A Five-Step Formula for the Perfect Loan File

Most people don’t try because they think getting a loan is too difficult.  While getting a mortgage loan isn’t the easiest thing in the world, it really is not difficult.  It takes documentation!  Even if it seems like we are asking for way too much information, understand early in the process that we are asking you for the documents and explanations of what is required for a mortgage loan today.   Meeting these documentation requirements is probably the biggest frustration for home buyers today.  This process will be so much easier if you just get the requested documentation to your mortgage lender when asked.  The real goal for mortgage lenders today is not the perfect loan, but the perfect loan file.

Here is a Five-Step Formula for that Perfect Loan File:

1. Meet Credit Underwriting Guidelines
   It is no longer necessary to have a high credit score, a large down payment, and stable employment to guarantee loan approval. Now, it is more important to have a borrower profile that meets credit underwriting guidelines. Your whole financial life needs to be supported, checked and re-checked, and reviewed once more before closing.  By doing this, the lender decreases its chances that the loan will be subject to repurchase.
   
2. Prepare for Processors and Underwriters
   You need to prepare for processing (the person who gathers the documents) and underwriting (the person who actually approves your loan).  This begins with your mortgage lender, who can match your financial qualifications to an appropriate mortgage deal and its underwriting guidelines. Your mortgage lender determines whether the information you provide can be validated and documented.  Be aware, however, that an underwriter can request additional documentation if the circumstances don’t quite fit the underwriting guidelines. If your mortgage lender puts your loan file together accurately and securely, your loan will close uneventfully.
   
3. Get Pre-Approved
   To start, you must begin with mortgage pre-approval.  This is accomplished through a phone interview by a mortgage representative. Be prepared to disclose everything: what you do for a living, your salary, how long you have been employed, and other such queries. Every dollar you own has to be accounted for, documented, and explained, including gifts from relatives and non-profit grants.
   
4. Report Your Homeownership History
   If you were previously a homeowner, or if you own a home now and plan to keep it as a rental investment, there are specific underwriting guidelines for you. Full disclosure of your credit and homeownership history can help stamp out future mortgage approval problems. Buyers with a short sale history or a recent foreclosure or a bankruptcy may have to wait a few years before they are eligible to take out another mortgage. Full authenticity of your mortgage history will prevent those dreaded calls by your mortgage lender who notifies you that there is a problem.
   
5. Have Proof
   Really, it all comes down to proof. Documents need to be specific and authentic. If your lender asks for a specific document, give it to them. Do not send summaries, and do not complain when your lender asks for something more specific. Give them the specific documents they request “because they said so.”

Questions?  Call or email us anytime!

Ask Sue!

Question:

Just because I qualify for a certain amount of money for a loan, should I really go that high?

Answer:

Absolutely not.  It is very important that you consider all aspects of owning a home, i.e. utilities, maintenance, etc, and also any other living expenses you may have.  These are factors your Lender does not consider for you when approving you for a loan.  But they are real costs that will affect your monthly budget.  Be sure to budget a comfortable payment well within your means, instead of the maximum you are qualified for.

If you have a mortgage question, ask away!  Either:

1. E-mail asksue@pcMortgageAdvisor.com
   
   ~ OR ~
   
2. Leave a comment here on the blog below
   -- If you include your e-mail address we will respond to you directly.

Check back next Friday for more mortgage answers!

Your personal mortgage advisor for life!

Ask Sue!

Friday is here, so here is our featured mortgage question answered:

Question:

Do I really need a real estate agent to help me purchase a new home?

Answer:

While working with a Realtor is NOT a requirement, it is many times in your best interest to work with a licensed Realtor.  Keep in mind that in most cases, the Seller is paying the Realtor fee.  You, as the buyer, are not.  The Realtor knows how to negotiate in your best interest without bringing emotions into the transaction.

If you have a mortgage question, ask away!  Either:

1. E-mail asksue@pcMortgageAdvisor.com
   
   ~ OR ~
2. Leave a comment here on the blog below
   -- If you include your e-mail address we will respond to you directly.

Check back next Friday for more mortgage answers!

Your personal mortgage advisor for life!

10 Do's and Don'ts of Credit

The following are some helpful tips to avoid the credit mistakes that many borrowers make during the loan process:

1. DON’T APPLY FOR NEW CREDIT OF ANY KIND. Including those “You have been pre-approved” credit card invitations that you receive in the mail. Every time you have your credit pulled by a potential creditor or lender, you lose points from your credit score immediately. Depending on the elements in your current credit report, you could lose anywhere from 2-50 points for one hard inquiry.
2. DON’T PAY OFF COLLECTIONS OR CHARGE OFFS during the loan process. Paying collections will decrease the credit score immediately due to the date of last activity becoming recent. If you want to pay off old accounts, do it through escrow and make sure that 1) you validate that the debt is yours, and 2) that the creditor agrees to give you a letter of deletion.
3. DON’T CLOSE CREDIT CARD ACCOUNTS. If you close a credit card account, it will appear to the FICO that your debt ratio has gone up. Also, closing a card will affect other factors in the score such as length of credit history. If you have to close a credit card account, do it after closing, and make sure it is a more recent account.
4. DON’T MAX OUT OR OVER CHARGE ON YOUR CREDIT CARD ACCOUNTS. This is the fastest way to bring your score down 50-100 points immediately. Try to keep your credit card balances below 30% of their available limit at all times during the loan process. If you decide to pay down balances, do it across the board. Meaning, make an extra payment on all of your cards at the same time.
5. DON’T CONSOLIDATE YOUR DEBT ONTO 1 OR 2 CREDIT CARDS. It seems like it would be the smart thing to do, however, when you consolidate all of your debt onto one card, it appears that you are maxed out on that card, and the system will penalize you as mentioned above in 4. If you want to save money on credit card interest rates, wait until after closing.
6. DON’T DO ANYTHING THAT WILL CAUSE A RED FLAG TO BE RAISED BY THE SCORING SYSTEM. This would include adding new accounts, co-signing on a loan, changing your name or address with the bureaus. The less activity on your reports during the loan process, the better.
7. DO JOIN A CREDIT WATCH PROGRAM. If you join a credit watch program, you can check your reports weekly, or even daily depending on the program you select. (When you pull your own reports, you don’t get dinged for a hard inquiry.) This way, if something does show up on your reports that has caused your score to go down, you will know it immediately, and you may be able to take care of the problem before closing.
8. DO STAY CURRENT ON EXISTING ACCOUNTS, like your mortgage and car payments. One 30-day late can cost you anywhere from 30-75 points.
9. DO CONTINUE TO USE YOUR CREDIT AS NORMAL. Red Flags are raised easily with the scoring system. If it appears that you are changing your pattern, it will raise a red flag, and your score could go down.
10. DO CALL YOUR MORTGAGE ADVISOR if you receive something in the mail from a creditor or collection agency that you believe may affect your score during the loan process. Your Mortgage Advisor may be able to supply you with the resources you need to stop any derogatory reporting to the bureaus

For more information about Credit, visit my website: pcmortgageadvisor.com/credit101.htm

If you ever have any questions, please call us!  We would be glad to help you!  (520) 744-2292

Your Personal Consultant for Mortgage Advice!

A Little About Fairway Independent Mortgage Corp.

With “National Strength and Hometown Service,” Fairway Independent Mortgage Corporation is the 20th largest mortgage bank in the nation with branches in 45 states - 8 of them right here in Southern Arizona.  In the highly competitive world of mortgage financing, Fairway is a company where customer service is a way of life.  Because of Fairway's size and loan volume, we are able to provide the best price and loan product to suit every customer's needs.  While the best mortgage rate may be the initial reason for choosing a lender, quick turn-around and service are what really set Fairway apart.  Start to finish, everything is done in-house.  With over 50 underwriters on staff, underwriting turn-times rarely exceed 48 hours.  Add in table funding and preliminary loan documents to title upon conditional loan approval and you can see how Fairway has mastered the recipe for success.

Contact me today to see how Fairway and I can help you with your mortgage needs!

Your personal mortgage advisor for life!

Have a Mortgage Question? Ask Sue!

Do you have questions regarding mortgages?

We would love to answer them!

Send us your questions and see them featured here with our answers every Friday.  We will also be contacting you personally by email with our answer to your question.

To ask your questions, either:

1. Email asksue@pcMortgageAdvisor.com
   -- Write "Mortgage Question" in the subject line.
   
   
   ~ OR ~
   
   
2. Leave a comment right here on the blog
   -- Make sure to include your email address so we can respond to your question directly as well.

And you can always give us a call at our office to discuss your mortgage needs!

Question:  

What does it REALLY cost to buy (own) a home?  

Answer:  

In addition to the monthly mortgage payment of principal, interest, property taxes homeowners insurance and mortgage insurance (if applicable), owning a home has other expenses.  Here is a list of expenses to consider when owning a home.  Keep in mind that this list is NOT all-inclusive.

1. Homeowner Association Dues
2. Utilities (electric, gas, water)
3. Internet and Cable TV
4. Telephone
5. Garbage and Pest Control
6. Maintenance 

For more information on buying a home, please give us a call or send us an email!

Five Foreclosure Buying Myths for 2013

Here are 5 myths about buying foreclosures updated for 2013:

1. Myth: There is going to be a flood of new foreclosures to the market.
   
   Reality: This is a rumor that has been around for a few years and has consistently been discredited. But since the Federal Government reached a settlement over the robo-signing scandal in 2012, there has been renewed speculation that we will see another flood of REO properties overwhelm the market. Don’t count on it! Banks have learned that they can affect local housing prices by controlling their inventory. They have found that to realize higher prices, they need to release homes in measured amounts. They have also learned to mitigate their losses by agreeing to short sales instead of foreclosing. So we should see more accepted short sales in 2013.
   
   
2. Myth: You can go directly to a bank to buy a foreclosure.
   
   Reality: Wouldn’t it great if we could go directly to the bank once we found out about a house going into foreclosure, and buy it from the bank before it hits the market?  The truth is that banks have a system – first they offer properties on the courthouse steps. If it doesn’t sell, they will assign the property to an asset manager who then hires local real estate agents to put them on the market in the local Multiple Listing Service.  So, if you want an REO, pay cash at the courthouse steps.
   
   
3. Myth: You can get a killer deal by submitting lowball offers on foreclosures.
   
   Reality: This particular myth just will not go away. The real truth is that banks want REOs sold quickly, in 30 days or less, so they typically appear on the market priced a bit under comparable properties. If the property sells quickly, great. If it doesn’t, the bank will usually lower the price after about 30 days. Lowball offers are ignored and really are a waste of everyone’s time and effort. Even if you have cash, your lowball offer usually won’t be accepted. It is possible, however, to get a deal on a foreclosure that has been sitting on the market for a while, like over 90 days.  But keep in mind that there are reasons why a property has not sold quickly in our market.
   
   
4. Myth: You cannot use foreclosures when doing an appraisal.
   
   Reality: Or short sales, for that matter. This used to be the case, but nowadays, in many neighborhoods, all there are is foreclosures and short sales. So these distressed sales represent the actual value of homes in the area and MUST be used to appraise the properties. Times have certainly changed and the way neighborhoods are valued have changed as well.
   
   
5. Myth: Foreclosures are only affecting the bottom end of the market.
   
   Reality: This used to be true. However, while foreclosure rates on the lower end of the market have actually decreased, they are increasing on the upper end. According to Daren Blomquist, vice president of RealtyTrac, the market share of foreclosed homes under $1 million is shrinking, but foreclosures among properties valued over $1 million are rising – up 115% since 2007. And foreclosures on properties valued upwards of $2 million have increased by 273%.

As you can see, there is a lot of misinformation out there.  You need a knowledgeable Realtor to help guide you through the home buying process.  If you need help finding a qualified Realtor, please feel free to give me a call!

Your personal mortgage advisor for life!