Frequently asked questions about the lending process


Source: Frequently asked questions about the lending process

Where do buyers begin?

Haley Newton, a loan officer with Starkey Mortgage in Sherman, said the first step in the buying process is not finding a house, rather it’s getting prequalified for a home loan. Buyers need to first find out how much house they can afford and if they can actually purchase a home.

“A lot them want to know what the first step is, and many people believe that the first step is finding a house, but that’s actually the second step,” Newton said. “You want to get prequalified with a local lender to know what you’re prequalified for, and then go out and find a house, which is the hard part.”

What documents do buyers need to provide to get prequalified and preapproved?

Prequalification is typically the quick and easy initial step and preapproval is a more involved process. The prequalification process starts with an application, which most lenders have available online, though Newton said buyers can call a lender or meet them in person to fill it out. After buyers fill out an application, which covers the buyers’ finances and history, the lenders will verify the information for preapproval and that requires the supporting documents.

“Once they’re prequalified, we’ll give them a list of documents they need depending on their application,” Newton said.

The list typically calls for pay stubs from the last 30 days, tax returns for the last two years, bank statements for the last two months, W-2s, IDs and Social Security cards.

Jeremy Lewis, branch manager of Grayson Home Loans, said sometimes the lender may require divorce decrees and documentation to indicate other income depending on the buyers’ situation. After preapproval, Lewis said he usually gives the buyers a call, and they figure out a loan program that best fits the buyers.

How much do buyers need for a down payment?

Short answer: It depends on the loan.

Lewis said the down payment is often the main concern for buyers, and it’s not a set amount. Depending on the loan type and what programs the buyers are eligible for, the down payment can be as little as zero down. Loans from the Federal Housing Administration, Veteran Affairs and the U.S. Department of Agriculture each have a set of stipulations that include the percentage required for the down payment.

“It depends on the loan type they’re going with — whether it be a conventional loan, an FHA loan, a VA loan or a USDA loan, it will determine what they’re going to have to place down — what their initial investment is going to be,” Lewis said. “There are still those out there out there that think they have to put 10 to 20 percent down, which is not correct. They can, in certain programs, put as little as zero down.”

Newton said there are down payment assistance programs in the state that can help cover the amount needed. These programs are income based and are capped anywhere from $55,000 to $75,000 depending on the program.

What’s the deal with closing costs?

In addition to a down payment, buyers also need funds to cover the closing costs. Lewis said the closing costs depend on the loan amount as a higher loan amount is going to cost more. About half the closing costs are directed to building the buyers’ escrow account, and the other half is a combination of fees for items such as the title and appraisal.

“Closing costs are another piece of the puzzle they’re going to have to come up with,” Lewis said. “However, in a Texas residential contract, you can ask the sellers to pay a certain percentage, depending on the loan type, for your closing costs.”

Buyers can negotiate with the sellers and ask that the seller pays a portion of the closing costs, which if the buyers qualify for a down payment assistance program, the initial costs can be very low.

“If you’re able to use the down payment assistance programs in addition to requesting the seller to pay some of their closing costs, they can actually get into a home with little to nothing down,” Newton said.

What is an escrow account?

“It kind of works like a separate checking account, and the purpose of that account is to pay the yearly tax bill that comes due every January, and their insurance premium that’s due once a year depending on when they closed on their home,” Newton said.

The initial money put into the escrow account is part of the closing costs, and Lewis said homeowners then add to it monthly when they make their house payments. The account is for buyers to put back money so property taxes and insurance are covered.

“Say when their tax bill comes due in January, there will be plenty of money in the account for them to pay their taxes, so that way they’re not coming up $2 to 3 to 5,000 all at once to pay their tax bill,” Newton said.

Can buyers purchase a home with a bad credit score?

Newton said buyers don’t necessarily need the best credit in order to get a home loan, and she noted that first-time homebuyer programs have recently lowered their credit score requirements.

“A lot people around here they don’t necessarily have bad credit, they just don’t have a lot,” Newton said. “They don’t use their credit.”

Newton said lenders will work with buyers and give them steps to take over 60 to 90 days to boost their credit score to where they can buy a home.

“It can be intimidating but we can walk them through it,” Newton said.

Buyers should consult with local lenders, and Lewis said he guides buyers through the process so they know what to expect.

“There’s so many different moving parts to a loan anymore,” Lewis said. “I try to keep everyone versed and ready for what’s to come in the process and what to expect.”

Joel Lobb
Senior Loan Officer
(NMLS#57916)

American Mortgage Solutions, Inc.
10602 Timberwood Circle, Suite 3
Louisville, KY 40223

text or call my phone: (502) 905-3708
email me at kentuckyloan@gmail.com

The view and opinions stated on this website belong solely to the authors, and are intended for informational purposes only. The posted information does not guarantee approval, nor does it comprise full underwriting guidelines. This does not represent being part of a government agency. The views expressed on this post are mine and do not necessarily reflect the view of my employer. Not all products or services mentioned on this site may fit all people. NMLS ID# 57916, (www.nmlsconsumeraccess.org). Mortgage loans only offered in Kentucky.
All loans and lines are subject to credit approval, verification, and collateral evaluation and are originated by lender. Products and interest rates are subject to change without notice.

Joel E Lobb
American Mortgage
5029053708
email us here

Kentucky FHA, VA, USDA & Rural Housing, KHC and Fannie Mae mortgage loans.

Credit Scores Needed To Qualify For A Kentucky Mortgage Loan Approval?


 

 

Credit Scores Needed To Qualify For A Kentucky Mortgage Loan Approval
Credit Scores Needed To Qualify For A Kentucky Mortgage Loan Approval

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Credit Scores Needed To Qualify For A Kentucky Mortgage Loan Approval

Source: Credit Scores Needed To Qualify For A Kentucky Mortgage Loan Approval?

Locking In Rates


 

Locking In Rates

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When is it appropriate to ‘lock in’ our interest rate?

 

May 17, 2004

Good question. And, as with the answer to so many things, it depends. Some say:

1. It is considered a fool’s game to try to time the bottom of the market.
2. If you can’t afford to lose, you can’t afford to gamble.
3. Interest rates can, and do, go up…as much as 3/4% or more in one week.

Although we certainly have not seen evidence of it lately, interest rates can rise and fall often and rapidly. The Wall Streetmoney market” is manipulated by so many factors, it is extremely difficult to predict. Everyone is guessing what might happen, but no one really knows. If you want to be safe, you lock in as soon as your lender will allow it.

Sometimes you need a tough hide to “float” and ride along with the market fluctuations. If you do this, you believe interest rates will fall during the period of your mortgage processing, and you must be prepared to take the consequences if they do not.

Before you decide which way to go, be sure you understand your lender’s rules. Some allow you to lock in at the time of application, generally without cost for 15 to 30 days; some only let you lock in after you are approved for the loan and, in a busy environment, this can take a few weeks. Some will let you lock in for extended periods of time for a fee, often payable upfront and nonrefundable. Some will allow you a “float down” option that provides you with a lower rate if rates go down, typically for a cost.

As you can tell by some of my comments, I would suggest you lock in your rate as soon as you can…then forget about it. You will sleep better. There are not many people who can stand the uncertainty of gambling with this big commitment.

Discuss the options with your loan officer, be sure you understand whether you are getting a “lock” with the lender making the loan and what period it covers. I have heard horror stories of “locks” made for short periods when everyone is so busy, and the timeline for closing is just about impossible. That’s a promise that is useless. Be sure you understand what kind of company you are dealing with, whether you have a true commitment on your rate and fee, one that really be trusted and accomplished.

Good luck.