Home Loans

Home Loans - It seems like a lifetime ago, that I didn’t know anything about Home Loans. Mortgages for the most part are easy. The process is to qualify your strength as a borrower. Are you the type of person that is financially responsible, or the person that never repays a debt? The single best indicator is your FICO score (credit scores). For mortgage purposes they take the middle score of the three. For example, if you have 680, 700, and 720 for your scores reported by the three credit agencies (Experian, Equifax, Transunion) then your score for a mortgage would be a 700. On the other hand if you have an 780, 650, and 700 your score would be a 700.

When I first entered the industry, everything was jibberish. FICO what? 1031 exchange properties huh? What are adjustable rate mortgage loans? Now I have friends that will come to me with questions because they are looking to buy a home. The one question I will always get is, “What would my rate be?” Not being in the industry any longer I do not follow the rates religiously nor all the niches and specials that pop up, I can’t even guess to what their rate would be with any real accuracy.

So here are some tips to strengthen your position as a borrower.

Improve your credit score – this can be done a multitude of ways. Best way is to obtain a copy of your credit report and see what factors are bringing it down. Having debt is not a bad thing, but lates, high balances and new credit can be.

Money in the bank – showing that you can save money is important, because let’s face it, stuff happens. Some loans require assets or “reserves” equal to x months of mortgage payment and taxes. Plus a down payment (if possible) will help your lower your rate in many instances. One caveat, if you are going to borrow money from a friend or family member, make sure you have it in your bank for a few months prior to obtaining a loan. Banks require seasoned assets and will check the average balance for two months.

Stability in work history – Show that you have been working at least two years in the same industry. Working as a clown at three different circuses in the last few years is ok, but working as a clown to a CEO of the corporation <Insert Hate Corporation> will have some problems.

Those are the most important factors for qualifying for the best terms loan. But that’s only half the battle. Now you have to get the best loan.

I’m sorry to say it but the industry is corrupt. There are many honest reputable businesses that do mortgages, but as a whole there is a lot of dirty laundry. So if you want the deal of a lifetime, you play dirty too. RESPA (Real Estate Settlement Procedures Act) will be your ally. RESPA says that you have the right to shop for as many loans as you want.

It will be an uphill battle. Escrow, agents, officers, and banks will all put pressure on you to choose a single brokerage or bank. You will have guarantees and promises. But nothing is concrete until you see the final paperwork with the exact loan terms promised to you. You see something different than promised, move on to the next lender.

Loans take time to process; don’t make the mistake of thinking that if something goes wrong another lender can pick up the slack in only a few days. When all is said and done, congratulations on your new home.

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