What is the difference between "pre-qualifying" and "pre-approval"?
Pre-qualifying and pre-approval: Pre-qualification is someone such as myself looking at your income, your credit, and your assets and asking you all the appropriate questions.And with my knowledge, I'll basically say, "Yes, Mr. Smith, you are qualified for a $500,000 loan". But, I am not an underwriter of a lending institution. So if you wanna go through the whole pre-approval process, then I just need to collect some documentation from you, submit a loan package to a lending institution and let their underwriter approve your loan.
Why is it important to pre-qualify for a loan?
It's very important to pre-qualify for a home loan, because in my business, every loan that I've touched over the last 15 years is completely different. If you're going to go out and make an offer on a million dollar home, but you don't realize your credit scores are very low, you really don't have that much money to put down for a down payment. You go into escrow on a piece of property and you put an earnest money deposit check down, and there's a good chance you might not get that back if you don't proceed with the deal. Getting pre-qualified is just essential. Before you even start looking for a home, you need to get pre-qualified from a mortgage broker such as myself.
How do I pre-qualify for a loan?
Simple, just give me a call, and we'll either get together face to face or we can talk on the phone. I'll just start asking you a lot of questions that are on the loan application. For example, how's your credit; we can run your credit report with your permission. What do you do for a living; are you salaried or self employed? How much money do you have in the bank? I'll ask all these appropriate questions, and also just talk about who you are and what you're looking for. With all this information, I'll be able to educate you on for what you could actually qualify for a home, and once we've done the prequalify route, you can go out and look for your dream home.
What is a credit report?
A credit report allows me to see everything about you. In simplest terms, I can see all your credit that you have built up over the years and if you are making your payments on time. Your credit report will show me how much credit card debt you have, whether or not you have student loans, if you have a mortgage in the past and if you have made those payments on time. You always want to pull your credit at least once or twice a year.
What is a credit score?
Credit score has really been popular now over the last five or six years. In a nutshell, it's a computer module that basically takes into account your credit and such issues as if you paid on time, how much debt you currently have, how much debt you can actually tap into if you like and if you always made your payments on time.
How will my credit score impact my mortgage loan?
With a credit score, you want the highest one possible, because that's what the banks are looking for. They've done their studies over the years so if your credit score is this and that, you're going to get much better, preferred pricing. So, with that in mind, make sure you pull your credit report at least once or twice a year. If you're seeing your credit score above 700, then you're going to be getting "A" paper pricing from the majority of the institutions that are out there.
How will previous bankruptcy effect my application for a mortgage loan?
Having a bankruptcy its definitely going to effect your application for a mortgage loan. If it's been more than seven years, there's a good chance that with most of the lending institutions out there, there won't be any hit toward your rate. However, if it's less than seven years, you will definitely pay a slight premium to still be able to obtain that mortgage. You're probably going to put a little more money down for a down payment and, at the end of the day, you will pay a higher rate for that bankruptcy.
If we are applying together and my spouse has a higher credit score than I do, will lenders still look at my score?
If you as a couple are applying together, they will still look at your credit rating. But the majority of lenders out there are going to go and use the credit score of whoever is the primary wage-earner in the household.
How can I find out what my credit score is?
The best way is to just give me a call. I can run your credit score. All I need is your name, your social security number, and your current address. With that information, I can send you your credit report. If there are any issues or discrepancies that are on your credit report, then I can work that out with you and get that stuff removed so that when you are looking to purchase your new home, you'll have a perfect credit score by the time you are ready to do so.
How can I improve my credit and FICO score?
One of the best ways to improve your credit and FICO score is to give me a call. I can run your credit report and then use the agency that we work with to help you fix it up. We have a system that's called repad re-score and it will actually say, “Look, if you pay down your debt by $5,000, or if you pay this credit card off, your credit score will be improved by 'x' amount.” So, that would be my recommendation.
Showing posts with label Mortgage Loans. Show all posts
Showing posts with label Mortgage Loans. Show all posts
Thursday, July 31, 2008
Qualifying For Your Home Loan
Do I need a job to qualify for a mortgage loan?
Believe it or not, there are lending institutions out there that will give you a mortgage loan without a job. However, you are definitely going to pay for it with a very high interest rate and, at the end of the day, do you really want to be getting more into debt when you don't have supplemental income coming in to support it? So, yes you can qualify for a mortgage loan without a job; it can be done, but I do not recommend it.
What factors will a lender look to in deciding whether to give me a mortgage?
In deciding whether or not to give you a mortgage, the lenders are going to look at: your income, whether you're salaried or self-employed and what kind of income you're making; assets, how much money you're going to put down for a down payment or how much reserves you have sitting in your bank account; your credit, what your credit score is on the debt you have; and last but not least, the property, what's the value of the property, the location of the property, what kind of mechanical liens are attached to the property, and that kind of thing.
How relevant is my salary to a lender?
Your salary is very relevant to a lender because we take what's called "debt ratios." We take what's called your "Principal, Interest, Taxes and Insurance" divided by your gross income; that's what called your "front-end debt ratio." Your back-end debt ratio is, once again, your PITI plus any monthly debt that you have, and we divide that by your gross income. Those are debt ratios, and they usually need to fall in between 28 to 36. So, yeah, you definitely need to have the income to support the mortgage that you want to obtain.
I am self employed what will lenders accept in place of a pay stub?
Nowadays regarding the self employed individual, the lending institution realized they were missing out on a very large market segment. What I mean by that is most self employed people usually have a lot of expenses to write off, and the lending institution, that underwriter of the bank, are just going to take what's on your tax return down at the bottom; what's called your adjusted gross income. So you might make $500,000, but on your adjusted gross income, it's only going to show you make $50,000. Therefore, if you're self employed, you need to go stated, and once again, most banks nowadays don't hit you very much as far as an interest rate if you have to go down the stated route.
Will lenders look at my bank accounts?
We do usually collect the last three months of bank statements to verify that the money has first of all been seasoned, meaning it's been sitting in your bank account for a few months. They are then going to take a look at any large deposits and any large withdrawals. But overall yes, they definitely want to look at your bank statements.
What can I do if I am rejected for a mortgage loan?
Well, if I'm talking to you as a mortgage broker and you get rejected for a mortgage loan, then unfortunately you just cannot qualify for a home at this particular time. I can go out to lending institutions for a mortgage loan, whether it's A-Paper borrower (it's called Alt-A), or subprime lending. I can do 100 percent financing. If I can't get it done, then once again, you either need to find a co-borrower, save up more money, or get a better job before you go out and try to look for a home.
How do I calculate monthly payments?
There are a lot of Internet programs that would do that for you, but if you give me a call, I can walk you through what the principle is on an interest payment, what an interest only payment is, and I can even tell you which type of calculator I use to allow you to calculate your own monthly payments.
What is included in a monthly mortgage payment?
In a monthly mortgage payment, one of two things will be included. If you've got a principal and interest loan, then it'll be the principal payment with the interest only payment. Or you can do an interest only payment, and that's all you'll have.
How much of my monthly payment is considered interest?
Usually for the first five years upon obtaining that mortgage, a very small amount will be applied towards the reduction of balance on your monthly payment. The majority of money is going to the interest payment for the first four to five years.
How much of my monthly payment is considered principal?
For the first five years, in a 3-year amortisation loan, the majority of your monthly payment is going to interest, to pay off the bank. Over a longer period of time, you'll start to see a much larger reduction in your principal payment.
Are "regardless of bad credit" loans a scam?
No, "regardless of bad credit" loans are not a scam. Nowadays, there are what are called subprime lending institutions that, if you do have a credit score at 520, or 540, you can still get mortgage money. You are definitely going to pay a higher interest rate, but it can be done. There are plenty of lending institutions out there nowadays that can give you a mortgage loan, even if you have credit issues, mortgage lates, credit card lates, or bankruptcies. I know a few banks I can go to right now with whom, if you're one day out of bankruptcy, I can get you a loan.
Believe it or not, there are lending institutions out there that will give you a mortgage loan without a job. However, you are definitely going to pay for it with a very high interest rate and, at the end of the day, do you really want to be getting more into debt when you don't have supplemental income coming in to support it? So, yes you can qualify for a mortgage loan without a job; it can be done, but I do not recommend it.
What factors will a lender look to in deciding whether to give me a mortgage?
In deciding whether or not to give you a mortgage, the lenders are going to look at: your income, whether you're salaried or self-employed and what kind of income you're making; assets, how much money you're going to put down for a down payment or how much reserves you have sitting in your bank account; your credit, what your credit score is on the debt you have; and last but not least, the property, what's the value of the property, the location of the property, what kind of mechanical liens are attached to the property, and that kind of thing.
How relevant is my salary to a lender?
Your salary is very relevant to a lender because we take what's called "debt ratios." We take what's called your "Principal, Interest, Taxes and Insurance" divided by your gross income; that's what called your "front-end debt ratio." Your back-end debt ratio is, once again, your PITI plus any monthly debt that you have, and we divide that by your gross income. Those are debt ratios, and they usually need to fall in between 28 to 36. So, yeah, you definitely need to have the income to support the mortgage that you want to obtain.
I am self employed what will lenders accept in place of a pay stub?
Nowadays regarding the self employed individual, the lending institution realized they were missing out on a very large market segment. What I mean by that is most self employed people usually have a lot of expenses to write off, and the lending institution, that underwriter of the bank, are just going to take what's on your tax return down at the bottom; what's called your adjusted gross income. So you might make $500,000, but on your adjusted gross income, it's only going to show you make $50,000. Therefore, if you're self employed, you need to go stated, and once again, most banks nowadays don't hit you very much as far as an interest rate if you have to go down the stated route.
Will lenders look at my bank accounts?
We do usually collect the last three months of bank statements to verify that the money has first of all been seasoned, meaning it's been sitting in your bank account for a few months. They are then going to take a look at any large deposits and any large withdrawals. But overall yes, they definitely want to look at your bank statements.
What can I do if I am rejected for a mortgage loan?
Well, if I'm talking to you as a mortgage broker and you get rejected for a mortgage loan, then unfortunately you just cannot qualify for a home at this particular time. I can go out to lending institutions for a mortgage loan, whether it's A-Paper borrower (it's called Alt-A), or subprime lending. I can do 100 percent financing. If I can't get it done, then once again, you either need to find a co-borrower, save up more money, or get a better job before you go out and try to look for a home.
How do I calculate monthly payments?
There are a lot of Internet programs that would do that for you, but if you give me a call, I can walk you through what the principle is on an interest payment, what an interest only payment is, and I can even tell you which type of calculator I use to allow you to calculate your own monthly payments.
What is included in a monthly mortgage payment?
In a monthly mortgage payment, one of two things will be included. If you've got a principal and interest loan, then it'll be the principal payment with the interest only payment. Or you can do an interest only payment, and that's all you'll have.
How much of my monthly payment is considered interest?
Usually for the first five years upon obtaining that mortgage, a very small amount will be applied towards the reduction of balance on your monthly payment. The majority of money is going to the interest payment for the first four to five years.
How much of my monthly payment is considered principal?
For the first five years, in a 3-year amortisation loan, the majority of your monthly payment is going to interest, to pay off the bank. Over a longer period of time, you'll start to see a much larger reduction in your principal payment.
Are "regardless of bad credit" loans a scam?
No, "regardless of bad credit" loans are not a scam. Nowadays, there are what are called subprime lending institutions that, if you do have a credit score at 520, or 540, you can still get mortgage money. You are definitely going to pay a higher interest rate, but it can be done. There are plenty of lending institutions out there nowadays that can give you a mortgage loan, even if you have credit issues, mortgage lates, credit card lates, or bankruptcies. I know a few banks I can go to right now with whom, if you're one day out of bankruptcy, I can get you a loan.
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