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Question: How can I qualify for a loan?
Answer: There
are several factors that are important to consider. As a Mortgage Consultant we will look at the following aspects to
evaluate your ability to qualify for a loan:
- Income - Do you make enough money to make your mortgage payments and pay your
other obligations?
- Assets - Do you have enough reserves to close your mortgage and meet lender requirements?
- Credit - Defines what loan program you can qualify for with your current score
- Employment - Do you have a stable employment history?
- Residency - How long do you stay in one place before moving on?
Question: What is a credit score?
Answer: Your credit score is a 3 digit number that expresses your creditworthiness.
This indicates to creditors or lenders the risks they're assuming if they grant you credit or approve you for a loan. The
result is a number between 300 and 850. The lower the score, the higher the risk.
- Over 750 = EXCELLENT
- 720 or higher = Very Good
- 660 to 720 = Acceptable (Average)
- 620 to 660 = Uncertain
- Less than 620 = High Risk
Remember:
Credit score is NOT the only factor we look for to obtain a mortgage however, It is important to have a mortgage professional
review your entire financial situation with you, and evaluate your mortgage ability on all the factors - income, assets, credit,
employment and residency. Only a mortgage consultant will know if items like outstanding collections, judgments, bankruptcies,
tax liens or other credit items will affect your ability to qualify
Question: How Your Credit Score Is Calculated?
Answer:
1. Your payment history
2. The amounts you owe- it is best if you try to keep your balances
under 40% of credit line.
3. The length of your credit history-the longer you have accounts opened the more
the trade line has to rate you on. Keeping older accounts open and using them
periodically to show still active will benefit your FICO score.
4. Types of credit used-having a good track record
with different types of credit accounts will give you a better overall analysis. (Mortgage
loans (house/ etc.), Installment loans (cars/ boats/ etc.), Revolving credit (Visa/ MC/ Sears/ Etc.) Only open new credit
accounts you actually need. Opening a lot of accounts at once can do more damage
than good.
5. New
Credit-every time you apply for a new account you are hit with an inquiry
on your credit. FICO scores treats Auto and Mortgage inquires separately preventing
each to decrease credit for rate shoppers.
Question:
What is a FIXED rate mortgage?
Answer: A fixed rate mortgage is a great product if someone
will be living in or owning the property for a long time (15 or 30 years). A fixed rate mortgage is an amortized loan.
Every month when you make your mortgage payment, some portion of it will go towards the principal and some to the interest.
Historically, this has been a very popular loan choice, but has become less popular due to the variety of mortgage products
now available.
Question: What is Adjustable
Rate Mortgage (ARM)?
Answer: An adjustable-rate mortgage (ARM) has an interest
rate that can chage during the life of the loan. If the interest rate goes down, so does the monthly payment (in most
cases). If the interest rate goes up, so does the monthly payment. The benefit to this type of loan is the initial
rate could be significantly lower than the rate for a comparable fixed-rate mortgage. This makes becoming a homeowner
more affortable (in terms of monthly payment) and often makes qualifying easier.
Words of Wisdom on ARM
mortgage:
If you choose a loan that carries
an adjustable rate, again, lenders are usually willing to offer a lower rate than they would for a fixed-rate mortgage.
Because it's an adjustable rate, the lender can later raise the interest rate after one, two, three, or five years (or sooner-
be careful!), for example, based on the predetermined guidelines of that loan. An ARM can save you money if it has a
fixed rate for several years and you know you don't plan to hang onto that property for that entire fixed-rate term.
For example, if the ARM has
a fixed rate for the first 5 years, but you only plan to keep the home for 4 years, you can qualify for a lower inerest rate
for 4 years and save money. The risk to you is that if you wind up keeping the property beyond 5 years, your interest
rate could go up, which means your monthly payment will increase. This can work the other way too. To your advantage,
adjustable-rate mortgage can also adjust in a downward fashion.
Question: What is Balloon Mortgage?
Answer: A balloon mortgage has one final payment that
is much higher than the regular monthly payment. The borrower receives a lower rate and makes lower monthly payments
for a specific period of time, which can typically be between 3 to 10 years. After that period, the borrower must pay
off the principal balance in one lump sum. This type of mortgage product is best for people who plan to sell their home,
pay if off, or refinance it before the balloon payment comes due.
Words of Wisdom on Balloon Mortgage:
Balloon loan tend to have alot of stigma attached to them. If you
don't have the money for that final payment, the lender could foreclose on the property. Generally speaking, if you
can qualify for a non-balloon loan. I would pursue that option instead.
Question: What is Bi-Weekly Mortgage (AKA 2 Step Mortgage?
Answer: A bi-weekly mortgage works just like a traditional fixed-rate
mortgage, except that, instead of making regular monthly payments, the borrower makes lower payment biweekly(every 2 weeks).
Paying biweekly means 26 payments a year- the equivalent of 13 months. The benefit is that you would pay off the loan
significantly faster than a standard fixed-rate loan and pay much less interest over the life of the loan. You would
also be building up equity in your home much faster and could cut the time it takes to payit off by up to 8 years.
Words of Wisdom on Bi-Weekly Mortgage:
Bi-weekly mortgage isn't much different than any other mortgage, except that the payments are made more often than once
per month. What it boils down to is that if a mortgage payment is made biweekly, that's 26 payments per year, which
equates to making 13 monthly payments per year instead of 12. I would recommend paying extra for a biweekly payment
privilege. If a broker or lender is going to charge you extra, consider accepting a traditional fixed rate mortgage
and then making one or more extra payments toward the loan's principal per year onyour own. The result in terms of your
savings will be basically the same and you will have control over when and whether or not to send in those extra payments.
Question: What is Stated-Income/Stated-Assets Mortgages?
Answer: To qualify you for a mortgage, the lender will rely on financial
information that you state is accurate, but you will not be required to furnish proof, such as tax returns, pay stubs or bank
statements.
Words of Wisdom on State-Income/State-Assets
Mortgages:
This type of loan is available to
certain qualified borrowers on specific loan scenarios. The borrower does not need to provide any supporting documentation
about their income and assets. The borrower literally just states what their income and assets are to the lender.
This requires you to make a declaration to the lender that the information you're providing is totally accurate. Depending
on your employment situation, requirements for this type of loan will vary. Keep in mind: a lender will verify your
employment. If you state you're earning a specific salary for doing a specific job, the lender will also do research
to make sure that the income you're declaring is within a reasonable and realistic range. Depending on the loan
to value calculation and your credit situation, many lenders won't charge extra for this type of loan, nor will have to pay
a higher rate. A SISA (Stated-income/State-assets) loan can be a real timesaver.
Question:
What is No-Income Verification Loan Mortgages?
Answer: To qualify for this type of mortgage product, the borrower
will not need to provide proof of his or her income. The borrower's credit score and credit history will play a major
role in the approval process.
Words of Wisdom on No-Income Verification
Loan Mortgages:
This type of loan allows the borrower to
potentially obtain a loan without having to state their income or prove their income. The approval decision is based
primarily on assets owned and the borrower's credit. There are several different categories of no-income-verification
loans. Again, as the risk for the lender increases, the rate the borrower will need to pay increases. These days,
it is possible to obtain a mortgage without having to prove your income, assets or employment, as long as you have qualifiying
credit.
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