Tag: mortgage

Mortgage Application Process: Why So Much Paperwork?

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I’m often asked by buyers why there is so much paperwork mandated by the bank during a mortgage application process when buying a home today. It seems that the bank needs to know everything about us and requires three separate sources to validate each and every entry on the application form.

Many buyers find the process of mortgage application intrusive and personal, and are being told by friends and family that the process was a hundred times easier when they bought their home ten to twenty years ago. If you feel frustrated, you are not alone. Two new national surveys found that significant numbers of borrowers believe the current mortgage process is a major hassle. The surveys were contacted for Freeandclear.com – a mortgage website, and Nerdwallet, which offers personal finance and mortgage information. Read more about these surveys here.

There are two very good reasons that the loan process is much more onerous on today’s buyer than perhaps any time in history.

1. The government has set new guidelines that now demand that the banks prove beyond any doubt that you are indeed capable of affording the mortgage.

During the run-up in the housing market, many people ‘qualified’ for mortgages that they could never pay back. This led to millions of families losing their homes. The government wants to make sure this can’t happen again.

2. The banks don’t want to be in the real estate business.

Over the last seven years, banks were forced to take on the responsibility of liquidating millions of foreclosures and also negotiating another million plus short sales. Just like the government, they don’t want more foreclosures. For that reason, they need to double (maybe even triple) check everything on the application.

Also Read:

Pre-Approval: First Step in Home Buying Process

However, there is some good news in the situation.

The housing crash that mandated that banks be extremely strict on paperwork requirements also allows you to get a mortgage interest rate as low as 3.43%, the latest reported rate from Freddie Mac.

The friends and family who bought homes ten or twenty years ago experienced a simpler mortgage application process but also paid a higher interest rate (the average 30 year fixed rate mortgage was 8.12% in the 1990’s and 6.29% in the 2000’s). If you went to the bank and offered to pay 7% instead of less than 4%, they would probably bend over backwards to make the process much easier.

Bottom Line

Instead of concentrating on the additional paperwork required, let’s be thankful that we are able to buy a home at historically low rates. If you are ready to make a move, feel free to contact me to schedule free no obligation buyer consultation.

To learn more about home buying process, please visit my Real Estate blog page – “BUYING A HOME”.

 

Pre-Approval: First Step in Home Buying Process

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In many markets across the country,  the amount of buyers searching for their dream homes greatly outnumbers the amount of homes for sale. This has led to a competitive marketplace where buyers often need to stand out. Washington DC Metropolitan area is not an exception – the market for desirable properties in Vienna VA, McLean VA, Arlington VA, Alexandria VA and Falls Church VA is very competitive, and often, buyers end up in a bidding war.

If you are competing with other buyers, one way to show that you are serious about buying home is to get a pre-approval letter for a mortgage and include it with the offer. In fact, majority of sellers in Northern Virginia, will not take buyers’ offer seriously if the pre-approval letter is not enclosed in the offer package.

But even if you are in a market that is not as competitive, knowing your budget will give you the confidence to know if your dream home is within your reach.

Freddie Mac lays out the advantages of pre-approval in the ‘My Home’ section of their website.

“It’s highly recommended that you work with your lender to get pre-approved before you begin house hunting. Pre-approval will tell you how much home you can afford and can help you move faster, and with greater confidence, in competitive markets.”

One of the many advantages of working with a local real estate agent is that many have relationships with lenders who will be able to help you with this process. But it’s always helpful to do your own research and shop around for the lender who would offer the best rates and competitive fees. Once you have selected a lender, you will need to fill out a loan application and provide important information regarding “your credit, debt, work history, down payment and residential history.”

Freddie Mac describes the 4 Cs that help determine the amount you will be qualified to borrow:

  • Capacity: Your current and future ability to make your payments
  • Capital or cash reserves: The money, savings and investments you have that can be sold quickly for cash
  • Collateral: The home, or type of home, that you would like to purchase
  • Credit: Your history of paying bills and other debts on time

Getting pre-approved is one of many steps that will show home sellers that you are serious about buying, and it often helps speed up the process once your offer has been accepted.

Bottom Line:

Don’t overestimate the down payment and credit scores needed to qualify for a mortgage today. If you are ready and willing to buy, you may be pleasantly surprised at your ability to do so as well. If you are ready to make a move, contact me today to schedule your free no obligation buyer consultation.

To learn more about home buying process, please visit my Real Estate blog page – “Buying A Home”.

And please, don’t forget to download

My Buyers’ Guide:

“Things to Consider When Buying a Home”

As a home buyer, there’s plenty you need to know. You’re about to make the largest financial investment of your life, but with my Home Buyers Guide, you’ll have the information you need about buying a home, right at your fingertips.

Here’s what you will find inside:

  • The Cost of Renting vs Buying
  • 2 Myths That Might be Holding You from Buying
  • Why Pre-Approval Should be Your First Step
  • What You Need to Know About Mortgage Process
  • What to Expect When Home Inspecting
  • And More!

The best part is, our Guide is free and available to download right now. All we need is your name and email, and we’ll send it directly to you.

[red-button url=”https://natashabackupadmin.truedes.com/buying-home-free-home-buyers-guide/”]Download Your Buyer’s Guide HERE[/red-button]

 

What is PMI? Get All the Facts Today

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What is PMI? Get All the Facts Today

When it comes to buying a home, whether it is your first time or your fifth, it is always important to know all the facts. With the large number of mortgage programs available that allow buyers to purchase a home with a down payment below 20%, you can never have too much information about Private Mortgage Insurance or PMI.

What is PMI?

Historically, the less a homeowner has invested in a property, the higher the chance the owner will walk away from it if payments fall behind. PMI protects lenders against the higher risk of low-down-payment loans by paying the losses if those loans go into default.

Freddie Mac defines PMI as:

“An insurance policy that protects the lender if you are unable to pay your mortgage. It’s a monthly fee, rolled into your mortgage payment, that is required for all conforming, conventional loans that have down payments less than 20%.”

As the borrower, you pay the monthly premiums for the insurance policy, and the lender is the beneficiary. Freddie Mac goes on to explain that:

“The cost of PMI varies based on your loan-to-value ratio – the amount you owe on your mortgage compared to its value – and credit score, but you can expect to pay between $30 and $70 per month for every $100,000 borrowed.” 

According to the National Association of Realtors, the average down payment for all buyers last year was 10%. For first-time buyers, that number dropped to 6%, while repeat buyers put down 14% (no doubt aided by the sale of their home). This just goes to show that for a large number of buyers last year, PMI did not stop them from buying their dream homes.

Here’s an example of the cost of a mortgage on a $200,000 home with a 5% down payment & PMI, compared to a 20% down payment without PMI:

The larger the down payment you can make, the lower your monthly housing cost will be, but Freddie Mac urges you to remember:

“It’s no doubt an added cost, but it’s enabling you to buy now and begin building equity versus waiting 5 to 10 years to build enough savings for a 20% down payment.”

Of course, the home owner will pay higher monthly payments to cover the cost of the PMI insurance. But the payment doesn’t last the life of the loan. Once a homeowner’s equity reaches 20%, PMI insurance can be cancelled, along with monthly PMI payment.

If you are currently paying PMI or if you’re thinking about buying ahome with less than a 20% down payment, the information in this report could save you thousands of dollars.

Your Legal Rights

The Homeowners Protection Act of 1998 stipulates that lenders must automatically cancel private mortgage insurance (PMI) once an owner’s home equity reaches 22%. The law will save many qualifying homeowners thousands of dollars each year by eliminating their PMI payments. But other qualifying homeowners will save even sooner.

Why? Because the savvy homeowner knows the law also requires a lender to cancel PMI at the 20% equity level if the homeowner makes a written request. Without a written request, the lender is allowed to continue charging PMI until the owner’s equity reaches 22% on the loan pay-down schedule.

Request vs Automatic

If you have reached 20% equity in your home through payments and market appreciation, then you can request to have PMI eliminated. This was always the case before 1998 law, but most homeowners didn’t know they had the option to do so. Now, however, the law requires lenders to send letters to homeowners, letting them know they’ve reached enough equity in their home from loan pay-down to cancel their PMI policy. But they are not required to send those letters until the equity reaches 22%.

Catch 22

For automatic PMI cancellation, lenders calculate equity using the amount of payments made and the original loan amount. Market value is not considered. To establish equity gained from appreciation, you must order (and pay for) a professional appraisal of the property’s worth.

Bottom Line

If you have questions about whether you should buy now or wait until you’ve saved a larger down payment, let’s get together to discuss our market’s conditions and to help you make the best decision for you and your family. Schedule your free no obligation consultation today!

And please, don’t forget to download

My Buyers’ Guide:

“Things to Consider When Buying a Home”

As a home buyer, there’s plenty you need to know. You’re about to make the largest financial investment of your life, but with my Home Buyers Guide, you’ll have the information you need about buying a home, right at your fingertips.

Here’s what you will find inside:

  • The Cost of Renting vs Buying
  • 2 Myths That Might be Holding You from Buying
  • Why Pre-Approval Should be Your First Step
  • What You Need to Know About Mortgage Process
  • What to Expect When Home Inspecting
  • And More!

The best part is, our Guide is free and available to download right now. All we need is your name and email, and we’ll send it directly to you.

Your Step-By-Step Guide to Mortgage Pre-Approval

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If you find yourself sitting in a strange hallway, waiting for a stranger in a suit to size you up and decide if you’re worthy as your palms sweat and your breath gets just a little bit harder to push out, you might be waiting for your appointment for your mortgage pre-approval. You’re one step closer to owning your own home, but this one is a doozy.

Let’s talk mortgage pre-approval step-by-step.

Step One: Mortgage Pre-Qualification Versus Pre-Approval

You probably already have a pre-qualification letter saying that you can probably buy a house in a particular price range, so why isn’t this enough? A lot of home buyers find this part of the process confusing, and frankly, it can be. Your pre-qualification was probably done over the phone or on your first meeting with your lender. They asked you a bunch of questions about your income, your job and maybe even pulled a “soft” credit report to get some idea about your debts.

Based on this information, they gave you the details on the kinds of programs you’re eligible for and how much you can expect in buying power. You probably got a letter that you could show your Realtor to help guide the buying process. The difference between the pre-qualification and the pre-approval is simple: a pre-qualification is based largely on your word. If you give the lender incorrect information, they’ll give you a pre-qualification letter that’s not right.

A pre-approval, on the other hand, takes a harder look at your background, work history and requires a full credit report and FICO score to ensure that you can, in fact, pay back a note.

Step Two: Documentation

Your next meetup with the nice banker is going to be to deliver documents, provide consent to pull a full credit report and, if you’ve already found one, give them the information on the home you’ve put under contract (in some areas your Realtor can do this last bit for you).

Documentation you’ll be asked to bring will include pay stubs, bank statements and tax returns, along with other information that may be needed to verify your income source or sources. Self-employed people, for example, are sometimes required to prepare profit and loss statements (or just pony up more tax returns). If you have assets like a 401(k) or even a CD, you’ll want to bring the details on these, too.

Step Three: The Loan Estimate Form

You’re going to get a copy of something called the Loan Estimate Form, probably at the same meeting where your lender pulls that full credit report and takes all your papers away. This form explains exactly how much they expect you’ll need to bring to closing, along with itemized estimated fees to plan for at closing. If you’re shopping your loan, collect these and compare them side by side before you make your final choice.

But don’t spend too much time crunching the numbers. Just like your contract (and the National Association of Realtors) says, “Time is of the Essence.”

Step Four: Acceptance

Once you’ve had a few minutes to review the paperwork and you’ve made your final pass through the numbers, all that’s left is to call the lender you’ve chosen and let them know you need that pre-approval letter sent over to your Realtor.

Understand that a pre-approval is not a guarantee that you’re going to get the money you need to close. Several things can go wrong along the way through underwriting, including, but not limited to:

– Unverifiable income (this is often due to issues with overtime)
– A change to your credit score.
– An increase in your debt to income ratio
– An undocumented change in employment
– Assets that are unverifiable

The best plan is be totally honest with your lender when you get your pre-approval so that you don’t get a last minute call telling you that your loan has been denied (this actually happens, so pay everything on time and don’t take out new credit lines or add to old ones until you’ve got the keys in your hand).

When is the Best Time to Make an Offer?

Ideally, you should have a pre-approval letter in hand before you so much as set foot into the first house you’re considering for purchase. After all, the seller isn’t going to think you’re all that serious without one, nor will they be keen to want to negotiate under these circumstances.

Help your banker help you get the best deal on the house of your dreams, save everybody a lot of headaches and get that pre-approval first. Knowing how much your closing costs are going to be will also help your Realtor write your contract accordingly if they should need to be wrapped into your mortgage.

Basically, that document is the key to everything. So, no pressure…

Also read: “Pre-Approval: First Step in Home Buying Process” and “Mortgage Application Process: Why So Much Paperwork”.

 

NATASHA LINGLE Realtor in Vienna VA

22102

First Comes Love… Then Comes Mortgage

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According to the National Association of REALTORS most recent Profile of Home Buyers & Sellers, married couples once again dominated the first-time homebuyer statistics in 2016 at 58% of all buyers. It is no surprise that having two incomes to save for down payments and contribute to monthly housing costs makes buying a home more attainable.

But, many couples are also deciding to buy a home before spending what would be a down payment on a wedding, as unmarried couples made up 14% of all first-time buyers last year.

If you’re single, don’t fret! Single women made up 18% of first-time buyers in 2016, while single men accounted for 8% of buyers. One recent article pointed to a sense of responsibility and commitment that drives many single women to want to own their home, rather than rent.

Here is the breakdown of all first-time homebuyers in 2016 by percentage of all buyers, income, and age:

 

Bottom Line

You may not be that much different than those who have already purchased their first homes. Let’s get together to determine if your dream home is already within your grasp!