What Factors Determine the Success of Your Mortgage Underwriting?

Mortgage planner with client

Mortgage planner with clientThere are different steps involved in a successful mortgage application. The most important of these is the underwriting process. The underwriter’s task is scrutiny of your application documents to ensure they comply with various guidelines and requirements.

Most applicants who choose to handle their mortgage application to save on costs generally fail at the underwriting stage. The fee you spend in hiring a mortgage planner from City Creek Mortgage in West Jordan, therefore, will not be an unnecessary expense as the expert will appropriately plan your documents to pass this intense scrutiny. Here are the elements that determine the outcome of your application when it goes through underwriting.

Capacity

This element evaluates your borrowing ability. A borrower’s capacity takes into account his or her employment and income history since lenders prefer borrowers with a steady income source. In evaluating your capacity, the underwriter will also assess your debt-to-income ratio, available assets and the available capital to meet your closing costs.

Collateral

When evaluating the collateral, the underwriter’s primary objective is to ensure the loan amount you’re seeking doesn’t exceed your property’s value. If the property’s value exceeds your mortgage amount, then the lender will be unable to recover the balance should you default on repayment. The most crucial document when evaluating collateral is your intended property’s appraisal report.

Creditworthiness

This is essentially an assessment of your repayment character. The length of your credit history, payment history, and type of credit are some of the elements your underwriter will evaluate. Before submitting your documents, your mortgage planner might recommend several steps to boost your credit rating.

If your mortgage’s underwriter encounters issues with these elements, he or she might give you a list containing conditions you must meet before approval. This is called a conditional approval. There are, unfortunately, times the underwriter might cancel your application altogether.

Don’t Fear a Conditional Mortgage Approval

a mortgage loanSo you received your home loan pre-approval application papers and see that there’s a note on it that says “approved with conditions”. Now you probably think that you’ve been approved for a mortgage. But wait, what about the conditions? Have you been approved or not?

Understanding a Conditional Mortgage Approval

A condition approval on a mortgage application means that the underwriter is more or less satisfied with your application documents, but that you need to resolve some “conditions” to be approved, explains an experienced home loan officer from VIP Mortgage in Tempe. The mortgage underwriter is assigned by your potential lender to review your loan application documents to make certain that it satisfies all the requirements and guidelines of the lender.

If the underwriter decides that everything seems to be in order with your application, but certain things need some clarification, you’d be issued a conditional approval. In most instances, underwriters usually request for clarification on the following issues or a copy of certain documents:

  • A letter of explanation in case you made a recent, sizable deposit or withdrawal
  • Verification of your current income and/or employment
  • Your mortgage insurance documents
  • A copy of your homeowner’s insurance plan
  • Other incomplete or missing paperwork require for loan funding

Take note that the underwriting process would differ significantly from the borrower to another such that you might receive other conditions during the underwriting process, while a friend that’s going through underwriting might get approved by the underwriter without any conditions whatsoever.

So Will My Mortgage Go Through?

Mortgage approval involves various stages, with the last being the final approval, when your mortgage would be funded before or during closing day. That said, it’s vital to understand that things could go awry at any stage during the entire process and the best thing that you could do once you receive your conditional approval is to satisfy the underwriter’s conditions as promptly as possible because your application would essentially be on hold until you could meet the conditions. Be proactive and patient to avoid further delays and get the ball rolling on your final approval.

Impress Your Mortgage Lender With 2 Incredible Moves

couple is having a meeting with their mortgage lenderIf looking to take a mortgage to fund your dreams of owning a home, you need to make a positive impression on your lenders. You want to prove to them that you’re indeed capable of living up to your word on repayments.

Whipping your finances into great shape is the key to successfully realizing your dream of owning a home, says prmicascade.com, a provider of residential mortgages in Moses Lake. Given the average asking prices for a house are in the $200,000 range, you need a good source of credit to raise that much cash.

That’s where qualifying for a mortgage on good terms makes a difference. See, lenders are quite skittish about their money and often impose measures to help them safeguard their interests. They need to know that they can trust you to pay back the money when issuing a loan.

Put some skin in the game

Given that buying a home is a major, even life-changing decision, you shouldn’t rush into it. Rushing into it only serves to complicate matters, and your finances will suffer for it. As such, you need to prove your commitment to the lender when going about the process. One of the best ways to do this is to raise a substantial deposit. Usually, 20 percent of the home’s asking price is sufficient but don’t shy away from raising more.

Borrowing more than 80 percent of the loan comes with one disadvantage – private mortgage insurance. This legal requirement means that you will pay more each month and none of that money goes towards building equity in the home.

Prove you’re creditworthy

Depending on the plan you pick, a mortgage is a long-term relationship that spans for years, decades even. Hence, the lenders are going to dig deep into your financial history. You need to ensure they are pleased with what they uncover.

Ever the cautious bunch, lenders are delighted by people who pay their bills on time or in full each month and don’t carry too much of it. See, it would do to lend you more money if you’re already struggling to pay back what you owe. Such a finding only raises red flags, lowering your chances of qualifying.

If you’re hoping to use a credit facility to finance your dreams of buying a home, then you need to win over the lenders. You need to come off as a creditworthy borrower who poses little or no risk to their money.

Applying for Mortgage? Avoid These 3 Mistakes

Mortgage ContractA lot of people commit costly mistakes that are easily avoidable when looking for the right mortgage. In fact, it even costs them their hard-earned money. That’s why it’s essential to choose the right loan lenders in FL to get the right mortgage that’ll fit your budget, notes Monroe Funding Corporation.

Here are a few of the most common mortgage errors that you should avoid.

Considering Only One Lender

Whether you’re buying a new car or the latest gadget, it’s always best to shop around and look for the best deal. The problem is a huge portion of mortgage applicants immediately consider the first mortgage provider that they can find. It’s essential to shop around when looking for a mortgage provider. Doing so will give you a better chance of finding the best deal at just the right price.

Setting Aside Most of Your Salary for Mortgage Payment

Another common mistake that some homeowners make is putting a huge portion of their monthly salary to their mortgage alone. Always keep in mind that there are other bills to take care of other than your monthly mortgage payments. Putting too much on your house loans each month will give you less space for other expenses such as your monthly bills and even your retirement.

Failing to Learn About the Entire Process

Most homeowners would often tell you how complicated and time-consuming the entire home loan application may be. That’s why it’s essential to arm yourself with knowledge so that you’ll have an idea on how the entire process works.

There are times when the problem doesn’t really start with the lender but with the loan applicant. So it’s always best to ask as many questions as you can so you can fully understand the process.

Why Mortgage Search Should Precede Property Search?

Mortgage Loan AgreementWhen buying a house, many homeowners shop around for properties first before mortgages. After all, exploring the real estate market is more fun and exciting while negotiating with one lender after another is tedious and overwhelming. Although this is true, focusing on the home loan at the start is more logical.

Here’s why experts at American Bank & Trust think you should consider your mortgage loan application as a top priority:

Narrowing Your Property Options Down

Negotiating with lenders before visiting open houses and calling real estate agents gives you an idea of the highest amount of money you borrow. When you know your price range, you can avoid wasting your time and energy pay attention to properties beyond your means. Unless you want to daydream, getting attached to a house for sale that you can’t afford can be heartbreaking.

Understanding What You Need to Work on

Learning how mortgages work, familiarizing yourself with important jargons, and comparing home loans takes time. You may think that it’s just an inconvenient hurdle, but obtaining financing is an important step to achieve your homeownership successfully. There’s so much to learn about the process that you can’t master overnight.

Paying attention to mortgages early allows you to take a 360-degree view of your financial situation. It tells you about your strengths and weaknesses, giving the chance to continue your good habits and ditch the bad ones consciously. If you’re too concentrated on property search, you might spend years trying to buy a house.

Determining Whether You Can Afford to Buy a Property

Most importantly, mortgage applications are a reality check. Considering that lenders scrutinize not just your credit score but also your income, employment history, and cash reserves, they force you to evaluate your financials.

Many things have to happen before you can say that you’re mortgage-ready. You ought to pay off most of your debts, have an emergency fund, and still come up with a decent down payment. Only when you accomplished them all, you can seriously dream of becoming a homeowner.

Don’t underestimate the effort necessary to obtain a home loan successfully. If you get past the mortgage front, everything else should go smooth sailing.

Pay Off Your Mortgage Earlier Than Expected in 4 Easy Steps

Mortgage loan documentsApplying for a loan in mortgage companies in Fort Myers is the best way to get your own home. However, a mortgage is a huge financial commitment that you’ll have to pay off for years.

But what if there’s a way to shorten your loan? This may sound impossible at first, but you can pay off your mortgage in less than ten years if you follow these tips.

1. Get a house that you can afford.

Choosing the right house can be a challenge, especially when there are so many options available. You can make it easier if you look at houses that are within your budget. So, examine your monthly earnings to help you determine how much you can spend on a house.

2. Consider paying bi-weekly.

You could consider paying half payments every two weeks instead of making just one monthly payment. It may seem the same, but since there are 52 weeks in a year, paying it bi-weekly will ensure that you’ll be making 13 full monthly payments each year.

3. Make extra payments.

Most mortgage companies will allow you to make an extra payment and put it towards your principal balance. Doing so can help you pay a bit of the principal much earlier than expected. This will save you in interest charges in the long run.

4. Be frugal.

It’s not bad to be frugal at times, especially when you want to finish your loans much faster. So, try to be frugal and think of ways on how to reduce your bills.

You could cut off your cable service, for instance, if you already have a stable internet connection. There are several streaming sites that you can choose from, which is a much more affordable option than a cable service.

Paying your mortgage much faster is the best way to free yourself from financial commitment. You might want to talk to a financial adviser or think of ways on how to save your money and put it on to your existing loan.

3 Mistakes You’re Likely to Make When Taking a Mortgage

Rejected mortgage applicationHomeownership is a dream come true for everyone. It might, however, be a steep venture without the money to buy or build your house. A mortgage is the best solution to achieve your homeownership dream regardless of your income. Exercising caution, however, is essential to get the perfect Texas mortgage for your situation and to avoid some of the common mistakes borrowers make. A mortgage is, after all, a long-term commitment. Ensuring it fits various patterns and circumstances in your life is vital.

Here are some tips to help you avoid some common mortgage mistakes:

Being House Poor

This is among the most prevalent mortgage mistakes. Being house poor is a consequence of committing a significant amount of your monthly income to mortgage repayment, leaving you with little to no funds to sustain yourself. To avoid making this mistake, allocate not more than 30% of your pretax income to mortgage repayment.

Ignoring the Real Price of Homeownership

Varied costs come with homeownership. Without proper preparation, they might surprise you along the way and leave you disappointed. Property taxes and maintenance and utility costs are some of the expenses that come with owning a house. Ensure you factor these before picking your mortgage, so your costs and monthly mortgage payments fit your budget perfectly.

Ignoring APR

Most mortgage borrowers only focus on their advertised loan’s monthly interest rates. Some lenders will advertise low rates, but compensate with high loan fees that ultimately increase your yearly repayments. Base your choice on the annual percentage rate (APR) since it includes the lender’s fees and interest, and is the ideal reflection of your mortgage.

It’s possible for you to make a smart choice when taking a mortgage. Avoiding these common mistakes is a big part of a stress-free mortgage, though not the only one. Having a trustworthy mortgage lender is the other crucial part of a hassle-free mortgage.

Q&A: What’s a Debt-to-Income Ratio and Why Does it Matter?

Woman using a laptopOther than your creditworthiness, your debt-to-income (DTI) ratio is another thing you need to worry about when applying for a mortgage. Whether you want to obtain a conforming or a jumbo loan, your prospective lenders would measure your capacity to pay with it. Plus, it can determine the mortgage rates in Salt Lake City you can qualify for.

To further advance your knowledge of DTI ratio, let’s answer the most asked questions about it:

What Is the Max DTI Ratio?

Mortgage lenders have different DTI ratio requirements, but your housing monthly payment shouldn’t exceed 36% of your monthly income. The lower your DTI ratio, the less likely you would miss your payment.

Apart from increasing how much you earn, one way to meet the DTI ratio requirements is to extend the term of your mortgage. Of course, this would mean paying for more interest over time.

What Are Front- and Back-End DTIs?

The front-end DTI ratio refers to the percentage of your gross monthly income you need to allot to cover your housing monthly payment. On other than hand, the back-end DTI ratio takes into account all of your monthly financial obligations.

According to the new Qualified Mortgage rule, the maximum back-end DTI ratio is at 43%. In other words, your monthly liabilities (debt payments) should exceed 43% of your monthly income. Despite the limit, most lenders would want to see your back-end DTI ratio to be below 43%.

How to Calculate Your DTI Ratio?

To figure out your current DTI ratio, get your average annual gross income based on your past two tax returns and divide it by 12. Then, add up your projected housing monthly payment and your other liabilities, and divide the total by your average gross monthly income.

If the number exceeds the maximum back-end DTI ratio allowed, don’t fret. You can lower your DTI ratio by paying your other debts off, pay a larger down payment to borrow far less money, or consider a more affordable property to buy to reduce the size of mortgage you need and decrease your potential housing monthly payment.

Put a premium on your DTI ratio to qualify not just for the kind of mortgage you want, but also for a favorable interest rate. If you can keep it as low as possible before speaking with your prospective lender, you can put yourself in a good position to negotiate a great deal.

An Expert Guide for a Successful Mortgage Refinancing

Man holding a refinance your mortgage card

Man holding a refinance your mortgage cardMortgage refinancing involves switching your current home loan to a better-suited option. This is primarily based on your current financial standing, as it enables you to reduce your loan interest rates and get a more flexible repayment plan.

Even with the benefits of mortgage refinancing in Krum, TX, some homeowners still doubt how this strategy could help them in the long run. It’s true that making mistakes in refinancing can land you in worse financial situations, but if you’re careful when making a decision, there shouldn’t be a problem.

Here’s an expert guide to getting your mortgage refinance right:

Have a refinance strategy

Know your reasons for refinancing. The ultimate goal of many people, for instance, is seeking to refinance with a lower payment. Are you one of them? If yes, then stick to a short refinance loan term to avoid paying high interest over the loan period. An efficient refinancing strategy should balance an affordable monthly payment with a suitable loan term.

Consider the Fine Print

Look at the terms and conditions of your current mortgage and compare it with your refinance mortgage. Lower monthly payments don’t always mean long-term financial benefits. Consider the key facts of your refinance over your current loan before making a decision. Check if there are exit fees when refinancing your mortgage, as this can hinder your future financial plans.

Consider All Your Refinancing Costs

Most lenders will only give you an estimate of their mortgage loan fees. Mortgage refinancing costs, however, go far beyond your mortgage loan fee. You should factor in the title research, credit report, appraisal, underwriting, tax transfer, and insurance costs to have a clear picture of the exact amount you’re going to spend.

It’s indeed challenging to find the perfect lender, as each of them has different services and products. This is why knowing the key to refinance right, like choosing the ideal lender for your situation, is ideal.

 

4 Reasons a Fixed-Rate Mortgage is Your Safest Bet

Different mortgage ratesAn adjustable-rate mortgage (ARM) is generally attractive and usually hard to pass up. It includes a “honeymoon” period, allowing you to pay a lower-than-usual interest rate for up to seven years. Less interest translates to more savings within the initial period.

However, many Oregonians prefer the ARM’s antithesis — the fixed-rate mortgage. Here’s why it might benefit you:

You Like Simple Math

Primary Residential Mortgage, Inc. noted that any mortgage lender in Portland would say that a loan with fixed interest is straightforward. It makes shopping around a breeze because only need to compare rates and get a fairly accurate monthly repayment depending on your chosen term.

When it comes ARMs, the details of the loan can become complicated. In most cases, figuring out how much you would pay for the year after the initial period is over requires considerable work.

You Put a Premium on Stability and Security

If you take out a fixed-rate mortgage, you would know exactly how much you would pay every month until it matures. Your loan would be impervious to market forces, making it proof against interest rate hikes.

You Feel That Interest Rates Are Bound to Go Up

An ARM is most advantageous when the interest rates generally remain low after the initial period. If you think the current interest rates could no longer go down, a fixed-rate mortgage could be a safe bet.

You Plan to Keep Your Home for a Long Time

Many borrowers apply for ARMs because they only intend to resell and move within or after the “discounted interest” period of their loans. If you have no plans to change addresses in the future, then a fixed-rate mortgage might be more suitable for you. Besides, you can always refinance your mortgage later to snag a lower interest rate when the opportunity arrives.

Speak with an experienced lender to discuss your options. This way, you can learn about the newest financial products on the market and ultimately make an informed decision.