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Questions Lenders Ask You

November 19th, 2009
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What should you expect to be asked when you try to qualify for a San Diego mortgage loan?

Questions to Expect From Mortgage LendersData Provided By Know what to expect before you apply.

Your mortgage lender will want to know a lot about you before approving your loan application, and justifiably so; they and their underwriters want to be assured that you meet their minimum level of creditworthiness before lending you money.
Areas of questioning.

Here are the general areas of questioning you can expect from a lender: 
1. Employment and income 
2. Outstanding debts 
3. Cash reserves and assets 
4. Down payment 
5. Loan purpose 
6. Property use 
7. Property type
 
Employment and income
Where do you work?
How much do you make?
How long have you been at your job?
How is your income derived — steady salary or irregular income? If it’s the latter, you may need to provide more details to obtain a favorable interest rate.
Outstanding debts
What recurring debts do you have?
How much do you pay a month for auto loans?
Credit cards? How much of your monthly pretax income do these debts consume?
Cash reserves and assets
How much money do you have in the bank?
How much will be left after you pay your down payment and closing costs?
Down payment
How much money are you putting down?
Is this your own money?
If not, is it a gift from your parents?
A nonprofit agency grant?
Loan purpose
Is this San Diego ca mortgage for a home buy or refinance?
If it’s a refinance, do you want to take cash out at closing to pay off other debts? If so, how much?
Property use
Do you plan to live in the house?
Is it investment property?
Property type
A condominium?
A duplex?
The following responses tend to work in your favor:
Steady employment (two or more years) with the same employer or in same line of work.
Low debt: no recent major buys (such as automobiles) and a debt-to-income ratio of 36 percent or less.
Loan is for straight home purchase (or rate-and-term refinance).
Property is detached single-family home to be used as primary residence.
Down payment of at least 5 percent of sales price with your own money.
You’ll have at least two months’ worth of mortgage payments in the bank after closing.
These responses tend to work against you:
Self-employed or contract worker.
High debt: credit cards maxed out, total debt-to-income ratio more than 36 percent.
Property is a duplex or condominium, to be used as a vacation home or rental.
No cash left after home buy and closing costs.
Down payment is 3 percent or less of buy price and money is borrowed.
Source: Move.com

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What Questions To Ask Your Lender

November 7th, 2009
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The Ten Questions To Ask Your Lender

 Here are the 10 key questions to ask at application time to help you find the best overall mortgage loan. If you have already selected a lender and are ready to apply, make sure you have the answers to these questions first.
  
1. What is the interest rate on this mortgage? 
2. How many discount and origination points will I pay? 
3. What are the closing costs? 
4. When can I lock the interest rate and what will it cost me to do so? 
5. Is there a prepayment penalty on this loan? 
6. What is the minimum down payment required for this loan? 
7. What are the qualifying guidelines for this loan? 
8. What documents will I have to provide? 
9. How long will it take to process my loan application? 
10. What might delay approval of my loan?
Once you’ve narrowed the lender field to a short list of finalists, it’s time to compare their offers.
 
1. What is the interest rate on this mortgage?
To determine exactly what you’ll pay over the term of the loan, you need to know the rate. Rates change quickly, and if your credit is less than perfect, you may not be offered the lender’s lowest figure.
To effectively compare different lenders’ programs, ask for the annual percentage rate (APR) of the San Diego Ca mortgage interest, which is generally higher than the initial quoted rate because it includes some fees. But beware: the APR found in advertisements can be misleading. Mortgage lenders don’t always include all the fees they charge in the calculation that determines APR, so customers who use that figure to shop rather than an itemized breakdown of rates, points and fees may end up comparing apples to oranges.
2. How many discount and origination points will I pay?
Lenders may charge prepaid mortgage interest points to lower your interest rate or other points that have no benefit to you at all. Find out how many you’ll be expected to pay and which kind of points they will be.
3. What are the closing costs?
Mortgages come with fees for services provided by lenders and other parties involved in the transaction. You want to know what those fees will be as early as possible. Lenders are required to provide a written good faith estimate of closing costs within three days of receiving a loan application.
4. When can I lock the interest rate and what will it cost me to do so?
Your interest rate might fluctuate between the time you apply and closing. To prevent it from going up, you may want to lock the rate, and even points, for a specified period. Ask your lender if lock fees apply. Also, find out what the experts are expecting rates to do, read Rate Trend Index.
5. Is there a prepayment penalty on this loan?
There may be a prepayment penalty on your loan. Some penalties are 1 percent of the loan amount, others are equal to six months’ interest, some apply only when you refinance or reduce the principal balance by more than 20 percent, and some kick in if you sell your home. Find out the duration of any penalty period and how the penalty is calculated. Some lenders offer lower interest rates to buyers who accept prepayment penalties.
6. What is the minimum down payment required for this loan?
The rate and terms of your loan will be based on a down payment figure, typically 3 to 20 percent of the buy price. If you can put more money down, you may be able to lower your rate and improve your terms; if you come up short, you may be required to get private mortgage insurance (PMI).
7. What are the qualifying guidelines for this loan?
These requirements relate to your income, employment, assets, liabilities and credit history. First-time home buyer programs, VA loans and other government-sponsored mortgage programs typically offer easier qualifying guidelines than conventional loans.
8. What documents will I have to provide?
Most lenders will require proof of income and assets before approving your loan, and may require other documents as well. Buyers with excellent credit may qualify for a no-documentation or “no-doc” loan, but they can expect to pay a hefty down payment and higher interest rate.
9. How long will it take to process my loan application?
The answer will depend on several variables. When the loan business is brisk, underwriters get backed up, verification takes longer, appraisals move slower and other bottlenecks develop along the loan pipeline. Lenders may say two weeks, but 45 to 60 days is probably more realistic in most cases. You’ll need their best guess to determine how long to lock in your loan.
10. What might delay approval of my loan?
If you provide the lender with complete, accurate information, the loan process should run smoothly. If the underwriter discovers credit problems, there could be delays. Make sure you notify your lender if you change jobs, increase or decrease your salary, incur additional debt or change marital status between the time you submit an application and the time the loan is funded.
Put these 10 questions to your leading candidates and compare their answers. The results should lead you toward the mortgage lender that is right for you.
Source: Move.com
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Qualify For A San Diego Mortgage

November 1st, 2009
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Qualifying for a Mortgage

Sponsored By
Here’s the formula bank lenders use to determine how much mortgage you can afford?
 
 Don’t start house hunting until you seriously consider how much you can afford to pay. A little advance planning will save you time and money later, because you won’t bid on unattainable houses or apply for mortgage loans that are out of your ballpark.
How much house can you afford?
You may hear an old formula that says you can afford a house worth about three times your total (gross) annual income. Don’t rely on this formula, however — it’s much safer to look at your own budget, figuring out how much you have to spare, and what the monthly payments on your new house will be (not just the mortgage — factor in taxes, insurance, maintenance, and more).
Lenders have traditionally wanted you to make all monthly payments using no more than 28 to 44 percent of your monthly income. In other words, if your monthly income is $2,000, the lender would want you to pay no more than $880 (.44 x $2,000) toward all your debts.
These traditions are, however, becoming less rigid — now, if you have an excellent credit record, a lender might allow you to go more deeply into debt. But you’ll need to use your own common sense, and make sure you leave yourself some money with which to buy furniture, cope with a job layoff, or simply enjoy life.
For a sneak peak at how much of a mortgage you’ll be able to qualify for, see Nolo’s calculator on qualifying for mortgages.
 
Check your credit history
When reviewing loan applications and making financing decisions, lenders typically request that the credit bureaus reporting your file — Equifax, Experian, or TransUnion — provide your credit risk score (also known as your FICO score). This seemingly mysterious number represents a statistical summary of the information in your credit report, including things like your history of paying bills on time and the level of your outstanding debts.
 
Higher FICO Credit Scores mean you can qualify for a larger San Diego Ca Mortgage loan.
 
The higher your credit score, the easier it will be to get a loan. If you routinely pay your bills late, expect a lower score, in which case a lender may either reject your loan application or insist on a very large down payment or high interest rate (to lower its risk).
Because your credit history has such an important effect on the type and amount of mortgage loan you’ll be offered, check your credit report and clean up your file if necessary — before, not after, you apply for a mortgage.
Loan preapproval vs. loan prequalification
Once you’ve done the basic calculations and completed a financial statement, you can ask a lender or loan broker for a prequalification letter saying that a mortgage loan approval for a specified amount is likely based on your income and credit history. Prequalifying lets you determine exactly how much you’ll be able to borrow and how much you’ll need for a down payment and closing costs.
Unless you’re in a very slow real estate market however, with lots more sellers than buyers, you will want to do more than prequalify for a San Diego Ca Mortgage loan: You will want to be preapproved — that is, guaranteed — for a specific loan amount. This means a lender has already checked your credit and evaluated your financial situation, rather than simply relied on your own statements. Preapproval means that the lender would actually fund the loan, pending an appraisal of the property, title report, and purchase contract.
For more information on deciding how much of a loan you can safely take on and successfully qualifying for the loan, see Nolo’s Essential Guide to Buying Your First Home, by Ilona Bray, Alayna Schroeder and Marcia Stewart.
 
Note: By qualifying a mortgage you will be in a much better negotiating position when it comes time to make an offer on your new home.  Mike Kench
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How To Get Rid OF PMI Insurance

October 30th, 2009
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Are You Sick & Tired Of Paying PMI Insurance?
 
No Fear!  there is a way to legally get rid of that PMI payment.
 
How to ask a mortgage company to cancel your private mortgage insurance By Ilona Bray – (Nolo).com
 
Private mortgage insurance (PMI) protects the lender if you default on your mortgage payments and your house isn’t worth enough to entirely repay the lender through a foreclosure sale. Lenders often require PMI for loans where the down payment is less than 20%. They add the cost to your mortgage payment each month. PMI can usually be canceled after your home’s value has risen enough to give you 20 to 25% equity in your house.
 
When you can get your PMI canceled?
 
Start trying to get your PMI cancelled as soon as you suspect that your equity in your home or its value has gone up significantly. The most obvious way for equity to increase is because you’ve made a lot of San Diego Ca mortgage payments. Your equity may also increase because your home’s value has gone up due to a rise in local home values or because you’ve remodeled. Such value-based rises in equity are harder to prove to your lender, and some lenders require you to wait a minimum time (around two years) before they will approve cancellation of PMI on this basis.
 
Did you choose to pay a higher interest rate on your mortgage in order to avoid PMI premiums? If so, don’t expect your lender to lower your payments after your equity has increased. Your interest rate is permanent, even if the lender used the extra money to purchase PMI to cover your loan. Your best course of action is probably to refinance.
 
How to get your PMI canceled.
 
The exact rules for canceling PMI are largely in the hands of your lender — or, to be more accurate, in the hands of the company from whom your lender buys the insurance (though you’ll never deal with that company directly).
Some baseline rules about cancellation were established by the federal “Homeowners’ Protection Act,” which applies to people who bought their homes after July 29, 1999. The Act says that you can ask that your PMI be canceled when you’ve paid down your mortgage to 80% of the loan, and that the lender must automatically cancel your PMI when you’ve hit 78%.
Here are the usual procedures for getting a lender to drop your PMI policy.
  • Contact your lender to find out the appropriate PMI cancellation procedures.It’s best to write a letter to your San Diego Ca mortgage lender, formally requesting guidelines.
  • Get your home appraised by a professional to find out its current market value.Your lender may require an appraisal even if you’re asking for a cancellation based on your many payments, since the lender needs reassurance that the home hasn’t declined in value. Although you’ll normally pay the appraiser’s bill, it’s best to use one whom your lender recommends and whose findings the lender will therefore respect. (Note: Your tax assessment may show an entirely different value from the appraiser’s — don’t be concerned, tax assessments often lag behind, and the tax assessor won’t see the appraiser’s report, thank goodness.)
  • Calculate your “loan to value” (LTV) ratio using the results of the appraisal.This is a simple calculation — just divide your loan amount by your home’s value, to get a figure that should be in decimal points. If, for example, your loan is $200,000 and your home is appraised at $250,000, your LTV ratio is .8, or 80%.
  • Compare your“loan to value” (LTV) ratio to that required by the lender. Most lenders require that your LTV ratio be 80% or lower before they will cancel your PMI. Note: Some lenders express the percentage in reverse, requiring at least 20% equity in the property, for example. When your LTV ratio reaches 78% based on the original value of your home, remember that the Homeowners’ Protection Act may require your lender to cancel your PMI without your asking. If the loan to value ratio is at the percentage required by your lender, follow the lender’s stated procedures for requesting a PMI cancellation.
If your lender refuses to cancel the PMI
Most lenders recognize that there’s little point in requiring PMI after it’s clear that you’re making your mortgage payments on time and that you have enough “equity” in your property to cover the loan if the lender has to foreclose. Nevertheless, many home buyers find their lenders to be frustratingly slow to wake up and cancel the coverage. The fact that they’ll have to spend time reviewing your file for no immediate gain and that the insurance company may also drag its feet are probably contributing factors.
If your lender refuses, or is slow to act on your PMI cancellation request, write polite but firm letters requesting action. Such letters are important not only to prod the lender into motion, but to serve as evidence if you’re later forced to take the lender to court. If court action becomes your best option, small claims court can be a good avenue, and you won’t need a lawyer to accompany you. For more information, including how to write polite but forceful demand letters, see Everybody’s Guide to Small Claims Court, by Ralph Warner (Nolo).Com
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Make A Real Estate Offer

October 23rd, 2009
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Making an Offer
 
Making an offer on a home is an exciting step – you’ve found the house you want and you’re working towards making it your home.

Be sure you’re serious about buying before you make an offer. If the seller accepts your offer, it becomes a legal contract after a few days.

Details and planning are important. Know what you would like to pay but also think about the most you’re willing to pay and the total pre-approved mortgage loan amount. Be specific, and put everything in writing. Also, having a pre approved mortgage loan will place you ina better negotiting posistion when making a real estate offer.

What are the steps in making an offer?

Negotiating a Sales Price
Before you negotiate a sales price, it’s important to determine if you or the seller has the stronger position. Knowing this will help you plan your negotiation.  A mortgage tip to consider would be to offer full price and have the seller buy down your San Diego Ca mortgage loan rate.  This will allow you to qualify for a higher loan amount amd provide you with lower payments.

The seller may have the stronger position if:

The local real estate market is strong and homes are selling quickly.
They aren’t in a rush to move.
Similar houses have sold for close to or above their asking price.
There are other offers being made on the house at the same time as you.
The buyer may have the stronger position if:

The local real estate market is weak.
The seller needs to move quickly.
The house has been on the market for a long time.
When negotiating, more information is better. Look at your notes from when you looked at the house. If there’s anything that needs to be repaired or replaced, you may want to consider including these costs in the negotiation. If you want certain appliances or fixtures to stay, be sure to include them as well. You may also want to make your offer contingent upon your obtaining financing or the house passing a professional home inspection, especially if it is an older home.

There are several steps to negotiating:

Asking price.
This is the price the sellers have originally listed. In a buyer’s market, you may be able to successfully offer below the asking price. However, in a seller’s market you may want to be prepared to offer more. Before making an offer in a seller’s market, know how much above asking price you are willing, and able, to bid in case the seller gets multiple offers.

Initial purchase offer.
This is your first offer. It may include contingencies (such as a requirement that the home pass a professional inspection or that you receive adequate San Diego Ca mortgage loan financing from your lender.)

Acceptance of offer or counter-offer.
The seller can accept your offer or make a counter-offer of a new price or additional contingencies.

If you’ve made a home inspection part of the contingencies and something serious is found during the inspection, you may want to submit a new counter-offer and discuss the situation with your lender. The process may go back and forth several times before you and the seller reach an offer that is acceptable to you both. Remember that in some instances, your lender may not approve your mortgage if the home has serious deficiencies that could affect its value.

Source Freddie Mac

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