Home Buying: Mortgage

If you want to be respected and considered a “real buyer”, then you need to have the evidence that you are prepared. One way to show that you are prepared is to have that preapproval letter from you lender in hand. Further, your agent would love to see you having that preapproval before they take you out to view homes because it not only protects you, but them as well. Overall, when you are preapproved, you are ready to buy!

Your preapproval letter should include the information that has been checked and evaluated (credit history, employment), along with the maximum loan amount, the type of loan (FHA, VA, USDA, Conventional), and the interest rate you are approved for.

Here is a fun fact for you, did you know there is a difference between a mortgage broker and a mortgage banker? A mortgage broker is a licensee through the state, who is able to sell loans to consumers. A mortgage banker is someone who works directly for an institution loaning the money, they can also issue you a preapproval letter directly.

When it comes time to apply for your loan, your lender will need the following financial records from you:

  • W2 forms or business tax return form if you’re self-employed, for the last two or three years for every person on the loan
  • Copies of one or more months of pay stubs from every person on the loan
  • Copies of two to four months of bank or credit union statements for both checking and savings accounts

A lender will also, most likely, require a credit report as well.

Tip: Compare loan programs first! When you are ready, then let the lender pull your credit. Wait to compare interest rates when you are ready to lock.

Your credit report can be defining factor is your ability to obtain a loan, even the amount of loan you are able to get. Here are five factors that determine your credit score:

  1. Your payment history
  2. How much you owe
  3. The length of your credit history
  4. How much credit you have
  5. The types of credit you use

When it comes time to compare loans, you should compare the interest rates among the lenders at the same time on the same day; ask for a written estimate of fees; ask for better terms if you can see that there are certain fees that are negotiable. Following are also ten questions that you should/could ask your lender:

  1. What are the most popular mortgage loans you offer?
  2. Which type of mortgage plan do you think would be the best for us? Why?
  3. Are your rates, terms, fee, and closing costs negotiable?
  4. Will I have to buy private mortgage insurance? If so, how much will it cost and how long will it be required?
  5. Who will service the loan? Your bank or another company?
  6. What escrow requirements do you have?
  7. How long is your loan lock-in period? Will I be able to obtain a lower rate if they drop during this period?
  8. How long will the loan approval process take?
  9. How long will it take to close the loan?
  10. Are there any charges or penalties for prepaying the loan?

When you are out there shopping for a mortgage that will work for you, remember that you are also shopping for the right lender as well. Be prepared to ask everything you need/want to know to assist you in making the best decision.

Home Buying: The Lender

It is important to have that preapproval letter in hand before making an offer for a home. Most Sellers now-a-days want to see that letter in hand, manly to confirm that you, as the buyer, is ready, willing, and able to purchase their home. After shopping for and finding the lender that is right for you, there are going to be several things that your lender is going to need from you.

A lender makes their decisions based on avoiding high risk situations and follow guidelines to ensure the sale ability of those loans in a secondary market. The amount of your home loan is based upon four criteria: (1) income, (2) assets, (3) debts, (4) interest rate that you can lock in.

A lender will qualify you based on your gross yearly income – including overtime, part-time, seasonal pay, commissions, bonuses, and tips. They will also include dividends from investments, business income, pension or Social Security, veteran’s benefits, alimony, and/or child support. What’s important is that you, as the buyer, should see what kind of loan you can qualify based strictly on your yearly salary, without the extra bonuses. This is because you know this is a steady income, plus this gives you some wiggle room during the bargaining process later.