Let's get smart about mortgages!

For some of us, a mortgage is something that you know of very well.  It arrives in your mailbox every month and that giant number that you owe seems to take a million years to get down to zero.  But for those that have yet to have a mortgage, it can be overwhelming and rather intimidating.  

We thought we would ask our friend, he literally is our friend, Anthony DeLuca to help us answer some basic questions about mortgages for those of us that have yet to enter the world of “the never-ending bill.”   
 
  1. What is the purpose of the “pre-qualification” process and when should I do it?
    Anthony:
    Pre-Qualification looks at a prospective borrower’s income, employment, credit, and liabilities to help determine how much house payment they can afford.  This is also balanced with their desired down-payment amount they wish to use for a new home purchase.  At this time of Pre-Qualification, different loan programs can be compared to give buyers financing options and choices.  It is often best to start the Pre-Qualification process before you start shopping for homes. This will give you a clear understanding of your desired budget and purchase price range.  
    • What information is needed for this process?
      Anthony: It is helpful to provide income and asset documentation such as recent pay stubs, W2s, and bank statements.  If a buyer is self-employed, the income calculation for mortgage pre-qualification is more complex, and it is best to provide your most recent last 2 years federal income tax returns.  
    • How is it helpful when buying a house?
      Anthony:
      Providing income documentation ensures your income calculation for mortgage underwriting purposes is accurate, and that you will not be denied for a mortgage loan.  By understanding your price range and mortgage options, you can make better decisions when looking for your new home.  
  2. If I get pre-approved by a lender, do I have to use them or can I use a different lender?
    Anthony: You are free to use the mortgage lender of your choice.  If you do choose a different mortgage lender, you will have to supply that mortgage lender with your information and often authorization to pull your credit.  In connection with all mortgages, you also have to explain the credit inquiries on your credit report.  
  3. How does my credit score affect my mortgage?
    Anthony: The credit score can be your best asset and leads the way in affecting your mortgage terms.  The credit score model is used to evaluate you as a buyer in terms of paying your bills on time; the amount of debt you owe to creditors; if you have filed bankruptcy; had judgments or liens filed against you and how many times lenders have reviewed your credit.  This credit score is used by lenders to make decisions on loan amounts and interest rates.  If you are trying to buy a house, you should not make large purchases with a credit card or loan, as this can negatively impact your credit score.  
  4. Will applying for a mortgage affect my credit score?  
    Anthony:
    Changes have been made to the credit scoring model where multiple credit inquiries from mortgage lenders within a 45-day window are counted on your credit report as a single inquiry.  This only applies to mortgage lenders within this window. Credit inquiries from other creditors, such as credit cards and loans, are treated as individual inquiries.  
  5. What type of mortgages are available?
    Anthony: Mortgage options and products vary by the mortgage lender.  Some products to consider are:
    • Conventional Financing – various fixed rate terms such as 30 or 15 year fixed.
    • FHA Loans – loans insured by the Federal Housing Administration, where a minimum of 3.5% down-payment is required.
    • VA Loans – loans insured by the Veteran’s Administration. You must be a veteran to qualify and no-down-payment is required. 100% financing is available.  
    • USDA Loans – loans insured by the US Department of Agriculture, a property must meet eligible area and there are limits on household income to qualify.  100% financing is available with no required down-payment.  
    • Renovation Loans – Combine the purchase of a home with a total renovation budget to yield a Total Project Cost.  
    • Jumbo Loans – loans that exceed the government loan limits, for 2019, loan amounts over $484,350.00.  
    • Refinances – loans to refinance an existing mortgage, or get cash out for home improvements or debt consolidation.  
  6. What is a general turnaround time for a mortgage application process from start to finish?
    Anthony: General turn times could be 30 – 60 days from application to closing.  
  7. Tips on finding the best rate?
    Anthony: Correspondent Mortgage Lenders and Mortgage Brokers that are set up with multiple banks/loan servicers/investors can help the consumer shop for the best rates and terms for mortgages.  These types of mortgage lenders use software programs or pricing engines to determine the best rates between the pool of investors or loan servicers that the Mortgage Lender is set up with.  Consumers can go to individual banks, which often offer today’s rate for a certain loan product.  The Correspondent Mortgage Lender is looking at multiple banks/loan servicers/investors through the use of technology to determine the best rate for the borrower.

    Another tip to consider is the lock period.  Shorter lock periods such as 30 days often offer a better rate than a 60-day lock. 

    In addition, origination/buydown/discount points are a one-time fee that the borrower can pay in connection with their closing costs to buy-down the interest rate.  1 point is 1% of the loan amount which is charged as a one-time fee in the closing costs.   These points then buy-down the interest rate.  The lower interest rate then yields less accrued interest over the life of the loan, producing cost savings for the consumer.  
  8. Tips on finding a solid, qualified and safe company to use?
    Anthony: For tips on finding a reputable company and loan officer to use, consult with family and friends on their experiences and who they used.  Also, search online for reviews of that loan officer and/or company.  Client reviews are a great way to hear of other buyer’s experiences.  
  9. How long can I lock in my rate?
    Anthony: Mortgage Lenders can have different lock policies and typical lock periods are 30, 45 or 60 days.  You often lock in your rate when you complete a mortgage application with a lender.   Consult the Loan Estimate when doing your mortgage application to ensure your rate is locked. The Loan Estimate outlines if your rate is locked and until what date.   Extended locks could also be available for 90, 120, 150, and 180 days and often there is an upfront lock-in fee if an extended lock is desired.  Extended locks can be a great solution if the consumer is concerned about economic factors and rates going up in the future.  If you have constraints that you cannot close on time, a lock extension fee is required to extend the rate lock.  
  10. Helpful hints and suggestions?
    Anthony: Before “Selling Later” and/or Buying a New Home, there is a lot to think about and consider as a buyer.  The more you know, the better you can execute, making the process of home buying exciting and rewarding.  If you are unsure of something throughout the process, Ask Questions!  The Mortgage Lender's role is to help guide you through the financing process.  Stay Organized, keep your documents readily available and accessible, don’t put them into storage.  

    Keep It Current, make sure your debts are paid on time, even one late payment in the mortgage process can cause problems.  

    Know Your Status, many factors can have an impact on obtaining a mortgage loan such as changing jobs, additional inquiries on your credit report, making major purchases, changing bank accounts, and deposits to your bank account.  Make sure your financial status is your focus!

Anthony DeLuca
Mortgage Lender & Branch Manager  @ Victorian Finance LLC
NMLS: 398494 PA Department of Banking: 34547
412-600-7086    anthony@victorianfinance.com 



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Disclaimer: There is not an ad.   Anthony was kind enough to answer these questions for us as a friend because, in all honesty, we are not mortgage experts.  We approach our blog as we do with most things: if we don't know an answer, then we need to find an expert and figure it out!  Anthony is that expert and is also extremely helpful.  If you have further questions, Anthony is more than happy to help answer them for you. 
Anthony DeLuca
Mortgage Lender & Branch Manager @ Victorian Finance LLC

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