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A mortgage is a little different from most
other loans. Usually much larger dollar amounts are involved,
which makes the lender more careful with regards to your
credit worthiness, the value of the asset the mortgage is
tied to, making sure the property has a clean and transferable
deed, and making certain the home is insured properly against
fire, flood, etc. We have made these services available to
you for both comparison purposes or simply to contact any
of these providers for additional information. We realize
many of you may already have some or all of these needed
services already in place but, you may want to make certain
you are getting the best service or pricing available.
Your Credit
We all know the importance and impact
of your credit history on your borrowing power. Although
we do not recommend having every lender in town pulling
your credit, it may be a good idea to have a good indication
of what to expect from your credit report before going
into the mortgage process. The current credit reporting
system is very complex and hard to understand with regards
to the influence of high balances on credit cards, late
payments, collections and inquiries. If you know your credit
is quite good you may want to simply have your end lender
pull your credit as you move through the loan approval
process. If you haven’t looked at your credit lately
or if you want to see you much monthly debt your report
is showing, you may want to have this information available
as you begin the process. Keep in mind that your total
monthly debt that appears on your credit report will be
added to the mortgage debt you are applying for to arrive
at what will be your debt ratio. This ratio, combined with
your credit scoring will determine your ability to qualify
for a certain mortgage amount. Credit scoring often influences
loan flexibility including amount of down payment required,
can you avoid mortgage insurance, can you qualify for interest-only
options and more. It would be very difficult to give you
a complete overview of these score ratings, as different
lenders have some variations for each of these score requirements.
Again, we recommend you make contact with a mortgage professional
so you can work with them to go over each of your product
options. Some general guidelines are: 500.. the minimum
score for any mortgage our lender base will allow. 620
Fannie Mae’s normal minimum, again your lender may
be able to get you qualified below this score if you have
other strengths. 680, normal interest only and stated income
minimums, 720 or higher will allow you most mortgage options.
These are simply general cutoffs that give you some idea
of where you might stand. Your lender will be able to take
your individual circumstances and work them to your maximum
potential.
Home Value
The appraisal insures that the value
of the property will be more that the mortgage amount.
You are normally allowed to choose your own LICENSED appraiser.
Some of the things you may want to consider are the cost
of the appraisal, will the home appraise for the value
you think it should before going to the final expense of
an appraisal and can the appraisal be done in a timely
manner, as to not hold up the mortgage process. The most
important variables that an appraiser uses in determining
your home’s value is the value of similar homes that
have sold in the area of the subject home. Usually 3 “comps” are
used and adjustments are made to different square footage,
condition, pool, and upgrades. For purchases, the loan
amount will be determined from the appraised value or the
purchase price, which ever is less. For refinances, the
loan amount will be determined by the appraised value along
with other pertinent guidelines such as how long you have
had your current mortgage, seasoning. This seasoning can
vary with different lenders or loan products so, this should
be discussed with you loan officer. The appraisal will
impact the purchase, down payment, if it appraises at less
than the purchase price. For a refinance, it will impact
the amount of “cash-out” you may be allowed.
Or if you can get out of a mortgage insurance situation.
If you would like to compare different appraisers in your
area with regard to their fees and timeframe you may want
to try http://www.appraisers.org ,
The banner we have provided below will not give you an
appraisal that can be used for your final mortgage but
it should be able to help you determine basic values and
what the market is in your area.
Insurance
You will be required to make sure
the lender’s collateral is protected against any
type of damage or destruction. It is normally your choice
and the amount of coverage can normally be determined by
replacement value or loan amount. The replacement value
is often calculated from the appraisal. As with most services,
you may want to shop for different coverage costs or a
provider that may be stronger in a certain area. Some insurers
offer better rates for combining all of your insurance
(Home, Auto, Life etc.) needs with a single provider.
It is important to have your coverage and premiums determined
as early as possible in the loan process. The premium (Yearly
payment) will be needed for your loan
underwriter to calculate your total monthly housing expense (Principal, interest,
property taxes and insurance). This expense is divided by your monthly gross
income to calculate your debt ratio which is an important guideline in determining
your ability to qualify for a certain loan amount. Your loan consultant will
be able to better explain these ratios, what the suggested allowable percentages
are and, how far you can “stretch” those numbers with other strengths
such as assets, credit scoring or down payment.
You may want to have a look at how your insurance quote
compares with other providers…
Title or Escrow Companies
Every lender, as well as buyer, will
want to be sure that the home they are buying is free of
liens or property encumbrances. A typical mark against
a property could be a contractor that has done work on
the home that was never paid for. That contractor could
then file a lien on the property that would have to be
clear up before the deed could be transferred. This same
situation could occur if back taxes are owed. You will
also want to know if there are any easements or right of
ways attached to your property. These issues are researched
and recorded by your Title Co.
It is also the role of the Title or Escrow Co. to determine
the various City, County, or State taxes due at closing.
This along with prepaid interest, lenders
fees, recording fees, required escrow reserves, and Title fees are totaled
for you final closing cost. This final cost should be fairly close to the Good
Faith Estimate provided by your lender. But, keep in mind, the lender only
controls the “800” series of numbers on the Good Faith. The Title
Co. provides the actual final cost of closing the mortgage. And sometimes factors
used in determining a Good Faith can change or have fees that could not be
determined at the time the Good Faith was created.
You may want to contact a Title or Escrow Company in the area of the home
you are buying. They can give you accurate quotes regarding these fees so
you are
more certain of what the cost of your purchase or refinance will be…
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