SummaryThis article will provide you with a list of eleven common mistakes that borrowers often make when preparing to applying for a mortgage or when in the middle of the application process. We will discuss the potentially negative affects that can be caused by each mistake. by Christian Scully Applying for a home loan can sometimes feel like a challenge, but the best thing you can do as a borrower is to be informed, prepared and to not make things harder for yourself. If you have already been prequalified for a mortgage, you are going to want to keep your current financial situation unchanged. Consider that you are building an image of yourself for your lender, you don't want to change that image before the lender can make the ultimate decision. If you are working towards getting prequalified for a mortgage, you want to avoid anything that will be detrimental to your credit history. If you are already under contract or in the middle of a refinance application, there are a few easy mistakes to avoid. No matter what point you are at in the mortgage process, make note of the following eleven things you should not do. 1. Don't open any new lines of credit or take out any loans.Opening new credit accounts could have two potentially negative effects. First, if you open a new credit account you could be adding debt to your credit report. Additional debt could change the loan amount you qualify for. Second, opening new credit accounts will lower the average age of your credit accounts which could lower your credit score. 2. Don't apply for credit with many different lenders.If you have applied for a credit card and been denied, don't keep applying for more cards thinking eventually one will approve you. Every time you apply for credit there is a hard inquiry on your credit report, potentially lowering your score. Applying to a few different mortgage lenders in an attempt to shop around for the best rate and terms is okay. Typically if you have a few inquiries from mortgage lenders in the same month it will be clear that you are shopping around and your score likely won't be impacted too much. However if you have 8 inquiries for credit card, 4 inquiries for auto loans and a few mortgage inquiries, it does not paint a very good picture of your financial situation, especially if those inquiries don't lead to actually opening a credit account. It shows lenders that you likely are not qualified for credit.
+ Better Note: Hard inquiries stay on your credit report for two years. If you are applying for a mortgage, your lender will likely ask for explanations if you have several recent hard inquiries on your credit report. They want to know that you don't have new debt obligations that have not yet been reported. Mortgages for First-Time Homebuyers 102: The Basic Steps in Getting Approved for a Home Loan.4/30/2021
SummaryIn this article we will break down the basic steps in the mortgage application process. Borrowers will deal with several people and so many documents. Read through these steps to have a good understanding of what to expect, and tips on how you can make the process efficient and what to do when you encounter any problems. by Christian Scully At this point you should have already been working with a loan officer, gone through the prequalification process, and been issued a prequalification letter that tells you, your realtor and any seller to whom you submit an offer how much you are qualified to borrow and what type of loan you will be applying for. If you have not been through the prequalification process, then take a few minutes to start with the previous article on this topic here. If you have been prequalified, congratulations! If you are still working towards prequalification, stay the path and keep working hard. The next step in the mortgage process is applying for the mortgage. If you are working with a good lender and they did a thorough prequalification, then you should already be in a good position to get through the application process almost effortlessly. Let’s break down the mortgage application process so you know exactly what to expect and you can be prepared. Mortgages for First-Time Homebuyers 101: The Basic Steps in Getting Pre-Approved for a Home Loan.4/29/2021
SummaryThis article breaks down what first-time homebuyers can expect when starting the mortgage application process. The first step is getting pre-approved, and we will discuss the steps to pre-approval and how first-time homebuyers can be prepared, knowledgable and less stressed during this process. by Christian Scully There are two types of first-time homebuyers that I meet a lot in my work as a mortgage loan originator: Some buyers reach out seeking a mortgage for the first time, excited and motivated to start shopping for their first home and have an expectation that they can simple fill out a quick application and be handed a couple hundred thousand dollars to go pick out the home of their dreams. Others reach out absolutely terrified at the idea of applying for a mortgage, either based on bad experiences their friends have had, or general anxiety when it comes to finances or credit. These two polar opposite attitudes when it comes to applying for a mortgage are both extremes. The problem with expecting the process to be super fast and easy is that they tend to be surprised at the need for some of the necessary steps in the mortgage process. This can cause frustration and even anger at times. And the issue with being frightened of the process and expecting a nightmare is that it causes unnecessary stress on the buyer and already begins the experience with negative attitude. Let's take a very simple, quick overview of how to start the mortgage application process and hopefully help set your reasonable expectations and provide a clear path to your goal of purchasing a home. The first phase of the mortgage application process involves getting pre-approved for a home loan. This should be every first-time homebuyer's first step in the home buying process as well. Before you can start seriously shopping homes, you need to know if you are in a financial position to actually be approved for a mortgage, and know exactly the maximum price of a home you can afford, and what type of loans might be the best option for your needs and goals. Our experience using an FHA 203k loan to purchase and repair our first multi-family house.4/10/2021
SummaryWhen we purchased our first multifamily home in Providence, RI in 2017, we decided to take advantage of a loan product called the FHA 203k loan. This type of loan helped us complete a couple of the major renovations needed on the house. Over the couple months of the mortgage application process and then for a time after closing, we learned the pros and cons of the FHA 203k. This article will give an overview of the FHA 203k loan program, pros and cons, tips and discuss whether or not I would recommend this type of loan to buyers. by Christian Scully What is an FHA 203k loan? The FHA or Federal Housing Administration is a government agency that insures loans made through FHA-approved lenders throughout the US. FHA loans offer some great benefits. FHA loans are generally easier to qualify for, providing a great option with borrowers who are lower income, have higher debt to income (DTI) ratios and/or lower credit scores. For these borrowers, the interest rates are generally lower than conventional loan products. FHA loans also allow the borrower to make as little as a 3.5% down payment.
The FHA 203k loan is a type of FHA loan that also includes funds for renovations. The borrower closes on one mortgage, that includes enough to purchase the home and additional funds to cover any repairs or improvements needed. There are two types of 203k loan: the Limited and the Standard. The Limited 203k is the easiest way to go and can provide up to $35,000 in funds for any improvement that is non-structural. Anything beyond that and the borrower would need a Standard 203k loan. Let's look at some of the advantages of using a 203k loan. SummaryThis article answers a commonly asked question by new borrowers when going through the mortgage process. Interest rates are similar to credit scores in that they often make no sense and change all the time for no obvious reason to the consumer. But when purchasing a home and applying for a mortgage, interest rates are not the most important piece of the puzzle. I discuss a simpler way to think about interest rates and how you should go about deciding whether or not it is a smart move to purchase a home. by Christian Scully So you've been pre-qualified for a mortgage, you have walked dozens of houses with your realtor and finally you've found the perfect house. Your realtor submits your offer and you nervously wait to hear the seller's decision. The call comes. The seller selected your offer. You're under contract to purchase the home! The next step is the mortgage application process. Yes, you already likely submitted some documentation and maybe even filled out an online application, but now all the pieces need to be put together by your loan officer, then processed and submitted to the underwriter, who will ultimately decide if your loan will be approved. Along the way, your loan officer will be communicating with you about the interest rate. Interest rates are impossible to predict, but there can be trends. If rates are trending down, your loan officer might suggest holding off on a rate lock. But if you qualify for a great rate on any given day, it may be in your best interest to lock it in. Why not wait? What if your loan officer presents you with an interest rate that is higher than you heard of on the news, read about on social media or otherwise expected? Is it still a smart move to purchase the home? I've been asked this question many times, and for me, it is a really simple answer. SummaryOne of the areas of most confusion for borrowers is that of closing costs. I find that borrowers don't know what they are for, how they are determined, if they can vary from lender to lender, and if there is any help available to pay for them. In this article I will break down the different types of fees that could appear in your "Closing Costs". by Christian Scully So you’ve got your credit score where it needs to be, you’ve saved your downpayment funds, you’ve been pre-approved for a mortgage loan, you’ve found your dream house and you are about to put an offer in… but wait! Closing costs! Do you have enough extra funds to cover them or will you need to roll them into your loan? Wait, you can do that? Closing costs are exactly what they sound like: the costs associated with actually closing your loan and finalizing the transfer of property from the seller to you. They primarily consist of three things: loan origination charges, the settlement services that are needed to finalize your purchase or refinance and finally any pre-paid and/or escrowed funds. Let’s look at both of these in a bit more detail: SummaryThis article explores some of the ways that paying off debt can impact your life. The elimination of debt can have both positive or negative impacts on your credit score, which could effect your ability to qualify for a mortgage. Paying off debt could positively or negatively impact your quality of life, depending on your goals and financial situation. Paying off debt could save or cost you money over time depending on the size and type of debt. It is important to have clear goals and intentions when eliminating debt and to take into account potential effects. by Christian Scully Paying off debt should definitely be a goal of anyone seeking to live what we consider to be a better life. Being financially free from creditors, not having monthly payments to worry about, and having the ability to save and invest more of our hard earned income should be everyone's goal. The idea that we forever have to have some sort of debt bill, we have to owe somebody money just to live a decent life is engrained in our society. When the Diners Club card was first offered in 1950, it began a shift in the culture's view of money and lifestyle aspirations. It was easier to appear rich as opposed to slowly build wealth over a lifetime. Those who remained frugal, bootstrapped small businesses, bought goods with money they had and invested any budget surplus managed to grow wealth enough to live incredible lives with generational financial security. When our mindset shift occurred and we began our debt-free journey to financial freedom, we were only focused on the main goal: pay off all debts as fast as possible. We didn't have a target date in mind, but I had long held a personal goal of not having children while in debt. Not having the financial strain of debt interfering with family life and raising children was number one on my list of reasons to be debt free. We used this as a starting point, but over the next couple years we learned about the different types and effects of debt and how we could find a balance to reach our goals and not put our lives on hold. I think there are two basic things to keep in mind from the start. First, when making any plan for the near or distant future, make a list of what you are hoping to achieve. What is the ideal result? What is the end goal? Then second and most important: fully expect those goals and the plan to morph over time. In fact it is super important that it does. Things come up, events happen, opportunities arise, markets change. Keep your eye on your goals, re-evaluate your list of goals regularly to make sure the targets don't need to be adjusted, and then shift and alter strategies as new opportunities or roadblocks come up. Once you have your goals targeted, consider the following ways paying off debt can effect you: SummaryThis article details several ways you can research the property tax history for any real estate property in the United States. Using publicly available resources, a homebuyer is able to easily locate the property tax history. We recommend that a homebuyer then verify that is the correct information by researching the most recent local tax assessment value, the local property tax rate and then checking if there are any applicable tax exemptions. by Christian Scully Property tax data is part of the public record.A lot of property information is a made part of the public record, making it available to anyone who knows where to look. It used to be that you would have to venture all the way down to your local city or town hall to request any property records. As more and more towns and cities throughout the country digitize their records, and online database systems improve, it is becoming increasingly easy to find all the information you need in a few minutes right on the web. Here are a few ways to find and verify this information:
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Real Estate + MoneyThoughts, ideas, lessons-learned, inspiration, how-tos and more from a journey in small business, to owning and investing in real estate, helping borrowers navigate the mortgage process as a licensed loan originator, in an ongoing pursuit to fund the life and retirement that is chosen, not accepted. |