First-Time Homebuyer Info

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WHAT IS THE LOAN PROCESS?

Applying For Your Loan: The Interview

A mortgage pre-approval is typically accomplished with a telephone interview. A prospective borrower calls and the questions begin. Our goal is to make the process as simple and painless as possible and that requires lots of questions at this critical phase of the process. Expect to answer queries on where you’ve been residing, what you do for a living, how long you’ve been employed in your current field, what your salary is and your asset balances. If there is a co-borrower, they will need to answer the same questions.

During the phone interview, your consultant will discuss with you where you are right now and help you determine your best way forward. If you don’t pre-qualify right away, your specialist will suggest ways to improve your profile, so you may become eligible in the future. Within 10 minutes, you’ll usually know if you’re ready for a mortgage. The interview is also a great chance to get acquainted with your consultant, who will play an important role in your becoming a home owner.

Good communication will increase your chances of a successful and speedy process! In all cases, full disclosure of your credit and homeownership past can potentially eliminate unforeseen mortgage approval woes. Remember that we are on your team but we need all the information in order to structure your mortgage the best way possible for you, and in order to avoid any bumps down the road during the final approval process. Full vetting will save you the dreaded we-have-a-problem call! Once the interview is complete, your consultant can typically provide you with a pre-approval letter that same day!

Processing Your Loan

Once you make an offer on a home and it’s accepted it’s time to process the mortgage. We make it simple and can send you the preliminary disclosures electronically or we can meet at our office or wherever would be most convenient for you! Processing a mortgage involves gathering documents to verify information at this stage which may include (but is not limited to) W-2 forms, two-weeks of pay stubs, and bank statements. Your mortgage consultant will provide you with a very short list of items to provide and can answer any questions you may have about the specific documentation that’s required. This checklist will itemize all of the disclosures you must sign and the items you must submit before receiving a final loan commitment.

Closing your loan

Final approval all comes down to your proof. If the lender asks for a specific document, give them exactly what they are asking for. This is where the approval process can get sidetracked if the lender asks for specific documentation and the borrower supplies something else. Here, too, is where both sides can often get frustrated. So if the lender asks for a bank statement and there are 5 pages for that bank statement, send them all 5 pages, and not just the summary. Give them EXACTLY what is requested. This may sound elementary, but the vast majority of mortgage approval process woes stem from scenarios just like this.

The reason the mortgage approval process is now so rigorous is simple. Avoiding defaults and loan buybacks has become the primary goal of mortgage lenders. Higher standards are reducing loan defaults, which should mean fewer foreclosures in the future. Reducing defaults ultimately benefit all borrowers through lower rates and reduced mortgage insurance. So when your lender requests specific documents, give it to them just “because they said so!”

The closing is the “end of the line” in obtaining a mortgage. At the closing, you will sign all of the required mortgage documents. If it’s a new mortgage, you’ll collect your new keys and then take possession of your new home. The professionals at New South Mortgage are happy to discuss the process with you in detail.

Select excerpts from Forbes.com.

CAN I BUY A HOME WITH NO MONEY DOWN?

The first thing to understand about buying a home is that you don’t have to have all the cash saved up in order to make your purchase. There are lenders that offer loans in certain situations up to 100% percent of the purchase price of your home. Both USDA and VA will allow certain qualified borrowers to obtain 100% loans with contracts structured so the seller pays closing costs, so you can truly buy a home with no money down.

If you have a steady job and a reasonable credit history, there is a good chance that you can find a home lender who will lend you most of the purchase price of your new house. FHA and Conventional (Fannie Mae and Freddie Mac) lenders require as little as 3% as a down payment and can be an excellent option for those with only a small amount to put down. They will even allow the down payment to be a gift from a family member. And we have lenders that will even allow the down payment to be come from a down-payment assistance program that we have FULL access to so you can truly obtain 100% financing if you need it!

Loans insured by the Federal Housing Authority (FHA) are designed to help everyone realize the dream of owning a home but they’re ideal for first-time home buyers. Because the FHA insures these mortgages, FHA lenders can work with borrowers who’ve had credit problems, collections, past bankruptcy filings, or debt-to-income ratios that are higher than normally allowed. In some cases they can provide financing down to a 580 credit score and below.

The professionals at New South Mortgage are happy to discuss your situation in detail and help you determine the best mortgage program for you and the best way to structure your own home loan.

WHAT ARE THE TOP 10 THINGS YOU NEED TO KNOW WHEN BUYING A HOME?

1. Don’t buy if you can’t stay put.
If you can’t commit to remaining in one place for at least a few years, then owning is probably not for you, at least not yet. With the transaction costs of buying and selling a home, you may end up losing money if you sell any sooner – even in a rising market. When prices are falling, it’s an even worse proposition.

2. Start by shoring up your credit.
Since you most likely will need to get a mortgage to buy a home, you must make sure your credit history is as clean as possible. A few months before you start house hunting, get copies of your credit report. Make sure the facts are correct, and fix any problems you discover.

3. Aim for buying a home you can really afford.
The rule of thumb is that you can buy housing that runs about two-and-one-half times your annual salary. But you’ll do better to use one of many calculators available on-line to get a better handle on how your income, debts, and expenses affect what you can afford.

4. In MOST scenarios, you do NOT need 20% down!
There are a tons of options and many lenders who offer low-interest mortgages that require a minimal down payment.

5. Buy in a district with good schools.
In most areas, this advice applies even if you don’t have school-age children. Reason: When it comes time to sell, you’ll learn that strong school districts are a top priority for many home buyers, thus helping to boost property values.

6. Get professional help.
Even though the Internet gives buyers unprecedented access to home listings, most new buyers (and many more experienced ones) are better off using a professional agent. Look for an agent who will have your interests at heart, and can help you with strategies during the bidding process.

7. Choose carefully between points and rate.
When picking a mortgage, you usually have the option of paying additional points — a portion of the interest that you pay at closing — in exchange for a lower interest rate. If you stay in the house for a long time — say three to five years or more — it’s usually a better deal to take the points. The lower interest rate will save you more in the long run. Your mortgage consultant can help you determine what’s best for you.

8. Before house hunting, get pre-approved.
Getting pre-approved will you save yourself the grief of looking at houses you can’t afford and put you in a better position to make a serious offer when you do find the right house. Not to be confused with pre-qualification, which is based on a cursory review of your finances, pre-approval from a lender is based on your actual income, debt and credit history.

9. Do your homework before bidding.
Your opening bid should be based on the sales trend of similar homes in the neighborhood. So before making it, consider sales of similar homes in the last three months. If homes have recently sold at 5 percent less than the asking price, you should make a bid that’s about eight to 10 percent lower than what the seller is asking.

10. Hire a home inspector.
Sure, your lender will require a home appraisal anyway. But that’s just the bank’s way of determining whether the house is worth the price you’ve agreed to pay. Separately, you should hire your own home inspector, preferably an engineer with experience in doing home surveys in the area where you are buying a home. His or her job will be to point out potential problems that could require costly repairs down the road.
Excerpts from Money/Cnn.com