Thursday, June 14, 2018

Getting to the Bottom of 6 Common Mortgage Myths

What six mortgage myths should all homebuyers be aware of? Today we will be covering these common misconceptions.

Today we are going to go over some of the worst pieces of mortgage advice that homebuyers actually believe.

1. Do not bother getting pre-approved. People hear this all the time, but it is absolutely false. Even if you know that your credit is good and that you are financially capable of a home purchase, buyers in today’s market cannot afford to submit an offer without a pre-approval letter. Additionally, getting pre-approved ahead of time will save you from falling in love with a home you can’t afford.

2. You must get a mortgage from the bank you already use. It is a common assumption that if you have an account with a bank, you have to work with that same bank when getting a mortgage. Actually, this is not a good idea in most cases. A better idea is to work with a mortgage professional. These experts have one job: to get you to the closing table.

3. You shouldn’t bother reading the fine print. There is a lot of terminology used in mortgage contracts that might be unfamiliar to most buyers. But this does not mean you should not pay attention to what you sign. If you are not confident reading through all of these documents alone, working with a qualified professional to dissect each page can help you better understand what exactly you’re agreeing to.

A mortgage professional should instead advise buyers to borrow based on what is feasible, not what is possible.

4. You should always go with the lowest interest rate. It may sound strange, but sometimes a higher rate is better. It is more important to look at all aspects of the loan and choose a program that works best for you as a whole, rather than focusing too intently on the interest rate alone.

5. First-time homebuyers are guaranteed free money. Mortgage professionals do love helping first-time buyers, but not all new homebuyers can or will qualify for certain programs. Also, not all first-time homebuyer programs are all that great to begin with. Sometimes a lower monthly payment means more expenses at the closing table, so it is important to consider all aspects of a deal before making a decision.

6. You should borrow as much as you are approved for. The issue with this way of thinking is that what a person qualifies for is not the same as what they can afford. A mortgage professional should instead advise buyers to borrow based on what is feasible, not what is possible.

If you have any other questions or would like more information, feel free to give us a call or send us an email. We look forward to hearing from you soon.

Thursday, April 19, 2018

Questions Your Loan Estimate Will Answer for You

When applying for a mortgage, your loan estimate will answer eight critical 
questions you’ll likely have.

Your loan estimate is the most important document you’ll see when applying for a mortgage, and here are the eight critical questions it will answer for you once you receive it:

1. How much am I borrowing?
Your loan estimate will break down exactly what your loan amount is. On the same page, it will also tell you what your cash-to-close amount is and your total closing costs.

2. What’s my interest rate? This document explains, clear as day, what your interest rate is. Remember, the rate your lender gives you is locked in unless you’re getting a “floating” rate.

3. What’s my monthly payment?
Your loan estimate also breaks down your principal and interest payments (i.e., what gets paid to the bank), your tax and insurance payments (what gets paid out to the third parties), and any mortgage insurance or HOA dues. Your HOA dues will not be included in your monthly mortgage payment, and your loan estimate will notify you of this.

4. Is my rate fixed or adjustable? Back in the day, the old loan estimate form wouldn’t say if your rate was fixed or adjustable, but the current one does. In my opinion, you should always get a fixed-rate loan unless you’re an investor.

Your loan estimate should be within $300 to $400 or your actual cash-to-close amount.

5. What are the costs of taking out a mortgage? There are many misconceptions floating around regarding this subject, but there are really only a couple fees you need to shop for. When you’re looking at your fee, your lender will show you what their origination charges are, along with their application, underwriting fees, and other things of that nature. These fees typically range from 0.5% to 2% of the overall cost. The best deals will normally only require a one-time-only fee of $1,500-or-less up front. Make sure when you’re looking at your fees, you’re looking at the overall fees, because the rest of the fees are estimates for third parties which your lender has no control over.

6. Am I being charged points? This question can be construed a couple different ways. Some banks charge an origination point, but you can also pay points that are considered discount points. This means you know you’ll be in your house for a long time and you want to pay an additional fee to reduce your interest rate now to reduce your payment over the life of your loan and save money.

7. How much am I paying for an appraisal? Most appraisals will be paid for in advance by the borrower, and a typical appraisal fee costs between $500 and $700. In most cases, your lender will ask for your credit card in advance so that when it’s time for the appraisal, they can just charge you directly for it.

8. How much money do I need to bring to the closing? The total out-of-pocket dollar amount you need to pay will be broken down on the second page of your estimate document. In most cases, your loan estimate should be within $300 to $400 or your actual cash-to-close amount.

If you have any further questions about loan estimates or you have any other mortgage needs, don’t hesitate to contact us. We’d be glad to help you.

Thursday, April 5, 2018

The 7 Fears That Keep People From Getting a Mortgage

There are seven main fears that keep people from getting a mortgage, but you shouldn’t have any of these fears because there’s no truth behind them.

Most people think they’ll never qualify for a mortgage for a variety of reasons. You shouldn’t be afraid though, because the odds are in your favor—according to Fannie Mae, more than seven out of 10 mortgage applicants get financing and find the house they want. 

However, there are still seven main fears that keep people from applying for a mortgage:

1. I don’t have enough money for a down payment. There’s a huge misconception out there that you have to put down 20% for your down payment. That’s not true. You can get a loan that requires a down payment of just 3.5%, and there are loans out there—USDA loans and VA loans, for example—that require no down payment at all. 

2. I have too much debt. Generally speaking, if you have a lot of debt, that probably means you make a lot of money. It’s not about how much debt you have, though. It’s about what your overall debt-to-income ratio is. In any case, this can be overcome because a lot of people I work with can afford more in terms of their housing payment than their rent and still end up qualifying. In most cases, you’ll be able to qualify for what you want.

3. I don’t make enough money. The money you make doesn’t determine whether you can get a loan or not. That just determines how much house you can buy. If you can find a house to rent for the amount you’re paying, you can find a house to own for the same amount. 

4. My credit score is too low. The average FICO score for a conventional loan is 751, and the average American buyer has a credit score of 685. However, don’t think this is the score you need to qualify. If you’re applying for an FHA loan, for example, you can have a credit score as low as 580. You can qualify for a VA loan with a score of 600. For a conventional loan, you can get approved with a score of 620. 

Don’t worry about having too much debt—there are ways to get you qualified.

5. I don’t want to go through the whole loan process only to get denied at the end. No one wants to fall in love with a house only to find out that they don’t qualify for it, but you can avoid this disappoint by getting fully pre-approved by a lender. To do this, they’ll review your credit, income, and assets. Once you get a full approval, 99 times out of 100, you won’t have any problems and you’ll be able to shop with confidence. Remember to be honest with your lender and provide them with all of your documents up front. 

6. What if I get a loan and get stuck with a horrible interest rate? There really aren’t very many subprime mortgages out there. A lot of lenders are still loaning on the exact same products. Many lenders will offer interest rates within 0.25% of each other, and that margin won’t affect your loan that much. It’s more important to look for a lender who offers the best service—someone who will be with you during the process and after the process. That’s the kind of service my team and me pride ourselves on. 

7. Buying a home costs more than renting. Your landlord’s PITI (principal, interest, taxes, and insurance) is almost always lower than what you’re paying them in rent. The difference between those two things is their profit. When you become a homeowner, that profit becomes yours as you build equity over the long term. It’s also worth mentioning that rental rates have skyrocketed recently. Every year you can face a rent increase, but you won’t face the same thing with a fixed-rate mortgage. 

If you have any other mortgage questions for me or there’s anything else I can assist you with, don’t hesitate to reach out to me. I’d love to help you.

Wednesday, March 7, 2018

Can You Still Get a Loan With Gaps in Your Employment History?

Having gaps in your employment history won’t prevent you from getting a loan as long as you’re open and honest about them.

When you apply for a mortgage, you have to provide employment history. Within the three qualifiers of getting a loan, credit, income, and assets, employment history falls under the income category. 

Most people don’t realize that you have to have a minimum employment history of 24 months to qualify for a loan, and one of the common things we see with people qualifying for a loan is gaps in their employment history. Gaps in your employment history won’t automatically disqualify you from getting a loan, though, and there are ways you can address this problem. 

First, there are legitimate reasons why someone would have gaps in their employment history (maternity leave, school, a medical issue, etc.), and that’s OK as long as you explain what your reason may be to your lender in advance and document it on your loan application. This kind of thing will usually pass through underwriting without issue. I once had a client who had a 10-year employment gap because he’d been incarcerated during that time, and we still managed to secure him a mortgage loan. 

Without the proper information, we can’t help you buy the home you want.

Having frequent employment gaps or job changes is another issue that doesn’t necessarily have to stop you from getting a loan as long as it’s documented properly. You should try to limit any job changes when you’re in the middle of a transaction, though. A lender will look at a borrower with frequent job changes and question things like whether they’re working in the same field and if their income is consistent, so if you can prove those things and verify your correct places of employment, they can order the proper documentation you need to qualify. 

When you do change jobs, most lenders require that you’re at your current job at least 30 days, so that’s important too. They sometimes make exceptions, but if you’re in the middle of signing a contract for your new job, that could delay your loan closing. 

Keep in mind, the reasons we have to address any employment gaps to verify your income are is because of the laws and rules already in place; we have to prove that you can make a mortgage payment. It’s our job to help you get qualified as long as it’s within the rules, so be honest and open with your lender about every job you’ve ever had. Without the proper information, we can’t help you buy the home you want. 

If you have more questions about this topic or there’s anything else I can help you with, don’t hesitate to reach out to me. I’d love to help you.