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FINANCE PROCESS

Step 1:
Make a rough estimate of how much home you can afford basic on your income and current debt.

Lenders and financial experts recommend that your monthly debts should be no more than 36% of your monthly income.(For a more conservative estimate, this should be based on your take home pay instead of your gross pay.) If you have additional outstanding debts such as student loans or credit card, you will need factor in those monthly payment into your total monthly debt payment. An online mortgage calculator can help you determine your borrowing power at current mortgage rates based on your income and your current outstanding debt, and will likely be the tool for you to make this initial estimate.

Step 2:
Take a close look at your credit report

Your credit history is one of the principal measures used by a lender to determine your interest rate. The better your credit, the better lending terms your bank, or lending institution will be able to offer you. A higher rate translates into a higher monthly mortgage payment, and so you can borrow and at which homes you should be looking. You should be aware of what information is on your credit report by obtaining and
reviewing copies of your credit report from the three main credit report agencies.

Remember that there are several factors that affect your credit including your payment history, your current ratio of debt to income and signs of responsibility. And since not all creditors report to all three agencies, it’s best to order a report from all three institutions. Your goal in ordering all three credit reports is to make any discrepancies on your credit report, its important that you contact the rating agencies and have those records corrected. This will help you avoid hassles later on.

What Is a Good

Credit Score?

Step 3:
Gather your documents / take a look at your assets and monthly expenses

Your credit history is one of the principal measures used by a lender to determine your interest rate. The better your credit, the better lending terms your bank or lending will be able to offer you. A higher interest rate translates into a higher monthly mortgage payment, and so your credit score will directly affects how much money you can borrow and at which homes you should be looking. You should be aware of what information is on your credit report by obtaining and reviewing copies of your credit report from the three main credit agencies.

Improving any of these areas will help you qualify for better lending terms, so keep that in mind before you speak with a mortgage professional. If its possible to pay off a car loan or a credit card balance before you seek financing for your new home, the preferential
financing terms that you could receive may save you thousands of dollars over the life of your mortgage.

Step 4:
Talk to a qualified lender

After looking at this information for yourself, its time to speak to a qualified lender. A professional advisor will no only be able to give you information on the best rates and terms available in the current market, but he or she can also explain to you what options you have given your unique financial situation.
There are a considerable number of choices available to consumers and i advise you to learn as much as you can about the different lending options that are available to you. Talking to a lender at this time will help you get a more accurate idea of what you can afford. When we begin to look seriously at homes, you’ll go back to the lender and shop around for the best loan available.

Prosperity

Home Mortgage

Loan

House

KNOW YOUR MORTGAGE

Know Your Lender

Home loans are available to consumers from thrift institutions commercial banks, mortgage companies, credit unions and mortgage brokers. You may also obtain a loan through a mortgage broker. A Mortgage Broker is unlike other lenders in that the broker does not lend money to you directly. A broker will help find you a lender and secure the terms of you arrangement.

Mortgage Broker vs. Traditional Lender

A broker may have access to several lenders and therefore can offer you a wider selection of loan products and terms. He or she can help you shop for the best deal based on your circumstances.(A Broker is not obligated to find you the best deal possible, so be sure to ask questions.)

For their work, brokers are paid a fee in addition to the lender’s origination fees. Brokers set their own compensation, so you’ll need to ask anyone you speak to how their fees are determined.

Know Your Loan Types

Not all home mortgages are structured the same. There are several borrowing options for home buyers and the type of loan that you choose should work for your unique financial situation.

Fixed Rate(Traditional)Loan

These loans are usually structured with payment terms of 15, 20 or 30 years. The Lender will agree to charge a fixed interest rare over the life of the loan. With this loan type, your monthly mortgage payment will remain the same for the length of the term.

Adjustable-Rate Loan(ARMs)

Also known as variable-rate loan often offer a teaser rate for the initial period of the loan. This introductory interest rate is usually lower than rate offered for fixed rates mortgages. The interest rate will fluctuate over the life of the loan based on market conditions. Changes in rate at certain time periods, and the lender can set both a maximum and minimum on the rate if fluctuation.

Know Your Loan Types(continued)
Federal Housing Administration(FHA)Loans

Federal Housing Administration(FHA) insured loans
are made by private lending institutions such as
banks, saving & loans, or mortgage companies to
eligible borrowers for the purchase of a home. to
secure an FHA loan, a borrower must apply and
qualify with a certified FHA Lender.
Additionally, eligible borrowers must be able to
pay minimum of 3.5% of a home’s purchase price.
If the loan is approved. FHA will insure a portion
of the loan’s value to the lender.

Veterans Administration(VA) Guaranteed Loans

VA Home Loans are available to qualified veterans and their spouses. Private lending institutions issue for a loans which are in turn guaranteed by the Veteran’s Administration. The VA does not require any down payment on VA Guaranteed Loans and allows the borrower to receive a competitive, fixed interest rate.

Know Your Rate-And Your Terms

When you start shopping for loan, you’ll start looking at interest rates. The interest rates, terms, and fees for a mortgage will be based on your qualification as borrower and on the current lending market. Keep in mind though that finding the right loan is not just about finding the lowest interest rate possible. Mortgage institution offers loans of varying terms – typically 30, 20, or 15 years. Shorter terms loans can save you thousands of dollars over the life of your loan if you can afford a higher monthly payment. You’ll want to get a complete picture and break down of what a given offer means to you on monthly basis as well as how much money you’ll be spending over the life of the loan. At a minimum, you should request quotes with a few different scenarios from a few lending institution and compare the financial impact of each situation before you determine your best course of action. Shopping around is worth your time!

Know Your Fees

Most loans have fees in addition to the total amount you are borrowing to finance your home. You can sometimes borrow the money needed to cover these fees, but that will obviously increase the overall amount of debt you undertake. Some fees are paid up front, and others are not due closing.

Points

The Lender or broker can charge you points on your mortgage. One point equals 1 percent of the loan amount. These are simply fees paid to the lender or broker that are often liked to the interest rate, and are usually paid in cash to the lender or the broker at closing. A lender may offer you a lower interest rate, but charge more points, so its important to compare offers.

Loan Origination Fees

The institution that actually loans you the money will generally charge on origination fee for processing the loan. They are often expressed as a percentage of the amount of the loan.

Underwriting Fees

Certain lenders will charge a fee to investigate your creditworthiness and determine if you are likely to repay your loan.

Broker Fees

Typical paid at closing, a mortgage broker may charge you a fee in addition to the origination fee. If you are working with a broker, b sure check with them what their fees is.

Transaction / Settlement / Closing Cost

These fee lump together several charges for: application fees, tittle examination, abstract of title, title insurance, property survey fee, deed preparing fees, other mortgage fee and settlement document, attorney fees, recording fees, notary fees, appraisal fees and credit report fees. The Real Estate Settlement Procedures Act requires that a lending institution provide a borrower with a good faith estimate of closing cost at the time of application. This estimate must list each expected cost as a range or as an exact amount where applicable.

Know Your Down Payment and Private Mortgage Insurance

The largest upfront cost in purchasing a home is the down payment.
Most traditional lenders expect borrowers to put at least 20% of
a loan’s total amount down.
Borrowers who are unable to so so are required to purchase Private
Mortgage Insurance(PMI). This insurance protects the lender in case
of default by the borrower.

Be sure to get a clear indication of the down payment percentage required by your lender. You will also want to know what kind of documentation your lender requires to verify that you have funds for the down payment.

Lender Interview Cheat Sheet

  1. What kind of loans do you offer?
  2. What kind of loan would you recommend for me? What are the advantages and disadvantages of this loan structure?
  3. What is the current interest rate? Is the rate quoted the lowest for that day or week?
  4. What is the Annual Percentage Rate(APR) of an offered loan?
  5. Is the loan rate adjustable or fixed?
  6. What are the discount points and origination fees?
  7. What are all the cost of the offered mortgages?
  8. If the rate is adjustable – how will rate and loan payment wavry?
  9. What are the qualifying guidelines for this loan?
  10. What is the lender’s required down payment for this loan?
  11. What documents will need to be provided?
  12. What are the closing costs?
  13. Will the lender guarantee the GFE(Good Faith Estimate) of settlement charges and loan terms?
  14. Does the lender offer a loan rate lock? Is there a fee for the rate lock?
  15. Is there a prepayment penalty?
  16. Are you equipped to approve loans-house
  17. How much time do you need to fund the loan?
  18. Will mortgage insurance be required?
  19. Can the term of the loan be extended?
  20. Is there a cap on payment adjustments?

PRE APPROVAL vs. PRE QUALIFICATION

Before you begin your home search in earnest, I highly recommend that you work with a lender to get pre-approved
for a home. Many home buyers will talk to a lender quickly and get pre-qualified, but this is not the same thing.

Pre-approved buyers are ahead in the home buying game.

If you make an offer on a home and the apply for a loan instead of the other way around, you are at the mercy of
the lender whow now knows that you don’t have time to shop around. A pre-approval letter from a lender will also
give you an edge when multiple offers have been made on a house. Pre-approved buyers generally close escow more
quickly, since most if the paerwork has already been taken care of.

Pre-Qualification is only a loan agent’s opinion that you’ll be able to obtain financing. No verification are made,
so formal approval is not issued. Pre-Approval means your loan application has been taken through a rigorous
procedure, including a review of your credit report. Pre-approval saves you the time of looking at houses you can’t
afford.