mortgage loans are organized into categories based on the size of the loan and whether they are part of a government program (conventional, FHA, or special programs). This choice affects how much you will need for a down payment, the total cost of your loan, including interest and mortgage insurance, and how much you can borrow, and the house price range you can consider. 

Each loan type is designed for different situations. Sometimes, only one loan type will fit your situation. If multiple options fit your situation, try out scenarios and ask lenders to provide several quotes so you can see which type offers the best deal overall.

6). Shop around

You’ll want to compare all the costs involved in obtaining a mortgage. Shopping, comparing, and negotiating may save you thousands of dollars. Home loans are available from several types of lenders – commercial banks, mortgage companies, thrift institutions, and credit unions.

Different lenders may quote you different prices, so you’ll want to contact several lenders to make sure you’re getting the best price. You can also get a home loan through a mortgage broker with access to several lenders, giving you a wider selection of loan products and terms to choose from.

Keep in mind that brokers are not obligated to find the best deal for you unless they have contracted with you to act as your agent. Therefore, you should consider contacting more than one broker, just as you should with banks or thrift institutions.

Good agents know good lenders

Your Farmington Hills real estate agent can help you find a mortgage lender. Most agents have a plethora of lenders in their referral database, and a group of lenders that they have personally worked with before. Agents can be trusted to refer a mortgage lender with a proven record and who can close loans.  

The Real Estate Settlement Procedures Act (RESPA) prohibits agents from receiving a “thing of value” from a lender in exchange for sending you its way, and this inhibits them from entering into quid pro quo arrangements that might not be best for their clients.

Most homebuyers want their new home purchase to be handled thoughtfully. They want to close within the contract period. That scenario is more likely to happen if you use your agent’s preferred mortgage lender.

7). Pull together your financial documents  

It’s a good idea to start prepping your financial documents. Lenders will request paperwork for your mortgage application that proves things like how much money you make and your debts. 

 Depending on your financial situation, the documents you will likely need when applying for a mortgage include 2 years’ worth of tax returns, pay stubs, W-2s or other proof of income, bank statements and other assets, credit history, gift letters, photo ID, and rental history.

If you’re self-employed or have other sources of income (such as child support), you will need to show your lender proof through 1099 forms, direct deposits, or other means. 

If you have any blemishes on your credit reports such as a previous short sale or a foreclosure, be prepared to write a statement that explains any negative items. Lenders may look at one-time unavoidable circumstances differently from habitual delinquency. 

The takeaway

The more you prepare ahead of time, the easier it should be to get the loan you need on the home you want and can comfortably afford. Don’t forget to compare different loan products, such as fixed-rate mortgages vs. ARMs, and conventional loans vs. FHA loans.

Both have their pros and cons and should be carefully considered. There is no one-size-fits-all approach. Also, be sure to shop around and get rate quotes from more than one lender. By doing so, you’ll likely get a better interest rate, more favorable loan terms, and save money now and in the long term.

Speak with your Farmington Hills MI REALTORⓇ about referring a lender to you. Real estate agents who routinely close a lot of deals have experience working with multiple lenders and know which of them will deliver.

Partner with Highly-rated Farmington Hills MI REALTOR -Tom Gilliam

Whether you are interested in Farmington Hills MI homes for sale or it’s time to list your current property, experience matters most in a changing market. Serving Farmington Hills and the surrounding area for over 20 years, Tom is able to provide his clients with the kind of knowledge, skills, commitment, and personalized service they need and deserve.

An extremely down-to-earth person, Tom is someone you can trust and feel good about working with. His clients appreciate his honesty and transparency and feel it helps them as they make important real estate decisions. Tom makes himself available to his clients whenever they have questions or concerns and promptly returns any texts, calls, or emails.

Farmington Hills MI Homes for Sale 

As your Farmington Hills MI real estate agent, Tom will protect your best interests, advocate for you, negotiate on your behalf and do whatever is necessary to ensure the best results possible. Having a trusted professional like Tom by your side means there is one less thing to worry about.

To find out more about buying or selling real estate in Farmington Hills MI, or homes in the surrounding Oakland County area, please give highly-rated REALTORⓇ – Tom Gilliam a call directly at (248) 790-5594 or send him an email

Tom Gilliam, REALTOR®
RE/MAX Classic
29630 Orchard Lake Rd.
Farmington Hills 48334
Direct: 248-790-5594
Office: 248-737-6800
Email: Tom @
License #314578 

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Garden Tip(s)10 Most Wanted This Spring-Realtor Tom Gilliam

Garden Tip(s)10 Most Wanted This Spring-Realtor Tom Gilliam

Main Garden Tip-If you’re like most people, as soon as the weather starts to warm up, and the mornings are bright and sunny, you start thinking about your garden, and what you can do to have the most successful growing season ever! Soon, you’ll see little chutes begin to pop up, and before you know it, you’ll be eating fresh salads directly from your own garden every day with these garden tips.

Before you start your garden, though, here are a few garden tips to help you prepare, grow, and maintain your garden the best way possible starting right now!

Garden Tip 1- Order early

A windy and rainy early spring day is the perfect time to get out the catalogues, and order your flower bulbs, and seeds. Every gardener has a few seed catalogues ready to offer inspiration and advice when picking just the right flowers and vegetables for your area. Keep in mind your sun/shade areas, your climate, and your soil when choosing bulbs and seeds.

Garden Tip 2-Clean up

Before you even begin planting, you’ll need to clean up and clear out those old beds and borders. Turn over the soil to prepare for new planting, and add in organic matter such as compost, seasoned manure, or old grass clippings. This will create the healthiest soil for your garden to grow.

Garden Tip 3-Plan

It pays to rotate your planting areas when you are gardening vegetables. Grab a notebook and a pen, or use an online planner, to get an idea of where you’ll be planting your seeds to maximize the area you have to plant in. Take tips from seed catalogues regarding your growing period, and the zone you live in. Take into consideration how many hours of sunlight your garden will get on a daily basis. Good planning can make or break a successful vegetable garden.

Garden Tip 4-Your greenhouse

If you’re a lucky gardener with a greenhouse, get out there and wash it down with a good disinfectant. Remember to wash down benches, trays, and pots, too, and keep it open over a couple of days to make sure it dries thoroughly.

Garden Tip 5-Start early

Begin starting seeds inside that need a longer growing season. You can start this in February or March, if you have a heat mat and lights. There are many flowers and vegetables that benefit from being started indoors, so do some research. Just about anything can be used as starter planters – even ice cube trays, pint milk cartons cut in half, yogurt cups, and/or toilet paper rolls cut in half and stood on end. The point is – start growing those seedlings!

Garden Tip 6-Pesky pests

Inspect your gardens carefully for any pests that have decided to over-winter there. The crowns of perennials are where many slugs, aphids, and snails take shelter over the winter. Clean out last year’s pots and if you see pests when you clean, consider purchasing parasitic nematodes as a protectant that won’t hurt your garden, only the pests.

Garden Tip 7-Move shrubs

Got a shrub or shrubs that you’d like to move? Now’s the time, while it’s still in its dormant stage. You’ll want to do this on a non-windy day so that the roots don’t dry out. Dig up as much of the root ball as possible, and this will mean digging a wide circle around the shrub. It’ll be able to establish itself much quicker if you do this. Don’t place them deeper than they were in their previous soil level, and when you’re done replanting them, give them a good drenching.

Garden Tip 8-Fix

As soon as the weather warms enough, get outside and repair garden boxes, raised beds, fences, trellises, and gates. These tasks aren’t what you’ll be wanting to do when planting time comes, so get them out of the way earlier rather than later, so you can enjoy your summer gardening. Enlist the help of high school students if you need an inexpensive way to get some of the bigger repairs completed without breaking your gardening bank.

Garden Tip 9-Garden tools

Clean them up with a disinfectant to stop the spread of disease from bacteria and fungus. Give them all a good sharpening, or take them to a local hardware store to do the job. You’ll enjoy your gardening more when you have clean, working tools to use.

Garden Tip 10- Compost

If you don’t already have a compost area – create one! You can either buy or make a bin, and you’ll have an awesome place for garden and organic food waste. Add in grass clippings, paper, and wood. As the compost breaks down, turn it each month, and soon it’ll be a boon to your garden.

By prepping your garden sites now, and doing some advanced planning, you’ll be ready to go when it comes time to get those seeds (or seedlings) in the ground.

Garden Tip(s)10 Most Wanted This Spring-Infograph

A Successful First-Home Purchase in Oakland County MI

A Successful First-Home Purchase in Oakland County MI

Think You’re Ready To Make A Successful First-Home Purchase in Oakland County MI? 

It’s very exciting — and perhaps a bit overwhelming — given the expense, time and the number of steps it takes to make a successful first-home purchase in Oakland County MI today. You’ll certainly face many decisions along the way, and there’s plenty to doA Successful First-Home Purchase in Oakland County MI before you achieve your goal of your beautiful first home in Oakland County MI. Relax! It may take a few weeks to get it all together, but buying your first home in Oakland County doesn’t have to be a difficult process if you take it step by step — and have me along as your guide.

Here’s an easy-to-follow summary of the process you’ll go through in buying your first home in Oakland County Mi. Keep it handy as you proceed, and be sure to ask me any questions you have along the way.

  1. Select An Experienced Oakland County Mi Real Estate Professional As Your Buyer’s Agent
    A buyer’s agent is a real estate professional that is contracted to look out for the interests of the buyer rather than the seller. Signing me as your buyer’s representative means I can not only help you find your first home, but I can help negotiate price and contract terms on your behalf and provide information about a home, the sellers, and even previous offers and counteroffers, among other services. In most situations, buyer’s agents are paid from the sales commissions offered by sellers.
  2. Check Your Credit 
    Be sure to check your credit before applying for a mortgage. You’ll want to ensure all the information in your report is accurate — and correct any information that isn’t — to get the credit score you’ll need to qualify for a mortgage at the best interest rates available today. -By law, credit reporting agencies must provide you with a free copy of your report once every year — if you ask for it. To request reports from the three major credit reporting agencies — Equifax, Experian and TransUnion:

    • By phone, call toll free (877) 322-8228.
    • Online, visit
    • By mail, write to Annual Credit Report Request Service, P.O. Box 105281, Atlanta, GA 30348-5281.

    TIP: Credit reports do not include your credit score. Although you can obtain a free copy of each credit report annually, finding out about your credit score will cost you a few dollars.

  3. Investigate Mortgage Programs
    There are lots of mortgage options available, all with different down-payment requirements, interest rates, terms and conditions. I will be happy to help you sort through your choices to find the best fit based on your financial situation and goals.
  4. Interview Reputable Lenders
    Once you’ve decided on the loan options you’re considering, contact several lenders in Oakland County Mi to find out what they can do for you. You’ll want to know about their interest rates, loan costs, terms, etc. I will be happy to provide you with a list of lenders who have helped our clients in the past.
  5. Get Pre-Approved For A Loan, Not Just A Pre-Approval Letter
    Pre-approval means the lender has reviewed your income/debt ratio, assets and credit profile and determined the amount of money they would be willing to lend you providing various conditions are satisfied by the particular home you decide to purchase — such as a supporting appraisal, clear title, etc.Here’s how loan pre-approval can help you:

    • Knowing exactly how much money you can qualify to borrow will ensure you don’t waste your time looking at homes you can’t afford.
    • Based on your loan pre-approval, you’ll know in advance what contract terms you’ll want to negotiate with sellers — for example, seller-paid points, closing costs, inspections, etc.
    • If you find a particularly good deal on a home, you’ll be able to jump on it, without worrying about whether you’ll get the financing you need.
    • Your pre-approved loan gives sellers confidence that their contract with you is more likely to go to settlement/closing –and get there more quickly — than would contracts from competing buyers who have yet to secure financing approval.
  6. Develop A “Needs And Wants” List
    Include the type of home — single-family, townhome, condo, etc. — number of rooms, size, location in Oakland County Mi and any other amenities that are important to you in your first home. Be sure to distinguish between minimum requirements (“needs”) and items you could do without (“wants”), if need be. Remember, you may not be able to afford your dream home as your first home, but making a smart choice will allow you to live in it comfortably and sell it when you’re ready.
  7. Search Available Properties
    I can pull all the homes on the multiple listing service (MLS) in Oakland County MI that match your needs and budget. Of course, you can view many properties online to sort out those that look like what you hope to find.
  8. Tour Homes
    This is where the real home shopping takes place — in person with your agent. Your personal visits to homes in Oakland County MI gives you a clear sense of their location, condition, amenities and overall “feeling,” none of which comes across accurately online. Be sure to drive and walk the neighborhood surrounding your top choices.
  9. Pare Down Your Choices Using Your “Needs And Wants” List
    It’s useful to go back to your original wish list to help you focus on selecting that one property in Oakland County MI that’s just the right combination of amenities to be your first home.
  10. Write A Purchase Offer For The Home Of Your Choice
    I will help you design a purchase offer to get you the best deal on the home you want in Oakland County Mi- and consider contingencies to protect your interests. I will submit your offer with your deposit (earnest money) to the seller or seller’s agent.-An earnest money deposit shows the seller that a buyer is serious about purchasing a property. When the transaction is finalized, the funds are put toward the buyer’s down payment. If the deal falls through, the buyer may not be able to reclaim the deposit.
  11. Negotiate The Contract
    Faced with an offer, sellers have several options — rejecting it or letting it lapse, accepting it as is, or making a counteroffer. Most contracts go through several rounds of back-and-forth negotiations (counteroffers) before both parties agree to the sales contract. I will put my many years of proven negotiating experience to work for you, so you’ll feel like a winner when you sign the bottom line of the contract to buy your first home in Oakland County MI.
  12. Submit Your Contract To Your Lender
    Your lender will need some more information and documents than were required for loan pre-approval. Staying in touch with your loan officer and responding to requests quickly will help keep your financing on track and on time.
  13.  Purchase A Homeowner’s Insurance Policy
    Your lender will require proof that you’ve purchased homeowners insurance (also “hazard insurance”) — shop various insurers to find the best deal.
  14. Schedule And Attend Home Inspections
    Hiring a professional home inspector is a smart move in Oakland County MI, especially when buying your first home. The inspector will provide you with a full report on the condition of the home’s systems, appliances and structure — and even more information if you’re available when the inspection is conducted (old clothes are recommended). You may also want to order specialty inspections to check for problems such as pests, radon gas, mold, etc.
  15. Negotiate Defects Found During The Home Inspection
    With a home-inspection contingency in your contract, you’ll be able to back away from the deal if the inspector finds problems the seller is unwilling to fix and you’re unwilling to buy. Ideally, though, you’ll negotiate with the seller to resolve problems so your home purchase can go forward.
  16. Prepare For The Move To Oakland County MI
    At this stage, you’ll be wrapping up things at your old home and getting ready to move into your new one — disconnecting utilities and services, setting up accounts for your new home, getting rid of items you’d rather not move, hiring movers or lining up boxes and friends, etc.
  17. Conduct A Final Walk-Through Of The Home
    Shortly before closing/settlement, you’ll conduct a walk-through inspection of the home to ensure that the property’s condition hasn’t changed and meets your contract’s requirements.
  18. Attend Closing/Settlement
    With your agent’s help, you’ll check all final documents for accuracy, sign the necessary documents, pay the buyer-assigned closing costs and pick up the keys to your first home. Just one step left — move in and celebrate!


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