How To Submit the Perfect Home Loan Application

Knowing how to submit the perfect home loan application can help you start your home ownership journey off on the right foot. Here are some helpful tips to ensure a smooth loan process. For a Smooth Process: An application is your first step to home ownership! Required documentation will vary, but generally, here is what we will need: YOUR EMPLOYMENT AND INCOME INFORMATION: 2 years employment history including job titles, dates of employment, employer’s address, and phone numbers Letter of explanation of any changes in employment Pay stubs for the most recent 30 days Copies of W-2s for the last 2 years Copies of federal, personal, and business tax returns for previous 2 tax years, including all W-2s, 1099s, K1s, and all schedules. If filing an extension, please provide extension YOUR RESIDENCE INFORMATION: 2 years residence history, including addresses, dates, and phone number for landlord if renting If you currently own a home, please provide the most recent mortgage statement Name and phone number of your homeowners insurance agent BANK & OTHER STATEMENTS: Most recent 2 months or quarterly bank statements for all checking, savings, and investment accounts (all pages, even if blank) Most recent 2 months or quarterly 401K/Retirement statements (all pages, even if blank) Copy of cancelled Earnest Money check when it clears your bank account, along with most recent bank statement showing check clearing Non-payroll deposits—we will need to verify the source and receive explanation for non-payroll deposits to your accounts, including any transfers between accounts (make copy of any check you deposit) IF APPLICABLE TO YOU, THE BELOW ITEMS MAY BE NEEDED: Complete divorce decree and/or separation papers Alimony/child support income; proof of receipt may be required Bankruptcy discharge papers (including filings, discharge, and list of creditors) If receiving Retirement or Social Security income, award letter and proof of receipt may be required If any portion of your down payment or closing costs is coming in the form of a gift, please call us, because the documentation required for gifts is fairly comprehensive Once we pull your credit, we may need a signed letter of explanation and/or documentation for any inquiries and/or derogatory credit VA loan: DD214 and Certificate of Eligibility To access our online application go to https://www.myloanform.com/?action=access.login&m=47

How Much Can I Afford?

How much mortgage money can I qualify to borrow? This is typically the number one question mortgage professionals are asked by new clients. Of critical importance when considering mortgage financing: There is sometimes a difference between what a client ***can*** borrow and what they ***should*** borrow. In other words, what makes for a comfortable long-term mortgage payment? The Quick Answer: If we’re simply considering the financial math, lenders will calculate your Debt-to-Income Ratio and generally allow for 28-31% of your gross income to be used for the new house payment with up to 43% of your gross income to be used for all consumer related debts combined. Sample Mortgage Scenario: Let’s use a gross monthly income of $3000 and a qualifying factor of 30% Debt-to-Income Ratio: $3000 multiplied by .3 (30%) = $900 max monthly mortgage payment This means that your mortgage payment (Principal, Interest, Taxes, Hazard Insurance) cannot exceed $900 a month. “Ballparking” a Qualifying Loan Amount: Simple step: We use a safe average of $7 per month in payment for every $1000 in purchase price so… Step 1) $900 a month divided by $7 = $128.50 Step 2) $128.50 multiplied by 1000 = $128,500 loan amount. Remember, these are average ratios and guidelines set by most lenders for common mortgage programs. Keep in mind, while most consumer debts are listed on a credit report, there are some additional monthly liabilities that may contribute to the overall qualifying percentages as well. Regardless of how your personal income and credit scenarios factor in, it is important to consider your overall budget when trying to determine how much of a mortgage you should qualify for. Other items to consider in your monthly budget: 1. Confirm all debts are taken into account 2. Any private notes or family loans 3. Short-term expenses – medical, auto repairs, travel, emergencies 4. Plan on additional expenses for the home such as water, electric, maintenance, etc… 5. Keep a cushion for savings and financial planning

Closing Process Defined

The home buying process is full of paperwork, important dates, contracts, market movements and checklists that can even overwhelm seasoned real estate investors. One of the main reasons to make sure you’re working with a professional real estate buying team is the fact that you get to lean on their combined experience to ensure a smooth and painless closing. Some agents and loan officers can close upwards of 20+ transactions a month. Compared to the 5-7 homes an adult may purchase in his/her lifetime, you can obviously see where it helps to have a few trusted professionals in your corner. The closing process can be argued as the most critical part of a real estate transaction where the most amount of things can go extremely wrong. This is where that professional team will really prove their value. If all of the initial questions, concerns, documents and contingencies were addressed early in the mortgage approval and home shopping process, then you should feel confident about walking into the closing with all bases covered. However, we’ve listed a few bullets, links and frequently asked questions on this page to help highlight a few important topics you may want to be aware of during the closing process. Six Prior-To-Closing Conditions That Can Delay Your Escrow: Even though your lender may have provided a Pre-Approval and/or Mortgage Commitment Letter, there may still be several conditions that could delay a closing. Sometimes buyers and agents let their guard down with the relief of getting closing documents to title, and they forget that there may still be a bunch of work to be done. Prior-to-Closing conditions are items that an underwriter would require after reviewing your file, which could simply be an updated pay-stub, a letter of explanation of recent credit inquiries or more clarification on information found in a tax return. Here is a list of a few Prior-to-Closing conditions you should be aware of: 1. Updated Income/Asset Documentation- You may have supplied your lender with a mountain of documentation, but make sure you continue to save all of your new paystubs and financial statements as you move through the process. Chances are your lender will want updated documents as you get closer to closing. 2. Credit Inquires – If you have had recent inquires on your credit report, a lender may check to see if any new credit has been extended that may not yet actually appear on your report. An inquiry could be for something minor such as a new cell phone, but can also be something that will impact your ability to qualify for the loan such as a car payment or another loan that you co-signed to help out a family member. ……(read more on Credit Inquires) 3. Employment Verification- Your lender will be making sure you are still actively employed in the position that is listed on your loan application, and they will do this more than once in the process. So make sure regular life events, such as maternity leave or a scheduled surgery, have been brought to your loan officer’s attention ahead of time. Once an underwriter starts to uncover surprises, they may hold a file up for a while to do a bunch of unnecessary digging to find out if there are any other issues that the borrower failed to mention. 4. Funds for Closing- Lenders will want to source where every dollar for the transaction is coming from and verify that it has been deposited into your bank account. If funds need to be liquidated from a retirement account or home equity line start the process sooner rather than later. Sometimes lenders will not release all of the funds immediately after a large deposit so it is important to have these in place well ahead of your closing date. The same applies for Gift Funds-make sure the donor is aware of your time frame and is willing to supply the required documentation to your lender. ……(read more on Making Sure Your Cash To Close Comes From Proper Source) 5. Title and Judgment Searches – Typically, title and judgment searches are performed farther along in the mortgage process because they are not ordered until after you receive your mortgage commitment. These searches could reveal judgments against your name or the sellers along with liens against the property you are buying or selling. Sometimes, even an old mortgage appears against the property since it was never properly discharged, or if you have a common name items could appear that are really not yours. Either way, the underwriter and title company will want to be sure that these are cleared up before the closing. ……(read more on Title and Judgment Searches) 6. Homeowners and Flood Insurance Coverage – Lenders want to review your policy several days prior to closing to make sure coverage is sufficient and accurately account for it in your monthly payment. Insurance coverage can sometimes be difficult to obtain depending on your past history with claims, credit, location and type of the property. Items to Bring to Closing Appointment: Your real estate agent and/or mortgage loan officer should be providing you with a final list of documents that need signatures or updated verifications, so the general list of items needed at closing is quite basic: 1. Funds To Close – If you are required to bring in a down payment and/or pay for closing costs to finalize the transaction, you’ll need to bring a certified check from a bank. The escrow company, your agent and loan officer should provide you with a full breakdown of all fees / costs involved in the transaction. While these final numbers may be more accurate than the initial Good Faith Estimated which was provided at the beginning of the application process, there will still be a small buffer amount added by escrow to cover any prepaid interest or other minor changes. If you don’t have to bring in any funds to close, then you might actually be getting a portion of the Earnest Money Deposit back. Keep in mind, it is important to make sure these funds to close come from the proper sources. 2. Proof of Identification – Official Drivers License or State ID card. Passports will work as well. …… Frequently Asked Questions: Q: Does It Matter Which Day of the Month I Close? The date of your closing is all about how you view the money being applied. Pay now or pay later, but it will always be collected. Let’s first look at how mortgage payments are broken down: When you pay your rent for the month, you are actually paying for the right to live in the house for the upcoming month. However, your mortgage payment is broken into four separate components; principle, interest, taxes and insurance (PITI). The principle is paid towards the upcoming month, interest is paid towards the previous month and the taxes and insurance are deposited into an impound account. As far as closing on a particular day of the month to save money on interest payments, it depends on the type of loan program you are using. If you’re more concerned about successfully closing with the least amount of stress, then early to mid month is usually a good time to close. Q: I am refinancing an FHA loan, will it benefit me to close in the beginning of the month? No, in fact FHA refinances should always close at the end of the month because you are responsible for the entire month’s interest. Q: Should I be concerned about the closing date on a conventional loan refinance? Not really, however you can save a couple dollars by closing early in the month, just avoid closing on a Friday because you could be responsible for the interest on two loans over the weekend. Items to Bring to Closing Appointment: Your real estate agent and/or mortgage loan officer should be providing you with a final list of documents that need signatures or updated verifications, so the general list of items needed at closing is quite basic: 1. Funds To Close – If you are required to bring in a down payment and/or pay for closing costs to finalize the transaction, you’ll need to bring a certified check from a bank. The escrow company, your agent and loan officer should provide you with a full breakdown of all fees / costs involved in the transaction. While these final numbers may be more accurate than the initial Good Faith Estimated which was provided at the beginning of the application process, there will still be a small buffer amount added by escrow to cover any prepaid interest or other minor changes. If you don’t have to bring in any funds to close, then you might actually be getting a portion of the Earnest Money Deposit back. Keep in mind, it is important to make sure these funds to close come from the proper sources. 2. Proof of Identification – Official Drivers License or State ID card. Passports will work as well. …… Frequently Asked Questions: Q: Does It Matter Which Day of the Month I Close? The date of your closing is all about how you view the money being applied. Pay now or pay later, but it will always be collected. Let’s first look at how mortgage payments are broken down: When you pay your rent for the month, you are actually paying for the right to live in the house for the upcoming month. However, your mortgage payment is broken into four separate components; principle, interest, taxes and insurance (PITI). The principle is paid towards the upcoming month, interest is paid towards the previous month and the taxes and insurance are deposited into an impound account. As far as closing on a particular day of the month to save money on interest payments, it depends on the type of loan program you are using. If you’re more concerned about successfully closing with the least amount of stress, then early to mid month is usually a good time to close. Q: I am refinancing an FHA loan, will it benefit me to close in the beginning of the month? No, in fact FHA refinances should always close at the end of the month because you are responsible for the entire month’s interest. Q: Should I be concerned about the closing date on a conventional loan refinance? Not really, however you can save a couple dollars by closing early in the month, just avoid closing on a Friday because you could be responsible for the interest on two loans over the weekend. For more information visit TxPremierMortgage.com

Debt to Income Ratio Explained. It is simple, really...

Before a first time buyer, or any home buyer sets out to start viewing properties, getting pre-approved is one of the crucial first steps, but examining your debt-to-income ratio is best done before applying for a home loan. Why is the debt-to-income ratio of 43% such an important percentage and factor? This ratio speaks to a home buyer’s financial capacity not so much in terms of buying a home but capacity to faithfully pay on the mortgage and not go into default – as much a concern for the lender as it should be for the home buyer. For purposes of getting pre-approved for a mortgage, your debt-to-income ratio is calculated simply by adding up all your monthly debt payments and then divide the total by your gross monthly income. This is how mortgage lenders measure a home buyer’s ability to successfully manage monthly mortgage payments and responsible servicing of the debt. An Example of Debt-to-Income Ratio Calculation Let’s say your annual income is $60,000 or $5,000 monthly and the home you’re interested in is $200,000 and for the sake of simplicity, you’re putting down 3.5% as with an FHA loan at 4% interest rate. This ratio speaks to a home buyer’s financial capacity not so much in terms of buying a home but capacity to faithfully pay on the mortgage and not go into default – as much a concern for the lender as it should be for the home buyer. For purposes of getting pre-approved for a mortgage, your debt-to-income ratio is calculated simply by adding up all your monthly debt payments and then divide the total by your gross monthly income. This is how mortgage lenders measure a home buyer’s ability to successfully manage monthly mortgage payments and responsible servicing of the debt. An Example of Debt-to-Income Ratio Calculation Let’s say your annual income is $60,000 or $5,000 monthly and the home you’re interested in is $200,000 and for the sake of simplicity, you’re putting down 3.5% as with an FHA loan at 4% interest rate. The amount you’re financing would be $193,000, add to that, again for simplicity, PMI (private mortgage insurance for loans with less than 20% down) property tax of $14 per $1,000 borrowed (check your target community’s property tax rate) and interest. Your total monthly mortgage payment would total $1,229.89. Now, let’s add $200 for an auto loan, $400 for revolving debt such as credit cards and accounts plus the mortgage of $1229.89. Obviously, there can be a lot more to an individual’s monthly debt than this, but we’re keeping it simple, but this totals $1,829.80. Divide the monthly debt of $1,829.89 by the gross monthly income of $5,000 and you get a debt-to-income ratio of 36%. Congratulations, your debt-to-income ratio is well below the general maximum of 43%. Need more information? Visit txpremiermortgage.com for more explanations!

What Does Title Insurance Protect Me From?

By including title insurance when purchasing property, your title insurer takes on accountability for legal expenses to defend your property title, should it ever be challenged. Many different occurrences can come into play to warrant the need for title insurance. The title company responsible will then take on the legal expenses to defend the property for as long as you are in possession of an interest in the property under the title. If the defense is not successful, you will be reimbursed for any loss of value of the property. Common Things Title Insurance Covers: 1. UNDISCLOSED HEIRS, FORGED DEEDS, MORTGAGE, WILLS, RELEASES AND OTHER DOCUMENTS 2. FALSE IMPRISONMENT OF THE TRUE LAND OWNER 3. DEEDS BY MINORS 4. DOCUMENTS EXECUTED BY A REVOKED OR EXPIRED POWER OF ATTORNEY 5. PROBATE MATTERS 6. FRAUD 7. DEEDS AND WILLS BY PERSON OF UNSOUND MIND 8. CONVEYANCES BY UNDISCLOSED DIVORCED SPOUSES 9. RIGHTS OF DIVORCED PARTIES 10. ADVERSE POSSESSION 11. DEFECTIVE ACKNOWLEDGEMENTS DUE TO IMPROPER OR EXPIRED NOTARIZATION 12. FORFEITURES OF REAL PROPERTY DUE TO CRIMINAL ACTS 13. MISTAKES AND OMISSIONS RESULTING IN IMPROPER ABSTRACTING 14. ERRORS IN TAX RECORDS

Talk the Talk – Know the Mortgage Lingo at Closing

What in the world are they talking about? Many borrowers go through the closing process in a haze, nodding, smiling, and signing through a bunch of noise that sounds like Greek. Even though you may have put your trust in your real estate and mortgage team, it helps to understand some of the terminology so that you can pay attention to specific details that may impact the decisions you need to make. Common Closing Terms / Processes: 1. Docs Sent – Buyers sit on pins and needles through the approval process, waiting to find out if they meet the lender’s qualification requirements (which include items such as total expense to income, maximum loan amounts, loan-to-value ratios, credit, etc). The term “docs sent” generally means you made it!! The lender’s closing department has sent the approved loan paperwork to the closing agent, which is usually an attorney or title company. Keep in mind that there may be some prior to funding conditions the underwriter will need to verify before the deal can be considered fully approved. 2. Docs Signed – Just what it implies. All documentation is signed, including the paperwork between the borrower and the lender which details the terms of the loan, and the contracts between the seller and buyer of the property. This usually occurs at closing in the presence of the closing agent, bank representative, buyer and seller. 3. Funded – Show me some money! The actual funds are transferred from the lender to the closing agent, along with all applicable disclosures. For a home purchase, if the closing occurs in the morning, the funds are generally sent the same day. If the closing occurs in the afternoon, the funds are usually transferred the next day. The timing is different for refinancing transactions due to the right of rescission. This is the right (given automatically by law to the borrower) to back out of the transaction within three days of signing the loan documents. As a result, funds are not transferred until after the rescission period in a refinancing transaction, and are generally received on the fourth day after the paperwork is signed. (Note – Saturdays are counted in the three day period, while Sundays are not). The right of rescission only applies to a property the borrower will live in, not investment properties. 4. Recorded –

Let’s make it official. The recording of the deed transfers title (legal ownership) of the property to the buyer. The title company or the attorney records the transaction in the county register where the property is located, usually immediately after closing. There you have it – an official translation of closing lingo. As with any other important financial transaction, there are many steps, some of which are dictated by law, which must be followed.

Assembling Your Home Buying Team – Knowing The Players

Buying a new home is literally a team sport since there are so many tasks, important timelines, documents and responsibilities that all need special care and attention. Besides working with a professional team that you trust, it’s important that the individual players have the ability to effectively communicate and execute on important decisions together as well. Real Estate Agent – A Realtor® is a licensed agent that belongs to the National Association of Realtors®, which means they are pledged to a strict Code of Ethics and Standards of Practice. A few of the important roles your agent performs: Determine your home buying needs Define your property search criteria – neighborhoods, school districts, local amenities… Provide insight on market trends and property values Negotiate purchase contracts Pay attention to due-diligence periods and other important timelines Articulate inspection and appraisal reports Professionally estimate fair market value on listings A common misconception of many First-Time Home Buyers is that hiring a real estate agent will end up costing more money. However, the typical arrangement in a purchase transaction is for the seller to cover the buyer’s agent commission. In some cases where a new home developer or For Sale By Owner is listing a property and offering a lower price to deal direct, it is still a good idea to have an agent in your corner to protect your financial and investment interests. Considering that some buyers may see 5-7 real estate transactions in a lifetime, compared to an agent that closes the same amount in a month, it is obvious to see that there is a big advantage to having the ability to rely on that experience when your home and security is on the line. Mortgage Professional - A mortgage professional (loan officer, mortgage planner, loan consultant, etc.) is the glue that holds the entire transaction together (biased comment). In addition to establishing the purchase price and monthly payment a borrower can qualify for, the mortgage team will also need to communicate with all of the other players on the home buying team throughout the entire process. To highlight a few details your mortgage team is paying attention to: Initial pre-qualification to determine purchase price / loan amount Explain all loan program options that may fit your investment goals Collecting / organizing loan approval documents Watching economic indicators that influence daily rate changes Locking rates Communicating with title / escrow officers Submitting loan package to underwriting departments Updating disclosure / GFE paperwork within proper time frames Following funding through the final recording Tracking inspections, insurance and other lending requirements Post closing rate / program monitoring (although that might just be us) Insurance Agent - The lender in any mortgage transaction will require a homeowner’s insurance policy (hazard insurance). This policy protects the property in the case of fire, theft or other damage (except flood or earthquake, those are separate policies and may be optional). If it is determined that the property that you want to purchase is in a flood zone, flood insurance is not optional, it is mandatory. The flood zone determination will be done with a “flood certification” from a third-party provider. Title and Escrow - It is possible to have a title company and an escrow officer work for different companies. Also, some states use closing attorneys and there are still a few states where they use abstract of title instead of title insurance. In most purchase transactions, the seller has the option of choosing the title company. The title and escrow officers are often thought of as the same role, but in reality are quite different positions. The title officer takes care of all issues that have to do with the title (also referred to as the deed) of the property. The lender may require a title insurance policy guaranteeing that the title is clear of all liens except those being filed by the lender. Escrow takes care of receiving, signing, and notarizing the final loan documentation, as well as collecting the other paperwork associated with the home sale. The escrow officer is a neutral third party that makes sure no money is transferred until all conditions for each side are met. The money management of an escrow company include: Real estate commissions Funds to mortgage company Homeowner’s Insurance Premiums Property Taxes HOA Dues and other third-party fees Finally, the escrow officer will see that you are properly recorded as the new owner with the county. Home Inspector - When you have found the home that you like, it is a wise idea to have a professional take a look at the home to see if there are any issues with the property that could be a problem in the future. Even though some buyers have an “Uncle Joe” who has owed several homes and knows what to look for, a certified Home Inspector can be money well spent. They will look at the functionality of the home to make sure the electrical, plumbing and physical aspects of the home are strong, which will help the buyer make an educated decision about following through with the purchase, or renegotiating certain aspects of the contract. Keep in mind, the home inspector and appraiser have different jobs. An appraiser determines value, while the inspector looks for structural problems, defects or maintenance issues. The inspector is doing this strictly for the buyer’s sake. The lender is not concerned if a faucet has a minor leak as long as the property is worth the sales price. Therefore, the lender generally does not require an inspection unless the purchase contract requires one. So, an inspection is not required, but it is recommended. As a matter of fact, one of the forms in an FHA application package is one that says “For Your Protection: Get a Home Inspection.” Appraiser - While the appraiser is typically never seen by the home buyer, an appraisal is obviously an important component of a home purchase transaction. The appraiser will conduct an analysis of the property to determine the current market value. The bank will always require an appraisal, and in some cases need a second opinion of value if the program guidelines or loan amount require it. Appraisers compare the sales prices of similar properties sold in the neighborhood and surrounding areas with the subject property. This can be a very tricky process, especially if there are few properties to choose from, or if there is an overwhelming amount of foreclosures and short sale listings. Now, since two homes are rarely identical, the appraiser has the difficult job of trying to compare apples to apples; sometimes red delicious to yellow delicious, or sometimes Fuji to Winesap. When done, the estimate of value is given. If that value is below the purchase price, then negotiation may take place. If it is at or above the purchase price, we are ready to go forward.