Be prepared when you meet with your lender
When applying for and obtaining a mortgage, the lender will ask for a lot of information. During the bubble, requirements were a lot looser than today. Following some of the tips from Marcia Stolle, will help make the process a little more bearable. And when you hear the words “paper trail” know that they mean business and do exactly as they say. Keep your eye on the goal the closing table.
Here are some tips from Marcia Stolle of Paramount Mortgage that can help you be prepared.
Marcia says:
Applying for and obtaining a mortgage can be confusing and stressful, however it doesn’t have to be that way as long as you adequately prepare yourself for the process.
In life, there are many factors and events that are out of our control and when it comes to mortgages, the same theory applies. Examples of situations that can’t be controlled in the context of obtaining a mortgage loan include fluctuating interest rates and home values. However, just as in life, there are several things that you CAN control and manage when preparing to purchase or refinance a home, such as your recurring monthly liabilities, credit score and the amount of cash saved for a down payment. Following the tips below will put you and your family in the best situation possible to obtain home financing!
Before beginning the process of looking for a new house, request a free credit report from the 3 reporting bureaus. By law, each reporting bureau (Equifax, Experian & Transunion) must provide consumers one free report every twelve months which will give you an idea of not only your credit score, but more importantly what your lender will see and consider a recurring liability. Start by going to annualcreditreport.com to request the free report.
In order to maximize your borrowing power (i.e. obtaining the largest loan possible), you must do one of two things (or both if possible): either (a) increase your monthly income, or (b) decrease your monthly liabilities. Since the amount you can borrow is directly related to your debt to income ratio, reducing or paying off outstanding balances listed on your credit report will resultantly increase the loan amount for which you can qualify.
A credit score is a numerical expression (typically between 300-850) based on a level analysis of a person’s credit files, to represent the creditworthiness of that person. Think of it as an objective way to compare the riskiness of borrowers, just as the SAT or ACT test is an objective standard to predict academic success of high school students. Simply put, higher credit scores translate into lower interest rates!
Typically, you can maximize your credit scores by simply paying your bills on time, getting current on all past due amounts, reducing the outstanding balances on your credit cards and not opening new accounts. If you are getting ready to purchase a new home, make sure you start or continue to pay everything on time, reconcile past due balances and reduce existing credit card balances for at least six months prior to purchasing a new home.
Finally, when purchasing a home, you will usually be required to put some of your own money down or towards the purchase of your home (unless you are an eligible veteran, in which no money down is permitted on Veterans Administration or VA loans). Depending on the specific loan program best suited for you, you will typically be required to contribute at least 3.5% of the purchase price as a down payment while other programs require at least 5% of the purchase price as a down payment. Not surprisingly, a larger down payment will result in both a lower interest rate and monthly payment – so start saving today!
