Be prepared for
mortgage underwriting to speed up the process.
A home may be the largest purchase you'll ever make, so it
shouldn't come as a surprise that a financial institution will want to verify
that you can afford it – now and in the future – through the underwriting
What Is Mortgage Underwriting?
Mortgage underwriting assesses the risk of lending money to a
potential homebuyer. During this process, you'll submit a loan application,
along with documentation to support your earnings, assets and liabilities.
You'll also consent to a credit check. The lender will perform an appraisal of
the property, which determines whether the offer you've submitted on a home is
an appropriate value.
Two important reasons for the mortgage underwriting process are:
But mortgage underwriting can take days or drag on for weeks,
especially if you're not prepared to submit full documentation, or if your loan
needs to go through manual underwriting. If you have your paperwork organized
and are ready to work with your lender, the experience can be efficient.
How You Can Prepare for Mortgage Underwriting
Schedule an initial consultation with a mortgage lending officer
to determine if you are ready to buy a home, says Ron Haynie, senior vice
president of mortgage finance policy for the Independent Community Bankers of
America. "There are also HUD-approved housing counselors who can help with
special government programs targeted to first-time borrowers or low- to
moderate-income borrowers," he says.
A great place to start your preparation for the underwriting
process is a toolkit offered by the Consumer
Financial Protection Bureau, which will guide you step by step
through buying a home, from just considering your options to closing on a home.
The underwriting process will begin once you fill out an
application with a lender. You'll be asked for information, including your
address, birth date, previous residences, Social Security number and income –
and all of it will have to be backed up by documentation.
Get your paperwork in order before you start the process, as you
would for a CPA who is doing your tax returns.
"Consumers should have a good understanding of their
financial situation and should be prepared to provide proof of income,
employment and assets," which could include bank accounts, investments and
real estate assets, Haynie says. "They should also be prepared to disclose
their debts, such as credit cards, auto and student loans."
What Mortgage Underwriters Examine
Major factors mortgage underwriters consider are:
and assets. If you're employed by a company, underwriters will ask for pay
Income verification can get complicated, though, if you have
inconsistencies due to a bonus or another factor. The underwriter might then
reach out to your employer to find out more about bonuses, overtime wages and
longer-term equity awards, and possibly to seek additional documentation, Oakes
If you're self-employed, more paperwork is likely to be
involved, especially around tax returns. This could include personal tax
returns and all relevant schedules because the financial institution wants to
know more about the long-term viability of your business, Oakes says.
The lender will want to know where your down payment is coming
from – mortgages typically require a down payment, except for special programs
that offer low or no down payments – and will need documentation to verify your
funding source. The lender also wants to ensure that you're not borrowing money
from somewhere else to make the down payment possible, so you'll need to show
how the money got to your account, whether through wages, gifts or other
Credit history and score. The credit score of the
home purchaser is a vital component of the underwriting process. Your score can
influence your interest rate and which mortgage programs are available to you.
You can obtain your credit score for free through AnnualCreditReport.com,
the only site federally authorized to provide free credit reports, and through
some credit card companies. Review the report at least six months before you
plan to apply for a mortgage so you can make improvements and correct any
value. One of the pivotal parts of the underwriting process is
confirming the value of your property. Even though you've agreed to a price
with the seller, an appraiser who evaluates the home's condition and the value
of similar nearby homes has to back up the price.
Your property's appraisal will then be matched with your
mortgage amount. The loan-to-value ratio, which describes the size of your loan
compared with the value of the property, also helps evaluate risk. An LTV ratio
of 80% – such as a $160,000 mortgage on a $200,000 property – is a dividing
line; if you borrow more than 80%, you'll typically have to pay mortgage insurance to the lender, says
Bill Banfield, executive vice president of capital markets at Quicken Loans.
Other property-related factors influencing underwriting include
property taxes, home insurance and homeowners association dues, if applicable,
Banfield says. Also, the lender will obtain a review of the title of the home
to ensure there are no issues – such as liens – associated with it, Oakes says.
Appraisals are subject to appraiser availability and access to
the home, however, so this is a potential point for underwriting to stall.
How to Speed Up the Underwriting Process
A prospective homeowner can make the mortgage underwriting
process go as quickly as possible by:
"You can really streamline your own process," Banfield
Using digital exchanges is another way to speed up the process
dramatically. In Banfield's experience, digital exchanges, such as when the
consumer allows the lender to connect directly to another bank to confirm
assets, simplify document sharing.
Another way to make the process less taxing is to obtain a
verified preapproval letter before you make an offer on a home.
Prequalification can give you an idea of how much you might be able to borrow,
but preapproval is more concrete. Preapproval means the lender will examine
your income, assets and credit to verify your risk factors. It allows you to be
a step ahead, Banfield says. If you're preapproved, all you'll need is an
approved home offer and an appraisal, he says. You might even be able to lock
in an interest rate.
What to Do if You're Rejected in Mortgage Underwriting
If you can't get a lender to approve your loan application, you
have options, depending on the reasons for your rejection.
If you're not approved because of a low credit score, take a
step back for a few months and work on improving your credit rating. Focus on
getting your accounts current and paying down balances.
Or you may need to adjust your offer if the appraiser doesn't
agree that the home is worth what you've offered to pay. Go back to the sellers
and see if they'll reduce the price to the appraised value so you can get your
If your income, assets or both aren't enough to afford the home
you want, you could choose a more affordable property, save more money for your
down payment, or look for assistance through a co-signed loan.
Typically, applications are either approved or denied, but
sometimes, mortgages are suspended in underwriting. If that's the case, you may
need to provide more documentation to verify employment, income or assets.
Source: To view the
original article click here
This question might seem a bit odd at first, but there can be
different stages for a loan application. Typically, the difference is when
someone has submitted a loan application to a lender but has yet to pick out a
property. When submitting an application in order to receive a preapproval
letter, there are certain things the lender will need before a preapproval can
be delivered. One, you’ll need to provide written authorization for the lender
to pull your credit report and retrieve credit scores. Loan programs today have
minimum credit score requirements. Before any approval letter is issued, credit
will need to be reviewed.
Lenders must also determine affordability. When issuing a
preapproval letter, it’s typically after the borrower and the loan officer have
had a conversation about monthly payments, down payments and closing costs.
This prequalification is the result of a general conversation between the two
regarding current credit status, employment, assets and other items. When these
items are reviewed and confirmed, it’s at that point where a preapproval letter
can be issued.
Borrowers can also request a Loan Estimate, formerly known as
the Good Faith Estimate, which will itemize various potential costs of
obtaining a home loan. Costs both from the lender and third parties. But the
loan estimate isn’t considered binding until the mortgage application is
considered a valid loan application according to regulations. There are six
things that do turn a prequalification or preapproval into an official loan
application which will then trigger a host of required disclosures the
borrowers need to review, sign and return to the lender. These six items are:
• Social Security Number
• Property Address
• Estimated Value of Selected Property
• Mortgage Loan Amount South
When this information is provided to the lender, either over the
phone, in person or in writing, the application becomes an official one and the
lender then is required to supply an official Loan Estimate to the applicants
within three business days. It is this loan estimate that will be used to
compare the initial estimate with the final numbers at the settlement table.
For example, lender charges cannot vary from the initial estimate to the final
settlement statement. Third party charges can have an aggregate variance of 10
percent from the initial estimate. For required services where the borrowers select
the provider, which is rare by the way, there is no regulation limiting changes
to the final number. If any one of the required six items is missing, the loan
application is not an official one and loan disclosures will not be delivered.
Most often this is a property address.
It’s important to note here that just because one item is
missing doesn’t mean the lender doesn’t have to provide you with an estimate of
closing costs. Your loan officer certainly will upon request. But when a
completed loan application with the minimum six pieces of information are
provided, things get official and various loan disclosures will be issued and
the clock begins to tick.
As we mapped out in our homebuying timeline, understanding what you
can afford is key, and this includes your down payment. If you're like most,
your down payment is top of mind as you embark on your homebuying journey.
Whatever you do, don't hang a white towel from your window just yet.
might be easier than you think once you understand your options and the two key
You don't need a 20% down payment. This
is one of the biggest misconceptions in the market, with many homebuyers
putting down significantly less. In fact, the average down payment for
first-time homebuyers is 5%, according to the National Association of
Realtors®. Plus, options like our Home Possible® mortgage allows qualified
borrowers to put down as little as 3%.
Putting down less than 20% means you'll be required to pay private mortgage insurance (PMI). However, if
putting 20% down is not an option or will deplete all your savings and leave
you with no financial cushion, it's probably not in your best interest. Plus,
once you've built equity of 20% in your home, you can cancel your PMI.
Assistance is available. Pulling
together enough money for a down payment may be a challenge, but the funds
don't necessarily need to come from your savings account, nor do you have to do
With many of today's mortgage
options, your down payment can come from a variety of sources other than
personal savings, including gifts from your family or employer. For many
homebuyers, this is a huge bonus.
There are also hundreds of
programs across the nation that provide down payment assistance, with eligibility
requirements varying based on your location, income and other criteria. Check
out Down Payment Resources' handy online tool, or explore HUD's listing of
available programs by state. The down payment
program benefit is typically around $10,000, perhaps enough to get your funds.
homeownership is out of reach because of the down payment. Get savvy and rev up
your engine! There are many programs and products that can help you realize
your dream of homeownership. Learn more about down payments, down payment assistance options and be
sure to follow our spring homebuying blog series.
Now that you’re settling in
to your new home, there are some important things you need to consider. The
American Bankers Association recommends the following tips.
The key to a
good budget is including as much information as you can, so that you can
adequately prepare and plan. It's important to keep accurate records of your
spending so you can spot places to save money and know how much you can
reasonably spend. ABA’s budgeting worksheet (also available in Spanish) will
help you document and categorize your expenses.
Whether you’re a
homeowner or a renter, you need insurance to protect your belongings. Check
with your local insurance agent, you might be able to get a discount if you
have things like dead bolt locks, an alarm system, or smoke detectors, or if
you already have a policy with that company, like car insurance. Also, find out
if you’re in a flood zone. If you’re concerned about flooding, you will need to
purchase a separate flood insurance policy. Learn more at floodsmart.gov.
Make sure all
of the locks on your doors and windows work properly. If it makes you more
comfortable, look into having an alarm system installed. Also, check your fire
and carbon monoxide alarms once a month to be sure they’re working. If you have
a dryer, clean the lint from the entire system, from the dryer to the exterior
vent cap. Lint is extremely flammable and poses a fire risk.
Be sure you
know all the tax deductions associated with your move and new home. If you use
a portion of your home for business purposes or moved for a new job, you may be
able to take deductions. Homeowners can deduct mortgage interest, property
taxes and loans for home improvements.
space will make it more comfortable and personal. If you’re a tenant, check
with your landlord before making major changes like painting the walls or
changing the appliances. Renters should take photos of the rental space before
moving in to document the existing condition and insist on a final walk-through
with the landlord. If you own your home, be smart about where you invest your
money on improvements to ensure you’re building equity in your home. For
example, updates in the kitchen and bathroom usually provide the best return on
may be sunny now, it’s a good idea to create a rainy day fund. The fund should
have at least three to six months of living expenses in case you or someone in
your household loses a job or becomes ill and unable to work.??
The vast majority of older American?s want to remain in their
homes as they grow older, also known as aging in place. There are a number of
costs to consider when aging in place including home modifications,
transportation and in-home medical care. One way to pay for these costs and
stay in your home is a reverse mortgage. If you’re considering a reverse
mortgage, the American Bankers Association encourages you to understand what it
is and weigh the pros and cons.
Mortgage – A reverse mortgage is a type of loan that allows you to
borrow against the equity in your home. You must be at least 62 years-old to
This is the value of your home minus debt against it.
Homeowner – With a reverse mortgage,
you are still a homeowner and still responsible for paying property taxes,
insurance and upkeep.
Repayment – When the loan is over,
you or your heirs must repay cash received from the loan plus interest. The
reverse mortgage loan becomes due when the borrower dies, sells the home or
moves out of the home. The lender may also require repayment if you fail to pay
your property taxes, fail to keep your home insured or fail maintain your home.
Be sure to read the terms of the agreement closely before signing.
Fees – Just like with any
other mortgage product, there will be fees to close the loan. Lenders may allow
you to pay the fees using your reverse mortgage. They are added on to the
balance of your loan and must be repaid with interest when the loan is due.
Annual Loan Cost – Because different reverse mortgage products can vary, it
can be difficult to compare prices and choose the best one for you. Ask your
lender for the Total Annual Loan Cost, a single annual average rate, to help
compare various reverse mortgage products.
Co-Borrower – If you live with a
spouse or partner, it is highly recommended that you apply for the reverse
mortgage together as co-borrowers. Anyone living in the home who is not a
co-borrower will be required to pay the loan or move out when you move or die.
Options – The way you take cash from your reverse mortgage can vary. You
can opt for a line of credit to take cash only when you need it, a monthly
payout, or a single lump sum.
?Shop around. Be
sure to check with multiple lenders. You can use sites like www.reversemortage.org,
sponsored by the National Reverse Mortgage Lenders Association, to find lenders
in your area.
Understand your options. Be
sure to evaluate all the options you have including applying for a home equity
line of credit or home equity loan. Also consider selling your home.
Be cautious. If
someone is selling you something and suggests you use a reverse mortgage to pay
for it, consult a trusted advisor before signing anything.
Nothing is free. If
anyone suggests that a reverse mortgage is free money, don’t believe it. Fees
are built into the loan, which must be paid back with interest when it becomes
Know your rights. After
closing the loan on a reverse mortgage you have three business days to
reconsider your decision. If you choose to rescind the loan, you must do so in
Consider borrowing jointly. If
the reverse mortgage is in one person’s name and that person dies or leaves the
home, the loan will become due. If there are two people living in the home –
make sure you’re both on the loan or able to repay the loan – otherwise, you
may end up losing the property.
Consider your age. Be
cautious if a lender is suggesting you do this at an early age. Your debt will
begin to grow and equity will decrease as soon as you take out the reverse
mortgage. The longer you have the loan, the more it will cost.
Only take what you need. Carefully
consider your payout options. Keep in mind that if you take the full amount of
the loan in one lump sum, you will be charged full interest on the largest
possible loan amount.
Reverse Mortgage Lenders Association: www.reversemortage.org
Consumer Financial Protection Bureau: http://www.consumerfinance.gov/askcfpb/224/what-is-a-reverse-mortgage.html
Federal Trade Commission: http://www.consumer.ftc.gov/articles/0192-reverse-mortgages
U.S. Department of Housing and Urban Development: http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/hecm/hecmhome?
Whether you’re preparing to rent or buy, the
American Bankers Association encourages you to be familiar with the following
for annual percentage rate, APR is how much your loan will cost over the course
of a year. This figure is almost always higher than the interest rate, because
it takes into account the interest charged as well as fees or additional costs
associated with the loan. Since all lenders use the same formula, it can be a
more effective way of comparing mortgages rather than just the interest rate.
costs, in addition to the price of the property, that buyers and sellers are
charged to complete a real estate transaction. Costs include loan origination
fees, discount points, appraisal fees, title searches, title insurance,
surveys, taxes, deed-recording fees and credit report charges.
account held by a neutral third party (called an escrow agent) who works for
both the lender and the borrower. Escrow accounts are usually required by
lenders to cover property taxes and mortgage insurance. After an initial
deposit, borrowers pay into the escrow monthly – usually as part of the
accurate estimate of fees associated with a loan provided to the customer by a
mortgage lender or broker. A GFE is required by law under the Real Estate
Settlement Procedures Act (RESPA). The estimate must be provided within 3
business days of applying for a loan.
individual or company who connects borrowers and lenders for the purpose of
facilitating a mortgage loan. Unlike a mortgage lender, a broker does not make the
loan or service the mortgage. A mortgage broker may represent various lenders
or may offer loans from one single source.
can pay a lender points to reduce the interest rate on the loan, resulting in a
lower monthly payment. The cost of one point is equal to 1 percent of the loan
amount. Depending on the borrower, each point lowers your interest rate by
one-eighth to one one-quarter of a percent.
legal document detailing the terms under which the lessee (the renter) agrees
to rent property from the lessor (the property owner). A lease guarantees use
of an asset and guarantees regular payments from the lessee for a specified
number of months or years.
from the landlord to the tenant ordering the tenant of vacate the property. In
most cases, the notification is given because the tenant either broke one of
the terms of the lease or is not following through with payment of rent. The
tenant is typically given 30 days to vacate the premises. Similarly, a
notice to intend to vacate may be required under the lease for the tenant to
notify the landlord before vacating the property.
out by a prospective tenant, which typically authorizes the landlord to conduct
a credit check to determine the suitably of the individual. Often, there can be
a non-refundable fee associated with the rental application.
in addition to rent, that a landlord requires a tenant to pay to be kept
separately in a fund for use should the tenant cause damage to the premises or
otherwise violate terms of the lease.
An important step to finding a home, whether you’re renting or
buying, is ensuring that you have a good credit history. The American Bankers
Association suggests the following tips to improve your credit score.
Your credit report illustrates your credit performance, and it
needs to be accurate so that you can apply for other loans – such as a
mortgage. Everyone is entitled to receive a free copy of his or her credit
report annually from each of the three credit reporting agencies, but you must
go through the Federal Trade Commission’s website at www.annualcreditreport.com?,
or call 1-877-322-8228. Note that you may have to pay for the numerical
credit score itself.?
Payment history makes up 32 percent of your VantageScore credit
score and 35 percent of your FICO credit score. The longer you pay your bills
on time, the better your score. Avoid missed payments by setting as many
of your bills to automatic pay as possible.
VantageScore’s scoring model, created by the three major credit
bureaus, will now weigh rent and utility payment records. This will allow it to
score as many as 35 million people who previously couldn’t get a credit score.
Racking up big balances can hurt your scores, regardless of
whether you pay your bills in full each month. You often can increase your
scores by limiting your charges to 30 percent or less of a card's limit.
Apply for and
open new credit accounts only as needed.
Keep this in
mind the next time a retailer offers you 10 percent off if you open an account.
However, if you need a new line of credit, don’t jump at the first appealing
offer; compare rates and fees offered through mail solicitation, on the
Internet or at your local bank.
FICO, closing accounts can never help your score and can in fact damage
Using legitimate, non-profit
credit counseling can help you manage your debt and won’t hurt your credit
score. For more information on debt management, contact the National Foundation
for Consumer Credit (www.nfcc.org).
Preparation is key to navigating today’s housing market. As part
of American Housing Month, ABA offers the following tips to help prepare
Before you begin the home loan application process, determine what
you can realistically afford. Take into consideration your credit score,
how much debt you currently carry and what type of down payment you are
prepared to make.
While each bank may require different documentation, you may be
required to furnish the following information depending on your employment and
Financial statements (one that is less than 60 days old);
Copies of additional monthly payments such as car loans, credit
cards, and student loans; and
Any other information (such as proof of additional income) that
you think will help your banker to positively evaluate your credit request
Knowing the fundamentals of the home loan process is an excellent
way to prepare to choose the right mortgage. Make sure you are familiar with
interest rates, loan terms and additional fees associated with buying a
Beyond the interest rates, there are closing fees and points and
commissions. You will want to compare these for all the lenders on your list.
There are several calculators available online that will help you determine
which loan provides the best value, including these from ABA (http://www.aba.com/aba/static/calculators.htm).
Get references from family and friends and do your research. Call
your local Better Business Bureau and ask if it has had complaints about any of
the lenders you are considering. Keep in mind, federally insured banks are
required to operate under a high level of regulatory supervision. A fully
regulated bank may be your best choice. To find a fully regulated bank in your
area, use the FDIC’s BankFind webpage at http://research.fdic.gov/bankfind.
Slick TV ads, telemarketers or door-to-door salespeople will often
offer fast, easy loans for houses, cars and home repair, but not disclose all
of the details. Read the fine print. If it sounds too good to be true, it
When in doubt, ask for clarification from your lender. Discuss how
long the loan process will take, how you will communicate – by phone or email,
and who will service your loan.
Source: To view the original article click here
rates hovering near one-year lows, some homeowners might be enticed to
refinance their current mortgage to save on their monthly payments or even pull
out some cash for a renovation project.
you’ve owned your home for a short time or you’ve had your mortgage a bit
longer, a mortgage refinance should involve careful
consideration. After all, you’ll pay fees and have to go through the mortgage
approval process again, so you want to have clear goals to improve your overall
financial picture with a refinance.
To help you
decide whether a mortgage refinance is right for you, here are the best (and
worst) reasons homeowners decide to refinance.
reasons to refinance your mortgage
your interest rate
Known as a
“rate-and-term” refinance, this is the most popular reason homeowners refinance
a home loan. Homeowners with a higher interest rate on their current loan may
benefit from a refinance if the math pans out — especially if they’re
shortening their loan term from 30 years to, say, 10 or 15 years.
mortgages typically have lower interest rates than longer-term loans because
you’re paying back the loan in less time, but your monthly payment will likely
go up. A rate-and-term refinance can result in big savings for a homeowner if
there’s room in their budget for it, says Kurt Johnson, senior vice president
with Mr. Cooper, a Dallas-based mortgage lender.
“If you can
afford to shorten the term of the loan and you are substantially lowering your
rate, it could be a win-win as you’re paying off your mortgage faster and
saving a ton of money on interest,” Johnson says.
If you have a
hefty amount of high-interest debt on credit cards or personal loans, a cash-out
refinance can help improve your cash flow and save you money in the
long term, possibly even if you take a slightly higher mortgage rate.
to this move is that you’ll be unable to deduct the
mortgage interest you pay on the cash-out amount that exceeds
the current loan balance if the funds aren’t used to “buy, build or
substantially improve” your home, according to the IRS.
myth that in order for a refi to make sense that you have to lower the rate by
1 percent or more, but I disagree,” says Elizabeth Rose, a certified mortgage
planning specialist with AmCap Home Loans in Flower Mound, Texas. “Even with
losing some mortgage interest deductibility, in the long run it’s improving
your cash-flow situation, saving you money and getting you out from underneath
your debt quicker.”
If you have a
home loan with private mortgage
insurance, a refinance could help lower your monthly costs, says Dan
Snyder, co-founder of mortgage lender Homeside Financial based in Columbia,
Maryland. Snyder is also CEO of Lower, a Columbus, Ohio-based direct online
especially true if you have a loan insured by the Federal Housing
Administration, or FHA. While FHA loans can be a viable path to homeownership
for borrowers with little savings or not-so-stellar credit, they come with a
big downside: mandatory mortgage insurance. After paying an up-front premium of
1.75 percent of the loan amount, most FHA borrowers continue to pay an annual
mortgage insurance premium of 0.85 percent of the loan amount for the remainder
of the 30-year term that cannot be canceled. That adds up over time.
PMI, homeowners can refinance an FHA loan into a conventional mortgage once
they gain 20 percent equity in their home.
reasons to refinance a mortgage
money for a new home
isn’t free; you’ll pay roughly 2 percent or more in closing costs, and it can
take a few years to break even. Moving up to another home before you’ve
recouped those costs means you’ll probably lose money even if you manage to
lower your monthly payments in the interim.
homeowner is planning to move within the next five years, they may not get as
much benefit from a refinance,” Snyder says. “Often, the costs (of a refinance)
could outweigh the benefits.”
A refinance break-even calculator can help you
decide how long you should stay in your home after a refinance to recoup the
on luxury purchases with a cash-out refinance
home equity like an ATM to misuse it without a clear financial goal in mind is
dangerous, Rose cautions. Using a cash-out refinance to pay for fancy
vacations, a new car or RV, invest in iffy ventures, or to splurge on other
luxuries can lead to even more financial turmoil, she says.
“There has to
be some sort of net tangible benefit to the homeowner to refinance,” Rose says.
“I don’t recommend cash-out refinancing for anything that won’t add security to
or improve your financial picture.”
into a longer-term loan
lower rate and lowering your payments may seem like a great move, but
refinancing when you’re already halfway or more through a 30-year mortgage is
rarely a good idea, says Steven Jon Kaplan, CEO of True Contrarian Investments
in New York City.
refinance, the most important consideration is how much interest is being paid
throughout the remainder of the loan, and how long the loan will continue,”
Kaplan says. “Because all mortgage loans are amortized the same way, almost all
of the monthly payments in the early years consist of interest, while almost
all of the payments in the final years of a mortgage consist of paying down
in the final half of a mortgage, such as the final 15 years of a 30-year
mortgage, it’s a very bad idea to refinance because you are finally at a point
where you are paying back more principal than interest. When you refinance, the
amortization begins from scratch so you will waste the first decade or so paying
off almost all interest.”
off your home faster if you haven’t met other financial goals
into a shorter-term loan solely to pay off your loan faster can short-change
you on other financial goals. More of your money will be tied up in your house
that could be put toward increasing your retirement account contributions,
college fund savings, paying down debt or making investments with higher
checked off those boxes and if the spread between your current interest rate
and a shorter-term refinance rate isn’t that large, consider knocking down your
mortgage debt another way, recommends Johnson, the Mr. Cooper lending
always pay more principal on your existing mortgage to pay it off in 15 years
while giving yourself the option of making smaller payments if you are faced
with financial hardship (in the meantime),” Johnson says.
recently bought your home
Even if rates
dip slightly within the first year of your home purchase, refinancing into
another mortgage too soon isn’t advisable, Johnson says.
lender churning, which is usually beneficial for the lender but, when refinance
costs are considered, rarely benefits the customer,” Johnson says.
Source: To view the
original article click here
While everyone's homebuying timeline is going to be
different, it's highly recommended that everyone work with their lender to get
pre-approved before beginning to house hunt. Shopping with a
pre-approval letter in hand boosts the confidence of both you and the seller
which helps your journey run a lot smoother. So—what is a pre-approval letter
and how do you get one? Gather your travel documents and let's hit the road.
What is a pre-approval
A pre-approval letter is a letter from your
lender that tells you the maximum amount you are qualified to borrow. Getting a
pre-approval letter is not a loan guarantee, it is simply documentation that
states how much a lender is willing to lend you—pending further details.
By starting your
homebuying process in the lender's office instead of in an open house, you can
discuss loan options and budgeting with your lender. This should provide you
additional guidance for your house hunting price range.
are also valuable to the seller because it proves you are a serious buyer. A
pre-approval letter confirms that your credit and documentation have been
verified—which can help you move faster in the competitive spring homebuying
market. Be aware, pre-approval letters have an expiration date so be sure to
ask your lender how long your letter will remain valid.
What is your lender
Start by getting in
touch with a lender and filling out a loan application. Your lender will ask
you to provide W–2 statements, bank statements, credit report and tax
returns. They will want to make sure you are a good credit risk and have the
financial ability to make your payments on time.
To do this, your
lender will assess and evaluate the “four Cs”:
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
Getting a pre-approval
letter doesn't mean you are committing to that lender for your loan. You will
want to talk to multiple lenders to decide who
can offer you the best deal that meets your needs. Note, the amount listed on
your pre-approval letter not necessarily how much you should borrow – it's the
maximum. Only borrow an amount that you feel comfortable repaying.
What to know more
about the homebuying process? Be sure to follow our spring homebuying series.
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