First Home Buyer Tips They Don’t Teach You in School

You don’t learn about how to buy a house in school. They don’t teach you  what you need to apply for a mortgage, what kind of loan you’ll need, or what PMI is (it’s called private mortgage insurance)

And let’s not mention that you need to shop around for the best deal — or you can hire somebody to do that for you.

So here are some First Home Buyer Tips to help guide you through the home buying experience. 

♦  Have a conversation with your significant other about what you’re millenial 2looking for, what you need and what you can do without. Standing in the living room during an open house with your real estate agent isn’t the time to argue about wanting three bedrooms instead of four.
♦  Know your financial records. What’s your credit score? How much Low Monthly Paymentsoutstanding debt do you have? What monthly payment can you afford?
How much money did you make last year? You’re going to need to know all of this information. Have all of your paperwork ready to go.
♦  Know your limit — if you can’t afford a $450,000 house, don’t go look at $450,000 houses.
♦  Shop around. There are dozens of real estate agents, attorneys, and mortgage officers so don’t settle. These people are going to work for you, their job is to make you happy. You’re going to be on the phone and meeting with them frequently, so make sure you like who you’re working with.
♦  Do your research. When you do decide on a real estate agent, he or she isGet Pre-Approved going to want to know what your price range is, what neighborhoods you’re interested in, if you want to be close to schools, expressways, public transportation, etc. Know what you want and Get Pre-Approved! 

♦ This is the big one you’ll be glad someone told you about.
Don’t get too attached to a house, because if it the deal doesn’t work out, for whatever reason, you’re going to be devastated.
♦  Be willing to negotiate, it’s a big part of the game.
♦  This goes hand-in-hand with negotiating: put your foot down and don’t let anyone take advantage of you. If the seller is asking for way more than you’re told the house is worth, or if they’re not willing to fix something that is broken or at least negotiate the cost, you have to be ready to walk open houseaway. There will be more houses, trust me.
♦  Don’t just purchase a house by its listing. Go look at EVERYTHING. A lot of houses look different in person than they do on-line, good and bad.

First Home BuyerI have the belief that anyone that deserves to own a home should be able to do so. The American Dream is still attainable for those buyers who do their homework, establish a game plan and work hard to achieve that goal. I’m here to help.


Credit Dos and Don’ts During the Mortgage Process

A good credit score is critical when it comes to obtaining the best interest rates and terms on a mortgage. Here are some Credit Dos and Don’ts when looking for a mortgage.

  Do Stay Current on All Existing Accounts. One 30 day notice can hurt you.

­   Do Continue to Use Your Existing Credit As Normal. If it appears your are changing your pattern, it will raise a red flag and your score could go down.

 Don’t Apply for New Credit. Every time you have your credit report pulled by a potential creditor or lender, you can lose ponts on your credit score. This includes co-signing for a loan.

 Don’t Pay-Off Old Collection Accounts or Charge-Offs. Talk to your loan officer first. Yes, you are liable for these debts, but now might not be the time. If you must pay-off these old debts, do it through the closing process of your mortgage. Be sure to request a “letter of deletion” from the creditor.

 Don’t Close Credit Card Accounts. When you close an inactive credit card account, it may appear that your debt ratio has gone up. Closing a card will affect other factors in the score, including credit history.

 Don’t Max Out or Over Charge Credit Card Accounts. Don’t make any large purchases. Keep your credit card balances at 30% of your credit limit before and during the application process. If you do pay down balances, do it equally across the board.

 Don’t Consolidate Your Debt. When you combine all your balances into one or two credit cards, it will appear that you have “maxed out” on that card and you will be penalized.

­   Do Call Your Loan Officer. Talk to you Loan Officer before taking any action that may possibly affect your credit score.

What is A Mortgage Rate Lock?

At some point during the mortgage application process, the borrower must exercise their agreement with the lender to lock in the rate for their final mortgage. 

rate lockWhat is a Mortgage Rate Lock?
A Mortgage Rate Lock protects the borrower from the risk that interest rates will increase during the rate lock period. It guarantees that the lender will offer the borrower a specific combination of interest rate, points or interest rate credit at the closing of their loan.
If market rates rise after the rate is locked, the borrower will still get the lower rate, to the lender’s detriment. But there’s a downside: If rates fall after the rate is locked, the borrower might not be able to take advantage of that opportunity. 

When Can a Mortgage Rate be Locked?
Buyers typically must wait until a seller has accepted their purchase offer for a specific property before they can lock in an interest rate for their mortgage. In addition, the lender must have certain information about the borrower and the details about the transaction before a rate can be locked. This includes receipt of all signed legal disclosures, the borrower’s credit score, anticipated loan-to-value ratio, property type and the borrower’s signed intent to proceed with the transaction. Until all pieces of the puzzle are in place, the lender can not accurately commit to any final interest rate, cost and terms.

How Long Can a Mortgage Rate be Floated?
When a mortgage rate is locked depends on the borrower’s tolerance for risk. The purchase and sales contract dictates when the loan must close. The borrower may opt to let the final mortgage rate ride or “float” with the market until they feel they can get the best deal. Of course they run the risk that the market will turn in their time period and rates will rise from current conditions.
A good mortgage loan officer may have, in good faith, projected a final mortgage rate for processing purposes, but the mortgage application cannot be approved until the final rate has been locked in.
In today’s mortgage processing environment, a mortgage rate could be floated until about 14 days prior to the prescribed closing date. This should give the lender to deliver the final disclosures, the underwriter time for a final review of the application and to issue a “clear to close,” and time for the closing deportment time to deliver closing package to the closing agent.

Should You Choose a Longer Rate Lock Period?
Borrowers are well advised to choose a 45 to 60 day rate lock period to ensure they can get the agreed upon rate even if there is a delay in processing their mortgage application. If a loan fails to close within the rate lock period, the borrower will charged the higher of the original lock and the current interest rate. If rates are higher, the borrower may be offered the opportunity to extend the original rate at a cost of 0.25 points for each 7 day period. (A point equals 1.00% of the base loan amount)

How Much Does a Rate Lock cost?
lockMost lenders will not charge for a Mortgage Rate Lock.  . But a rate lock isn’t free. Rather, a longer rate lock typically involves a higher interest rate, which is more expensive for the borrower. The interest rate or “pricing” difference between a 15-day rate lock and 60-day rate lock might be as little as one-eighth or could be as much as half of a percentage point. The longer period protects the lender from potential market deterioration. The shorter the rate lock period, the more risk the borrower is taking on, but they should be getting a better price.”

No Mortgage Loan officer is an interest guru. But he does understand the lender’s commitment to you and will do his best to honor the rate lock obligation. However, the complexity of your application and issues like: failure to provide additional documentation in a timely manner, appraisal concerns, possible title problems all add time to the process.

There is rarely a reason not to lock a loan as soon as you can. Interest rates change daily, sometimes hourly. To protect yourself against the volatility of the marketplace, it’s a good idea to lock your rate once you are satisfied with the rate. The reason some buyers dislike loan locks is because they want to grind every dime out of a transaction that is humanely possible. Just remember that if the rate was acceptable when it was locked three weeks ago, a drop of an 1/8 of a point or so isn’t the end of the world. You don’t need to be that kind of borrower to get a good deal.

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The Mortgage Underwriter and Your Mortgage Application

The Mortgage Underwriter is one of the most important people in the Mortgage Application process. Without the approval of an underwriter, no lender will fund or close on a loan. It is the job of the underwriter to ensure a borrower can repay the loan they are applying for and to determine that the sales price is supported by the appraisal value before granting lending approval.

app approvedApproval of a Mortgage Application is based on several things: income, credit history, debt ratios, and savings.
♦  A borrower must be able to prove a stable income and job history needed to repay the loan.
♦  They also must have a credit history that reflects a stable record of repaying obligations and a balanced debt to income ratio. Additionally, a borrower’s monthly debt must fall within acceptable limits determined by the loan product’s guidelines.
♦  Lastly the borrower must show that they have enough money saved for their down payment and closing costs. It is also smart to have a few months of mortgage payments saved away in case of an emergency.

It is the Mortgage Underwriter’s job to make sure all of these factors meet particular loan guidelines. The underwriter will evaluate all of this information and sometimes ask for more information or explanations from a borrower to clarify and support their decision on the  Mortgage Application.

Mortgage Underwriters also review the Appraisal to make sure it is accurate and thorough, and that the home is truly worth at least the purchase price. A property’s appraised value is also reviewed by the underwriter to ensure the value supports the amount of the loan you are requesting. A good underwriter will also take into consideration the condition of the property, the location of the property and how it may be affected by natural disasters, such as floods.

An Mortgage Underwriter does his or her best to evaluate the potential risk involved when lending to a borrower. In January 2014, the Consumer Financial Protection Bureau enacted stricter requirements on some mortgages, which included tougher background checks into your bank account, spending and employment history.  If an underwriter does not follow all guidelines and makes a poor lending decision and the loan defaults, meaning a borrower stops making payments on their mortgage, it could result in a hefty cost to the lender.

The Mortgage Underwriter has final approval and final responsibility for the Mortgage Loan.  They must make important decisions based on the facts presented in the file, their own judgments and similar application experiences. The Mortgage Underwriter has to take a calculated risk and do his/her best to determine if a file adheres to not just the letter but the intent of the loan program guidelines. It is not an easy job.

CT Mortgage Broker With A Unique Advantage

I’m a Mortgage Broker with a Unique Advantage in the world of Mortgage Finance. The relationships I have formed with trusted lenders over the years means that I can get loans done quicker and closed on time when others may not be able to accomplish anything at all.
The majority of the dozen or so lenders I work with have Account Reps. When these Reps are really good at what they do, and you do a lot of volume with them, they will do everything possible to keep me and my clients happy. The #1 reason … the happier I am with their service, the more loans I will send their way… and the more money they will make!

Every Mortgage Account Rep is always vying for more business. The reason is obvious… they cooperationwant to make more money. Over time, true relationships are formed. I have done business with many of these reps for years and strong bonds have been formed. I know them professionally and they know how much I love my dog.

I wouldn’t try to count the cups of coffee I’ve shared with these Reps. Their message is always the same …When I have a problem with one of my loans, call them ASAP so they can expedite the problem. They always know…if they fix issues, I can deliver on my promise to my clients and that means more future business they’ve earned and deserve.

What Does This Mean To You?
 The relationships that I’ve formed over my 40 years of Mortgage Approvedfinancial service experience means that loans can get done quicker and, when glitches arise, loans can still get closed when the big box banks turn their customers out to the wolves.   

What To Do and What Not To Do After Mortgage Pre-Approval

Congratulations & Thank You! You’ve listened to my advice! You’ve decided to “Get Off the Fence” and buy your new Get Pre-Approvedhome. You’ve also done the smart thing and got Pre-Approval for a mortgage. Now you can shop for that home confident in knowing how much of a mortgage you can afford and how big a house you can buy.Shopping for a New Home
Now the “Fun” begins! It will be an anxious time deciding on the right house. But don’t forget, the mortgage application process is not over. Just because you have Pre-Approval, doesn’t mean you can sit back, wait for the appraisal, and expect the transaction to close easily. You still have to take action!

Here’s a list of What To Do and What Not To Do After Pre-Approval to be concerned about as you move through the next stages of your mortgage process:
Don’t Apply for New Credit. Don’t Make any Major Purchases do not enter
Lenders are required to pull a new credit report just before final approval of the loan. Don’t be tempted to take advantage of the great sale for furniture or lawn mowers you’ll need in the new house. Any new credit inquiry will have to be examined; any new debt could affect your debt: income ratio (DTI); and worse, adversely change your credit score that could affect the final rate and terms of your loan.
Even if you pay cash, you may have less money for the down payment and closing costs and/or less money cash reserves (monies left over in your bank accounts to cover future ability to make future mortgage payments)
Don’t Change Jobs. Tell Your Loan Officer About Any Pending Change in Employment Status.
new job
If a great opportunity comes along for career advancement after you’ve been Pre-approved, try to postpone the first day on the job until after your mortgage closes. Lenders are concerned about job stability and are well aware that most new jobs have a 30-90 day probationary period. Lenders might require you to provide a month’s worth of pay stubs to prove your new salary. They also might be concerned if the new job is not in the same line of work..
Conversely, you might be notified of a pending lay-off or worse. Even though you have provided the lender with current pay stubs, lenders will call your employer to verify current employment and the prospect of continued employment.
Be sure to discuss these situations with your loan officer as either one will require more paperwork and could delay your closing.
Do Not Pay-Off All Your Debt. Do Not Pay-Off Old Collection Accounts.
Consult with your loan officer before you do anything that will impact your credit score. Paying off credit card debt money managementwill reduce your cash reserves and could hurt you if the account is closed.
Paying off old collection debt will often signal to the credit reporting agencies that there is new activity on an a bad account and could actually lower your credit score.
Do Not Co-Sign for Any Loans
After 40 years of lending experience; I know that borrowers assume co-signing for your co-signchild’s car loan won’t affect their credit. “It’s not my loan, my kid pays for it.” The loan is considered a debt for both signers and will show up on the mortgage applicant’s credit report and will be included in their DTI. If the child has been late on any payments, the delinquent history will negatively impact the applicant’s credit score.
Do Not Ignore the Lender’s Request for Additional Information.
If your lender needs further clarification of the statements you made in your application, follow directions and do it ASAP! You must be prepared to provide all documents as soon as they are requested, because any delay on your part could delay closing and cost you money.
Do Not Move Any Money Around. Keep a Paper Trail of All Deposits.
Family Finances
To eliminate potential fraud, most loans require a thorough paper trail to document the source of all funds. It is okay to start packing up the dishes, but not your bank records.
Do Not start consolidating your bank accounts, do not make any large deposits to your accounts; Do Not make any large withdrawals either. If you do, document everything!. Keep copies of the check, the deposit ticket and the bank statements that were involved in the transaction.
Most important, Do Not Accept Any Gift Funds until your loan officer tells you how. There are very specific rules and paperwork that must be followed to document the use of gift funds for your down payment and closing costs
Do Not Continue Shopping For a Better Deal With Other Lenders.
This is not meant to be self-serving. Do your shopping for mortgage programs, rates, payments referraland closing costs first. Once you decide on a mortgage professional you trust, stick with them (unless you become completely dissatisfied with their service for some reason).
This is very important because all credit pulls when shopping for a mortgage will not hurt your credit as long as they are done within a 14 day period. If you continue to allow other mortgage companies to look at your credit and/or apply with other companies this can negatively affect your credit scores. I recall several situations where borrowers continued to shop for a better deal and it hurt their credit enough to disqualify them for the program they were Pre-Approved for, forced them to accept a higher interest rate and scramble to find additional monies for closing costs.
Do Stay Current on All Existing Accounts
Make sure you pay all your current obligations and you don’t have any overdrafts on any account. Overdrafts are a sign of “fiscal irresponsibility” and can kill an application quicker than many other factors.
Do Not stop paying your current mortgage, Do Not allow any utility or telephone bill to become collection accounts.
Remember, a Pre-approval is just a snapshot in time. Finding a new home may take awhile. So as time goes by, the lender will require more recent bank statements; and they will pull a new credit report just prior to closing. You want to stay as close to the original snapshot as possible.
Do Line Up an Attorney, and Insurance Agent and a Home Inspector
These professionals play an important role in your home buying experience. The attorney to review your Purchase Contract, defend your interests in the buying process, and represent your at the closing. You’ll need an insurance agent to provide you with home owners insurance; and a home inspector to make sure the property is in good physical shape.
Do Tell your Mortgage Broker and Your Attorney About Any Changes in the Purchase Contract and/or Statements Made in The Application
Situations may arise where the buyer and seller change the terms and conditions of the original agreement. Seller concessions, higher/lower sales price, closing date are some that come to mind. Any change to the LTV or the DTI will require re-submission of the loan documents and could delay the closing at additional expense.Similarly, let your loan officer and attorney know about any change in marital status or name change. This will help you avoid problems with the final closing documents and/or title problems.
Do Understand That Mortgage Pre-Approval is Not a Commitment to Lend.
A Mortgage Pre-Approval Letter can only be issued by an underwriter. The credit report that was pulled and all the documents you supplied form the basis of the snapshot of your financial situation at one moment in the process. It is typically issued with the caveat that it is subject to “receipt of a satisfactory appraisal of the property” and “final review of the complete application file” by the underwriter.
As the mortgage process evolves, borrowers are encouraged to stay as close to the original snapshot as possible.
Bottom Line.First Home Buyer
You chose your mortgage professional because you trust him. If you have questions about what to do or not to do throughout the mortgage process, do not hesitate to give him a call. Be honest and upfront with your concerns; ask questions if you don’t understand something; and keep in touch after application all the way through closing to guarantee a smooth hassle free transaction.