Archives for July 2020

With record low-interest rates available right now, have you decided now is the time to take the leap and get into a new home? It seems you’re not alone. The U.S. Census Bureau reports as many as 676,000 new homes were sold in their latest collection home sales data.

So, while you might be able to get great rates, there’s lots of competition to find the perfect house for you. Finding that house can feel daunting and never-ending.

And what the financing once you find the perfect house? There’s the mortgage broker vs bank debate when it comes time to get a mortgage. How do you know which option is a better choice for you?

This should be an exciting time, buying a house. Don’t let the financing part get in the way of your excitement. Read on to learn all about the differences between working with a conventional bank or working with a mortgage broker.

How Banks Work With Mortgages

Let’s say you’re ready to buy and want to get pre-approved. You have your checking and saving account at the local branch of your bank, so you decide to start there.

You head into the bank where you will meet with a loan officer from the bank. This loan officer is essentially the bank’s sales force when it comes to home loans.

They will help you with the application and guide you through the process if you get the loan from them.

Certainly, it might be convenient to decide to get your loan from the same place you do your other banking. Yet, the big question is what option do they have for you when it comes to writing a mortgage for you.

Let’s take a closer look at what the traditional bank can do.

Positives to Work With the Bank for Your Mortgage

You might already have a relationship with this bank which can be positive. As mentioned, it might be convenient to add this loan to the rest of the banking you do here. And convenience matters.

The bank might also be able to provide a variety of loans from a conventional loan to a jumbo loan. Although, you want to be sure if your bank will offer an FHA option if this is how you hope to get into a house.

Often banks will have competitive interest rates.

Things to Consider With a Bank Loan

While it might be true that they often have competitive mortgage rates, you would need to leave that bank and go to multiple banks to be able to compare loan packages or mortgage options.

Banks have limited options when it comes to mortgage loans. They are often more particular about who they lend to.

When you’re shopping for home loans, one thing you want to know is how your lender is getting paid. Banks will not disclose how they make money on the loans they give beyond interest. This makes comparison shopping tricky.

The thing to remember here is that your loan officer works for the bank. He represents the bank’s interest in your loan. That can be positive or negative too.

How Working With a Mortgage Broker Works

A mortgage broker works as an independent agent. They don’t represent just one financial institution. Instead, they work with many financial institutions.

When you go to a mortgage broker, they will consider you as a borrower.

• How much do you want to borrow?
• How much do you have for a down payment?
• What’s your credit like?
• What other factors might impact you getting a mortgage?

Then the mortgage broker’s role is to look at the wholesale lenders they work with and to find you the best mortgage available.

Positives to Work With a Mortgage Broker for Your Mortgage

One of the biggest positives in working with a mortgage broker is the options you have. While a bank has a limited menu of mortgage products, a mortgage broker will have many options.

They can work to find the best loan for you. If you want to do a loan with a smaller down payment, they can find a lender to accommodate you. Maybe you have less than perfect credit and the bank wouldn’t finance you.

Because the mortgage broker works with many lenders, there are more options available.

The mortgage broker also sets their profit margins and can be easier to negotiate with. They also need to tell you who is paying them and how much, so the fees and costs are typically more transparent than with a bank.

Things to Consider With a Mortgage Broker

One thing to consider is that when you work with a broker, you have more parties involved. So instead of you and the bank, you now have you, the mortgage broker and the lender.

The more involved parties can mean it can take longer. The broker also might have less control when it comes to moving a loan along. This might be something to consider in the busy housing market if you are on a tight timeline.

Often mortgage brokers arrange more complicated loans which can be more costly. But often these are the loans banks won’t do.

If you have a relatively uncomplicated loan, the costs should be competitive with traditional banks though.

Interest Rates

When you are buying a house, paying attention to interest rates is huge. Even the smallest difference in rates can cost you or save thousands and thousands over the course of a loan’s life.

While the home buying process can be overwhelming, this one area that’s an advantage for mortgage brokers.

They can do the rate shopping for you. It’s their role to find a competitive mortgage that best meets your borrowing profile.

Choosing Mortgage Broker Vs Bank

When considering mortgage broker vs bank, in the end, you want the best loan you can get for your home purchase. Often this means going working with the person who has the most options available.

If you are in the market for a new house, we can help you find a great mortgage package. Contact us today to get started with a consultation, so we can help you get into your new home.

Finding the right home is an essential piece of the home buying process, but it’s not the first step a buyer should take. Would you be surprised to find out your first move as a buyer should be to secure a home mortgage pre-approval letter?

If that sounds backward to you, consider what a pre-approval can do for you!

First, getting pre-approved helps you understand how much house you can afford. Second, most sellers (and realtors) don’t take buyers without a pre-approval mortgage letter seriously. Third, when you begin the mortgage process, being pre-approved can get you and your lender through everything faster and smoother.

Curious about how the pre-approval process works? Read today’s post and find out everything you want to know.

What Exactly Is a Home Mortgage Pre-Approval?

Most buyers today, go through the pre-approval process before looking at available homes in-person. While a mortgage pre-approval doesn’t guarantee any buyer to get a home loan, it does show good faith.

Pre-approval means you’ve started working with a lender.

Before issuing a pre-approval letter, a loan specialist will analyze your financial situation. They’ll look at your income, debt, credit history, and your assets. Once they’ve put the numbers together, you’ll have a clearer picture of how much money you can borrow, how much you can afford for a monthly payment, and your interest rate.

After the lender pre-approves you for a home loan, you’ll receive a letter. The pre-approval letter shows sellers you’re taking the homebuying process seriously. It also shows the willingness of a lender to work with you.

Sellers love a pre-approved buyer, and so do real estate agents.

The Difference Between Pre-Approval and Pre-Qualification

Once you start thinking about a new home, you’ll hear a variety of terms associated with home loans. In addition to pre-approval, you may come across the phrase, pre-qualification. Approved and qualified may seem like they have similar meanings, but they’re not interchangeable.

When you work with a lender on pre-qualifying you for a mortgage, you supply the numbers for your income, debts, and assets. The lender then tells you how much of a mortgage you may qualify for, but they don’t too deep into your finances. Think of a pre-qualification as a rough estimate.

For the pre-qualification, the lender bases their estimate on your verbal information. Some lenders also pull a credit history for a pre-qualification.

A pre-approval for a mortgage consists of an in-depth inquiry into your financial situation.

To give you a pre-approval letter, your lender will require proof of your income and assets as well as an official credit report. Lenders thoroughly assess a prospective borrower’s financial situation before signing off on a mortgage pre-approval.

Be Prepared with the Right Documents

As part of the pre-approval process, you’ll fill out a mortgage application. The lender will require several documents including, but not limited to, the following:

• Driver’s License or United States Passport
• Social Security Card
• Pay Stubs and W-2s
• Tax Returns
• Bank Statements for Personal and Business Accounts
• Statements for Asset Accounts
• Letters of Explanation for Credit Issues

Be prepared to collect two years’ worth of income information. If you’re self-employed or you work on commission, you’ll usually need two years’ worth of tax returns. The type of loan you apply for determines how many bank statements you’ll need to provide.

If you’re receiving a gift from a relative or friend to help with your downpayment, you’ll need a gift letter. The letter states that the money is a gift and you don’t need to pay it back.

How Long to Get Pre-Approved?

Do your best to gather all the documents the lender asks for and submit them together.

Typically borrowers who come with all their documents get their mortgage pre-approval on the day they meet with the lender. It’s the only way you can speed up the approval process!

Several things can slow down the process, including:

• High Amount of Debt
• History of Foreclosures
• Low Credit Score

While these issues don’t necessarily preclude you from receiving a pre-approval, they can add several days to the process. In some cases, especially for buyers with complex financial situations, any of these can add a month or more.

How to Get a Pre-Approved Mortgage

In addition to ensuring you deliver the requested documents to your lender, there are a few other things you can do to ensure you get your pre-approval letter.

• Eliminate as much debt as possible. Lenders measure your debt-to-income ratio to determine how much of a mortgage you can afford.
• If you’re aware of blemishes on your credit report, clean up as many of them as possible before you talk with a lender.
•  Stash at least 3-6 months of money away to cover expenses. Your lender will consider whether you have cash savings to fall back on should you lose your primary source of income.
• Show proof that you have or will have a down payment of at least 10%.

As far as down payments go, borrowers with larger down payments enjoy certain advantages. A 20% down payment may increase your chance of getting pre-approved. Another bonus of a larger down payment is that you won’t need to pay private mortgage insurance (PMI)

Can Your Pre-Approval for a Mortgage Change?

One of the most common mistakes people make when working through the mortgage process is making significant changes. Some changes can change the status of the pre-approval for your mortgage.

Here are some helpful tips for maintaining not only your pre-approval but gaining the final approval for your home loan.

Avoid making job changes until after you close on your home. Hold off making major purchases with your credit card. Be careful about making large deposits or withdrawals from your bank account—keep documentation if you do.

Let your lender know of major changes to your financial situation. If you keep things steady, you ensure your pre-approval doesn’t change.

Ready to Start the Pre-Approval Process?

Now that you have a better understanding of how a home mortgage pre-approval works, you’ll want to contact someone who specializes in connecting borrowers with lenders. You must get into a loan program that best fits your needs.

A mortgage broker is an ideal person to help!

To get started on the road to homeownership, contact us today. We’d love to work with you on a pre-approval for the mortgage on your new home.

If you’re thinking about buying a home, there’s a lot you’ll need to think about. You need to find the right realtor, do research on potential neighborhoods, and ensure that you’re able to find something in your price range. 

However, there’s one thing you might not have thought of.

If you want to handle the home shopping in the best way possible, you should focus more of your attention on mortgage shopping. 

Shopping for a mortgage is an important part of the home buying process, and it isn’t something that you should dive into unprepared. 

Whether you’re a first-time home buyer or are just in the market for a new property, we’re here to help. Keep reading so you can learn our important tips for finding the right mortgage lender. 

Why Mortgage Shopping is So Important

It’s best to start shopping for a mortgage before you start shopping for your home. Knowing what lender you’re going to use can make the home buying experience much less stressful. 

When you know what lender you’re going to use ahead of time, you’ll know what you can and can’t afford. Too many people have made the mistake of falling in love with a home only to later realize that they can’t find a lender that’ll give them enough money. 

Getting pre-approval for a mortgage can give you an advantage over other buyers. You’ll be ready to make an offer while they scramble to find a lender. That’s why we always recommend shopping around for mortgages before you shop for homes. 

We have all of the info you’ll need to find the right mortgage. If you’re ready to start the home buying process, make sure you follow these 4 important tips to find a lender first. 

1. Read Plenty of Reviews

Some people read through multiple reviews before they settle on eating at a new place or buy new clothes. If you spend a lot of time looking at reviews for restaurants or products, wouldn’t you want to put the same importance on finding reviews for mortgage lenders?

Reviews should play an important role when you’re looking for lenders. They can tell you everything you’ll need to know about what it’s actually like to work with a particular lender. 

Don’t just read to see if people are happy with their new homes. Read between the lines to see what people have to say about the service they received. 

Did they mention that the lender they worked with were very knowledgable? Did someone call out how friendly employees were? Did you notice any reviews where people felt like their concerns were ignored?

The answers to those questions are very important. Be sure to read reviews about lenders before you set your mind to working with someone. 

2. Get Your Credit Score in Order

If you want to find the best mortgage lender, you’re going to have to set yourself up to be a stellar borrower. One of the best things you can do when you’re in your pre-buying phase is to focus on improving your credit score. 

There’s a lot you can do today to start building up your credit. The first and easiest thing you can do is to make sure you pay your bills on time.

Late payments can add up and can eventually bring down your score. Even if you just make the minimum you no longer have to worry about missing payments completely. 

If you’ve been unable to make payments because of financial troubles, it never hurts to speak with your debtors. They may be able to help you get on a repayment plan that makes keeping up with your bills a lot easier. 

People that have a lot of credit card debt should work on paying off their balance, but they shouldn’t immediately close their accounts. Work on keeping the card a little active by charging small things like gas or groceries that you know you can pay off quickly. 

3. Comb Through Your Credit Report

Since you’re working on improving your credit score, you’re in a great spot to go through your credit history. Request a credit report so you can know exactly where you stand with your debt. 

Errors on credit reports are a lot more common than you’d think.

Someone with a similar name could have their charges on your report. You may have paid off very old debt, but someone may have forgotten to note that on your report. Going through your credit report can also alert you of any potential fraud on your account.

It’s important to note that it may take a while to straighten out any errors on your report. That’s why it’s best to start the process early on so you don’t have to delay buying your dream home because of an old report error.

4. Ask About Potential Speciality Mortgages

Are you or your spouse a veteran? Is this your first time buying a home? If so, find a lender that specializes in that. 

Loans for first-time buyers and veterans can be great for buyers, but that’s only true if they work with a lender that’s familiar with them. 

If you know that you qualify for a specialty loan, don’t be shy about finding a lender that knows the ins and outs of them. You’ll be able to find a loan that meets your unique needs, and working with someone who understands them can ensure that you reap all of its benefits.

Get Mortgage Guidance Today

Mortgage shopping is simple when you know what to look for. If you focus on improving your credit and doing research on your lenders, you’ll be able to find one you’re happy with in no time. 

Do you have questions about finding a mortgage? Did you want more advice for first time home buyers?

Regardless of what you need, we’re here to help. Be sure to reach out today so we can have a conversation about the best way to fulfill your home buying needs.