| A mortgage is a little different from most
other loans. Usually much larger dollar amounts are involved, which
makes the lender more careful with regards to your credit worthiness,
the value of the asset the mortgage is tied to, making sure the property
has a clean and transferable deed, and making certain the home is
insured properly against fire, flood, etc. We have made these services
available to you for both comparison purposes or simply to contact
any of these providers for additional information. We realize many
of you may already have some or all of these needed services already
in place but, you may want to make certain you are getting the best
service or pricing available.
Your Credit
We all know the importance and impact of your credit
history on your borrowing power. Although we do not recommend having
every
lender in town pulling your credit, it may be a good idea to have
a good indication of what to expect from your credit report before
going into the mortgage process. The current credit reporting system
is very complex and hard to understand with regards to the influence
of high balances on credit cards, late payments, collections and
inquiries. If you know your credit is quite good you may want to
simply have your end lender pull your credit as you move through
the loan approval process. If you haven’t looked at your credit
lately or if you want to see you much monthly debt your report is
showing, you may want to have this information available as you
begin the process. Keep in mind that your total monthly debt that
appears on your credit report will be added to the mortgage debt
you are applying for to arrive at what will be your debt ratio.
This ratio, combined with your credit scoring will determine your
ability to qualify for a certain mortgage amount. Credit scoring
often influences loan flexibility including amount of down payment
required, can you avoid mortgage insurance, can you qualify for
interest-only options and more. It would be very difficult to give
you a complete overview of these score ratings, as different lenders
have some variations for each of these score requirements. Again,
we recommend you make contact with a mortgage professional so you
can work with them to go over each of your product options. Some
general guidelines are: 500.. the minimum score for any mortgage
our lender base will allow. 620 Fannie Mae’s normal minimum,
again your lender may be able to get you qualified below this score
if you have other strengths. 680, normal interest only and stated
income minimums, 720 or higher will allow you most mortgage options.
These are simply general cutoffs that give you some idea of where
you might stand. Your lender will be able to take your individual
circumstances and work them to your maximum potential.
Home Value
The appraisal insures that the value of the property
will be more that the mortgage amount. You are normally allowed
to choose your
own LICENSED appraiser. Some of the things you may want to consider
are the cost of the appraisal, will the home appraise for the value
you think it should before going to the final expense of an appraisal
and can the appraisal be done in a timely manner, as to not hold
up the mortgage process. The most important variables that an appraiser
uses in determining your home’s value is the value of similar
homes that have sold in the area of the subject home. Usually 3 “comps” are
used and adjustments are made to different square footage, condition,
pool, and upgrades. For purchases, the loan amount will be determined
from the appraised value or the purchase price, which ever is less.
For refinances, the loan amount will be determined by the appraised
value along with other pertinent guidelines such as how long you
have had your current mortgage, seasoning. This seasoning can vary
with different lenders or loan products so, this should be discussed
with you loan officer. The appraisal will impact the purchase, down
payment, if it appraises at less than the purchase price. For a
refinance, it will impact the amount of “cash-out” you
may be allowed. Or if you can get out of a mortgage insurance situation.
If you would like to compare different appraisers in your area with
regard to their fees and timeframe you may want to try http://www.appraisers.org/
, The link we have provided below will not give you an appraisal
that can be used for your final mortgage but it should be able to
help you determine basic values and what the market is in your area.
Insurance
You will be required to make sure the lender’s
collateral is protected against any type of damage or destruction.
It is normally
your choice and the amount of coverage can normally be determined
by replacement value or loan amount. The replacement value is often
calculated from the appraisal. As with most services, you may want
to shop for different coverage costs or a provider that may be stronger
in a certain area. Some insurers offer better rates for combining
all of your insurance (Home, Auto, Life etc.) needs with a single
provider.
It is important to have your coverage and premiums determined
as early as possible in the loan process. The premium (Yearly payment)
will be needed for your loan underwriter to calculate your total
monthly housing expense (Principal, interest, property taxes and
insurance). This expense is divided by your monthly gross income
to calculate your debt ratio which is an important guideline in determining
your ability to qualify for a certain loan amount. Your loan consultant
will be able to better explain these ratios, what the suggested allowable
percentages are and, how far you can “stretch” those
numbers with other strengths such as assets, credit scoring or down
payment.
You may want to have a look at how your insurance quote compares
with other providers…
Title or Escrow companies
Every lender, as well as buyer, will want to be sure that the home
they are buying is free of liens or property encumbrances. A typical
mark against a property could be a contractor that has done work
on the home that was never paid for. That contractor could then file
a lien on the property that would have to be clear up before the
deed could be transferred. This same situation could occur if back
taxes are owed. You will also want to know if there are any easements
or right of ways attached to your property. These issues are researched
and recorded by your Title Co.
It is also the role of the Title or
Escrow Co. to determine the various City, County, or State taxes
due at closing. This along with
prepaid interest, lenders fees, recording fees, required escrow reserves,
and Title fees are totaled for you final closing cost. This final
cost should be fairly close to the Good Faith Estimate provided by
your lender. But, keep in mind, the lender only controls the “800” series
of numbers on the Good Faith. The Title Co. provides the actual final
cost of closing the mortgage. And sometimes factors used in determining
a Good Faith can change or have fees that could not be determined
at the time the Good Faith was created.
You may want to contact a
Title or Escrow Company in the area of the home you are buying. They
can give you accurate quotes regarding
these fees so you are more certain of what the cost of your purchase
or refinance will be…
Click here for Title Loan Sources
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