It's easier when you understand the process!
Let's look at it from the lender's perspective first. In lending you the money, the lender is assuming a number of long-term risks. What are the chances the loan will be repaid? Will the loan payments be made on time? The loan application is an important document to the lender in determining a borrower's credit worthiness. Lenders verify answers to in-depth questions concerning income, assets and liabilities, credit and legal history, as well as a description of the property.
Most lenders try to approve a loan application if at all possible. The burden falls on the lender to determine whether an applicant is qualified or not qualified and may require a personal interview. However, increasingly most applications are accepted by mail or the internet and most will pre-qualify you before you shop for a loan.
The initial interview sets in motion important consumer safeguards:
- The Truth-in-Lending disclosure requirements provide the applicant with an estimated yearly cost for the loan.
- The Real Estate Settlement Procedures Act (RESPA) requires lenders to provide homebuyers with information on known estimated closing costs.
- The Annual Percentage Rate (APR).
Documents to bring to the initial interview:
- Purchase contract for the house.
- Certificate of Eligibility from the Veterans Administration if applying for a VA loan.
- Credit card receipts for the past several billing periods.
- Bank account numbers and addresses of your bank branch.
- Pay stubs, W2 forms or other proof of employment and salary.
- Last 2 years IRS Income Tax Return
- If you are self employed, tax returns, balance sheets and other information about your business.
IS YOUR INCOME SUFFICIENT?
The lender will mail employment and income forms to past employers in order to verify your income. Depending on interest rates and debt load (a general rule is that you can qualify for a loan up to twice the total family's income). However, the amount you earn may not be as important as how you earn it. Bonuses and commissions as well as overtime pay can vary greatly in different pay periods and lenders are reluctant to depend on them if they account for a large portion of your total yearly income. Lenders will want to verify several years back to get a better idea of what you typically earn from these sources.
IS YOUR CREDIT GOOD?
Before approving your loan, lenders will look at your history for several crucial aspects of your credit history. Your history of past credit, the type of credit, your credit score, your attitude towards credit and lapses of employment and debt repayment. Answers to these can give lenders a fair idea of how you handle responsibilities and long-term debt.
LENDERS ARE PROHIBITED FROM ASKING QUESTIONS ABOUT
Future parenting plans and the applicant's spouse, unless the spouse is also contractually liable or the spouse's income will be used to qualify or if the applicants live in a community property state.
WHAT IS THE FAIR CREDIT REPORTING ACT?
It is designed to ensure fair and accurate consumer credit reporting. The Act stipulates that lenders must certify the purpose for which the information is sought and use it for no other purpose. Also, the Act prohibits reports based on subjective information from neighbors and others concerning character, general reputation, etc. Certain other information, such as bankruptcy more than seven years before, is also prohibited unless the principal involved in that action as $50,000 or more.
HOW DOES THE EQUAL CREDIT OPPORTUNITY ACT HELP ME?
It prohibits discrimination in lending based on race, color national origin, sex, marital status, age (provided the applicant may legally contract), and the fact that all or part of the applicant's income comes from a public assistant program.
IS THE HOUSE WORTH THE PRICE THE BORROWER IS WILLING TO PAY?
The home you are purchasing will need to be appraised by your lender to determine that in case of foreclosure the lender has a property they can sell. This is typically determined by an independent appraiser who looks for present worth of the home and how the neighborhood's dynamics will affect the future value, up or down, of the home.
The appraiser pays particular attention to the physical security of the property, age, structural soundness, landscaping. location, kind of neighborhood, access to transportation, shopping, schools, the local government's plans for the area, how zoning and taxes will affect the home in the future and recent comparable sales. In most cases the homes appraise at or over the purchase amount, however, at times the appraised value will fall below the purchase amount. To avoid this situation, wecan help you structure the right offer based upon a sound analysis of the area and recent sales.
TYPES OF MORTGAGES
The Conventional fixed rate loan is usually approved very quickly. The payment and interest rates are fixed for the entire terms of the loan - usually 15, 20 or 30 years. The borrower can borrow up to 100% of the loan amount in some programs but most follow the 80% loan with a 20% down payment. Qualifying is easier with the higher down payments. You can also obtain Adjustable Rate Mortgages known as ARM's.
FHA insured loans are guaranteed by the federal government, down payments can be as low as 4 percent. All FHA loans may be assumed by qualified buyers, but are limited, depending on geographic location to the amount that can be borrowed. Processing time is up to 6 weeks.
VA Guaranteed loan are available to qualified veterans. Since the VA guarantees the first $27,000 of any qualified loan applicant, low or no down loans are possible. They are assumable at the note rate, although, the buyer may have to be qualified. VA loans usually take a little longer to process.
We recommend that you contact us to get to the best Mortgage Companies in Pensacola who will offer you a variety of rates and loan programs to fit your individual needs.
