Streamlining the Lending Process

Streamlining the Lnding Process

If you are starting a search for a new home, most likely you’ll need to get a home loan. The process might seem overwhelming if you haven’t obtained a loan in a long time; even more so for first time home buyers. The lending process doesn’t need to be difficult and by being prepared, you can streamline the process and ensure you are able to get the best loan for your needs.  

Choose a Lender
 The first step is to find a lender. You might start at your personal bank or credit union. Another good source for referrals is your agent or family and friends. The lender should have access to a variety of programs as well as the government options: VA and FHA programs.  

Be Prepared
Before you meet with the lender, gather the information you will need. Generally, you will need to provide current pay stubs, W2s, bank account statements and the last 2 years of your tax returns. If you have been divorced and/or have child support obligations, bring the final court document with you as well. 

 Understand Your Limits
 Typically, you will be able to borrow up to 31% of your gross monthly income. In addition, the lender will require that you have no more than a total monthly debt of 36% of your gross income. Be prepared to disclose all your debt, even if it does not appear on your credit report. Your loan officer is your advocate and there to help you succeed. 

 Don’t Make Any Credit Changes
 Once you’ve started the loan process, it’s critical that you make no changes to your credit. Postpone any big purchase, do not apply for new credit of any kind and do not pay off any credit cards. It’s also important not to change jobs during the approval process, even if it’s for more money. Before you do anything, talk to your lender.  Getting a home loan is not as difficult as it was a few years ago, but it’s important to plan early and do the right things. Once you make the decision to buy a home, speak to a lender immediately and then follow their advice and you’ll find the loan process simple to manage.

Currently, interest rates are running to the lowest levels in nearly two years. It's been another awesome week for rates. 
Home Mortgage Rates are now all sitting below 4%, Two weeks in a row in fact. If you have been waiting to own a home while locking in at a low rate now is the time to think about calling your lender and your agent. 

Questions about rates, home sales, home buying or relocation send me a message and I'll be happy to assist in way I can. 

Pre-Qualified Versus Pre-Approved

The Difference Between a Pre-Qualification vs. Pre Approval

 There is plenty of real estate terms used in transactions. Needless-to-say it can be confusing for both buyers and sellers trying to navigate the process. The home loan process might feel overwhelming and difficult to understand. Both buyers and sellers find terms like “PreQualification” and “Pre-Approval” used interchangeably, it’s no wonder they find themselves wondering how to proceed. 

 Pre-Qualification-The first step in obtaining a home loan is to meet with a lender and discussing their financial situation. The lender will discuss income, job stability, debt and credit. Once they have performed a basic review of the qualifications and run credit, they will issue a Pre-Qualification Letter to the potential buyer. This letter will identify the maximum sales price, down payment requirement and basic terms of the loan, such as interest rate.  The Pre-Qualification letter is used to provide evidence that the buyer has been reviewed by a lender who is vouching for their ability to obtain a loan. Because it's a quick procedure - and based only on the information you provide to the lender - your pre-qualified amount is not a sure thing; it's just the amount for which you might expect to be approved. As a result, being a prequalified buyer doesn't carry the same weight as being a pre-approved buyer, who has been more thoroughly investigated.  

Pre-Approval- A Pre-Approval is quite different. Getting pre-approved is the next step, sand it tends to be much more involved. A pre-qualification should be a good indication of credit and the ability to borrow, but a pre-approval is the definitive word. In this case, the lender collects all the necessary information and proof of eligibility and has it reviewed by the lender underwriter for approval. A PreApproval letter is almost like shopping with cash, the only remaining piece of the puzzle is the property they are buying.

Finding the right agent and mortgage lender is key to getting the correct information and starting your home buying process a lot smoother. Contact me to find out more or if you have questions. 

Down Payment-How Much Will You Need?

DOWN PAYMENT-HOW MUCH WILL YOU NEED?

    Gone are the days when anyone could buy a home with just a promise and signature. No documentation loans allowed virtually anyone to buy a house with no money down with just a simple credit check. After the mortgage meltdown, this all changed. Lenders tightened guidelines and down payments were back. 

But how much do you actually need? Must you always find 20% down? The answer might surprise you; there are many ways to buy a home with less than 20% down payment.

  

 0% Down – There are still two loan programs which allow one to buy a home for no down payment; the VA loan and the USDA loan.

 -The VA loan requires the borrower to be a qualified service person or veteran and the USDA loan is for certain areas under the Department of Agriculture.  

 5% Down – Conventional loans with loan limits can allow one to buy a home with as little as 5% down. These loans do have PMI (Private mortgage insurance) which can be eliminated when the loan amount falls below the 20% threshold.  

3 ½ % Down – FHA offers first time home buyers a good home loan for only 3.5% down payment. Again these loans have loan limits and PMI but offer a faster entry into the housing market.  

It's important to know that if you are buying a home with less money down, know that your mortgage payment will be higher than if you put more money down. The three drivers that inflate a mortgage payment are:

1.Interest Rate

2.Larger Loan Size

3.Private Mortgage Insurance (PMI)

Buying a home doesn’t always mean 20% loan. Although many lenders like 20% down payments but most first-time buyers put down much less. Just keep your eye on the fees. The down payment is not the only upfront money you have to deal with. There are loan closing costs and earnest money to consider as well. (we will get into more detail about earnest money in next weeks blog post)

It is tempting to go with the lowest all-in upfront charges when trying to buy a home. But the key to building net worth is to buy smart, especially when it comes to such a large purchase as a house. 

Lenders are required to disclose all fees and it's always a good idea to shop around with multiple mortgage providers in your area to get your best deal. Plus, the more you explore your options, the more you'll learn about the process. 

 If you’re considering buying a new home, talk to myself or your lender about your options.