Many people buy a new home by looking at homes, and putting an offer on one, and then call the bank. Some even buy some new furniture, close down some credit cards, or accept that new job prior to consulting with a professional about the financing of that new home. The savvy consumers, however, call their mortgage professional first and ask some essential and germane questions. For example, how does my credit, income, debt, assets and future home selection affect my ability to get a loan and the terms in which I will be able to secure credit?
Knowing your credit score, ways to improve it and ways to avoid lowering it are all critical to getting the best terms available. Many times there are errors in the credit report that can adversely impact a score and it can take a few months to get the errors corrected and the credit score modified to reflect the change. Also, the decision to pay down certain debts prior to pulling your credit score can mean the difference of thousands of dollars in extra interest paid because of your perceived “credit worthiness”.
The “type” and “duration” of your income may play a bigger role than the amount of your income. If you are self-employed or have recently switched jobs or professions, that can send red flags to the underwriters of the loan.
Your debts and assets focus on your ratios and what percentage of cash flow is going to service debt. You may have tremendous income but if your ratios are too high, you may not get approved under the best terms available.
Other factors that are also out of the borrower’s control are the various programs available, including Conventional, FHA, VA, USDA and New Construction. You may want to speak with a mortgage provider that features all of those programs. Understanding that a bank only offers it’s own rates while an independent broker/banker has access to many lenders rates and programs, may endorse the position that you shop for a mortgage in a way that provides the most choice and flexibility in program and rate. There are many independent brokers that act as a “mortgage bank” and advance their own funds and sell the loan to another lender soon after closing. These mortgage banks often have all of the advantages of a broker with additional features that may provide faster loan turnaround times and fewer fees.
We now start getting into the specifics of your deal including getting a pre-approval letter that gives the real estate agent and sellers a little more confidence in knowing that you are a bona fide buyer and not someone who is shopping in a neighborhood with no ability to buy in that neighborhood.
Understand that without 20 percent of the purchase price being paid at closing, there may be an additional cost for Private Mortgage Insurance (PMI). There are fees to originate the loan, close the loan and pre-paid fees to cover taxes and insurance, as well as any association fees. You will want to know what these fees are so you can manage your finances and compare fees.
Your mortgage professional may point you towards your tax preparer to discuss any tax deductibility of closing costs along with any tax credits available from the US government with the First and Second Time Homebuyer program. There may also be tax abatements available from your county or local jurisdiction that should be examined.
No matter your situation, whether you are considering buying or refinancing your current mortgage, it is good to get a mortgage check up to see what steps can be taken to maximize your financial leverage and minimize the amount you pay for the leverage on the biggest expense of your life. You should not have to pay for such a checkup and you should only provide payment once it is determined that you will derive a benefit by getting a mortgage or refinancing your current mortgage.
Please feel free to contact me to answer any questions that you may have. There will never be a fee to simply address your mortgage questions. You may learn that making a change in your mortgage may make a positive change in your bottom line. You may also learn that there is no need to change, and that your current situation is vindicated.
There are many factors out of our control, including housing supply and demand, the secondary market for mortgage backed securities, etc., so that is why we at Sail Mortgage say “We cannot direct the wind, but we can adjust the Sails.” Luck, good fortune and low mortgage rates all favor the informed and well prepared. It is never too early to become informed, so call now.
Lisa Siranovich
(724) 934-2800 x210
lisas@sailmc.com
