This kind of mortgage advice can come in handy when looking to buy a home.

The home value is determined by similar homes that have recently sold in the area.

Here is an easy example:

The subject property, meaning the home you are looking at buying, is your standard 3 bedroom, colonial, with about 1500 square feet. Now, there are 2 other similar homes on the same block, both have 3 bedrooms, are colonial, and about 1500 square feet. One of the homes sold for $150,000 and the other sold for $160,000 just a few months ago. These two homes are called comparables.

These two comparable’s give you a good indication that the range in value of the subject property is $150,000 – $160,000.

Now, that was a basic example and in reality, comparables don’t come that cut and dry. Lenders today are getting tighter and tighter with their guidelines, when it comes to the appraised value. I am seeing most underwriters (underwriters are the people that decide whether your loan should be approved or denied) asking for recent home sales within the last 6 months. Going out as far as a year may not be acceptable, in some cases. If the property is located in an urban area, the comparables to use should be within 1 mile, or so.

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There are many more factors that go into finding comparables, but the important factors that pull the most weight are these:

- Similar type of home. (compare a ranch style to a ranch style)

- Similar square footage. (don’t compare a home with much more than a couple of hundred square foot difference)

- Date of sale. (today’s lenders are looking for sales no older than 6 months and 3 months for really strong ones)

- Distance from the subject property. (try to stay within a mile, but if you have to go farther out that’s ok too)

First time home buyers will find this information very valuable, since most first time buyers don’t understand if they are making a good offer on a home or not.  It also helps to work with a local real estate agent to help with this.

If you have a 401k account, you have a down payment for your home.

Contact the person who handles your 401k account and ask them about information for borrowing against your 401k.  Most 401k plans allow you to borrow against the value of the account.  Generally, the max you can borrower is 50% of the current value.  This will be a loan borrowed to yourself, because the money you pay back goes right back into the 401k account.  I believe the average interest rate you pay on the money borrowed is around 6%.

Lenders allow you to use this money as the downpayment for your home, so take advantage of it.  They don’t count the debt against you in the total debt to income ratio and they only ask that you show that the funds came from your 401k account.

This option for a down payment on a home is overlooked all to often.