Before you meet with a Realtor and start house hunting, it is a good choice to talk to a loan officer and make sure you can qualify for the type of mortgage you want. 
Once you have an idea of what kind of mortgage will be best for you, learning the next steps and how to be prepared is the next step.
One of the best places to start is schedule and appointment with a loan officer to get pre-qualified. It's a BIG step. you can get the process kicked off to a smooth start. 
Lenders will need lots of documentation to get you approved for a mortgage, and the more you bring upfront, the less you will have to do later. Knowing what your loan officer needs ahead of time will put you in front of the game. Let's go through the steps:

1. The Money!
Hopefully you are able to put  down payment on your home. Do you know how much you need? Check with your bank account and see how its doing. You will need money for the down, and other expenses that go with along with the purchase.
2. Monthly Bills
How much are you comfortable spending each month. Work on your budget before you work with a loan officer. If the loan officer tells you, that you are approved for a certain amount, make sure it works for you, also if it includes taxes, insurance and/or mortgage insurance. 
3. What do you need to bring
We have a list (check here) of things you will be asked for, but just to give you an idea: Current paystubs, W2's, current bank statements, last 2 years tax returns, any income documentation besides paystubs. and photo id's. This will get you started.
Once you have started here, you should have a pretty good idea on where your financial situation stands. Make sure to ask your loan officer any question you may have. You can even get a pre-qualification letter to present to your Realtor, this lets them know you are ready and they can write a strong offer on a home. If you let the buyers know you're a serious buyer, it is advantageous if you are in a multiple offer situation!

Your credit score is one of the major factors in applying for a loan. If possible monitor it before applying, See where you are and what factors effect your score. Knowing what is present on your report can give you some insight to what your future borrowing situation will look like. 
Listed below are 5 things that you may not think would hurt your overall score. Take a look at your credit report closely, do any of these effect you?

1. Improperly cancelled Gym Memberships
When you sign up for a gym membership, you usually sign a contract specifying the steps you would need to take to properly cancel the contract. This might even include providing a 60 day notice or having your membership for an allotted amount of time, or even having to cancel it in person with the gym. If you do not cancel the membership properly, they will still attempt to collect on the fees. Even if you cancel an automatic payment with your bank, they will still pursue the money due. After a couple of months of not being able to collect, the gym can report the unpaid balance to the credit bureau's, this will go on your credit report and adversely lower your credit score. 
2. Traffic Tickets
Some cities and states report unpaid traffic violations and parking tickets to credit bureaus. If you receive a citation (even from a state you do not live in) and you do not pay it, you could find that the delinquency was reported to the credit bureaus. The situation can even become more dire if it is turned over to collections.
3. Unpaid Library Fines
An unpaid library fine can be reported to agencies and lower your credit score. The library can turn the fees due over to a collection agency and that will be reported.

4. Cell Phones
It surprises many people that credit checks can be required when opening a new cell phone contract. Many cell phone providers will run a hard inquiry before approving new service. This is due to the fact that providers want to make sure you can pay your bill. If your credit report shows red flags, you may have to pay for monthly service in advance. Since the credit check is a hard inquiry,  it can bring your credit score down. realize that other utilities, like cable TV or internet providers may do the same. 
5. Missed Utility Payments
If you miss a utility payment it may result in your services being cut off, and many consumers do not realize that this can also impact their credit standing. Utility companies can report missing payments to the credit bureaus, and even turn accounts over to collection agencies. Whether it's a lapse in settling the account when you move, or whether you are having trouble making payments, the utility company can report it.

Just because something is not "officially a loan" does not mean that it cannot impact your credit score. Just remember when you agree to pay something and you miss a payment there is a good chance it will be reported to a credit bureau or a collection agency. So make sure if you are going to miss a payment, keep the lines of communication open with the provider.

Do you think you are ready for a mortgage? It can be a big step that requires planning and being prepared. A mortgage is one of the biggest financial decisions you will ever make. Here are 7 things to consider before you go begin your mortgage application:
1. Know your Credit Score
Your credit score will affect your qualification for a mortgage. Before considering to buy a house, check your credit report and score to make sure there are no surprises that you may not know about. In general, you will have good credit when you have no late payments, collections and no high balances. 
2. Consider Maintenance Costs
It's important to consider the cost of maintaining a home before you buy a home. The mortgage is only one cost of owning a home. Consider your income and evaluate if you would have the money if the roof leaked or the heater were to wear out. Does your monthly budget include enough to save for maintenance. 
3. Your Job Security and Stability
Before applying for a loan, evaluate your long term job stability. Will your job last? How will you handle changes? Thinking a bit into the future is part of planning for a mortgage. Check your emergency funds and savings, if your situation changes, will you still be able to afford your home.

4. Gather the Paperwork
Applications require a specific amount of paperwork from you. Lenders can ask for tax statements, bank accounts, check stubs..etc. Be ready to supply the information in a timely manner to help the process go smoothly. (see our paperwork checklist)
5. Consider Hidden Expenses
Home ownership comes with multiple expenses that go beyond appraisal fees, property taxes, closing costs and insurance. One of the hidden costs to a home is more bills! If you are used to renting you may not pay things like water/sewer and trash. Be ready to evaluate all the costs that are associated with ownership.
6. Build An Emergency Fund
Emergencies happen!! From flooded toilets to broken appliances, are you ready for unplanned expenses? Having emergency funds aside are better than using a credit line.
7.  Be Aware of Other Credit Applications
Lenders will be checking your credit lines. Applying for any other type of credit line during your application process can hurt your chance for a mortgage. When getting ready to apply, do not apply for any other type of loan. Before you buy a home, consider how your current financial situation will be affected and plan for any emergency.

What is a VA Loan?
Back in 1944, the U.S Government created a military loan guaranty program to help returning service members purchase homes. The result, the VA Loan, is a loan that is issued and guaranteed by the Federal Government. Since it started, the VA Loan program has helped more than 20 million veterans and their families get home financing. 
The VA Home Loan program is an important loan to understand for our service members. Here are some ways they differ from other mortgage types.

We hope this blog helps you when preparing for a home purchase. If you would like to get Pre-Approved and find out what you can afford, Contact Us today! 619-Low-Rate
(619) 569-7283 or drop us an email here.

Does it feel like you are giving up everything just to qualify for a loan? The process can be a bit daunting, but when you know what goes on behind the scenes that can help you understand the process and the time involved in making sure your loan is the best loan for you. 
Here are the steps involved and a little about what happens at each step. 
1. Pre-qualification
 Pre-qualification is the term used to explain the mathematical equation used to determine what kind and how much of a loan you can afford. This is usually done by asking a few questions about your income, credit score and debts. It is just a way to see were we first stand. 
2. Applying for the loan
This is where the process really begins. You can either meet face to face with a Loan Officer (usually the best way) or you can do it over the phone. A loan application is filled out and disclosures are created. When applying for the loan you will be given a list of all of the documents you need to gather. 

3. The processing of the loan application
Processing a loan may be better described as verifying all of the information that was provided by you. Typically we will ask for: 

• Last 2 paychecks
• Last two W2s forms
• Last two bank statements
• Taxes for the last 2 years

After these are gathered the information then is put in motion, along with credit worthiness and you will be informed of the types and amounts of loans you can quality for. 
4. Appraisal
An appraiser will contact you to set up a appointment to spend about 15 minutes looking at your home. They appraiser will also pull "comparable homes" that are close in size and that have sold close by. This helps determine the worth of the property on the current market. 
5. Underwriting
The underwriter is the person that looks over all of the information gathered and completed and approves or rejects the proposed loan. Sometimes during this process you may be asked to provide additional information.
6. Closing
Yeah! This is the time we have been waiting for. A closer will usually contact you about 24 hours before and you will sign the rest of the documents and disclosures. And the process is done! 

You are buying a home for the first time. Excitement is building and you are ready..but are you? The following are misconceptions and common mistakes to avoid;
1. Lack of Credit
Check or monitor your credit score! Know where you are financially and if you are financially ready to be a home owner. 
2. Not knowing how much you can afford! 
Analyze your monthly income. Can you find a home within certain price range that you can afford? This is where a local mortgage broker can help you find out what you can afford at today's rates.
3. Stuck in a Long Lease
If you are looking to get a home soon, take a look at your rental lease. How long do you have to go, how are the market conditions in your area. Talk to your landlord and negotiate an early exit, just in case you find "the one" a little quicker than anticipated. 
4. Lack of Cash
You will need enough cash to purchase a home, along with some reserves to show the bank that you are financially fit to buy a home. There are types of home loans that offer lower downpayment options. Make sure to discuss these with your loan officer. Things you typically need money for are: 
Down payment, earnest money deposit (emd), Inspection and appraisal, closing costs, prepaid interest, up front Escrow fees (property taxes, insurance) and typically 2-6 months of reserves equal to your new house payment. 

5. Less Than a Full Commitment
Finding a home is not a weekend project! On average it can take up to 10 weeks to find "the one". Keep good communication with your REALTOR and your Lender during the searching process. 
6. Can't Find a Home
Don't settle! This is one of the biggest purchases of your life! Make a list of the basic things you would like in a home and make sure the home you get, gets at least 85% of the list marked off! If you find the right home, be ready to write on it!
7. Lender Communication
Keep your lender in the loop. Let them know where you are in the process, and more importantly if anything changes in your current financial situation. IE.Any changes in jobs, or large purchases.
8. Not Getting a Home Inspection
Home inspections help you find what may be wrong with the home. Yes it is an extra expense, but it may save you big money in the long run! Get one!
9. To Busy at Work
Find ways to be available during the week for your REALTOR and Lender. Even if it might mean spending your break on the phone.
10. Not Getting Pre-Approved
It will be difficult to get an offer accepted without a pre-approval letter. Many sellers ask to see that you have the right financial situation to purchase their home. Make sure to get involved with a lender early in the stages of looking for a home!

Looking for a home? Here are 7 important steps to helping you get approved for a home loan
1. Improve your credit score
Do you know what your credit score is? Knowing your credit score and what shows up on your report is  great way to preparing for home ownership. A score of over 620 is required to get a good home loan. 
2. Budget
Decide on a budget. Getting pre-approved will help you know what you are qualified for and can help you balance your household budget to make sure that you are comfortable with the monthly payment. 
3. Get a PRE-APPROVAL
We have written before about the pre-approval process and why it so important (check our archives). This helps any seller know that you are a ready and willing buyer and will follow through with the purchase. Also it shows that you have committed to buying, since it involves showing your documentation of income and debts to a qualified lender. 

4. Organize your Documents
When getting pre-approved your loan officer will ask for paperwork to help prove you are a qualified borrower. Be prepared to pull bank statements, pay stubs, previous taxes and W2's along with identification.
5. Do NOT Make any Last Minute Mistakes
When you commit to a property and a loan there is a time frame to get to the end of the process. Towards the end of escrow and before documents to finalize the loan, the lender will recheck your credit and employment status. Don't:

• Quit your job
  
• Buy a Car
• Apply for a Credit Car
• Make any Large Purchases

6. Sign Everything!
Yes, there are mountains of paperwork, each and everyone of them cover what it takes to purchase a home. After all of the paperwork is signed it will take just a few more days to become a new home owner and get the keys! 

If you are a first time home buyer and you have decided to purchase a home, one of the first decisions is what kind of a loan will you get? Before choosing things like fixed rates or Arms, you will first need to decide what type of loan you to get! 
What is an FHA Loan? 
FHA loan is a mortgage that is backed or insured by the Federal Housing Administration. It works by the federal government insures loans for approved lenders to reduce the risk of loss if a home owner defaults. FHA loans are easier to get than other loans because they are available for buyers with less than perfect credit and have lower down payment options. 
What is a conventional loan?
A conventional loan is everything else! A conventional loan is not insured by the federal government and is also known as a conforming loan. These home loans usually require a larger down payment. 

What is the major difference? 
1. FHA loans require a higher monthly mortgage insurance. 
2. Conventional loans require a larger down payment, but can save money in the long run and can save you substantially in the long run. 
3. FHA loans require additional approval. If you are looking at a condo property, it will need to be approved.
4. PMI on an FHA can never be removed, however on a conventional you can sometimes remove it after 24 months of payments and 20% equity. 
5. With conventional loans non-borrowing spouse debts are no considered. Say you are married and your credit is good but your spouse, not so much. For FHA even if the loan is in your name, your spouse's debts will be still considered. Conventional loans do not count on non-borrowing spouses debts.
So when deciding which will be better, talk to a qualified loan officer to find out which bests fits your budget!

Lets break down six myths about credit scores that need some serious light shed upon them. If you are buying a home and trying to secure a mortgage loan, these are some basics that you will need to understand about your credit score and make sure your score, and your subsequent loan is the best it can be!
Myth 1. Your credit score drops if you check your own credit
Truth: Viewing your credit score reports only as a "soft inquiry" and doesn't change your score. "Hard Inquiries" by a lender or creditor, though, can slightly lower your score.
Myth 2: You should close old or inactive accounts to help your credit score
Truth: Closing accounts may actually have the reverse effect of lowering your credit score because it can shorten the measured duration of your credit history.
Myth 3: Paying off a negative record means it's taken off your credit report
Truth: Generally, negative records like collections or late payments will remain on your credit report for up to seven years.

Myth 4: Cosigning doesn't mean you're responsible for the account
Truth: If you open a join account or cosign a loan, you will be held legally responsible for the account, meaning activity on the joint account is displayed on credit reports of both account holders.
Myth 5: Making on-time rental, utility, and cell phone payments helps my credit score
Truth: While outstanding rental, utility, and cell phone debt that have gone to collections an negatively affect your score, generally, on time payments are not regularly reported to credit bureaus.
Myth 6: Your credit score reflects changes or trends in your payment behavior
Truth: Historically, credit scores have not incorporated trended credit information, meaning they are a moment-in-time glimpse at consumer risk.

We hope this has helped clear up confusion on what actually impacts a credit score! If we can help you understand your credit information, or you would like to see what you can be approved for, give us a call at 619-Low-Rate