Thou Shalt In Mortgage Lending

Becoming a homeowner is the American Dream!  And, because homeownership is of monumental importance in your life “thou shalt” remember these ten things to optimize your home buying experience:

Thou Shalt Enjoy the Home Loan Process!

Mortgage lenders generally offer the same rates and fees. They all have access to the same bag of money. So (hands down) the number one criterion that will help you pick the best mortgage lender and ensure an enjoyable and smooth home loan process is customer service! Yes! Customer service is key in mortgage lending!

Find the mortgage lender that has the best reviews from satisfied customers. The best mortgage lenders are those who take personal responsibility for your loan. This means they:

* Communicate in a timely and courteous manner
* Deliver documents without delay
* Anticipate complications and take proactive steps to avoid them
* Manage the loan process thoroughly and competently from start to finish
* Meet crucial purchase contract deadlines

Thou Shalt Get Pre-Approved!

A pre-approval letter is a statement from a lender that you would probably qualify for a specific mortgage amount based on the mortgage loan officer’s thorough review of your financial information: credit report, pay stubs, bank statement, salary, assets, obligations, etc.  Pre-approval should mean your loan is contingent on the appraisal of the home you choose, clear title and other contractual obligations, as required (i.e. clear termite report, septic and well inspections) providing that nothing changes in your financial picture before closing.

Getting pre-approved is much more involved then getting pre-qualified. You’ll complete an application (Uniform Residential Loan Application- or 1003 as it is referred to in the industry) and supply the lender with the necessary documentation to perform an extensive check on your financial background and credit score.  From this, the lender can tell you the mortgage amount for which you are pre-approved. You’ll also have a better idea of the interest rate for your loan and the general amount for closing costs and pre-paid items.   With a mortgage pre-approval, you will receive a conditional commitment in writing.  Getting pre-approved for a mortgage also enables you to move quickly when you find your dream home.  In a competitive market, this lets the seller know that your offer is serious!

Thou Shalt Listen to the Experts!

Choose your mortgage lender carefully!  Becoming a homeowner is the American Dream.  And, because homeownership is of monumental importance in your life, you should shop for a mortgage lender who is ready, willing and able to make your dream a reality.  Mortgage lenders are NOT all the same!  While interest rates are important, there is more to the mortgage process that you should know.

Why use a realtor?  If you have a sore throat and fever would you consult your auto mechanic for a diagnosis?  Will you get your best advice on how to grow roses from your accountant?  Shall I ask my attorney what to do about a toothache?  NO!  Ask the expert!  Who should I talk to if I want to buy or sell a home? A realtor is an expert who will help you when buying or selling a home!

Should I shop for homeowners insurance?  The location of your home, its construction and condition all play a part in how much you pay for home insurance (and so do YOU).  Homeowners insurance costs vary widely among providers.  Insurance companies assess risk in different ways so it is important to compare homeowner insurance quotes to be sure you get the most affordable rate.  One of the best things you can do is to get multiple quotes from competing companies.  Pricing changes all the time as insurers adjust their portfolios.  Be vigilant in your quest for homeowners insurance.  Sometimes the best rate may not be your best choice- who will you call if you need to file a claim.  Make sure you trust, and can depend on the insurance agent on the other side of the phone call.  That agent may not have the lowest premium- but customer service, accessibility, and integrity do add value.

Thou Shalt Think About Resale Value!

A home’s resale value is the amount you may expect it to sell it for at some point in the future. Many factors affect the resale value of a home.

When most of us are house hunting we search for the perfect home that fits our families’ current needs. We also may be looking at homes in terms of what they are worth right now and how the price compares to similar homes or other homes in the area. Homebuyers tend to focus on whether the home suits their own needs and aesthetics.

The time to think about selling your home is the day you buy your home. If you buy a home with good resale value, selling it in the future should not be difficult. Some homebuyers never consider resale value when they buy. This is a mistake. When buying a home be forward thinking- resale value is important!

Thou Shalt Maintain Employment!

Rule of thumb- two years employment with the same business or in the same business is preferable.  Short interruptions in employment may need to be explained via a Letter of Explanation.

Borrowers must have sufficient income to qualify for the loan size they seek. Lenders count income that can be documented through paperwork.  So, if you are not sharing all of your earned income with “Uncle Sam” that may be a detriment when determining the maximum mortgage you qualify for.  It may be prudent to avoid “writing off” parts of your income if you plan to buy a home.  While you may pay more in taxes- you show more income, thereby qualifying for a larger loan size.

Thou Shalt Keep Your Debt in Check!

Home buyers seeking a mortgage have been well-served by following the 28/36 rule.  The 28/36 Rule states that a household should spend a maximum of 28% of its gross monthly income on total housing expenses and no more than 36% on total debt, including housing and other debt such as car loans, credit cards, student loans, etc.

Thou Shalt Grow Your Assets!

This is a very important part of the home buying qualification process.   While there are many programs available with little or nothing down, you do not want to go into this very important long term financial commitment without assets and reserves.  For some loan types if your down payment is less than 20% you can expect to pay mortgage insurance.   Assets are an important to have but building credit is equally as important.  Lower credit scores can mean higher interest rates and often a larger down payment.  Running a credit check can help you identify delinquent bills and derogatory credit.  Your mortgage lender should help you make a plan to improve your credit.

Thou Shalt Keep Credit Inquiries Minimal!

When a creditor checks your credit for the purpose of giving you a loan or credit card they will do a hard pull.  Hard pull or hard inquiries may affect your credit score negatively.

Thou Shalt Track and Trace Monies!

Monies for your home loan will need to be tracked and traced.  Any out of the ordinary deposits will need to be sourced.  This means that a paper trail is required to determine the origins of the deposit.  Some funds may also need to be “seasoned” in your bank account for a certain period of time.  The best way to avoid this from becoming a problem is to ensure that monies in your accounts come from payroll and other easily sourced entities.

Thou Shalt Pay All Bills on Time!

Your credit history reflects fiscal responsibility.  Your pattern of payment history, types of credit and inquiries will be scrutinized during the home loan process.  To avoid problems with credit history you should pay your debts on time, keep ratios low on credit limit to balance on revolving credit and don’t overuse credit.  One installment loan and two revolving debts (with balances under 30% of the high credit) are looked upon favorably during the home loan process.

 

If a home loan is in your future- follow these “Thou Shalt” rules.  Kara Davis of Crew Lending will help you with all of your residential lending needs. She is a leading provider of mortgages in Lake Charles, Sulphur, Westlake and the entirety of Louisiana.  She can also lend in 47 other states.  Choose your mortgage lender carefully to ensure your smooth path to homeownership.  Kara Davis will help you understand the loan process and work with you from Application to Clear to Close. For more information call Kara Davis at 337-842-0115.

Thou Shalt