Mortgage Info

Choosing A Mortgage Company:

 

When you are ready to shop for a loan, you can work directly with a lender or with a mortgage broker representing many individual lenders. Direct lenders are lending their own money, have in house programs, and make the final decision on your application. Brokers are intermediaries who represent many lenders and loan programs from which to choose. If you have special financing needs or want to shop the market for the best deal, an experienced broker may be able to find the best loan for you.

Along with shopping the source, you'll also have to shop the total costs of the loan, including the interest rate, broker fees, points (each point is one percent of the amount you borrow), prepayment penalties, the loan term, application fees, credit report fee, appraisal and a host of other items.

Your Initial Meeting With a Mortgage Professional:

The loan approval process generally begins with an initial interview where you and the mortgage professional discuss the potential loan. This can usually be done in person or by telephone. You will need to have information on hand that will verify your income and long-term debts. You may prefer to meet with the mortgage company before house hunting to determine in advance how much you can afford and the mortgage amount for which you can qualify. This step is called 'pre-qualification' and can save you time and trouble by making certain you are looking in the correct price range. 

 

Having these items on hand when you visit the mortgage company will help speed up the application process. Usually an application fee and the appraisal fee will have to be paid when you submit the mortgage application. After the initial meeting with the mortgage company, you should have a general idea if you qualify for the size and type of loan you want. After the mortgage application, the mortgage company should let you know if you qualify for the loan within a few days.

 

The following are some of the items a lender may need (items will vary accordingly to each individual loan):

  • A purchase contract for the house (if you have one)

  • Your bank account numbers and the address of your bank branch, along with checking and savings account statements for the previous 2-3 months

  • Pay stubs, W2 withholding forms, tax returns for two years, or other proof of employment and income verification

  • Credit card bills for the past few billing periods, or canceled checks for rent or utility bill payments, to show payment history and amount of revolving debt

  • Information on other consumer debt such as car loans, furniture loans, student loans and retail credit cards.

  • Balance sheets and tax returns, if you are self-employed

  • Any gift letters, if you are using a gift from a parent or relative or other organization to help pay the down payment and/or closing costs. This letter simply states that the money is in fact a gift and will not have to be repaid

Two Key Factors in Qualifying for a Home Loan:

When a lender makes a decision about a mortgage application, they consider two basic factors: your ability and willingness to repay the loan.  

 

Ability to repay the mortgage is determined by verifying your current employment and analyzing your total income. Lenders prefer for you to have been employed at the same place for at least two years, or at least be in the same line of work for a few years. Your proposed monthly payment will be compared to your monthly earnings.  

 

Willingness to repay is influenced by how you have paid previous loans and by examining how the property will be used. Willingness can be gauged by your credit report and previous commitment to rent or utility bills. There is also a greater tendency to stick with your payments if you live in a house as opposed to a rental property or vacation home.

It is important to remember that there are no set rules and each applicant is handled on a case-by-case basis. Many applicants come up a little short in one area, but make up for it with other strong points. These compensating factors may include a large down payment, solid employment, extensive educational background or overall financial health. For applicants who need to make a lower down payment, mortgage insurance is protection for the lender in case you stop making payments. This allows low and moderate income families become homeowners with low down payment programs.

After The Mortgage Application:

Your mortgage company will begin the work of verifying all the information you've provided. This process can take anywhere from one to four weeks, depending on the type of mortgage you choose, whether you're buying a home outside your local community, or a host of other factors. Within three business days after your application, the mortgage company must give you a good faith estimate of your closing costs. You'll also get a statement that shows your estimated monthly payment, the cost of your finance charges, and other facts about your mortgage.

 

Stay in touch with your mortgage company to speed up the application process. Some homebuyers find the closing process to be one of the most intimidating aspects of buying a home because it's so unfamiliar. If so, ask your mortgage company what to expect at your closing. Once you receive your approval, and you're waiting to close on the sale of the home, don't go on a shopping spree. The mortgage lender may do a final check of your credit report or bank accounts to make sure you're not assuming more debt or spending your cash reserves.

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