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Financial
Information & Real Estate / Conversion Calculators |
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First - What is a Mortgage ? |
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Since the majority of people can't pay cash for their homes, they borrow
the money they need, usually from a Bank or Mortgage Company. This
money, which is typically a fairly high percentage of the properties
purchase price, is repaid with interest to the lending institution by
the borrower over a considerable period of time - 15 to 30 years. In
addition to signing a promissory note for the loan, the borrower is also
required to offer the home as security. Which means the borrower signs
and agrees to pay so much per month for a defined # of months and agrees
that if those payments are not met on schedule, they give the house back
to the lender. This conditional agreement, made by the borrower to
convey the home to the lender if the loan is not paid as agreed, is the
mortgage.
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Major Types of
Mortgages defined !
Conventional Loans
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A
conventional real estate loan is a loan secured by the real estate
itself and made at the risk of the lender without the benefit of any
government guarantee or government insurance. If the loan is not
paid according to the terms of the agreement, all the lender can do is
take the title to the property. In that case the lender will get only
what the property sells for which could possibly not recover all the
funds. Conventional mortgage loans may also be insured by private
mortgage insurance companies, which reduces the lender's risk. |
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FHA -
Federal Housing Administration Loans
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An FHA real
estate loan is a loan secured by the real estate in where the lender is
insured by the Federal Housing Administration ( FHA which is an agency
of the United States Department of Housing and Urban Development). The
FHA imposes certain requirements, and the program ensures that in the
case of a covered default, the lender will recover the funds. An FHA
loan can only be given by an FHA approved lending institution. |
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VA - Veterans
Administration Loans
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A VA loan is
a loan made to an eligible veteran, secured by the real estate, with a
some portion of the loan guaranteed by the Veterans Administration. The
VA does impose certain requirements, and the program ensures that, in a
covered default, the lender will recover the funds up to a specified
amount. VA loans can only be made by an approved VA lending institution. |
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Other Types
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Today the
financial markets offer a variety of other types of mortgages, some that
even require no money down or some that will allow a person with So-So
credit obtain a mortgage loan. It is important to find a Mortgage
Representative that is experienced & knowledgeable, to be able to
find the best loan for you at the lowest interest rates and assist you
through out the financial portions of the home purchasing process.
It is just my personal opinion, but it has been my experience that
Buyers have been better served when they use a Local Mortgage
Representative or Lending Institution, they have then had the advantage
of personally meeting with the Representative and there is no substitute
for discussing your situation & the process in the same room,
directly with the Mortgage Representative. |
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A guide for the Home & Property Financing Process !
For Best results follow this guide in the sequence laid out
below:
Get Pre-Qualified First ! |
This is simply where
the Mortgage Representative does a calculation based on your income to
debt ratio. They can then give you the approximate dollar amount you can
afford to finance for a house or property, (based on current industry
guidelines). Typically the Mortgage Rep will offer this service at no
charge. This should be done BEFORE you start looking at any houses. It
will be a waste of your time (and your Agents) if you start looking at
houses or property that is either way below what you can & want to
spend or way above the amount that you can or want to spend !
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The Credit
Report & Pre-Approval ! |
Quite often your Mortgage Rep will get the information needed to verify
your credit rating at the same time they are Pre-Qualifying you. It is
very important to get this done early in the process, so that you can
find potential credit problems whether real or just computerized errors
you were not aware of.............the sooner these are found the sooner
they can be resolved ! I have seen people find that PERFECT
HOME and then go for the mortgage credit approval, only to find that some
past problem, computer error or a host of other situations
has negatively affected their credit ..........
fortunately MOST have been able to clear up the problems
with the help of their Mortgage Representative and go on to purchase that Home, BUT why take the chance
- make sure all is well EARLY ! There
is often a small charge to get this done.
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Actual Loan
Application ! |
This is where you will fill out the actual loan application forms with the
help of your Mortgage Representative (You can get this accomplished before
you have found that right house or property & put a Contract on it!).
Here your Mortgage Rep will officially verify all of your credit and
income information. In addition to filling out the loan application, you
will also need to have other documentation available.........Your Mortgage
Rep will tell you specifically what you need to bring...............but
typically you will need *One month of pay stubs or
1099, *Two years of Federal W2 forms,
*Previous three months of bank statements, but to be
SAFE just ask your Mortgage Rep what you need to bring with you. There is
typically a moderate charge for this process to be done. Again it is very
important to get this done early in the process, this step will normally
find any problems that may have been missed in the credit
report/pre-approval step..........the sooner these potential problems are
found the sooner they can be resolved !
The sooner you have the financial process completed up to this
point.........the more it could possibly help you when you find that JUST
RIGHT HOME OR PROPERTY and start negotiating a sales contract.....when you
can show Sellers that you are a willing, ready & financially approved
Buyer you are in a better bargaining position !
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Loan Commitment ! |
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At this stage the Lender/Underwriter will review all the information
provided and will give a conditional Loan Commitment to you, which state
they will provide financing for your home or property purchase.
Commitments can be given with stipulations added. Here are a few examples
of stipulations that could be given and must be fulfilled prior to
Closing: *an accepted sales contract, *required inspections
completed, *acceptable
appraisal, *clear title work, *re-verification of all previous
credit information & rating Any charges at this point from the Title Company, Lender/Underwriter,
Inspections, etc. will be handled at the Closing. Some Inspections could
require payment of charges at the time of service.
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We
are now SO Close.......Don't let any of these things happen to You
& become Closing STOPPERS!!!
Yes, it is still possible for the financing to go wrong prior to
Closing if any circumstances / information changes up to the last minute.
Some Examples: *employment change, *change in assets, *change in income
to debt ratio, *any stipulations from
the Lender / Underwriter not fulfilled, *etc.
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The Closing ! |
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You will need to come to the Closing (typically done at a Title Company)
with several items, below are some examples........but, your Mortgage Rep,
the Title Company & Your Agent will let you know specifically what you
need to bring......... Some typical examples : *a paid receipt & insurance declaration
page for one (1) year of pre-paid home owners
insurance, *a cashiers check for
Closing costs, the amount will be in the Settlement Statement from the
Title Company, you should receive one to two days prior to the Closing, *a FHA / VA loan must have an
original termite inspection report, *Etc.
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Once You & the Seller have finished Closing and the Seller has
received their money -
YOU ARE THE NEW OWNER OF THE HOME / PROPERTY !
Congratulations
!!!
It's now time to CELEBRATE
& start to Move !!!
I wish
you the Best in all your endeavors and I truly hope you
will give me a chance to be your agent and work with you in the
future ! |
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What's in a
Credit Report ???
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Identifying
Information
Name, current and previous
addresses, Social Security number,
year of birth, current and previous employers & Spouses name. |
Credit
Information
Credit
accounts you have with banks, retailers, credit card issuers, etc.
Type of loan, date opened, credit limit or loan amount, account
balance,
payment pattern over past two years |
Public
Record Information
State and
County court records related to bankruptcies, tax liens,
monetary judgments. |
Inquiries
List of anyone who
has accessed your credit report for up to past two years.
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What's
not in a Credit Report ???
Information about
your race, religious preference, medical history, personal lifestyle, personal background, political preference, criminal
record.
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Free Report
Free annual (every 12
months) credit reports provided by federal law are available online at
www.annualcreditreport.com
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or calling 877-322-8228,
or you may mail a request to:
Annual Credit Report Request Service,
P.O. Box 105281, Atlanta, GA 30348-5281. |
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What is a 'CREDIT
SCORE' ???
The number one deal
breaker for real estate transactions is the inability to
obtain financing. You can help yourself qualify for the Home of your
Dreams by understanding the importance of good credit and how to obtain the best possible
credit score.
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The
Basics !
It sounds simple, but many people don't really understand
what a credit report contains or who compiles it. The most common method used today to determine
credit worthiness was developed by the Fair Isaac Corporation. A three-digit number
assigned to each consumer and called a FICO has a tremendous bearing on what size loan you
will be able to qualify for and at what interest rate. FICOs range from 350 to 850 and are
based on credit information drawn from a number of
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Calculating
Credit Worthiness
The information used to
determine these scores comes from such places as mortgage companies, credit card issuers and auto financing companies and is
reported to one of three major credit bureaus - Experian, Equifax, and Trans Union. FICO
scorers use five kinds of data contained in the credit report: length of credit history, types
of credit used, new credit, amounts owed, and (most importantly) payment history. Most lenders
base their decisions on FICO scores. Typically, the higher the credit score, the lower
the interest rate. |
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New
Help for No Credits
Sometimes, however, an artificially low score can be generated. This
happens when sufficient credit information is unavailable as is often the case
for recent college students, new divorcees, widows, U.S. immigrants and people whose cultures
don't utilize financial institutions or large national organizations. Loan applicants with
low or no scores may be turned down or pay a higher rate. New score designs introduced by
Issacs in 2004 can help this under-served market. They draw upon information outside the
three major credit bureaus to include such sources as payday loan companies and rent-to-own
stores. As a result, another potential barrier to homeownership is removed and will help more first-time buyers than ever before. |
When
Errors Happen
Experts agree: consumers should check their credit scores at least
once a year. Knowing your credit score can helps you understand how much house they can
qualify to buy. Also mistakes do happen. You could be forced to get
less than the loan you deserve because of errors on your credit reports. To potential homebuyers already
strapped by costs associated with the loan process, one more expense could be the final straw.
Now, thanks to the Fair and Accurate Credit Transactions Act (FACTA), you can access your
credit report annually for free. Many of FACTA's new consumer protections, including the
right to obtain a free credit report every 12 months, went into effect December 1, 2004,
starting in the West and rolling Eastward every three months. By the third quarter of 2005,
every consumer in the country will be eligible to take advantage of this new and valuable
credit resource. |
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Jefferson County's
REALTOR® of the Year 2003 |
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***
This website is
intended to assist readers by providing information on real
estate matters. We have made strong efforts to supply accurate
information; however, we cannot guarantee the timeliness,
accuracy or completeness of this information, or information
found on other websites we link to. If you find that the
external links we have provided have changed and now go to the
wrong or any inappropriate websites, Please let us know
immediately ! Please
verify all information enclosed as it pertains to your
specific real estate situation with a Licensed Realtor,
since conclusions you could make based on the information
presented may vary depending on your location, situation and/or needs. The information presented in this website
represents Mary's professional opinion. Buyers and sellers are encouraged to seek independent council
relating to all issues of purchasing and selling of real property. This website is in no way meant to substitute for independent council.
If
your property is currently listed with a real estate
broker, please disregard. It is not our intention to
solicit the offerings of other real estate brokers. We are happy to work with them and
cooperate fully. RE/MAX Beat Choice is a registered trademark. An Equal Opportunity Company. Equal Housing
Opportunity. Each RE/MAX Office is independently
Owned and Operated.
Copyright ©
2005 - 2008 Mary Carter, USA, All Rights Reserved.
Mary reserves the right to deny any request for any form of
additional information at her sole discretion
and the right to implement a monetary charge with notification
at the time requests are initiated to cover
costs incurred. This information is only available in the
continental United States & is solely intended
to be available to clients or prospective clients in the
geographical areas that Mary covers.
Mary's site was designed by & is
maintained by Gary Carter -
garylcarter@charter.net
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Principle
balance: this represents the money you originally borrowed and