Obtaining home mortgage financing can be a very smooth or a completely "hair raising" experience depending on how you go about the process. The following are suggestions for those looking to make their next home purchase or refinance experience as smooth as possible.
Checking your credit regularly is the best way to ensure that you can deal with any unexpected issues that may show up on your credit report. If you know that you are going to be obtaining mortgage financing ahead of time, you will be able to identify any unexpected issues by reviewing your credit several months in advance. If your credit report does present issues that adversely affect your credit rating, you will have a significant window of time to deal with these issues. There is often a stigma associated with having your credit pulled. This is based on the fact that having your credit re-pulled repeatedly over a short period of time can lower your scores. However, this has a relatively negligible affect compared to other factors used in credit scoring and usually only lowers the scores for a period of couple of months. In general, if you pull your credit several times within a short period of time this should be considered as a single inquiry and thus will have a very limited impact on your score (for more information go to www.myfico.com). If you can maintain a positive credit rating you will find that you can often qualify with less documentation while obtaining more favorable rate pricing on your loan.
When a lender examines your loan application in order to determine whether or not to extend credit to you they are examining 4 basic criteria:
Your Debt to Income Ratio is probably the most important factor that a lender considers in approving you for a loan because it directly reflects your ability to make your monthly payments. To determine your Debt to Income Ratio, a lender will add up the minimum required monthly payments listed on your credit report. Making a significant purchase that requires financing will create an additional liability on your credit report and therefore will increase your Debt to Income ratio. This can potentially lessen your qualifications for a loan. Taking on additional debts can actually lower your credit score. If you feel that you have major purchases that you need to make, plan those out into the future once you are in the home or your financing is complete. If it is absolutely necessary to make the purchase right away, you will want to discuss the possible impacts that the purchase might have on your financing with your loan officer.
Lenders will want to verify that you have seasoned assets in reserve and to cover your down payment and closing costs. Lenders want to know that you ve had the funds required for your investment into a home (down payment and closing costs) plus your required reserve in your possession for a given period of time (usually 60 to 90 days). If you can avoid transferring funds from one account to another 60 to 90 days before you begin the process through closing, you will lessen the amount of documentation required to verify your funds to close and reserves and decrease the time your loan file will spend in underwriting.
There is a lot of excitement involved in buying a new house. If you are looking at a home on the high end of your price range, you may find yourself putting your house payment into a whole new perspective. Although you may really want this house at the moment, if you do move forward with a loan that comes with a payment that is considerably higher than you are used to paying, you may find yourself making compromises in lifestyle that you may regret later. So, it is really important to look closely at your bottom line before making the choice to take on a given mortgage. It is important to consider your overall budget now and into the future as well as how long you think you will practically be in the home. This is also very important when selecting from a variety of different loan programs.
Finding a good loan officer is a very important factor in your financing. Because buying or refinancing may be the most significant transaction you ever make, you really want to make sure that you are in good hands. You want the loan officer that you choose to perform the necessary function without making costly mistakes and also to provide you with the level of service you deserve. This is an extremely important transaction and you will be sharing some of your most confidential and personal information with your loan officer. Having someone you like working with makes you comfortable can make the entire process a lot less stressful. You also, want someone who you respect. You want to know that the person handling your loan is an expert in their field who is fully competent and capable of handling the transaction. You also want someone who is going to provide the highest level of customer service.
Trust is probably the most important factor involved in selecting a loan officer or mortgage professional to work with. A great way to find a loan officer that you can trust is through your referral network. If you can't find someone within your referral network, there are a variety of good loan professionals available that can help you with your home finance needs. You will just need to be a little more diligent when searching them out. When you approach a mortgage professional to help you with your financing, don't be afraid to probe them with questions. From the outset, you want to do your best to get a good feel for whether you would like working with them, that they have the experience level and commitment to customer service that you deserve and whether they have your best interest in mind.
Although, there are a variety of elements which will affect the overall outcome of the loan process, following the suggestions listed above will typically lead to a less stressful experience, will help to ensure the loan is completed more quickly and will allow for a much smoother closing overall.
Joel Wilder, is a Sr. Loan Consultant, with AmericaOne Finance. He can be reached by phone at (206) 388-3602 or email at email@example.com.
I asked Joel to write this article after meeting him at his home inspection and found him to be a good listener and a very good explainer. His tips make a lot of sense to me and demonstrate his very professional style. -George