Tag Archives: Mortgage Tips

5 Steps Towards a Better Credit Score You Can Take Today

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5 Steps Towards a Better Credit Score You Can Take TodayWhen it comes to finding the best mortgage, your credit score is a major determinant as to the kinds of rates and conditions you can get. Lenders quite understandably want to manage their risk. But for a number of potential homeowners, these practices and policies can be a barrier to home ownership.

The good news? If your credit score isn’t great, you can easily improve it and get better lending terms. Here are five steps you can take right now to give your credit a boost.

Get Your Annual Credit Report And Dispute Errors

Simply disputing errors on your credit report is one of the easiest ways to give your score a boost. The FTC says that 1 in every 5 Americans has errors on their credit report that have an impact on their score. By simply disputing errors on your credit report, you can give your score a small boost almost overnight.

Miss A Few Payments? Talk To Your Lender

If you’ve missed a payment and it’s more than 30 days past due, chances are your lender has already reported the missed payment. Once a missed payment is on your credit report, the fastest way to remove it is to talk to your lender. Get a written and signed agreement that if you pay the overdue balance, they’ll report the account as “paid in full.”

Ask For A Credit Increase

Your credit utilization ratio – the amount of credit you’ve used compared to the total amount available to you – makes up 30% of your FICO score. In general, experts say that using more than 30% of your available credit can harm your score. If you can’t immediately pay down your debt below that 30% threshold, one great way to improve your credit utilization ratio is to ask for a credit limit increase.

Get A Co-Signer To Help

Having someone with good credit co-sign your lending agreement is a great way to improve your credit. When you get a co-signer for your credit card or car loan, the better quality credit line may help boost your score. Just make sure you stay on top of payments – otherwise both you and the co-signer will see your credit scores fall.

Keep Good Debts On Your Report

While it is important to review your credit report and have any negative items removed, you’ll want to ensure that any positive entries – debts you’ve paid in full – stay on the report. When your credit report shows debts as paid in full, your score increases because it shows that you’re a responsible borrower.

Improving your credit score doesn’t have to take years. These five strategies can help you to boost your credit and qualify for better mortgage loan terms. Contact your local mortgage professional to learn more.

3 Tips and Tricks to Make Mortgage Pre-Qualification Easy

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3 Tips and Tricks to Make Mortgage Pre-qualification EasyIf you’re planning to buy a home, you should know that the mortgage pre-qualification process is the first in a series of steps that eventually lead to home ownership. A pre-qualification is different from a pre-approval – the pre-qualification meeting is simply you and your lender hashing out how much you can afford to spend on a property. But once you’ve been pre-qualified, it makes the mortgage process easier.

So how can you make the pre-qualification quick and painless so you can get on with your house hunt? Here’s what you need to know.

Get Your Debts In Order

One of the major questions during the pre-qualification meeting will be your credit history and debt payments. Your lender will use your social security number to look up your credit history and determine how your income and current monthly debt payments stack up. If you have a high amount of debt, you may want to do everything you can to pay it down to qualify for your dream home. However, it’s important to go over the details with a trusted mortgage professional for specific guidance here.

Chart Your Income And PITI

Your lender will use a specific ratio (the PITI to income ratio) to determine how much it’s willing to lend you in order to buy a home – and that’s why, if you calculate this ratio beforehand, you’ll know what to expect going into the meeting. PITI stands for “Principal and Interest, including Taxes and Insurance”.  It refers to the four components of a standard mortgage payment. Your PITI ratio, often referred to as the “front end ratio” then, shows how much of your income goes toward your monthly mortgage payment.

To calculate your front end ratio, simply divide your gross monthly income by your monthly mortgage payment (your PITI amounts plus your mortgage insurance). Most lenders will want to see a PITI to income ratio that is under 28%.

Build Up Your Savings Account

It’s important that you have some savings over time that can be used for a down payment, closing costs and reserves.  Although there are some very low down payment options, having a decent balance in your savings account always helps you qualify easier for a mortgage.  

Closing costs are the fees associated with getting a mortgage loan.  These can also be negotiated to be paid by the seller if you choose.  But once again, they aren’t required to make that concession, so it would be wise to move toward saving for those expenses. 

Reserves are the amounts that will need to be collected to cover your taxes, insurance and mortgage insurance on the property.  These will fund the “reserve” in your escrow account so you’ll always have enough to cover those expenses as they come due throughout the year.  Your mortgage company keeps this money for you and pays the expenses on time as well.

Pre-qualifying for a mortgage can seem like a daunting process, but it’s actually quite simple. Your mortgage advisor can help you to understand what goes into a pre-qualification. Contact us today to learn more about how pre-qualifications work and how you can get started.

It Isn’t Always a Clear Road after Pre-approval: 4 Reasons Why Your Mortgage May Be Denied

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It Isn't Always a Clear Road after Pre-approval: 4 Reasons Why Your Mortgage May Be DeniedSo you’ve been pre-approved for a mortgage – great! You’ve taken the first step toward becoming a homeowner. But before you start picking out china patterns, you’ll want to keep in mind that a pre-approval isn’t the same thing as a mortgage agreement. There’s still no guarantee that you’ll actually get a mortgage.

But why would a lender deny a mortgage after pre-approving a borrower? Here’s what you need to know.

Sudden Changes In Income Or Employment History

A number of mortgages will require borrowers to have consistent employment for a certain length of time. If you apply for an FHA mortgage, for instance, you’ll be obligated to have an employment history dating back at least two years. Any gaps in your employment history will require a written explanation that your underwriter will need to approve.

If you switch career fields while in the process of buying a home and it has a significant impact on your income, your lender may deny your mortgage.

Credit Mismanagement After Pre-Approval

Lenders like to see consistency – so if your credit score suddenly drops after you’ve been pre-approved for a mortgage, it sends up a red flag. Even something as minor as a late payment on a cell phone bill could affect your credit score just enough to cause your lender to deny you. Pay extra attention to your bills throughout the home buying process, and make sure nothing slips past you.

Taking On More Debt In The Interim

A number of buyers will take on more debt after they’ve been pre-approved for a mortgage. Although it may be tempting to get a new car to go with your new house, getting a car loan will change your debt-to-income ratio and cause your lender to think twice about how responsible you are. If you’re in the process of buying a home, hold off on any other major purchases until after the deal has closed.

An Unsatisfactory Bank Appraisal

Sometimes, your mortgage can be denied for reasons that have nothing to do with you. Some lenders will only issue a mortgage if the property value of the house in question is appraised above a certain level. Others will deny a mortgage if the home requires roof repairs, electrical work, or a new heating system.

You’ll want to check with your lender to see what home conditions could be cause for denying your mortgage application.

Getting approved for a mortgage is a convoluted process at best, but a mortgage advisor can help you to navigate the approval process with ease. Contact your local mortgage professional for more tips on how to ensure you get approved.

Video: What Is “Prime”?

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What Is “Prime”?

The Prime Lending Rate – sometimes just called “Prime”  – is the interest rate that banks charge each other for overnight loans. Some consumer rates – like ARMs – are set in relation to Prime.

In the US, Prime is affected by the Federal Reserve lending rate to banks; historically, Prime is about 3 percent above the Fed rate.

The video shows  an example.

  • The Federal Reserve loans to Bank A at 1%
  • Bank A loans to Bank B at 4%
  • Both banks – A & B – will recalculate variable-rate loans like ARMs on that 4% Prime figure.

ARM rates are frequently defined as “% above Prime” – that gap is usually called the “margin” or “spread.” Just remember those 3 layers in Prime: Federal Reserve Bank A Bank B And finally, YOUR rate.

What Is Prime

Who Is Exempt From The VA Funding Fee?

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Who is NOT required to pay the VA funding fee?

This video could save some veterans thousands. VA loan applicants pay a funding fee – as of 2014, 2.15% of the total loan amount – which can be thousands of dollars. Some veterans and spouses are eligible for exemption.

Broadly speaking, veterans who received disability benefits – current or former and who are NOT currently in debt to the government may be exempt from the funding fee. Some spouses may qualify as well.

The key thing to understand is, exemption from the funding fee is NOT automatic! Borrowers must certify their veteran status, government debt, benefits and active service state on VA Form 26-8937.

It’s important to tell your mortgage company that they need to submit this form EARLY in your home-buying process – if they just look up your records without submitting the form the VA will not begin the review and approval process and your home purchase could be delayed by weeks. Who Is Exempt From The VA Funding Fee

Video: What Steps Need To Be Taken To Secure A Loan

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What Steps Need To Be Taken To Secure A Loan

You’ll see some pictures in this video to help you remember later, but the first step in securing a loan is to complete a loan application.

To do so, you’ll need the following information.

  • Pay stubs for the past 2-3 months.
  • W-2 forms for the past 2 years.
  • Information on long-term debts.
  • Recent bank statements tax returns for the past 2 years.
  • Proof of any other income.
  • Address and description of the property you wish to buy.
  • A sales contract on the home you want to buy.

During the application process, the lender will order a report on your credit history and a professional appraisal of the property you want to purchase. The application process typically takes between 1-6 weeks.

What Steps Need To Be Taken To Secure A Loan

Video: Are There Special Mortgages For First-Time Homebuyers?

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Yes. Like the video shows, lenders now offer several affordable mortgage options which can help first-time homebuyers overcome obstacles that made purchasing a home difficult in the past.

Lenders may now be able to help borrowers who don’t have a lot of money saved for the down payment and closing costs, have no or a poor credit history, have quite a bit of long-term debt, or who have experienced income irregularities.

Video-FirstTimeMortgages

What Factors Affect Mortgage Payments?

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As you can see in the video below, the amount of the down payment the size of the mortgage loan, the interest rate the length of the repayment term and payment schedule will all affect the size of your mortgage payment. In bullets:

  • Down payment
  • Loan size
  • Interest rate – fixed or adjustable
  • Repayment term – how long
  • Payment schedule – how often

all affect the size of your payment.

How Are Pre-Qualifying And Pre-Approval Different?

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How Are Pre-Qualifying And Pre-Approval Different? Watch this video and it’ll make sense.

Pre-qualification is an informal way to see how much you maybe able to borrow. You can be ‘pre-qualified’ over the phone with no paperwork by telling a lender your income, your long-term debts and how large a down payment you can afford. Without any obligation, this helps you arrive at a ballpark figure of the amount you may have available to spend on a house.

Pre-approval is a lender’s actual commitment to lend to you. It involves assembling financial records and going through a preliminary approval process. Pre-approval gives you a definite idea of what you can afford and shows sellers that you are serious about buying.

Buying a New Home? Follow These Three Tips to Ensure a Stress-Free Transaction

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Buying or Selling Your Home? Follow These Three Tips to Ensure a Stress-free Real Estate TransactionBuying real estate and or taking out a home loan is a significant milestone in life. Frequently, it means that a new phase is starting, whether it’s a new job, a new relationship, or moving to a new area. However, when the most basic steps are missed, this transition can be fraught with stress and disaster. To ensure a smooth transaction, home buyers should be sure to mind the following tips.

#1: Always Be Honest

Honesty and clear communication need to be a two-way street. Home buyers expect their mortgage professional to be honest with them, and likewise it is always necessary for a home buyer to be honest with their mortgage professional.

Hiding details or covering up potential problems by either party will only cause more issues when everything comes to light. When important information is withheld, it’s possible for delays to occur, costs to rise, or even for the deal to fall through.

It’s much better to disclose all necessary information upfront so the situation can be handled appropriately. An expert mortgage professional will be able to guide home buyers through any problems and issues to a workable solution.

#2: Hire A Professional Team

Buying real estate and taking out a mortgage is not an easy process, so it’s never a good idea to try to proceed without a professional who can be trusted.

Far too often, people let friends or family members represent them in real estate transactions. In these cases, it’s likely for feelings to be hurt, relationships to be damaged, and trust to be compromised.

Rather, it’s recommended for home buyers to use a real estate agent and mortgage professional they do not have a close personal relationship with. That way, they can stand confident that their agent or mortgage professional is looking out for their best interests, and nothing else.

#3: Understand The Market

Far too often, home buyers fail to understand the market and their finincial situation.

Failing to identify this crucial information will waste time for buyer and mortgage professional. However, this is where a real estate agent or mortgage professional comes in: he or she will know the market inside out and be able to offer valuable counsel for all financial situations.

Home buyers should call their mortgage professional if at any time they have questions about taking out a mortgage; this professional is the key to a smooth real estate purchase.