Mortgage

Understanding The Mortgage Approval Process

by Lisa Udy on July 19, 2011

When applying for a mortgage loan, there is a great deal of paperwork involved in the process. After filling out all of the necessary paperwork, however, many homebuyers are still completely in the dark regarding the actual mortgage approval process.

As a result, they sit on pins and needles as they wonder whether they will be approved for the loan they seek to get the home for sale they want. To help alleviate this stress, it is beneficial to learn more about the mortgage approval process before filling out any of the paperwork.

From the borrower’s perspective, the mortgage approval process is seemingly quite simple. Step one involves filling out paperwork, while step two is waiting to hear back from the lender. In reality, the mortgage approval process begins well before any paperwork is filed.

This is because one of the most significant pieces of the approval process lies within the borrower’s credit report. By making an effort to establish a good credit score and a clear credit report, you will significantly increase your chances of being approved for a mortgage at a reasonable rate. Other factors that are considered when determining whether or not you qualify for a loan include:

Income: Do you have a reliable source of income that is adequate to cover your loan payment?
Debt: How much debt are you already carrying and how long will it take to pay off that debt?
Employment History: How long have you been with your current employer and has your income grown over the last several years?
Property Appraisal: What is the value of the home compared to the requested loan amount?

The person who reviews all of this information is referred to as a loan underwriter. By examining this information, the underwriter will be able to determine how much risk is involved in providing you with a loan. Obviously, lenders want to feel confident you are not taking on more than you can handle. Therefore, it is generally a good idea to share other sources of income, such as child support or alimony, with the lender. Furthermore, your total monthly mortgage payment should be no more than 28 to 33 percent of your monthly gross income. Keep in mind that many fees are included when calculating the total monthly mortgage income. These include:

Mortgage payment (including principal and interest)
Property taxes
Mortgage insurance
Hazard insurance
Homeowners association dues (where applicable)

Keep in mind that the underwriter will also consider your total debt, which will include things such as credit card debt, student loans, car loans and other monthly expenses. In general, underwriters want these debts to be less than 36% of your gross monthly income.

While there are no guarantees that you will be approved for a mortgage loan even if you do meet these criteria, chances are good that you will get the loan you are seeking if you stay within these parameters.

About The Author – Eric Bramlett is co-owner and broker of One Source Realty, a boutique firm specializing in Downtown Austin condos and Steiner Ranch Austin.

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Choosing A Lender To Buy Logan Utah Homes

by Lisa Udy on January 21, 2011

When you are looking to apply for a mortgage, the first step will be to consider whether you should use a direct lender or a mortgage broker.

Both direct lenders and brokers attract clients through marketing campaigns. Both are able to gather information regarding your financial status so as to determine whether or not you are eligible for a loan. Despite this, there are several differences as well.

Lending Sources

Brokers typically represent several sources whereas direct lenders are a single source. The broker acts as an intermediary between the lenders and yourself. Although this is helpful, there are also some downsides to brokers. For example, an intermediary may increase the time it takes to close the loan.

Guidelines and Rates

Many individuals believe that brokers offer rates that are lower. The truth of the matter is that all rates are based solely on the secondary market which is a factor regardless of whether you use brokers or direct lenders. Even if some differences exist between the rates, it will not be significant. Additionally, brokers are required to follow certain guidelines which may make it more difficult to obtain the loan.

Licensing

Direct lenders are usually licensed to provide funds in all 50 U.S. states. However, brokers are often only licensed in several states. This may be a problem if the property which you want to purchase is not located in a state where your broker may conduct business. If this is the problem, a direct lender may be a better choice.

Sub-Prime Lending

The sub-prime marketplace has undergone severe financial strain in recent years and, because of this, it might or might not be a better choice to use a mortgage broker instead of a direct lender. The sub-prime lending guidelines are constricted. Therefore, if you do not have good credit, finding a broker that will provide you with a loan will probably be quite difficult. There are several direct lenders who are less affected by the market.

Mortgage Fees

All lenders are required to charge fees for the processing of the loan. However, in order for brokers to make a profit, they are required to charge more money as they are the individuals who are actually doing the work that you would otherwise do if you were using a direct lender. This means that you will be paying the fees for the broker as well as the fees for the lender.

The number of people who use direct lenders and mortgage brokers are about equal and depends primarily on the person’s needs and situation. There are several benefits to using either one or the other. However, because the brokers serve as intermediaries, it may be more time-consuming and costly.

Information that is Required by Either the Lender or the Broker

The information that is required usually includes:

• Personal information
• Asset information
• Credit information
• Income information
• Property information
• Selecting the type of mortgage

The first piece of information that is required is the type of property which you are looking to purchase. For example, it is imperative that they are aware of whether you are buying a condo, a single family house, or a townhouse. You will also need to inform them whether the home will be used as a rental property, a vacation home, or a primary residence. They will also need the address.

Next, the lender will ask you how much money you will need to borrow and how much the house costs. The lenders will then ask about the down payment you will make as well as your financial information so that they can determine that you actually have the money required to put a down payment on the home.

The income information that you provide to the lender will largely affect whether you are given the mortgage for your new home. The lender will ask for proof of your income including any salary and commission information along with any bonuses that you receive, retirement plans, and any other information regarding other properties and automobiles you possess. Ask the lender or broker what information that you will need to provide so that you make sure that you cover all the bases.

About the author: Tim Ryan helps buyers find great deals on Naples real estate. To learn more about buying in Naples, FL visit his site where you can search for thousnads of Naples homes for sale.

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Smart Moves For Logan Utah Home Buyers

by Lisa Udy on July 23, 2010

Buying a Logan Utah home is a huge step no matter what period of your life you’re in. Being smart about your purchase is essential to protecting the financial future of you and your family. Take these steps to ensure your investment goes as planned.

Save A Large Down Payment

Gone are the days of buying a home with 100% financing, no job history, and low credit. Some loans, such as Utah housing and rural housing (USDA), will still allow you to buy without a down payment, but they are more difficult to qualify for, have higher interest rates, and are only for low income families.

Other than those loans, you will have to put some money down on your purchase. A larger down payment (10-20%) will allow you to qualify for more options when loan shopping, and will allow you to get a lower interest rate.

Even half a percentage point lower on your interest rate can save you thousands of dollars over the life of your mortgage. Besides, the payments will be lower, and you will have a little equity stored up in-case you need to sell your home sooner than you’d like.

One of the reasons so many home owners are currently underwater on their homes right now is because they put no money down. Their homes lost value causing them to owe more than the homes worth.

Also, many people bought homes using adjustable rate mortgages, and as the rates adjusted, their payments went up more than they could afford. Your money down will allow you to stay away from those types of loans.

Don’t Buy A Home You Can’t Afford

As a general rule of thumb, your house payment shouldn’t be more than 33% of your monthly income. I usually tell my buyers payments under 33% of their incomes allows them to save the money they need to keep their homes full of the things they need to live. It’s no fun to be house broke.

Besides, if you buy the cheaper home and pay a little extra on every payment, you can pay it off much sooner. After which, you can sell it and buy that bigger home when your family grows, and use the equity you built up for a larger down payment, allowing you to get a better monthly payment.

One thing many home buyers don’t think about when purchasing a Logan UT home is the cost of maintenance. If you’re home payment is so large that you can’t afford to take care of a bad furnace a couple years down the road, you shouldn’t buy that home.

As a homeowner, if you don’t maintain your home, you will lose value, and reselling it will be a much more difficult process. Can you imagine what a poorly maintained home would look like after 10 years?

To see, go over to my Logan UT homes for sale website and search homes priced under $130,000. You’ll notice the vast difference of price to square footage between the homes that have been well maintained vs. homes that need a lot of work. Repairing a home is a lot of money, and keeping it maintained will keep your costs down.

Get Pre-Qualified Before You Go Home Searching

Knowing exactly how much you can afford and knowing how much you qualify for are two different things. First, talk to a Logan UT mortgage professional to find out what you qualify for. Many times, my buyers are surprised by what they can or can’t qualify for, especially today, as lenders and loan programs are changing the qualification specifications on a daily basis.

Once you know amount you can qualify for, figure out how much you actually want to borrow. You may qualify for a $200,000 home, but the payment might make you uncomfortable. You don’t have to buy a $200,000 home just because you qualify for it.

Tell your Realtor what you feel comfortable paying and they should show you homes in that price range. The last thing you want to do is go house shopping, fall in love with a home, and later on figure out you can’t afford it.

After seeing a home you love but can’t afford, every other house you see won’t stack up, which will leave you frustrated. Getting your financing in order before you even look at a home will save you, and your Realtor, time and money.

Being A Smart Home Buyer

Being a smart home buyer will make your home search a whole lot more fun, and when the time comes, you will have the confidence and ability to put an offer on the Logan Utah home you always wanted.

We all know a home’s value may not always go up. So by taking these steps to secure a great home, with a nice down payment, and great financing. You can be one of the few who bought a home in a great buyer’s market on your own terms. It’s a great feeling to know you bought smart and can sell smart when you need to. Happy home buying!

Related Posts:

The Complete Guide To Buying A Home

5 Reasons To Buy And Not To Buy A Home In 2010

Key Market Indicators Help Time Real Estate Markets

How Much Home Can You Afford Without Being House Broke?

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