The week ran away from me and I spent 15 minutes trying to remember my password today....
The markets have been friendly to interest rates this week and the trend looks like it should continue. This should help to spring some life in to the SPRING market. Unfortunately as rates come down...gas prices are going up.
Well it is time to get the realtor's to work for and with you. Meet with them and go over what it is you are looking for in a house and let them know what price range you have been pre-approved for. With this information the realtor can start searching for homes based on your constraints. As hoes are found the realtor will set up showings and go with you to them to look at the property.
Once you have a property that you want to buy you will draft a purchase agreement with the realtor. The realtor may suggest a price to offer on the home but you can offer anything that you want and the realtor has an obligation to present it. When you present an offer you will need to put down what they call earnest money. This is usually an amount ranging from $500-$2000 for most homes. This is money that is deposited into an account with the real estate company until closing and it counted towards your down payment. Simply put this is money that is for "good intentions" of buying the home. If for some reason your loan ended up being denied you would get this money back.
When you present an offer on the home you will typically negotiate or counter. What this means is that you may offer one thing and the seller may come back with something different and you may go back and forth. Typical items that are countered are the price of the home, seller paid costs and closing dates.
Once an offer is accepted your realtor will provide the lender with a copy of the purchase agreement. At that time the lender will review the information and discuss interest rates and locking in with you. They will also collect for the appraisal and get that completed as well as ordering the title work.
The title company is also your right to choose. But typically the listing agent of the house you are buying will like to use their company. This is not unusual but you do ave the right to shop for the best deal on this and pick the company that you want. Your lender may even have some suggestions on this.
One thing that you may be doing right after you have your offer accepted; and is highly suggested, is to have a home inspection done on the home. This is different then the appraisal. The appraisal does look for some defects and such but is primarily based on value and an appraiser does not warrant the working condition of a home. The home inspection is very complete and everything is checked. What is nice about this is that you may find something wrong with the house and get the seller to take care of it. A purchase agreement is always contingent on you getting your financing and a home inspection so if it is not good, you have an out.
Well you are now in the home stretch of the process.....and headed for closing....what all happens? we will go over that in our next blog.
I have started following a person that I know that does life coaching and she has some good stuff that she puts out.....so remember that if you wait for the screams you will miss the whispers.
Have and awesome weekend and bring on March!
Friday, February 25, 2011
Friday, February 18, 2011
The Fed...Home Buying and the Realtors part....Why can't winter be over?
Well the Feds came out this week and held things constant. Of course the housing market and employment market are the 2 things that they see as holding our economy back. They do see some modest growth but nothing that they are yet concerned on in regards to inflation. Until we see the labor force improve as well as the housing market.....interest rates should stay low. Home affordability is at a high right now between rates and home prices. Any realtor will tell you that you will get more bang for your buck right now then you ever will.
Speaking if Realtors....if you are going to buy a house you will be wanting one. Realtors are there as an advocate for you in the home buying process. A good realtor will listen to your home need wants and actual needs. By doing this they will hopefully be able to help find a home for you to purchase that is in your price range and meets or exceeds what you are looking for...especially in this market since a $300,000 house is now a $200,000 house.
You want to make sure that you pick your realtor just like you pick your loan officer. They should be willing to listen to you and you should feel comfortable with them Don't just pick a realtor because their name is on the home sign...pick them because you feel you can work with them.
Typical things that a realtor does for you include:
Educating you on the market
Analyze your wants and needs (said that already ..didn't I)
Steer you to homes that fit your criteria
Coordinate the work of other needed professionals
Negotiate on your behalf
Review paperwork and deadlines
Solve potential problems
Here in the Midwest this week we got treated to some really nice weather only to wake up today to the cold once again. It was like a big tease but I think that we all needed a little hint of spring to keep us going. It has been an odd winter everywhere this year even on the west coast.
And right now our neighbors to the east are having issues with collective bargaining and their governor...teachers and students walking out of classrooms......and we thought we had it bad with Jesse Ventura.
Have a great weekend.
Speaking if Realtors....if you are going to buy a house you will be wanting one. Realtors are there as an advocate for you in the home buying process. A good realtor will listen to your home need wants and actual needs. By doing this they will hopefully be able to help find a home for you to purchase that is in your price range and meets or exceeds what you are looking for...especially in this market since a $300,000 house is now a $200,000 house.
You want to make sure that you pick your realtor just like you pick your loan officer. They should be willing to listen to you and you should feel comfortable with them Don't just pick a realtor because their name is on the home sign...pick them because you feel you can work with them.
Typical things that a realtor does for you include:
Educating you on the market
Analyze your wants and needs (said that already ..didn't I)
Steer you to homes that fit your criteria
Coordinate the work of other needed professionals
Negotiate on your behalf
Review paperwork and deadlines
Solve potential problems
Here in the Midwest this week we got treated to some really nice weather only to wake up today to the cold once again. It was like a big tease but I think that we all needed a little hint of spring to keep us going. It has been an odd winter everywhere this year even on the west coast.
And right now our neighbors to the east are having issues with collective bargaining and their governor...teachers and students walking out of classrooms......and we thought we had it bad with Jesse Ventura.
Have a great weekend.
Tuesday, February 15, 2011
Home Buying continued....and The Government and all of its Reform's
If you have been following me on twitter (@omsiguy) or on Facebook (http://www.facebook.com/#!/profile.php?id=1406307637)
then you have seen all of the updates coming out pertaining to the government and everything that it is trying to do.
Their road of reform is continuing in regards to the financial and mortgage market and some of it makes sense but most of it seems like a long shot to accomplish and implement. Bottom line is our government wants to dictate what, where, when, why and how the mortgage industry does what it does. The greed that ran throughout a few years ago was not just in the mortgage industry itself but also with investors and consumers as I have previously mentioned and now they want to jump in after the fact to say how we can conduct our business.
The main problem that I have is that the majority of the people involved do not understand what getting a mortgage is like for the average person or what providing a mortgage can all involve. As a result some of the changes that they want to make could make things increasingly difficult for consumers and for mortgage lenders of all type. What we could end up with is a small monopoly of players in the mortgage business that would and could control the bulk of things including where interest rates are set.
But lets see what all gets done and what constraints are placed....perhaps we will be lending money for mortgages and calling it soiled green.
Back to Home Buying.......
Now that your file is put together and obtained all of the information that is needed as well as picking the correct loan product to go with...it is time for underwriting. The lender would if they had not already updated the file and re ran an automated underwriting decision.
Once this was done the lender would submit the file to an actual underwriter with all of the supporting information so that they can review for approval based on the specific underwriting that a lender has in place. These overlays can be basic to extreme and may cause a loan that is approved on the automated system to not be approved.
After the underwriter has reviewed the file they may have some additional questions or requirements that are needed for the loan. This is not unusual in the lease. The questions or requirements could be very basic or complex dependent on what the file looks like and the constraints of the file and the loan program The lender wants to do the loan...but they want to make sure that they have everything covered to make sure that there are no issues down the road. Every T needs to be crossed. The title, appraisal and the actual credit portion of the file will be looked at closely.
The lender has a fiduciary obligation to protect you and themselves when approving the loan. This is why, especially in the last few years, they have become so much more picky. They are running the risk of buying the loan back from the investor if the file is not perfect in every way.
Now that your loan is approved...lets go buy a house.....(or complete the refinance).
I will start to go over a little of the home buying process and other items in the next blog.
There is so much information that I could share with you in these blog entries so please be sure to ask questions if need be.
Remember if you follow me on twitter or face book I provide a lot more information in relation to the mortgage and real estate industry.
Have a great week!
then you have seen all of the updates coming out pertaining to the government and everything that it is trying to do.
Their road of reform is continuing in regards to the financial and mortgage market and some of it makes sense but most of it seems like a long shot to accomplish and implement. Bottom line is our government wants to dictate what, where, when, why and how the mortgage industry does what it does. The greed that ran throughout a few years ago was not just in the mortgage industry itself but also with investors and consumers as I have previously mentioned and now they want to jump in after the fact to say how we can conduct our business.
The main problem that I have is that the majority of the people involved do not understand what getting a mortgage is like for the average person or what providing a mortgage can all involve. As a result some of the changes that they want to make could make things increasingly difficult for consumers and for mortgage lenders of all type. What we could end up with is a small monopoly of players in the mortgage business that would and could control the bulk of things including where interest rates are set.
But lets see what all gets done and what constraints are placed....perhaps we will be lending money for mortgages and calling it soiled green.
Back to Home Buying.......
Now that your file is put together and obtained all of the information that is needed as well as picking the correct loan product to go with...it is time for underwriting. The lender would if they had not already updated the file and re ran an automated underwriting decision.
Once this was done the lender would submit the file to an actual underwriter with all of the supporting information so that they can review for approval based on the specific underwriting that a lender has in place. These overlays can be basic to extreme and may cause a loan that is approved on the automated system to not be approved.
After the underwriter has reviewed the file they may have some additional questions or requirements that are needed for the loan. This is not unusual in the lease. The questions or requirements could be very basic or complex dependent on what the file looks like and the constraints of the file and the loan program The lender wants to do the loan...but they want to make sure that they have everything covered to make sure that there are no issues down the road. Every T needs to be crossed. The title, appraisal and the actual credit portion of the file will be looked at closely.
The lender has a fiduciary obligation to protect you and themselves when approving the loan. This is why, especially in the last few years, they have become so much more picky. They are running the risk of buying the loan back from the investor if the file is not perfect in every way.
Now that your loan is approved...lets go buy a house.....(or complete the refinance).
I will start to go over a little of the home buying process and other items in the next blog.
There is so much information that I could share with you in these blog entries so please be sure to ask questions if need be.
Remember if you follow me on twitter or face book I provide a lot more information in relation to the mortgage and real estate industry.
Have a great week!
Friday, February 11, 2011
Roller Coaster week for Interest Rates..Still a great time for a Mortgage
This interest rate ride is almost like a roller coaster ride at an amusement park. And the last week of it has not been fun as interest rates have crept up. The scary part is that we have got so spoiled on such low rates that we are forgetting even in the 5 range that rates are still very good. I think that 20 of the 24 years that I have been in the business that rates have been in the 6.5-8% range so why are we being so critical of a 5ish type rate?
These interest rates like to bounce around and what they will do...none of us know for sure. They eventually will go up but when is any ones guess. Expectations are for them to take a drop again this Spring as they typically do just in time for the Spring and Summer markets.
Bottom line thought though is that if you sit around waiting for that perfect interest rate or perfect time top buy...it will go right past you.
That extra 1/8th is not worth holding out for. It is not going to make that big of a difference on your buying power or your savings on the loan. If you have the opportunity to make it happen...do so.
There are a variety of bonds and notes that are traded on Wall Street. Mortgage Backed Securities are the ones that are traded that directly effect interest rates. These are traded just like stocks and can be all over the place in a given day as they are dependent on supply and demand just like a stock. Economic data is the huge drive for rates but other things can affect them as well such as interactions in other countries and even war. Dependent on the mood of Wall Street these bonds can be very volatile in a given day.
They can swing wildly because these traders that are investing in them are dealing with millions and even billions of dollars so even a slight change can affect their return on investment greatly. Because of this it has been said that traders on Wall Street are out of touch with reality....I would have to agree as they really do not see how it affects the average person when they do what they do.
Most people do not have the ability to access how these bonds are traded so some will just watch what the 30 or 10 year treasury bonds do for direction. These bonds can give you an idea but are not a perfect gauge of what mortgage interest rates are doing.
Next week I will get back in to the home buying process and a few other things. Please remember that if you have comments, feedback or even questions....they are all welcome. I have also started using twitter in an effort to get out various information as it pertains the mortgage and real estate market....feel free to follow me @omsiguy.
Have a great Weekend....it is warming up!!!!
These interest rates like to bounce around and what they will do...none of us know for sure. They eventually will go up but when is any ones guess. Expectations are for them to take a drop again this Spring as they typically do just in time for the Spring and Summer markets.
Bottom line thought though is that if you sit around waiting for that perfect interest rate or perfect time top buy...it will go right past you.
That extra 1/8th is not worth holding out for. It is not going to make that big of a difference on your buying power or your savings on the loan. If you have the opportunity to make it happen...do so.
There are a variety of bonds and notes that are traded on Wall Street. Mortgage Backed Securities are the ones that are traded that directly effect interest rates. These are traded just like stocks and can be all over the place in a given day as they are dependent on supply and demand just like a stock. Economic data is the huge drive for rates but other things can affect them as well such as interactions in other countries and even war. Dependent on the mood of Wall Street these bonds can be very volatile in a given day.
They can swing wildly because these traders that are investing in them are dealing with millions and even billions of dollars so even a slight change can affect their return on investment greatly. Because of this it has been said that traders on Wall Street are out of touch with reality....I would have to agree as they really do not see how it affects the average person when they do what they do.
Most people do not have the ability to access how these bonds are traded so some will just watch what the 30 or 10 year treasury bonds do for direction. These bonds can give you an idea but are not a perfect gauge of what mortgage interest rates are doing.
Next week I will get back in to the home buying process and a few other things. Please remember that if you have comments, feedback or even questions....they are all welcome. I have also started using twitter in an effort to get out various information as it pertains the mortgage and real estate market....feel free to follow me @omsiguy.
Have a great Weekend....it is warming up!!!!
Tuesday, February 8, 2011
Super Bowl is over and Now it is time for Part 4 of the Process.
Well the much anticipated Super Bowl is now over and the Green Bay Packers were the big winners. Will rates make an adjustment based on which team won? That is not a belief that I share but history shows that there will be rate movement after the big game is done. Not right away but slowly after...so lets keep our fingers crossed. The economic data that has been coming out has been good for interest rates but bond traders have not reacted the way we would expect them to.
So every thing is gathered for your loan and documented. The loan officer spots check things and then so does the loan processor. Your debt to income or DTI as they call it will be spot checked to make sure it meets the constraints. This number is the amount of debt that you have plus the housing payment in relation to your income. Of course the amount of your down payment or ability of down payment will be looked at as well as this will determine what financing may be available to you. And then finally the credit score is the big one that comes in to play. The credit score has become a much larger piece of the loan approval process then it used to be as most loan types require a higher score then even a year ago. These 3 factors are the main components that are looked at as a whole in addition to the actual property itself. With these 3 all items are considered for a loan file and the underwriting takes all of them in to account. A strength in one area can help offset a weakness in another.
Now the combination of these same 3 items can decide what the best route of mortgage financing is right for you. With the big mortgage crisis fall out that we have had we are basically back to the basic loan programs that have been around for some time.
Conventional Loan Program - These are not backed by the government and typically require a larger down payment. There are still some specific programs that allow for a smaller down payment but they have some restrictions. Loans with less then 20% down will require mortgage insurance.
FHA Loan Program - These programs were originally designed as a home affordable program for first time buyers especially but is widely used by move up buyers as well. Many of the guidelines for this type of loan are much more liberal then those for conventional loan programs. These loans regardless of the initial down payment will have mortgage insurance.
VA Loan Program - A loan program designed for those that have served in our military, this loan typically requires no down payment what so ever. It does have a small mortgage insurance premium that is referred to as a funding fee.
Under these loan programs there will be options for fixed rate as well as adjustable rate loan programs. The type that works best for you will be determined on your preferences and your constraints.
Next up....Loan Approval and the basic process flow to expect.
So every thing is gathered for your loan and documented. The loan officer spots check things and then so does the loan processor. Your debt to income or DTI as they call it will be spot checked to make sure it meets the constraints. This number is the amount of debt that you have plus the housing payment in relation to your income. Of course the amount of your down payment or ability of down payment will be looked at as well as this will determine what financing may be available to you. And then finally the credit score is the big one that comes in to play. The credit score has become a much larger piece of the loan approval process then it used to be as most loan types require a higher score then even a year ago. These 3 factors are the main components that are looked at as a whole in addition to the actual property itself. With these 3 all items are considered for a loan file and the underwriting takes all of them in to account. A strength in one area can help offset a weakness in another.
Now the combination of these same 3 items can decide what the best route of mortgage financing is right for you. With the big mortgage crisis fall out that we have had we are basically back to the basic loan programs that have been around for some time.
Conventional Loan Program - These are not backed by the government and typically require a larger down payment. There are still some specific programs that allow for a smaller down payment but they have some restrictions. Loans with less then 20% down will require mortgage insurance.
FHA Loan Program - These programs were originally designed as a home affordable program for first time buyers especially but is widely used by move up buyers as well. Many of the guidelines for this type of loan are much more liberal then those for conventional loan programs. These loans regardless of the initial down payment will have mortgage insurance.
VA Loan Program - A loan program designed for those that have served in our military, this loan typically requires no down payment what so ever. It does have a small mortgage insurance premium that is referred to as a funding fee.
Under these loan programs there will be options for fixed rate as well as adjustable rate loan programs. The type that works best for you will be determined on your preferences and your constraints.
Next up....Loan Approval and the basic process flow to expect.
Friday, February 4, 2011
Riding the Roller Coaster....Interest Rates..
It has been a bad week for interest rates as they have crept up slowly all week. The good thing is that they are still low but as they creep up they start to affect home affordibility for many.
Everyone always trys to predict what rates will do and to be honest no one actually knows but they predict in a way that they can't be wrong or right....ust in the ball park. Rates are like a roller coaster swinging up and down and even breaking sideways at times. A wild and wooly ride with lots of uncertainty. The only thing that is certain is that they will change.
Here is a perfect example;
http://www.cartoonstock.com/newscartoons/cartoonists/rma/lowres/rman3169l.jpg
Right now most expect rates to stay range bound for a while until we start to see major changes in our economy. In addtion as they like to follow cycles, many do expect rates to come down after the Super Bowl as we head in to the Spring market.
When you are refinancing or buying that home try not to let greed get in the way of your decision to lock in to an interest rate. Yes you will be mad if you lock and they go down but you will be mad as well if they go up. Use good sense and do what you feel is right instead of rolling the dice.
If rates take a big drop many lenders are willing to renegotiate the interes rate with and for you. You may not get the market rate but if you get a lower rate that is very fair. It is fair because when you execute a lock in with a lender it is a binding contract and the lender has no obligation to do this for you. It is just good business to do so. Remember that if rates go up they are not going to raise your rate if you hae locked in.
And of course we have a big weekend coming up....Super Bowl Weekend.....and as I said before many feel that rates will come down after this weekend....we will see. I personally believe that they will come down towards the end of Feb.
I found this article on the web about the Home Buying Process and thought it would go well with the blog and what I am laying out for you on it.
http://www.cnbc.com//id/41411693
I will continue on with more of this next week again.
For those of us that have received the blessing of so much snow....all I can say is be safe. I was hearing reports today about roofs collapsing. They say that 2 ft of snow on a roof is equal to 38000 pounds. Watch out for the ice dams and stay warm. have a great weekend everyone.
Everyone always trys to predict what rates will do and to be honest no one actually knows but they predict in a way that they can't be wrong or right....ust in the ball park. Rates are like a roller coaster swinging up and down and even breaking sideways at times. A wild and wooly ride with lots of uncertainty. The only thing that is certain is that they will change.
Here is a perfect example;
http://www.cartoonstock.com/newscartoons/cartoonists/rma/lowres/rman3169l.jpg
Right now most expect rates to stay range bound for a while until we start to see major changes in our economy. In addtion as they like to follow cycles, many do expect rates to come down after the Super Bowl as we head in to the Spring market.
When you are refinancing or buying that home try not to let greed get in the way of your decision to lock in to an interest rate. Yes you will be mad if you lock and they go down but you will be mad as well if they go up. Use good sense and do what you feel is right instead of rolling the dice.
If rates take a big drop many lenders are willing to renegotiate the interes rate with and for you. You may not get the market rate but if you get a lower rate that is very fair. It is fair because when you execute a lock in with a lender it is a binding contract and the lender has no obligation to do this for you. It is just good business to do so. Remember that if rates go up they are not going to raise your rate if you hae locked in.
And of course we have a big weekend coming up....Super Bowl Weekend.....and as I said before many feel that rates will come down after this weekend....we will see. I personally believe that they will come down towards the end of Feb.
I found this article on the web about the Home Buying Process and thought it would go well with the blog and what I am laying out for you on it.
http://www.cnbc.com//id/41411693
I will continue on with more of this next week again.
For those of us that have received the blessing of so much snow....all I can say is be safe. I was hearing reports today about roofs collapsing. They say that 2 ft of snow on a roof is equal to 38000 pounds. Watch out for the ice dams and stay warm. have a great weekend everyone.
Wednesday, February 2, 2011
An FHA update and Home Buying Part 3
Well it is another snowy day here in the great Midwest...one that causes drivers to forget how to drive and even causes schools in rural areas to start late. None the less it is another week being started off with info that can be used.
FHA in its wisdom some time back imposed an anti flipping rule, This was meant to stop the quick inflation of home values and prices due to rapid turn times/sales of property's. This was particularly true as values were increasing at a dramatic clip. An investor would buy and sell a home sometimes without ever moving in and within an hour or so of closing on the purchase the new sale would transpire. This was one of the things that caused homes to inflate the way that they did in value.
So FHA came out with a ruling that a a new purchase agreement on a home sale could not be executed within 90 days of the closing date/recording of sale of the previous home sale.
Last year they came out and decided to help infuse the home sale market and to get the economy stimulated that they would allow flips as they call them within 90 days under certain restrictions. They were going to allow this for a specific period of time. The issue was that not all lenders wanted to do them or if they did they imposed some of their own restrictions or overlays in regards to what might be required or allowed for such a transaction.
Well FHA has decided to extend this in hopes to try and jump start the home buying market.
Here is FHA's full announcement off of their website.
http://portal.hud.gov/hudportal/HUD?src=/press/press_releases_media_advisories/2011/HUDNo.11-007
Now back to that home buying process.......
The Loan Approval Process consists of a few different things. Who you speak to will give you different items that they feel are important and so I will list what I see.
How much home can a person afford?
In deciding this a lender will look at the following
Credit History
Cash Requirements
Closing costs
Income
Stability of employment
Existing debt
In reviewing these items a lender will help you look what what makes the most sense for you based on your constraints and abilities as well as the constraints of the loan products that you are interested in. Together a plan of action can be derived.
How important is your credit?
More so than in the past, your credit/fico score has become most likely the biggest factor. It can not only effect if you can get a mortgage but also what type and at what interest rate.
Even if you have no credit there can still be options for you.
What are and who determines the settlement fees?
There are 3 basic sets of costs or settlement fees when buying a home.
Down Payment
Amount required based on loan program.
Closing Costs
These consist of costs from the lender, title company, third parties involved in the loan and the government. Most of these are set for the specific task while a few are actually tied to the loan amount.
Pre-Paids
These are the odd costs that are hard for many to explain. Quite simply they are costs of owning your home that you are charged at closing in advance and are placed in to an escrow account. The exception to this would be any per diem based on your closing date.
What does my mortgage payment include?
In most cases your payment will be made up of;
principleinterest
property taxes
home owners insurance
mortgage insurance
The amounts of these items will be based on your individual costs for your property.
What is an escrow account?
Property taxes and home owners insurance are generally part of your mortgage payment. Money for your taxes and insurance is deposited in to a escrow account. When the money for taxes and/or insurance comes due it is paid from this account. When you first open your mortgage account your prepaid taxes and insurance are deposited in to this account. The account is reviewed at least annually to insure that there is enough money being collected to pay your costs.
What can I expect at application?
At application information is collected from the consumer that will aid in the decision making process as well as required disclosures that are to be signed. The information is reviewed and a credit report is run. Generally at this time the loan officer will run the loan through and automated underwriting program to determine loan eligibility. Additional information may be obtained and alternate loan programs may be addressed.
Typical documentation required at application may include;
2 months asset statements
2 years W2 forms
30 days of recent paystubs
Dependent on the situation additional information may be required such as paperwork pertaining to rental properties, bankruptcies, self employment, divorces and more.
We will talk about loan approval, appraisal and title in upcoming blogs as well as various other information as it becomes news worthy.
Again I welcome all comments and questions.
FHA in its wisdom some time back imposed an anti flipping rule, This was meant to stop the quick inflation of home values and prices due to rapid turn times/sales of property's. This was particularly true as values were increasing at a dramatic clip. An investor would buy and sell a home sometimes without ever moving in and within an hour or so of closing on the purchase the new sale would transpire. This was one of the things that caused homes to inflate the way that they did in value.
So FHA came out with a ruling that a a new purchase agreement on a home sale could not be executed within 90 days of the closing date/recording of sale of the previous home sale.
Last year they came out and decided to help infuse the home sale market and to get the economy stimulated that they would allow flips as they call them within 90 days under certain restrictions. They were going to allow this for a specific period of time. The issue was that not all lenders wanted to do them or if they did they imposed some of their own restrictions or overlays in regards to what might be required or allowed for such a transaction.
Well FHA has decided to extend this in hopes to try and jump start the home buying market.
Here is FHA's full announcement off of their website.
http://portal.hud.gov/hudportal/HUD?src=/press/press_releases_media_advisories/2011/HUDNo.11-007
Now back to that home buying process.......
The Loan Approval Process consists of a few different things. Who you speak to will give you different items that they feel are important and so I will list what I see.
How much home can a person afford?
In deciding this a lender will look at the following
Credit History
Cash Requirements
Closing costs
Income
Stability of employment
Existing debt
In reviewing these items a lender will help you look what what makes the most sense for you based on your constraints and abilities as well as the constraints of the loan products that you are interested in. Together a plan of action can be derived.
How important is your credit?
More so than in the past, your credit/fico score has become most likely the biggest factor. It can not only effect if you can get a mortgage but also what type and at what interest rate.
Even if you have no credit there can still be options for you.
What are and who determines the settlement fees?
There are 3 basic sets of costs or settlement fees when buying a home.
Down Payment
Amount required based on loan program.
Closing Costs
These consist of costs from the lender, title company, third parties involved in the loan and the government. Most of these are set for the specific task while a few are actually tied to the loan amount.
Pre-Paids
These are the odd costs that are hard for many to explain. Quite simply they are costs of owning your home that you are charged at closing in advance and are placed in to an escrow account. The exception to this would be any per diem based on your closing date.
What does my mortgage payment include?
In most cases your payment will be made up of;
principleinterest
property taxes
home owners insurance
mortgage insurance
The amounts of these items will be based on your individual costs for your property.
What is an escrow account?
Property taxes and home owners insurance are generally part of your mortgage payment. Money for your taxes and insurance is deposited in to a escrow account. When the money for taxes and/or insurance comes due it is paid from this account. When you first open your mortgage account your prepaid taxes and insurance are deposited in to this account. The account is reviewed at least annually to insure that there is enough money being collected to pay your costs.
What can I expect at application?
At application information is collected from the consumer that will aid in the decision making process as well as required disclosures that are to be signed. The information is reviewed and a credit report is run. Generally at this time the loan officer will run the loan through and automated underwriting program to determine loan eligibility. Additional information may be obtained and alternate loan programs may be addressed.
Typical documentation required at application may include;
2 months asset statements
2 years W2 forms
30 days of recent paystubs
Dependent on the situation additional information may be required such as paperwork pertaining to rental properties, bankruptcies, self employment, divorces and more.
We will talk about loan approval, appraisal and title in upcoming blogs as well as various other information as it becomes news worthy.
Again I welcome all comments and questions.
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