Mortgage Information

It’s a good idea to get pre-approved by a lender before you start looking for a home. Most will give you a free consultation. Once you’re pre-approved, you'll know exactly what you can afford, you can act immediately when you find the home you want, and sellers are more comfortable accepting your offer.

What to expect on your first visit/contact with a lender?

A mortgage lender will evaluate four areas of your financial history to determine your ability to secure a loan. These are:Credit history/credit scores 

• The amount of monthly credit you currently have
• Income/employment history
• Your financial assets (money in the bank, investments, retirement accounts and potential gift funds).

Typically the lender will only look at the last two years of your history in all the above areas.
In order to prepare for your first visit to a lender, you should have documents on your most recent 2 year residence and employment history ready. (Recent grads who are newly employed are usually fine as school can be a part of the 2 year history without any problem.)

• 30 days of pay stubs
• 2 yrs of W-2’s or 2 years tax returns (if self employed)
• 2 months worth of bank/asset/investment/retirement account statements (all pages)
• Diploma or school transcript if a full time student during the past 2 years
• Information on any real estate you may currently own
• A copy of recent mortgage statements or your current lease
• Explanations for any derogatory credit or gaps in employment you know you may have
• Any correspondence with creditors if you have disputed any debts

An FHA loan is a government insured loan that was instituted to assist buyers with minimal cash to purchase a home and first time buyers. This program requires that the buyer invest a minimum of 3% of the purchase price. Part of that can be a minimal down payment of 2.25% plus some closing costs. Sometimes the buyer can negotiate for the seller to pay the remaining costs.
FHA loans have more lenient guidelines for borrower credit history, allow for all or part of the funds needed by the borrower to be a gift, and has stricter requirements on the property’s condition for the protection of the borrower.

What is a Conventional Loan?

A conventional loan is a loan that meets the standards of the “conventional” secondary marketplace. There are two types of conventional loans, Conforming & Non-Conforming. Conforming loans usually fit neatly into the box of rules and are under the prescribed maximum loan amount set each year. Both the borrower and the property fit the typical scenarios and there is nothing unusual.

Loans over the “conforming” loan amount or loans that have some facet outside the box either related to the borrower or the property are called Non-Conforming loans. A loan can be Non-Conforming if the borrower is unable to document their income or assets, or their credit scores are low, or if the property is unusual for the area or if the loan amount or program is designated Non- Conforming.

Fixed Rate
A fixed rate mortgage is one in which your monthly principal and interest payment will always be the same for the life of the loan. The benefit is that you always know what your principal and interest costs are. Fixed Rate loans are usually amortized (paid in full) over a period of 30, 20 or 15 years. Your monthly payments are predictable over the life of the loan. (Keep in mind that your monthly mortgage payment may include principal and interest AND 1/12 of your annual property taxes and home owners’ insurance. So although the principal and interest will remain steady, the taxes and insurance amounts can vary.)

Your real estate professional can assist you in finding a lender for a consultation.