|
Mortgage Application Walkthrough
Preparation is essential to ensuring total success
in acquiring your mortgage. We recommend that you follow these steps before
applying for a mortgage.
Review your Finances
Observe your income and determine where it is now and where will it be
in the future. Do you have upcoming expenses significant enough to interfere
with mortgage payments; if yes, to what degree? Observe your obligations
and financial lifestyle and figure out how much you can comfortably afford
each month. Do not forget to take taxes, insurance, and other costs into
consideration. After understanding your financial standing, you will be
able to select a loan type that works for you.
Examine your Credit
Obtain and thoroughly evaluate a copy of your own credit report. Check
for inconsistencies and dispute any questionable entries. Also check for
information that is not present in your report. Study your credit history
and be prepared to explain any permanent faults. Knowing your credit history
will give you an advantage when a lender questions your financial background.
Select a Lender
Choosing the right lender is easy when following these two basic steps:
plan filtering and cost evaluation. To start plan filtering, collect a
list of lenders and investigate their mortgage plans. From your list eliminate
lenders who do not offer the program you want. Once you have narrowed
down your list, you can then start cost evaluation. Consider the following
and determine how each will impact your mortgage: interest rates, broker
fees, application fees, credit report fees, points, prepayment penalties,
and appraisal costs. After you have purged your list of unreasonable lenders,
you are then ready to submit your application.
Apply
Prior to applying for an online mortgage, collect necessary documentation
to support any claims you will make on the application. You will be asked
for information regarding your employment, credit rating, income, assets,
current and previous liabilities, and other details used to determine
your financial competence. Do not intentionally submit an online mortgage
application containing invalid information in hopes of receiving a larger
mortgage; you could be faced with criminal penalties. The lender will
then check your credit and you will be asked to provide documentation
including recent payroll stubs, federal tax returns, W-2 forms, bank account
statements, investment earnings reports, asset statements, rental agreements,
proof of insurance, and more. If you are pronounced creditworthy, an appraiser
will likely affirm that your loan amount matches the value of the home
you plan to purchase.
Lock or Float
Guarantee yourself the best rate and contract terms by locking or floating.
It is a general rule to lock-in when interest rates are on the rise. This
is advantageous because you will preserve a low rate for a longer duration
with a lock-in. When interest rates are declining you should float to
take advantage of falling rates before you close on your loan. If possible
lock-in points and try to set the lock on application rather than on approval.
Make sure your lock-in period is ample enough to allow for settlement;
lock-in periods longer than 60 days could be cost prohibitive.
Pre-Qualified vs. Pre-Approved
Ultimately, you want to become pre-approved; it is a promise that you
will receive a loan if you still meet the lender's requirements at the
time of purchase. Pre-qualification only states that you have been deemed
creditworthy enough to borrow specific dollar amount. While falling under
either category is beneficial, telling a seller you are pre-approved is
more advantageous.
How Does Credit Inquiry Affect Me?
The impact of a consumer credit inquiry is minimal.
Inquiry itself will show on your report for a long time; all inquiries
are displayed for the past 24 months. Credit score matters more than inquiry
requests and will take a small hit anytime you apply for credit. Inquiry
will only affect your chances of approval only if your credit score is
border-line for eligibility. For example, you have a credit score of 621
and you apply for a conventional mortgage that requires a 620 score, inquiry
may jeopardize your chances for a loan. Unfortunately the bureaus do not
release public information about how scores are calculated. The bureaus
provide general guidelines but there is no exact formula to determine
how any one event will impact your score.
How do I learn my credit score?
We recommend that you do not pay the bureaus
for your credit score as the scores they provide given are calculated
differently than the scores lenders and creditors receive. This is fairly
well documented; and it has been concluded that bureaus tend to provide
lower scores to those requesting their own credit information. To discover
your true credit score, ask to see the report a lender pulls when you
apply for credit -- that is the only way to know where it truly stands.
Be advised, there can be a great discrepancy between the three bureaus
as well (Experian, Transunion, and Equifax.)
|