Step 1. Gather the paperwork
Most people know that lenders as a general rule will require a wide array of paperwork. Don’t fight it, embrace it. Get yourself a file folder, a big one, and start collecting together the following:
1. Income documents: Pay stubs for the last 2 months, W-2’s or Tax returns (if self-employed) for the last 2 years.
2. Debt & Asset documents: A list of who is owed, the total amount owed, and the minimum monthly payment. An easy way to do this is to make copies of your latest payment stubs for car(s), credit cards, mortgages, etc. Don’t forget to include any student loans. For asset documentation, copy your most recent IRA, mutual funds, and bank statements. Also put together a list of all real estate owned along with the mortgage owed, monthly payments, and proof of rental income if any.
3. Miscellaneous: Provide the name, phone number and account number of your home insurance policy.
Step 2. Help yourself (and your loan officer)
This may seem like simple, “no brainer” advice, but sometimes the simple things are often overlooked.
A. From the start of the loan application until the loan closes (meaning it’s funded, you’ve done the final signing, and the money is in the bank) DO NOT quit your job, buy a car, apply for a credit card or any other form of credit, or otherwise start to build up an insane amount of new debt. Lenders will re-check your credit report and sometimes your employment just before transferring the funds.
B. Appraisals are difficult to get in a timely manner at times because of high demand. As much as possible, accommodate the appraisers schedule to get your loan done A.S.A.P. Don’t re-schedule because of a football game (use your Tivo) or a hair appointment.
C. Make copies of everything you provide your lender and/or loan officer, and keep it in your personal file. A loan file goes through a lot of hands during the process, just incase a document gets lost or misplaced you’ll have a replacement at the tip of your fingers. You will also want to keep in your file the “Good Faith Estimate” and/or “Truth in Lending Statement” for your records.
What will result from this preparation? The application process can go quickly and smoothly, and most likely your loan will be quickly “approved”, not “approved subject to” 439 conditions and 164 additional pieces of paperwork. You can therefore enjoy a simpler, less stressful refinance.
Sunday, February 11, 2007
Steps to a Simpler Refinance
Wednesday, January 31, 2007
Q&A: How to prepare for an appraisal…
Question: The lender has ordered an appraisal, what can I do to help the appraisal come in at a higher value?
Answer: A houses value is primarily determined by the location and size, but physical appearance and maintenance also affect the market value a great deal. Considering that fact, prepare your home as if a hot prospective buyer were coming.
Outside the home you’ll want to take a good look at the front, back and side yards. Remove clutter and debris, mow the yard, trim the hedges, and pull the weeds. A fresh coat of paint will always make a home appear newer and in better condition, though that may not be possible given budget or time constraints, but do consider at least touching up chipped paint.
Inside the home as well remove clutter, and again a fresh coat of paint will always make a home appear newer and in better condition. Bathrooms and kitchens should be free of mold and mildew. Shampoo the carpets, wax the floors and do all those little things that make your home look its best. And don’t forget to contain Fido in a kennel so the appraiser has full access to the property.
If you have recently completed any remodeling, or updates have a list prepared to give to the appraiser. For example: March 2003 – new tile in the kitchen, June 2004 – Central Air Conditioning installed, etc.
Though it is not necessary for you to follow the appraiser around the property, you should make yourself available to answer any questions he may have during his visit. And as with most things, being friendly and polite can’t hurt the end result.
Answer: A houses value is primarily determined by the location and size, but physical appearance and maintenance also affect the market value a great deal. Considering that fact, prepare your home as if a hot prospective buyer were coming.
Outside the home you’ll want to take a good look at the front, back and side yards. Remove clutter and debris, mow the yard, trim the hedges, and pull the weeds. A fresh coat of paint will always make a home appear newer and in better condition, though that may not be possible given budget or time constraints, but do consider at least touching up chipped paint.
Inside the home as well remove clutter, and again a fresh coat of paint will always make a home appear newer and in better condition. Bathrooms and kitchens should be free of mold and mildew. Shampoo the carpets, wax the floors and do all those little things that make your home look its best. And don’t forget to contain Fido in a kennel so the appraiser has full access to the property.
If you have recently completed any remodeling, or updates have a list prepared to give to the appraiser. For example: March 2003 – new tile in the kitchen, June 2004 – Central Air Conditioning installed, etc.
Though it is not necessary for you to follow the appraiser around the property, you should make yourself available to answer any questions he may have during his visit. And as with most things, being friendly and polite can’t hurt the end result.
Monday, January 22, 2007
Different types of loan programs part 2
Fixed Rate Mortgages: With fixed rate mortgages the interest rate and monthly payment remains fixed for the life of the loan. Fixed rate mortgages are generally available for 10, 15, 20, 25, 30, 40 and 50 year terms. In most cases the shorter the term the lower the interest rate. The most popular are the 30 and 15 year terms. Your monthly payments are lower with a 30 year term then they would be with a 15 year. But if you can afford the higher payments with a 15 year fixed-rate mortgage you have the benefit of repaying your loan twice as fast and will save you more than half the total interest cost of the 30 year loan.
Bottom line: These traditional loans generally carry a higher interest rate than an ARM or Balloon mortgage, but they are a great loan choice if you are looking for steady payments and long term stability.
Balloons: These are short term fixed rate loans, similar to an ARM they have a fixed term usually for 3, 5 and 7 years, monthly payments are usually based on a 30-year fully amortized schedule. With a Balloon, at the end of the fixed term a lump sum payment of the remaining loan amount is due. The benefit of this loan is that the interest rate is generally lower than a 30 or 15 year fixed rate, resulting in lower monthly payments. There are Balloons loans with refinancing options available, which allow the borrower to convert the mortgage at the end of the balloon period to a fixed rate loan, if certain conditions are met (which can vary depending on the lender).
Bottom line: Also a good choice for investment properties, or short term loans. Lower rates than a fixed, but the downside is that at the end of the term you will have to come up with a lump sum to pay off the lender, either through a refinance, from your savings or from the sale of the property.
HELOC (Home Equity Line Of Credit): Usually these are 2nd Mortgages and have a lower maximum loan amount. A line of credit will have terms such as: a term of 25 years, the first 10 years you can withdraw and pay back as much of the loan amount as you wish, the last 15 years of the loan is just a repayment period.
Bottom line: A HELOC usually has great rates compared to traditional second mortgages. Because of the flexibility during the first 10 years they are often used for home improvement.
~More loan programs will be covered in an up coming article~
If you would like to know more regarding any loan type, whether I have discussed it here or not, please email me your questions.
HannahPadilla@aol.com
Bottom line: These traditional loans generally carry a higher interest rate than an ARM or Balloon mortgage, but they are a great loan choice if you are looking for steady payments and long term stability.
Balloons: These are short term fixed rate loans, similar to an ARM they have a fixed term usually for 3, 5 and 7 years, monthly payments are usually based on a 30-year fully amortized schedule. With a Balloon, at the end of the fixed term a lump sum payment of the remaining loan amount is due. The benefit of this loan is that the interest rate is generally lower than a 30 or 15 year fixed rate, resulting in lower monthly payments. There are Balloons loans with refinancing options available, which allow the borrower to convert the mortgage at the end of the balloon period to a fixed rate loan, if certain conditions are met (which can vary depending on the lender).
Bottom line: Also a good choice for investment properties, or short term loans. Lower rates than a fixed, but the downside is that at the end of the term you will have to come up with a lump sum to pay off the lender, either through a refinance, from your savings or from the sale of the property.
HELOC (Home Equity Line Of Credit): Usually these are 2nd Mortgages and have a lower maximum loan amount. A line of credit will have terms such as: a term of 25 years, the first 10 years you can withdraw and pay back as much of the loan amount as you wish, the last 15 years of the loan is just a repayment period.
Bottom line: A HELOC usually has great rates compared to traditional second mortgages. Because of the flexibility during the first 10 years they are often used for home improvement.
~More loan programs will be covered in an up coming article~
If you would like to know more regarding any loan type, whether I have discussed it here or not, please email me your questions.
HannahPadilla@aol.com
Tuesday, January 16, 2007
Different types of loan programs part 1
There are so many different loan programs to choose from it can often be quite overwhelming for the average borrower. To help you in the decision process we’ll be discussing a variety of loan programs over the next couple of weeks to help you, at least understand some of them and how they work. This is in no way a complete and all inclusive list of loan programs available, but it will cover the most popular ones out there.
Option Loans or Pick-a-Payment loans: Option loans generally follow these guidelines: you will have four different payment options each month, you can pay the P&I (principle and interest) as if it were a 15 year fixed loan (the highest payment), P&I as if a 30 year fixed (second highest), pay interest only (the second lowest payment) or make a payment of the initial start rate (the lowest payment option, though the start rate is only fixed for a short time). This loan can be very useful if you have irregular income, for example $10,000 income one month and $2,000 the next, or perhaps you are expecting a windfall in the near future. These loans are also very popular right now especially in California where housing prices are so high.
Bottom line: Because of the flexibility of the monthly payments these can be great loans, if used properly. Borrowers need to go in knowing though that these can become negative amortization* loans if they are only every able to make the lowest payment, not paying the full interest due on the loan.
[*Negative Amortization: Occurs when loan payments are not enough to cover the amount of interest due for that payment period. The unpaid interest is calculated and added to the total loan amount, increasing the outstanding balance.]
ARM’s (Adjustable Rate Mortgages): Adjustable Rate Mortgages are just what the name implies; they will be fixed for a specific time period and then will adjust according to the terms after that initial time frame. For instance a 7/1 ARM is fixed for the first 7 years but then once a year, every year after, the rate will adjust according to the market. They are generally available in 1, 3, 5, 7 and 10 year terms. There are safety measures set in place though, there will be a set “margin” of how much the rate can change either up or down each time it adjusts, and there will be a “life-time cap” which is the highest the rate can go over the life of the loan. This loan is often used by real estate investors.
Bottom line: A good choice if you know that you will be selling or refinancing the property before the fixed period is over. But if you plan on owning the property past the fixed period, it is a gamble.
~More loan programs will be covered in my next article~
If you would like to know more regarding any loan type, whether I discussed it here or not, please email me your questions.
HannahPadilla@aol.com
Option Loans or Pick-a-Payment loans: Option loans generally follow these guidelines: you will have four different payment options each month, you can pay the P&I (principle and interest) as if it were a 15 year fixed loan (the highest payment), P&I as if a 30 year fixed (second highest), pay interest only (the second lowest payment) or make a payment of the initial start rate (the lowest payment option, though the start rate is only fixed for a short time). This loan can be very useful if you have irregular income, for example $10,000 income one month and $2,000 the next, or perhaps you are expecting a windfall in the near future. These loans are also very popular right now especially in California where housing prices are so high.
Bottom line: Because of the flexibility of the monthly payments these can be great loans, if used properly. Borrowers need to go in knowing though that these can become negative amortization* loans if they are only every able to make the lowest payment, not paying the full interest due on the loan.
[*Negative Amortization: Occurs when loan payments are not enough to cover the amount of interest due for that payment period. The unpaid interest is calculated and added to the total loan amount, increasing the outstanding balance.]
ARM’s (Adjustable Rate Mortgages): Adjustable Rate Mortgages are just what the name implies; they will be fixed for a specific time period and then will adjust according to the terms after that initial time frame. For instance a 7/1 ARM is fixed for the first 7 years but then once a year, every year after, the rate will adjust according to the market. They are generally available in 1, 3, 5, 7 and 10 year terms. There are safety measures set in place though, there will be a set “margin” of how much the rate can change either up or down each time it adjusts, and there will be a “life-time cap” which is the highest the rate can go over the life of the loan. This loan is often used by real estate investors.
Bottom line: A good choice if you know that you will be selling or refinancing the property before the fixed period is over. But if you plan on owning the property past the fixed period, it is a gamble.
~More loan programs will be covered in my next article~
If you would like to know more regarding any loan type, whether I discussed it here or not, please email me your questions.
HannahPadilla@aol.com
Wednesday, January 10, 2007
Deciding where to get your loan?
Unless you have a wealthy, generous Uncle you really only have two choices as to where to get your home loan. Either you go see a Direct Lender or bank, such as Bank of America or Ditech, or you seek out an Independent Mortgage Broker.
You may choose a Direct Lender because of an already established relationship, such as a checking or savings account, or their national advertising campaigns. But you may end up paying for that advertising in higher interest rates, and increased origination fees. Direct lenders also tend to offer a limited range of loan programs and may be inflexible when it comes to less then ideal borrower circumstances. They can only offer what they have on their menu (and they don’t allow substitutes).
Working with a Broker on the other hand, is like heading to the food court instead of a single restaurant. A Broker works with and has access to hundreds of lenders, which opens up to you almost limitless options in loan programs to better fit your needs. They also have a reputation for offering more responsive service, than Direct Lenders, often making themselves available to clients after normal business hours and on the weekends.
Brokers can offer lower rates and lower origination fees. And here is why, lenders offer Brokers the best rates because they bring lenders business in massive amounts, so lenders try harder to get the Brokers business.
Here’s my advice in choosing which is right for you: Shop around. Get the total cost, both the interest rate and the origination fee, and compare what each has to offer.
Choosing wisely though, you can have a painless, financially beneficial, perhaps even enjoyable loan process.
You may choose a Direct Lender because of an already established relationship, such as a checking or savings account, or their national advertising campaigns. But you may end up paying for that advertising in higher interest rates, and increased origination fees. Direct lenders also tend to offer a limited range of loan programs and may be inflexible when it comes to less then ideal borrower circumstances. They can only offer what they have on their menu (and they don’t allow substitutes).
Working with a Broker on the other hand, is like heading to the food court instead of a single restaurant. A Broker works with and has access to hundreds of lenders, which opens up to you almost limitless options in loan programs to better fit your needs. They also have a reputation for offering more responsive service, than Direct Lenders, often making themselves available to clients after normal business hours and on the weekends.
Brokers can offer lower rates and lower origination fees. And here is why, lenders offer Brokers the best rates because they bring lenders business in massive amounts, so lenders try harder to get the Brokers business.
Here’s my advice in choosing which is right for you: Shop around. Get the total cost, both the interest rate and the origination fee, and compare what each has to offer.
Choosing wisely though, you can have a painless, financially beneficial, perhaps even enjoyable loan process.
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