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Understanding Mortgages

Choose WiselyAll of the steps you’ve taken so far to turn yourself into a more successful mortgage candidate should leave you in a good position to make your big decision for moving forward. You’ve done your Research, Asked Questions, Accepted Guidance from the professionals and considered Comfort when it comes to making your monthly payments. Now you’re ready to choose where to apply for your mortgage loan.

Step Five: Choose Wisely

As you’ve no doubt guessed by now, you have a lot of options. You can spin yourself in circles trying to ask everyone you know which mortgage company is best to work with, scouring online reviews and testing the temperature of public opinion. You could twist yourself into knots wondering if you have to call the loan officer your real estate agent mentioned in order for things to go smoothly, or if it’s better to go through a dedicated mortgage company instead of a local bank.

Though that mortgage person your friends suggested is “really nice,” that may not mean they have access to all of the options you’d need. That one questionable online review for that loan officer, who seemed to know their stuff when you talked to them, may not tell the whole story. Just because your real estate agent handed you a mortgage company’s phone number, that doesn’t increase your chances of getting the house or obligate you to go through that company for your mortgage. Your local bank and independent mortgage companies may have different loan products and timing for processing mortgage applications. You aren’t going to learn the answer to all of this. What you can focus on is identifying what you’re going to trust.

Trust

You may be a person who takes a look at a company’s technology offerings and decides to work with the company that has done the most to protect their clients’ personal information. Perhaps you’re a person who trusts the companies who spend the most on advertising and their name is the first to come to your mind. Maybe you’re a look in the eye and test the handshake kind of person. Online reviews might be the deciding factor. Any way you slice it, the question of trust boils down to your preference.

Choose Wisely

That said, you might want to factor these in when making your decision:

 

Your Security

You may or may not be aware that sending personally identifying information (info a criminal could use to access your financial accounts or steal your identity) through email or social media messages isn’t considered safe. Make sure your mortgage company is already aware of this and offers secure methods for you to provide your sensitive information to them.

Good News Fast, Bad News Even Faster

You’re going to want to find out quickly when something has not gone according to plan. That gives you and your mortgage team time to look at your options and get things moving forward again. It’s important to work with someone who will communicate with you promptly throughout the process.

Honest Estimations

Everyone wants to hear that a mortgage company can process their mortgage and have approval in their hand inside a week. There are many steps in the mortgage approval process, some within the mortgage company and some with other parties, such as appraisers, insurance quotes and title research. It’s important that each of these steps is done correctly, and in the right order. If a mortgage company is claiming that they think they can have you approved in half the time that other companies are quoting, it’s a good idea to ask questions about how they’re able to make this happen. You may have a better experience working with someone who sets realistic expectations up front than struggle with missed deadlines and disappointment.

The decision is yours. You’ve done your research and have the tools you need. Now get out there and choose wisely.


Understanding Mortgages

eligible versus comfortableComfort is an important and underestimated consideration in the 5 steps to turning yourself into a more successful mortgage candidate. While Research is a somewhat obvious beginning, Asking Questions is the logical next step and Accepting Guidance is generally considered good to do, Eligibility often becomes the focus in the excitement of the home search and mortgage pre-qualification instead of how Comfortably you can meet the new payment expectations.

Step Four: Eligible vs. Comfortable

By now you’ve researched and have a reasonable idea of what kind of home you’re looking for. You’ve even done your homework on mortgage financing. You’ve been pre-qualified for up to a certain amount of money, and with that number, you realize you may be able to set your sights higher than you originally thought!  

Careful

It’s okay to be pre-qualified for more than you’ll need. Pre-qualification is based on information you have provided, and the more accurate information you provide the more accurately your estimated qualification can be assessed. There are limitations, however, and no matter how much of your information is plugged into the equation, you may still have living expenses that don’t get factored in. Ultimately, you are going to be the expert on what you can afford and what you can’t.

Eligibility

Why would a mortgage company pre-qualify someone for more than they could afford? Well, the short answer is that they’re trying hard not to do that. Everybody involved is going to want you to be able to afford the home you’re financing. Rather than calculating everything up at the low end of your price range and then re-calculating every time you find a new property, it often makes the most sense to aim for the high end first, knowing that it’s easy to come down in price from there.

Comfort is Key

This leaves you to be honest with your mortgage lender, your real estate agent, and most importantly with yourself regarding your comfort level with the payment sizes you’re discussing. When looking at your price range, consider such things as how the utility payments may be different from what you’re used to, or if repairs are going to be needed. Leave yourself some room when planning out how your new budget will look. That house that’s just beautiful but just a little out of reach financially may be less fun to live in if you’re struggling to make ends meet.

Prioritize your comfort. You’ll thank yourself down the road. And the final step and topic for next week… Choose Wisely!


Understanding Mortgages

accepting guidanceLooking at the 5 steps to turning yourself into a more successful mortgage candidate we started with research and asking questions to make sure you understand what to expect. Now, let’s talk about accepting the guidance we’ve been given.

Step Three: Accepting Guidance

You researched your questions, became an expert on your specific needs and asked for guidance on anything that remained unclear. You know what kind of mortgage you want. Time to pull the trigger. Jump in. Hit the big red button. Compare companies that offer the mortgage loan product you want and pick a winner. Done.

You absolutely can take that approach, and since you’ve done your research and understand your needs, you’re in better shape for the effort. In asking questions along the way you may have been given bits of guidance from a loan officer, though, and it’s worth taking a look at what they said.

Areas of Expertise

It’s a loan officer’s business to gather as much knowledge as possible on how mortgage products work, what little “quirks” or specific requirements there may be that could cause mischief, and whether there are state specific programs available to help depending on your needs. While you are the expert on your specific needs, a loan officer is going to bring expertise on mortgage loan products to the equation. It’s a good idea to keep an open mind while you’re researching. There may be a solution that didn’t come up in your research that is perfect for your situation.

Try not to get too caught up on one idea or plan. You may be focusing on one way of keeping your costs down while your loan officer is able to see that by shifting your focus to another area you could save much more. If they let you know, take a moment and listen.

Ultimately, the decision is yours. You’re going to be able to choose the path that you want. When you do, try to keep the guidance you’ve received in perspective. There may be an opportunity that didn’t come up in your searches, and who knows. It could be a money saver. And the next step and topic for next week… Eligibility vs. Comfortability!


Understanding Mortgages

ask questionsIn this series we’re examining 5 steps to turning yourself into a more successful mortgage candidate. We’ve talked about the value of research, not necessarily to become an expert on the mortgage industry, but to become an expert on your own needs and preferences. The home buying and mortgage loan financing processes can seem complex and it’s important to understand what questions to ask to get the help you need. Now it’s time to formulate those questions.

Step Two: Ask Questions

If you don’t ask, you don’t know.

Picture this. You fill out your mortgage application and submit the documentation the mortgage company needs. Things like recent pay stubs, bank statements, photo ID, tax returns, W-2s, etc. In other words, kind of personal stuff. You’re not sure exactly why they need all of that but you want the approval so you can buy your house. “Thank you, we received your documentation,” they say. You sit back and wonder if you’ll have your mortgage approval by lunchtime. 

Your first disappointment is in learning that it takes longer than a couple of hours to get through the mortgage process. Next, you learn that your intent to use that box of cash you’ve been saving up for the last year as down payment money isn’t a popular plan to the mortgage company. They’re asking whether you have other ways to pay those costs. Ways that can be documented. These misunderstandings are easily avoidable if you do some research on what happens during the mortgage process and ask questions about anything that remains unclear.

The mortgage process can go smoothly and quickly, and technology is playing a great role these days in speeding up what has been a lengthy process historically, but there are still important steps involved after you submit your application. Some of the steps have to do with documenting the security of your current financial standing and looking at your history of repaying debts. Other steps are in place to check that you aren’t trying to commit any kind of fraud or financial crime with this mortgage transaction. That may sound funny to most of us, but the mortgage industry is a big target for that sort of thing and extra caution is required.

Your loan officer and his or her team understand all of these factors and it’s their role to put your application package together completely and compliantly. The more they understand about your situation and your needs, the better they’ll be able to do that job and make sure you’re applying for the mortgage product that best fits your needs. The more you understand about how things work and what to expect, the more comfortable you’ll feel in those periods of time when you don’t have an answer yet, or when your mortgage team reaches out to you to get one more set of documents “…and quickly please.”

Your mortgage experience doesn’t have to be fraught with anxiety or delays due to misunderstandings. Ask about anything that you’re left confused or unsure over. Make sure you understand the answers you’re given. If you’re uncomfortable with anything, let your mortgage team know. And the next step and topic for next week… Accept Guidance!


Understanding Mortgages

Do the researchLet’s face it. House hunting is the fun research that most people think of when contemplating buying a home. You learn about neighborhoods. You decide on numbers of desired bedrooms and bathrooms, look at the condition of the property and weigh the importance of finishes. School districts and nearby amenities may sway your decision. You research real estate agents and the value of working with a professional or taking your chances on your own. You envision yourself living in the new home with endless sunny days filtering in through those nice big windows. Then the question comes: “Are you pre-qualified?”

Unless you plan to pay the entire amount yourself, you’re going to need to get a mortgage loan to help with your home purchase. And this, folks, is where the confidence in what to research next often runs out. At what point do you get pre-qualified? How do you judge which is the right mortgage company? What kind of mortgage program should you ask for? How much money do you need to have saved? What are the fees? Does a good interest rate require negotiation skills? How long does it take to get approved and what if you get rejected? Can you just show the mortgage company an app on your phone and walk out the same day with keys to your new home?

In this series we’ll examine 5 steps to turning yourself into a more successful mortgage candidate.

Step One: Research

The Benefits of Research

The more you understand entering into your mortgage pre-qualification, the more comfortable you’re bound to be through the mortgage approval process. Following are some areas of focus that should help you get underway.

First Things First… Where to Start

The first step in house hunting ought to be mortgage pre-qualification. Real estate agents and home owners are likely to ask you whether you’re pre-qualified because they don’t want to waste time showing you the house, or talking offers, until they know that you’re deemed capable of making a home purchase.

Understand Your Needs

The best chance a mortgage company will have of meeting your needs is if you can clearly state what they are. You don’t have to become an expert on every mortgage product out there, but you are an expert on your personal situation. That is exactly what your loan officer is looking to learn from you so they can turn around and give you solid professional guidance.

They’ll want to understand:

  • Your debt load compared to your income.
  • Your credit history.
  • What amount of monthly mortgage payment you would be able to pay consistently and comfortably.
  • How much money you have already saved to cover closing costs and down payment.
  • What is most important to you: low interest rates; low monthly payments; low down payment; using your VA benefits; not having to pay monthly mortgage insurance; not having to pay any mortgage insurance; getting assistance to buy your first home; seeing the house as a short term investment; planning to stay in the home for as long as possible; downsizing; upsizing; paying the loan off as fast as you can, etc.

It’s Okay. Play.

Mortgage calculators range from simple to complex, depending on where you look and how involved you want to get. Play around. Take a look at different ideas and get a feel for what that would mean for your wallet. It’s a good idea to keep in mind that mortgage calculators are broad brush estimating tools and may not take all of the facts into consideration. Still, in playing around, you may pick up on trends in one mortgage product or another that will help you to know what you’re looking for or inspire good questions to ask.

Mortgage Payments Calculator
Payments Calculator

How much will my payments be?

 

Affordability Calculator
Affordability Calculator

How much should I borrow?

 

Rent vs. Buy a Home Calculator
Rent vs. Buy

Should I think about buying a home instead of renting?

The more informed you are when you enter into your mortgage pre-qualification, the more you’ll be able to help get the kind of results you want. Poke around. Read up. And the next step and topic for next week… Ask Questions!


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