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HOW DO I SELECT THE BEST LENDER?
If a friend or family member has recently completed a refinance or home purchase, always ask how their transaction was handled. If they were pleased, you should give extra consideration to their lender. While Realtors will usually refrain from "recommending" anyone, they can usually tell you which companies have performed well in the past. Because of the large number of lenders they have experience with, they can be an excellent source of referrals. Go to the lender's office and interview the loan officer or manager. Although we are always busy, it is refreshing when a purchaser or potential client takes an interest in how we handle our business. Your initial impression is usually right. Be sure you are comfortable with the answers you are receiving to the questions you ask. If you visit with a loan officer on the phone or in person and are confused, it is best to keep interviewing until you find someone who can communicate with you about the details of your transaction. Be cautious about selecting a lender who has the "lowest rate in town." Most lenders will vary only slightly from day to day in the interest rates they offer. Sometimes you get exactly what you pay for. Take all of the extra time you need to shop for your lender. You will be up-close and personal with these people for quite some time.
SHOULD WE BE PRE-QUALIFIED BEFORE OUR HOUSE HUNT?
Yes! It is actually easier to buy a home if you know in advance that you will be approved. You can make arrangements with most lenders to be "prequalified" for your purchase. Here's how to do it: Make an appointment to see your lender. Take your financial information, such as bank statements and W-2 forms, as well as paycheck stubs. The mortgage company will run your credit report and review your documents. At that time, you will be able to discuss different financing options and decide which type of loan is best for you. Most lenders will write you a prequalification letter that will let your Realtor, as well as the seller of a property, know that you have been counseled and should be a preferred purchaser. It is a good feeling to have the pressure of worrying about the loan behind you and know that you can concentrate on finding that "dream home."
CAN WE QUALIFY WITH PAST CREDIT PROBLE MS?
We are finding many borrowers that have rearranged their priorities as well as their spending habits. Many have learned valuable lessons from their bad experiences and have come through their "healing time." They are now ready for home ownership. It is important to note that there is a big difference between a person who had a bad credit experience in his or her life and a person who is a bad credit risk. The three main questions in the mind of your lender will be: What happened? What was the cause of your particular problem? What did you do about it? Did you give every effort to try to work things out? Why will it never happen again? Are you back on your feet? Did you make the right changes? The more difficult credit problems, such as bankruptcy and foreclosure, the more important the explanation and the more healing time that would be necessary. We have all had some pretty tough times at one point or another. Do not be afraid or embarrassed about trying to start again. Everyone deserves a second chance!
CAN NON-CITIZENS QUALIFY?
Each loan type has different guidelines for citizens of other countries. FHA requires that the home you are buying in this country is your primary residence. You must have a Social Security card, as well as all of the other documentation required for FHA buyers. Fannie Mae requires that you have permanent resident alien status - a green card. If you are a nonpermanent resident alien, an additional down payment, as well as permission to work in the United States for extended periods through a work visa, is required, and you must owner-occupy the property. Freddie Mac underwrites loans for permanent and nonpermanent residents alike, with no special requirements for the latter. It is important that you make an appointment with your lender before you select a home so that you will be aware of the financing available for your particular situation. The great news is that home ownership is encouraged for everyone in this country.
WHAT ARE SOME QUALIFYING TIPS FOR A RELOCATING BUYER?
The number one tip is - do not pack your personal papers! Mortgage loans are very precise and require documentation furnished by the borrower. I suggest keeping your financial records with you until your new loan closes. You may also be prepared by knowing the exact details of your relocation policy. These are a few of the items your lender will want to know: Will your company buy your present home or issue an equity advance? If your home does not sell, will your company make the payments for you until it does sell? Will your company pay your closing costs on your purchase? If so, will they advance the funds or reimburse you after closing? It is important to keep copies of any advance checks you may receive as well as all documentation on your move. It is much easier to keep extra unused paperwork than to try to find additional paperwork when you are trying to close. Good luck with your move!
CAN A RECENT COLLEGE GRADUATE BUY A HOME?
Most loan types are very interested in financing recent graduates. Many investors will use your college credits in your chosen field to determine your experience. In most cases, they also expect that you have established very little credit. This is acceptable as long as the credit you have established is good. The one loan type that is a little more stringent in guidelines is the Veteran loan. The VA wants you to be through your initial probationary period with your new company and would actually prefer that you had six months on your new job prior to buying your home.
WHAT IS AN 80-10-10?
In mortgage slang it refers to a financing option you could choose to avoid Private Mortgage Insurance (PMI). The 80 refers to an 80 percent first-lien mortgage. The first 10 refers to a 10 percent second-lien mortgage and the second 10 refers to the required down payment of ten percent. One of the advantages of using this type of financing is the income tax deductibility of the interest on the second lien versus the nondeductible insurance payment of PMI. PMI is deductible as of January 1, 2007 with incomes less than $100,000 annually. You will also have the guarantee that the second-lien financing will eventually be gone and you will have only the first lien to pay monthly. Most second liens have a shorter term of 10 to 15 years. To remove PMI payments you must prove that your mortgage is at 75 percent of the total value of the home and this will take some work on your part. This program does require an excellent credit history.
HOW CAN WE BE SURE TO GET THE INTEREST RATE ADVERTISED BY A LENDER?
Home loan interest rates change on a daily basis. They can change more than once a day. When you get a quote, it becomes your rate once you lock in with your selected lender. A lock in is a promise (in writing) to close your loan at a certain interest rate and points. You should have a lock-in agreement with clearly defined terms. These terms include expiration date, interest rate, and points paid by buyer and seller, and they usually include the expectations you should have of your lender as well as those they have of you. Be sure you understand all of the rules involved. It is important that you know about your lender's strength and reputation. The promise offered to you is made more valuable by these two. Once you read this disclosure carefully and agree to the conditions, be sure you have a fully accepted and executed copy for your files. This is your contract with your lender and protects your interest rate.
WHY DO MORTGAGE INTEREST RATES GO UP AND DOWN SO DRAMATICALLY?
Many years ago, savings and loan institutions made the majority of home mortgage loans. They would often set a rate for new home loans for long periods of time - up to a month or so. As the lending industry has evolved, the buying and selling of mortgages has become very sophisticated and there are many different investors making new home mortgage loans. The easiest indicator you can follow in watching the direction of interest rates is the bond market. Although interest rates usually have long periods of decline or increase, there are many days when rates may jump up or down dramatically -just as the bond market can. I call these "hiccups." When rates begin to go higher permanently, it will be (as history has proven) a slow, steady increase. It is the trend you will want to follow. Is the overall trend up or down? Don't let those daily "hiccups" alarm you.
IS THERE ANYTHING WE SHOULD KNOW ABOUT NEW CONSTRUCTION FINANCING?
Your loan will be approved well in advance and you will want to be prepared as your home progresses and you prepare to close. The following is a list of six helpful hints: Be sure you understand and can comply with all of the conditions of your loan approval. Let your lender know of any changes to be made to the house, the sales price or any contract changes. Do not make any changes to your financial position without consulting your lender. It may not be wise to buy a new car! Save copies of all major paperwork that might influence your loan. For example, save copies of any bonus checks you might receive. Notify your lender when you are within 60 days of closing. You will probably be at the building site and in communication with the builder to know this approximate date. It is important to notify your lender so that any updates that are necessary can be accomplished. Use extreme caution concerning setting your closing date and time. If you give notice where you are currently living and must be out by a certain date, it will be very uncomfortable if the home is not complete and will not pass final inspection. Many times buyers get approved for their home loan, begin construction and then forget that the lender will require that the file be updated prior to funding into the permanent loan. When the house is finished, the builder will want his money. He or she probably won't appreciate any delays and your lender will appreciate your advance notice and preparedness.
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