Selecting a Lender
Finding a mortgage lender is not a problem. Selecting someone who will help you find the best loan product for your situation even if it means sending you to another lender is paramount. There is a huge advantage to be able to sit across the table from someone you’re doing business with and look them straight in the eye. It’s difficult to make an informed decision based on a website and a phone call. Doing business with a full-time professional who specializes in residential loans like you’re trying to get is important. You want the loan officer to be familiar with local conditions, values and practices. It’s to your benefit to have a loan officer who has the experience to put the unusual transaction together even if yours is not.
Here are a few questions that will be helpful in selecting the right loan officer.
- What percentage of your business are FHA & VA compared to conventional mortgages and how long have you been doing them?
- What percentage of your loans close on time according to the sales contracts?
- Will my credit score affect my interest rate?
- Will you help me select the best loan product for me regardless of your commission?
- Are there prepayment penalties on any of the loans we’re considering?
- Are there any restrictions on refinancing any of the loans we’re considering?
- When is my loan rate locked-in? Is there a charge for that?
- Is your loan underwriting in-house?
As a real estate professional, I can be your best source of information and can recommend a trusted lender. If you have any questions as to what kind of answers you should expect, please give me a call.
The Yes’ and No’s
to keep your dream home in the palm of your hands
There are many things that can come up during your home loan pocess. Here are a few things to do and don’t while you are in the process of purchasing your home:
- Lenders may require a verification of rent so be sure you keep your monthly rent payments satisfactory. DO continue to pay on any housing debt, whether renting or owning.
- Lenders may require a verification of employment, which can be done just days prior to closing. DO keep your job during any part of the loan process (yes, some people quit their jobs while getting a loan and then no longer qualify).
- DO ask questions throughout the process with your lender if you are unsure about the loan process or things that may affect it in a negative way.
- DO keep your bank accounts in good standing, no overdrafts.
- DO make sure that any large deposits in your bank account can be verified and sourced.
- DO be honest and up front with your lender from the very beginning to help prevent any issues down the road.
- As well as an original credit report is pulled during the prequalification process, lenders may also pull an additional “soft pull” credit report just days prior to closing.
- DON’T get behind on credit card or loan debt, nor apply or open up an additional debt that could increase your debt to income ratio, which could cause you to no longer qualify for the loan. The new car to fit in your new garage or the new boat to fit in your new dock can wait till after closing!
- DON’T transfer credit card balances.
- DON’T pay charge offs. (unless your lender says to do it and you can verify the funds you used to pay off the debt)
- DON’T pay off any collections. (unless your lender says to do it and you can verify the funds you used to pay off the debt)
- DON’T close any credit card accounts.
- DON’T increase your credit card debt.
- DON’T consolidate debt or credit cards.
- DON’T pay off loans or credit cards unless your lender says it’s ok and you can verify the funds you used to pay off the debt
As a rule of thumb, DON’T change anything during the loan process without discussing with your lender FIRST!
FHA or Conventional Comparison
Buyers with a minimum down payment are generally faced with the decision of whether to get a FHA or a conventional loan. With the new 3% down payment program on conventional loans, it may become more confusing which loan to pursue. The two loan programs have mortgage fees that can differ greatly. FHA has a 1.75% up-front mortgage insurance charge in addition to the monthly mortgage insurance charge which was recently lowered by .5%.
FHA’s mortgage insurance is a fixed amount where conventional mortgage insurance providers’ fees are determined by individual companies and according to the credit score of the borrowers. A borrower with a good credit score will be charged less than a borrower with a marginal credit score.
Mortgage insurance on conventional loans can be cancelled when the equity in the property reaches 20%. FHA mortgage insurance in most cases, is paid for the life of the mortgage. Once a borrower has a 20% equity in their home, to eliminate the monthly FHA mortgage insurance, they would need to refinance the home with a conventional loan and would not be eligible for any refund of the up-front fee paid at closing or added to the mortgage.
If a borrower has a low credit score, FHA may be the better choice because conventional underwriters may have a higher minimum score. FHA loans also tend to be more lenient than conventional loans when a borrower’s total monthly debt exceeds 45% of their monthly income. FHA tends to allow borrowers a shorter time frame after foreclosures and bankruptcies.
The decision-making factor is which mortgage will provide the lowest cost of housing including payment and all loan fees. A lot of information is necessary to make a good decision and typically, the borrower isn’t able to acquire it on his/her own.
A trusted mortgage professional is very valuable in not only providing the information but guiding the borrower through the entire process. Your real estate professional is uniquely qualified to make such a recommendation.