Category: Mortgage (Page 46 of 60)

Keys to a Fast Mortgage Approval – Have These 6 Items Ready

August 1, 2017 / Tom Bonetto

Before you get set to make that offer on your dream home, it’s vitally important to be qualified for that mortgage, if you will be financing the property.

With that in mind, there are a half-dozen necessary documents that you will need to prove your reliability to a mortgage lender.

Here are the documents you’ll want to make sure you have when the time comes for pre-qualification and approval.

Recent Paystubs

It can be more difficult to gain mortgage approval if you have inconsistent work history or are self-employed, so you’ll need to show 2 months of recent pay stubs to prove consistent employment.

Copy of Driver’s License and Social Security Card

Our underwriters will need to verify your identity against your credit report and other items.

Previous Tax Returns and/or W2s

In order to ensure the earnings information you’ve provided to the lender is correct, you’ll most likely need to provide your federal tax returns for the two years prior to your mortgage application. In addition, you may also be required to provide your W-2s as backup documentation.

Bank Statements

In order to identify where the down payment or closing costs are coming from, you’ll need to present bank or savings statements to show that you have the money necessary for the transaction. If you are planning on receiving a gift from parents or relatives for that down payment, you’ll need a letter to show where the funds are coming from and to show that the funds are, in fact, a gift.

Investment and Asset Statements

It’s certainly a good sign to the lender if you have a healthy balance in your checking and savings accounts, but you’ll also need to provide any statements for mutual funds and other investments. While they may not be necessary to prove financial soundness, they will help with approval if you have a lot of money saved.

A List Of Your Debts

This process might not be the most fun, but your lender will also want to know about any outstanding debts like auto loans, credit card payments or student loans. The majority will show on the credit report obtained by the lender, but don’t fail to tell your loan officer about all debt related issues.

The mortgage application and approval process isn’t easy, but it isn’t rocket science, either! Having the appropriate documentation and being upfront about your debts, you may be able to speed up the timeframe. If you’re currently looking at your mortgage options, don’t hesitate to contact me to find out more. It would be my pleasure to help!

Cash Out Refinances for Student Loans

July 31, 2017 / Tom Bonetto

Mortgage giant Fannie Mae has once again re-tooled some of their guidelines. This time it is regarding student loans and how they are treated in debt-to-income ratios for qualifying for a mortgage. This really is fantastic news.

It gets even better for homeowners who have student loans, as Fannie Mae is offering improved pricing on cash out refinances for paying off student loans.

The Big News

Effective immediately, Fannie Mae will waive the “loan level price adjustments” (LLPA), or rate increase adjustment, on cash-out refinances when student loan are being paid off. LLPA’s are intended to adjust for the “risk based” pricing and they directly impact mortgage rates.

Here’s a practical example: a cash out refinance with a loan to value of 80% and credit scores of 740 or higher, has a price adjustment of 0.875 points! This is typically factored into the cost of the rate. (you can click here for Fannie Mae’s LLPA matrix).

The lower your credit score, the higher the adjustment is because of the anticipated higher risk for the loan. Get this….if student loans are being paid off, the extra cost of the LLPA is waived!

The Specifics

In order to qualify for the new special student loan cash-out refinance, the following must take place:

at least one student loan must be paid off;
loan proceeds must be paid directly to the student loan servicers at closing;
only student loans that the borrower (home owner) is personally obligated are eligible;
student loan must be paid off in full with the proceeds from the refi. No partial payments are allowed;
property may not be listed for sale at the time of the transaction.

Homes in the California and Arizona area have appreciated at a solid rate over the last few years. Now may be a great opportunity to eliminate student loan debts…especially with the preferred lower mortgage rate! Please do contact me for more regarding this program.

What is a Home Appraisal and Why is it Important?

July 24, 2017 / Tom Bonetto

If you’re buying a home and your offer has been accepted, one of the next steps is verifying the value of the home. As part of that process, your lender orders a home appraisal.

It gives you a trained professional’s point of view on the fair market value of the home to make sure it’s in line with the purchase price.

What Is a Home Appraisal?

A home appraisal is an unbiased report on the worth of a house in the fair market, performed by a trained and licensed individual.

Appraisals are needed to ensure the homebuyer, the home seller and the mortgage lender receive the accurate and true value of the real estate in question.

In most residential property transactions you are able to choose your real estate agent and your lender. However, in today’s regulatory world, you don’t get to pick your appraiser. Instead the appraiser must be chosen by the lender to provide a level of independence from the buyer and seller.

In order to ensure that appraisals are impartial, the Appraisal Independence Requirements, or AIR, prohibits a lender’s loan production staff from having direct contact with—or influence upon—any appraisers.

To reduce the risk of violating AIR, lenders now hire appraisers via appraisal management companies. These companies work with many residential appraisers in order to cover a more diverse housing market and to reduce the risk of improper influence.

Who orders and pays for the appraisal?

Your lender orders the appraisal to be performed by a licensed appraiser through an appraisal management company. However, you, the borrower, are typically required to pay for it – outside of escrow. Usually with a credit card.

The cost appears on the Closing Disclosure as part of your closing costs.

What determines a home’s value?

When estimating a property’s value, appraisers consider:

Comparable properties that have sold recently, especially those that are similar in size and location to the home you are buying. Their sale prices are usually the most important factor.
General condition and age of the home
Location of the home, including views or other remarkable features
Size and features of the home and property, including the number of bedrooms and baths
Major structural improvements such as additions and remodeled rooms
Features and amenities such as swimming pools and wood flooring

What’s the difference between an appraisal and an inspection?

An appraiser does not necessarily look for potential defects in the home. That’s the responsibility of the home inspector. You hire an inspector directly if you are purchasing a home and want an itemized report of potential repairs or problems with the property.

The appraiser instead focuses on whether the home’s agreed-upon purchase price is in line with what it is worth.

How Can You Improve Your Home Appraisal Process?

As a buyer, you can make sure that the home appraisal process protects you by taking a careful look at the Final Report of Value. If there are portions of it that you don’t agree with, such as findings that differ from your inspection report, or inaccurate comps, be sure to speak up.

If there is a significant difference between the agreed selling price and the appraised value of the home, your bank may choose not to fund the mortgage and the deal could fall through. Buyers can typically solve this problem by bringing additional “cash to close,” which is essentially increasing your down payment by the difference between the sales price and the appraisal value, or negotiating the sales price.

As a home seller, you will also want to be ready for the appraisal process. Itemize any recent improvements that you have made to the home and complete any planned do-it-yourself projects before the appraisal. Don’t be afraid to highlight the upgrades and positive features of your home to the appraiser.

In Closing

Appraisals are a very important part of obtaining a mortgage loan. I’d be more than happy to help you learn more about the other steps involved in buying a home so you can navigate them with confidence. Please contact me to find out more about this important step in the home buying process.

Improve Your FICO Score by 100 Points Quickly

July 18, 2017 / Tom Bonetto

How To Increase Your Credit Score Fast

You can raise your FICO and reduce what you pay for a mortgage, automobiles, and credit cards. And it’s not that hard to do.

Gina Pogol at The Mortgage Reports has put together a step-by-step guide to get your credit score up and start paying less for everything you finance. Below is a sampling from her article that you might find very useful….

How Much Can You Save?

Per Pogol and MyFICO.com, improving your score by 100 points can save you thousands per year – although that’s not enough to make you rich overnight, it certainly is enough to improve your life.

The average home purchase mortgage, according to the Mortgage Bankers Association (MBA), was $324,844 in May 2017.

MyFICO says that you’d pay 5.15 percent with a 620 credit score, and 3.78 percent with a 720 credit score.

The difference in payment for an average loan amount and a 30-year fixed mortgage is $264 a month. And that’s really just the start.

The First Step – Assessment

Your first task, when raising your FICO, is to see what you’re up against.

You can get a copy of your credit report from all three major bureaus for free at the government’s site, annualcreditreport.com. Pay the small charge to obtain your FICO scores as well.

Your “representative” score is the middle score of the three. So if your scores are 598, 602 and 623, your representative score is 602. Note that there are many variations on the FICO score, and not every lender uses the same one.

What’s The Reason For Your Low Scores?

Your plan of action depends on the reasons for your low FICO score.

If the cause is inaccurate information, you can clean up your report yourself by contacting all three credit bureaus, Trans Union, Experian, and Equifax, and the company reporting inaccurately, providing proof that you paid on time.

This can take weeks to fix. If you have a mortgage in process, your lender can bring in a rapid re-scoring company to expedite the process at a reasonable cost.

There is no guarantee that correcting information will raise your score by any specific amount.

Know The Codes

If your report is accurate, your scores have “reason codes” you can use to determine the biggest factors bringing your score down. The most common, according to Equifax, include:

Serious delinquency.
Public record or collection filed.
Time since delinquency is too recent or unknown.
Level of delinquency on accounts is too high.
Amount owed on accounts is too high.
Ratio of balances to credit limits on revolving accounts is too high.
Length of time accounts have been established is too short.
Too many accounts with balances.

Note that the most often-used word in those codes is “delinquency.” If your credit history looks like a rap sheet, littered with late payments, charge-offs and judgments, you’ll need to put some time between your mistakes and your next loan application.

You might even want to reach out to an expert for credit repair.

You won’t be able to start the process until you bring your accounts current. However, your creditors may be able to help you out.

Make Sure You Pay On Time

Next, get a system to ensure on-time payment. It takes about six months of on-time repayment to make a meaningful difference in your credit score, so start as soon as possible.

Set your accounts up on autopay from a checking account. Choose a payment date that follow your paydays and make sure money is there to cover your debts.

If you can’t afford your payments, enlist the help of a non-profit credit counseling service. They can possibly lower your monthly payments, bring accounts current, get penalties waived and help you toward debt-free status.

This may be called a debt-management plan, or DMP. A DMP is not a debt settlement plan, which you should probably avoid.

Some experts recommend that you consider bankruptcy if a DMP won’t pay off your unsecured debts within five years.

High Balances on Existing Debt

The other main category of reason codes concerns the amount of debt you’re carrying. FICO looks at the amount of credit you have with the amount used (utilization ratio), the balances and number of accounts with balances.

Credit bureaus look for spending patterns that are unsustainable. For instance, if every month you spend more than you earn, your payments increase each month, leaving even less disposable income.

Eventually, you have no more available credit and you can’t make your payments.

Fortunately, fixing this changes your score almost immediately. If you have savings to pay off your accounts, consider using it. It’s a safe bet that the interest you’re getting is a lot less than what your creditors are charging.

If you don’t have savings to cover this, you may be able to improve your score by paying off your credit card balances with a personal loan or home equity loan. Lowering your revolving (credit card) account balances drops the utilization ratio.

Don’t do this unless you are 100 percent confident that you will not use your credit cards until the new loan is repaid.

If you have more questions regarding your FICO score and getting into a home loan, please contact me, as it would be my privilege to help!

How Much Do Extra Mortgage Payments Save You?

July 8, 2017 / Tom Bonetto

Paying extra on your home loan can make good financial sense.

It really means a guaranteed return on investment, which isn’t the case for other investments like stocks or mutual funds.

If your current mortgage interest rate is, say, at five percent, you are guaranteed to “earn” five percent — by saving interest — on any amount of principal you pay off.

Borrower Options

Most conventional, FHA, and VA loans allow the borrower to make extra payments (known in the industry as prepayments), without any penalty or fee.

To be clear, making extra mortgage payments might not be the right strategy for everyone, however.

Homeowners often refinance instead, into a 15- or even ten-year mortgage. This drastically cuts their interest rate and slices years off their mortgage.

For shorter-term loans, sometime is the 3% range, make refinancing a very attractive proposition.

Deciding to refinance or make additional payments takes some examination, but the right choice could help you save thousands in interest and get you closer to a mortgage-free life.

Find out more here, from The Mortgage Reports

Big Savings

By making extra principal only payments, the savings could be huge.

For example, a 30-year fixed-rate mortgage at 4% and $200,000 borrowed would require about $140,000 in interest over the life of the loan.

But if you were to prepay just an additional $100 a month toward principal, you would save about $30,000 in interest, and pay off that loan five years quicker.

Here’s another prepayment benefit: unlike the capital gains and dividends earned on other types of investments like stocks and bonds, the savings earned from prepayments are not taxable.

In many cases, taking a longer-term loan at 30-years might be a great option – especially if you pay off the principal faster. You get the flexibility of a smaller monthly payment, but can pay the mortgage down quicker, if you choose.

I’d be more than happy to sit down and talk with you about mortgage term related options. Contact me here for more!