April 13th, 2017 7:04 AM by Jackie A. Graves
researching and knowing your options can help you secure the best mortgage
option for you.
One of the most nerve-wracking aspects of purchasing
a home is the mortgage
application and approval process. Regardless of your financial history, waiting
for the OK from a lender can be unsettling when you’re trying to close on that
For first-time homebuyers in
particular, unfamiliarity with the process means a lot of shots in the dark
when contacting mortgage lenders, searching Google for house-hunting advice and
questioning whether your credit history is good enough to afford
Whether it’s your first home purchase or you’ve owned
previously, the mortgage industry is constantly evolving to reflect the current
economy and better fit consumers who are looking to borrow.
The Hispanic population is a
growing portion of homeowners nationwide, with Hispanic homebuyers accounting
for 60 percent of total homeownership growth in the U.S. since 2010, according
to the National Association of Hispanic Real Estate Professionals’ 2016
State of Hispanic Homeownership Report.
But even with the strong growth
in Hispanic homeownership, some homebuyers in the community and many other
Americans throughout the country are not familiar with programs available to
make purchasing real estate more feasible. You might even qualify for mortgage
products you didn’t know existed, and loan programs geared at making homebuying
more accessible are often underutilized.
Case in point: Veterans
Association home loans. A March 2017 study by national mortgage banker American
Financing found the majority of post-9/11 veterans have yet to use a VA home
loan. Among them, most of the more than 1 million injured veterans
likely qualify for not
only a no-down-payment loan, but are also exempt from having to pay a VA
funding fee, which can be 1.5 to 3.3 percent of the loan amount, depending on
the type of loan and the borrower's military service.
Part of this is due to the
process of transitioning out of the military, says Tim Beyers, a mortgage
analyst at American Financing. “You’re just trying to check as many boxes as
you can. You may not be paying nearly enough attention to the benefits that are
afforded to you,” he says.
But it’s not just veterans who
are missing out on opportunities to be approved for a more affordable mortgage.
Fannie Mae’s HomeReady
mortgage program, for example, incorporates less-traditional
underwriting practices to account for boarder income when you have roommates
and offers down payments as low as 3 percent.
Here are six things you can do
to boost your chances of getting approved for a mortgage that best fits best
your financial situation.
Begin months in advance. Few people purchase a home on a whim, and
most start dreaming about it months, if not years, ahead. Set a timeline six
months to a year in advance and become familiar with mortgage interest rates, predictions
for where they’ll be when
you to apply for a mortgage, the typical cost of homes in your city and the
monthly payments you think you could afford.
Changes on your financial
statements, such as an increase in your line of credit or a paycheck bump, can
make you more attractive to lenders. But give yourself at least two months (or
two statement cycles) between the changes and when you apply for a mortgage,
says David Birulin, vice president of lending with BrightStar Credit Union in
Find a guiding hand early on. Especially if you’re a first-time
homebuyer, you’ll want to work closely with a real
estate professional you
can trust to guide you every step of the way.
“Someone who is experienced in
the community, has a great reputation and is willing to help you really
navigate through the process,” says Gary Acosta, co-founder and CEO of NAHREP.
When it comes to connecting
with a mortgage professional, Birulin recommends asking how the loan officer or
originator is compensated. Someone who works entirely on commission and makes
more when you take on a bigger loan with higher interest may not be your best option
when you’re looking for a lot of guidance
in the process.
Start gathering your financial
information. When it
comes time to apply for a mortgage, you not only want to have all your relevant
information – pay stubs, W-2 forms from the last two years, tax returns,
residence history and more – but you want to know what’s in your financial records
as well, from positive credit histories to blemishes that could create a hurdle
for loan approval.
Birulin recently began
gathering information to prepare to purchase a new home. “There were some
accounts I thought were cleared that weren’t cleared,” he says. By going
through the information in advance, Birulin has been able to resolve issues
that might complicate a mortgage approval.
Having all your financial
ducks in a row means all your ducks. From a room listed Airbnb to
an Etsy shop, many Americans are getting additional income that should be
“Make sure all the money that’s
collected is deposited in one bank account, so that there is a way to track
that and quantify that,” Acosta says.
Reduce debt. By getting a mortgage, you’re taking on a
substantial amount of debt, so you want to have as little debt from other
sources as possible. Student or car loans aren’t likely to be a deal breaker
for mortgage approval, but heavy credit card debt or high existing monthly
payments could be a problem.
Use your credit cards less. With your debt paid down, use your credit
cards less in the months prior to applying for a mortgage. Even if you’re
paying off your balance every month, lenders will look more favorably at a
borrower who utilizes 30 percent or less of his or her total lines of credit,
Look for programs that work for you. Even if you only have a vague understanding
of the types
of programs you may
qualify for, a trustworthy loan originator, loan officer or mortgage broker
will explore every option with you to help you decide the best course of
action. Many major banks and organizations like the VA offer information about
all their loan products and programs online.
“A good bank will work with you
to make sure that you’re getting the fullest extent of your benefits,” Beyers
says, referring particularly to VA programs.
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