3 Terrible Mortgage Myths

3 Terrible Mortgage Myths Debunked.

3 Terrible Mortgage Myths.

If you haven’t watched the Game of Thrones, we wonder where you’ve been. GOT has snared the general cable customer with its storytelling of a medieval fantasy epic.

The actors who portray the various characters as well as the directing sometimes lead viewers to temporarily transcend their belief and actually think the characters are real. But they’re not. As good as the story is portrayed, it is still a myth, at best.

A good myth, but a myth nonetheless. Another place to look for myths that just don’t seem to go away has to do with financing a home. For those that have never obtained a home loan or haven’t for quite some time, may be reaching their own conclusions which are keeping them from buying.

Below are 3 Terrible Mortgage Myths. These myths can create a tremendous amount of confusion for future home owners.Perhaps the most pervasive myth is how much someone needs for a down payment.

Myth #1: You Need 20% as a Downpayment.

No, it’s not 20%. This 20% down requirement applies to conventional loans but even these mortgages accept a down payment as low as 3.0% when accompanied with a monthly mortgage insurance policy. Government-backed loans such as VA, FHA and USDA require little to nothing down as well.Another myth is the concept of a prequalification. A prequalification and a preapproval are indeed two different animals and if you only have a prequalification letter in your hand, it’s very possible your real estate agent will ask for you to return to your lender and get the preapproval letter which requires a review of income, credit and assets.

Myth #2: All Mortgage Lenders are Alike.

That’s not true. While most mortgage companies can access most mortgage loan programs there are lenders who can specialize in a certain market segment or have access to a loan product not many other lenders even know about.

Myth #3: Buyer’s Can’t Get a Mortgage Due to Credit History

Finally, there is a pervasive myth that buyers today can’t get a mortgage due to their supposed credit history. That’s a big mistake.Mortgage lenders use an automated underwriting system and can pick up certain loan programs that can fit a borrower’s profile, even with credit that’s not exactly perfect.The point with this misconception, is to let a loan officer determine whether or not you can qualify for a mortgage. Don’t simply rely on some website somewhere as you try and qualify your own situation.To get started with a mortgage application click the following link: Mortgage AppTo learn more about what our process looks like and what makes us different click the following link: Our Process

Why Pre-Approvals Matter

Being Prepared: Why Pre-approvals Matter

Without a doubt the hottest female comic actor today is Tina Fey.  She first came onto the scene back in the 1990s working with the improve group, The Second City. After leaving The Second City Fey became a sketch artist on NBC’s Saturday Night Live. She remained there for eight years before leaving the group and tackling more work on screen.Fey is now a regular on television and online commercials but her success was not an accident. She prepared, studied and was ready for the opportunity when it came around. Lack of preparation would lead to gigs going to other people.That’s why those who are thinking about buying a home work with a lender well before it’s time to shop for a home. Without proper preparation, someone else may get the home instead. Pre-approvals matter because they can be the difference in getting your dream home.

Pre-approval Process

Properly preparing to receive a home loan means having your financials already reviewed and at the mortgage company. By completing a loan application and obtaining a preapproval letter you will be able to make an offer immediately upon finding a property and you will demonstrate to the seller than you already have financing lined up.What can you expect when getting your preapproval letter?Your loan officer will ask that you complete a loan application and then provide documentation regarding your income and assets. For a preapproval, you’ll need to provide your most recent pay check stubs covering a 30 day period. Your loan office will also ask for your W2s from the past two years.Bank statements showing you have enough funds in the bank for the down payment and closing costs will also need to be provided. Your loan officer will also pull a credit report and credit scores. In essence, all your loan application needs at this stage is a property and you nor your seller will have to worry about getting approved.If the seller looks at two offers and one has a preapproval letter attached and one does not, which offer do you think the seller will take? That’s right- yours. The one with the preapproval letter.To get started with a mortgage application click the following link: Mortgage AppTo learn more about what our process looks like and what makes us different click the following link: Our Process

What You’ll Need for a Pre-Approval

What You’ll Need for a Pre-Approval: Pre-approval Requirements

The Documents You’ll Need for your Pre-approval

Do you still have your old collection of vinyl records? Over the years, vinyl has been making a comeback for audiophiles everywhere. While studios today digitally record a performer’s music, there’s something special about the sound coming from a vinyl record.For those that do appreciate vinyl records, you remember how the record slipped out of the sleeve. You carefully held the record by its edges and looked at the list of songs appearing on the record label.When you prepare for a mortgage preapproval, you too will receive a list of items you’ll need to provide the mortgage company before a preapproval can be issued. What are those items?

Pre-approval Requirements

Pre-approval Requirement #1 Income Documentation.

Typically a borrower will provide documentation of gross monthly income. Document your income by providing the most recent paycheck stubs. You’ll need to have documented at least 30 days of income. You can also expect to provide your two most recent W2 forms.Self employed? If so, you’ll need to provide federal income tax returns from the previous two years. Also, you’ll need to include a year-to-date profit and loss statement. This P&L is typically something you can do on your own but sometimes a lender will ask for one prepared by a certified public accountant.

Pre-approval Requirement #2 Asset Documentation.

You’ll need to show you have enough funds readily available for a down payment. Document your assets by providing recent bank statements or investment accounts.

Pre-approval Requirement #3 Authorization Form.  

When you first submit a loan application you will need to sign a borrower’s authorization form. This is a blanket form. It allows a lender to contact various third parties for information needed to close your loan.Once you sign the authorization form, the mortgage company will use it multiple times.Although all loans are approved in much the same manner regardless of the applicant, no two borrowers are ever exactly alike. The bank might ask you for more information if the loan progress toward a final approval.However, if you document your income, assets and credit then your loan pre-approval is soon to follow.To get started with a mortgage application click the following link: Mortgage AppTo learn more about what our process looks like and what makes us different click the following link: Our Process

Adjustable vs. Fixed Rate Mortgages

Adjustable vs. Fixed Rate Mortgages: Which is Best for You?Wikileaks has been in the news a lot lately, hasn’t it? So-called “leaks” used to be perhaps an occasional event but today the leaks seem to be much more frequent as well as, well, juicy.The problem Wikileaks has is credibility. Yes, the reports are released to the media but it’s difficult to determine whether or not the leak is authentic or just a smoke screen for something else.If you’re buying a home or refinancing a mortgage it may also be a bit confusing when determining whether or not a fixed rate is better or an adjustable rate mortgage. Unfortunately, you won’t see a Wikileaks report about which is better. But then again you don’t have to.Fixed rate mortgages typically range from 10 to 30 years in five year increments. Your mortgage lender can offer a 10 year fixed, 15, 20, 25 and 30.

Monthly Payments

Certain portfolio loans can be as long as 40 years. Lenders don’t really have any preference over which term you select but in general the longer the term of the loan the lower the monthly payment. The shorter the term, the higher the monthly payment but with shorter terms the total amount of interest paid is much, much less.

Adjustable vs. Fixed Rate Mortgages

Adjustable Rate Mortgage

Adjustable rate loans in today’s market are hybrids. The rate of the hybrid loan can adjust once per year once the fixed period ends. These initial fixed rate terms are typically offered in 3, 5, 7 and 10 year periods.What is the allure of a hybrid? A hybrid will offer a slightly lower rate compared to a fixed rate loan. So, which should you choose?

Fixed Rate Mortgage

Your loan officer will ask how long you intend to keep the property you’re thinking of financing. If you’re long term, it might be better to select a low fixed rate. Fixed rate loans can’t change at any time in the future.Lower-rate hybrid mortgages can be beneficial to borrowers who only plan to keep the loan a short period of time. No one can ever tell the future. If your future sees you in your next home then a fixed rate locks in today’s rates for the life of the loan.To get started with a mortgage application click the following link: Mortgage AppTo learn more about what our process looks like and what makes us different click the following link: Our Process