Tips on Credit to Help Buyers
Do Not Change Jobs: Changing jobs before or during the loan process can create a real problem in qualifying for a loan, particularly if that job is in a different line of work or at a lower rate of pay.
Do Not Switch Banks or Move Money Around: It’s difficult to verify funds if money is moved, so leave everything as is until your loan is closed.
Do Not Pay Off Bills: Your loan officer will advise you if it is necessary to pay off bills to help you qualify. He/she will show you how to pay off bills so there is sufficient proof of payment.
Do Not Make Any Major Purchases: Large purchases have major impact on qualification. If you add a payment, or increase a payment it will decrease your qualification amount. Stay away from purchases such as cars, boats, RV’s, furniture, etc. The large payment obligation may prelude you from qualifying.
ALWAYS BE AWARE OF YOUR CREDIT BALANCES
Shopping for your Lender
An important aspect of your purchase is choosing a good Lender. You need to check reputations and references. Comparing interest rates and loan packages is also advised.
- Interest rates change daily.
- There are different loan programs for different financial situations. If a Lender does not know much about you, he/she might quote you a rate from a program that does not fit your situation.
- Interest rates quoted over the phone are not usually locked rates.
Note: Make appointments with different lenders and compare.
Reasons for Pre-Qualification
- You will know the exact amount for which you can qualify. This allows you to view Properties you are certain you can afford.
- Your monthly payment will be set (approximately), so you can figure it in to your budget.
- You will receive closing cost and down payment figures.
- You and your lender can select the best loan program for your particular situation.
- If you are a first time buyer, you might qualify for a special loan package that would allow you to get more home for your money.
Your next step – Pre-Approval
The goal is for you to not just become pre-qualified, but pre-approved. Prequalification is a lender ratio analysis of your income and debts that approximates the maximum loan amount for which you are eligible. You become pre-approved when you complete a loan application, pay for a credit report to be run, and the underwriter of the loan approves you for a loan based on the information provided (contingent upon subsequent items such as the appraisal).
To help you determine your property price range, most lenders and agents recommend getting pre-qualified. Pre-qualification makes sense before beginning your property search.
Types of Loans
Listed below are general explanations of different loans. For additional explanations please contact a lender.
|Adjustable Rate Mortgage|
Mortgage loans under which the interest rate is periodically adjusted to more closely coincide with current rates. The amount and times are agreed to at the inception of the loan.
Loan that has a reduced rate and payment for a specific period of time. This is done by paying interest up front.
|Balloon Payment Loan|
A loan that is typically amortized over 30 years, but is due and payable at the end of a certain term. May be extended or rolled over to a different loan. EXAMPLE: 30 years due in 5 years.
|Community Homebuyer’s Program|
A first time buyer program with a fixed rate and low down payment, commonly 3-5%. There are no cash reserve requirements and qualifying ratios are easier. Loan is subject to buyer meeting all income standards and completing a four hour training course.
A mortgage not obtained under a government insured program, secured by investors.
Loans insured by the Federal Housing Administration under H.U.D. They offer low down payments and easier qualifying.
|Fixed Rate Loan|
A loan with one interest rate that remains constant through the life of the loan.
|Graduated Payment Mortgage|
A loan that starts payments lower than standard fixed rate loans, and increases the payment by a predetermined amount each year.
A loan that may be taken over from the seller by the buyer. The buyer would pay the seller for his/her equity and assume the payments, avoiding qualification. These loans are complicated and rare. Please contact your lender with any questions.
A loan that can be up to 100%+, secured by the government for people who have served in the armed forces. Customarily, the buyer pays no costs of the purchase. The extra fees that the seller has to pay are usually added on to the sales price.
Official notification of loan approval is made.
Documents are drawn
Loan documents are completed and sent to the title company. The borrowers come in for final signatures.
Lender reviews the loan package for completeness and accuracy. Funds are then transferred.
Recording of documents
Title Company records the Deed and Deed of Trust at the County Recorder’s Office and the escrow process is officially closed.
The borrower meets with a lender who through the course of the interview gathers pertinent information and identifies any additional documentation that will be needed by the lender to obtain loan approval.
The lender will obtain all documents required, including but not limited to, credit report, appraisal on property, verification of employment, mortgage or rent obligations, funds to close, landlord ratings, preliminary title report, etc.
The loan package is assembled and submitted to the selected underwriter for approval.
Supporting documentation is obtained as required. Lenders follow-up on any issues or problems that need resolution, and request any additional information or documentation that may be required.