What Do You Need for a Preapproval?

February 16, 2012 by 5 Comments

preapprovalIf you’re considering buying a home, many real estate agents and/or sellers will require a preapproval letter. A preapproval letter is different than being “prequalified”. Being prequalifed means that you have provided verbal information to a mortgage originator to get an idea of what you qualify for. Being preapproved means that you are providing documentation that supports the information you have provided. Income, employment, assets and credit are verified for a preapproval.

Some preapproval letters aren’t worth the paper they’re written on. Especially if the mortgage originator you’re working with does not require supporting documentation before preparing the letter. If you have not provided supporting documentation (listed below) to your mortgage originator – you’re probably just prequalified and not actually preapproved.

Here is a list of documents you may be required to provide in order to obtain a preapproval:

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Filed Under: First Time Home Buyer, Residential Purchase, The Mortgage Process Tagged With: , , , , , , ,

The Low Down: Comparing FHA to Fannie Mae Homepath Mortgages

September 13, 2011 by Leave a Comment


EDITORS NOTE: Fannie Mae is no longer offering the FannieMae HomePath mortgage program. If you are considering buying a Fannie Mae HomePath property (foreclosure that is owned by Fannie Mae) in Washington state, I’m happy to help you. 

If you’re thinking about buying a home with minimum down payment requirements in the greater Seattle area, you may be considering a property that is owned by Fannie Mae and eligible for the Fannie Mae Homepath Mortgage or using an FHA insured loan which most properties qualify for.  When home buyers contact me about a Fannie Mae Homepath mortgage, they often ask how it compares to an FHA insured loan. Both are great programs and the benefits may vary depending on credit score, down payment and the type of property.

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Filed Under: Fannie, Freddie and FHFA, FHA, First Time Home Buyer, Homepath, Residential Purchase Tagged With: , , ,

Shallow Credit can leave you in the Deep End when Qualifying for a Mortgage

August 5, 2011 by 2 Comments

Shallowcredit When in comes to qualifying for a mortgage, lenders are generally looking for borrowers who have established a history of paying their obligations on time. Ideally this would consist of four accounts that have been open and used for the last one to two years.  When someone does not have active accounts, or when their accounts are all new, their credit history appears “shallow” to some lenders. [Read more…]

Filed Under: Credit Scores and Reporting, First Time Home Buyer Tagged With: , , ,

The Mortgage Process: Contemplating Buying a Home to Getting Preapproved

November 9, 2010 by Leave a Comment

For a while now, I’ve had this idea floating around in my head that with four years of articles at Mortgage Porter, I really should organize the post by the actual mortgage process.  Right now, my blog is traditionally organized chronologically and by categories.  I’m not changing that at all…what I am planning on doing is reposting the articles I most commonly refer to for my clients in an order that follows the mortgage process.  This will be a post I will continue to update with new content via links to the article…it’s a work in progress!  

In my opinion, someone considering buying a home should start researching the process months before actually entering into a purchase and sales agreement.  So that’s where we’ll start:

Considering Buying a Home?

Getting on Track to Buy Your Home

Basic Tips for Homebuyers

How Much Home Can I Afford?

That new car with cost you!

Tips for Improving Your Credit Score

Game Plan for if your credit score is low.

Getting Preapproved

Are You Really Preapproved or just Prequalified?

Debt to Income Ratios (aka DTI)

Do I Really Have to Provide All Pages of My Bank Statements?

What is required to document income?

Documentation for Self Employed or Commissioned Paid Borrowers

Why it pays to get preapproved early:  You may think you know your credit score

Preapproval Letters Defined

What should a preapproval letter contain?

Relocating to Washington State and getting preapproved for a mortgage

Is my Preapproval Letter Still Valid wth all the Rate Changes?

Planning Your Funds for Closing

Funds for closing when you’re buying a home

How much do I need for a down payment?

Gifts from Parents:  FHA and Conventional

We’ve just started the process with this post addressing considering buying a home to getting preapproved!  Watch for future post where I’ll organize articles I’ve written on being in a transaction.

Filed Under: Residential Purchase, The Mortgage Process Tagged With: , , , ,

Did You Know that FHA Mortgages are Assumable?

April 14, 2010 by 2 Comments

One benefit of FHA insured mortgages is that they are assumable to qualified buyers.  This means that if you have an FHA insured mortgage at today’s low rates and you’re selling your home during a higher mortgage rate environment, being able to offer a lower rate to potential buyers could provide a distinct advantage over other competing listings. [Read more…]

Filed Under: FHA, First Time Home Buyer, Residential Purchase Tagged With: , ,

How Much Home Can I Afford?

October 8, 2009 by 2 Comments

This is a common question from first time home buyers.  When working with home buyers who are just beginning the process, after discussing credit and other information, I like to ask in return:

  • What type of monthly mortgage payment would you be comfortable making?
  • How much money are you planning on using for a down payment and closing costs.

To me, it’s better to solve for your potential sales price rather than finding a home or getting your heart set on a certain sales price first before knowing what you actually qualify for.

For example, Seattle Sally has saved up $75,000 and would like to use $40,000 towards a home purchase.  She has been paying anywhere from $2,200 – $2,000 a month for rent and would like to keep her payment around $2000. 

NOTE: Rates quoted below are from October 2009 and are outdated. If you would like a current mortgage rate quote for your home located in Washington, please contact me.

Beginning with a conventional scenario, a payment of $2038 (principal, interest, estimated property taxes, estimated home owners insurance and private mortgage insurance) with about $40,000 for down payment and closing costs would produce a sales price of $325,000.  This is based on a 30 year fixed rate of 4.625%* (apr 4.790).

A sales price of $365,000 with a 10% down payment and the sellers contributing towards closing costs would produce a payment of about $2283.

The only issue I would have with the conventional financing is that private mortgage insurance is that these days, pmi underwriters are picking all mortgages to pieces.

FHA would provide a total payment of $2076 with about $40,000 for down payment and closing costs and a sales price of $325,000.  This is based on a rate of 4.875% (apr 5.400).

If we have the seller pay most of the closing costs and prepaids, a payment of $2287 would produce a sales price of $365,000 with Sally bringing in approx. $38,000 for down payment and closing.

One thing to consider, beyond more forgiving underwriting, with FHA is that your mortgage will be assumable.  Imagine having a rate of 4.875% a few years from now when rates will most likely be much higher.  If you are a seller competing with other similar home on the market, and you can offer an assumable mortgage at a tempting rate–this will be a serious advantage.   Once inflation happens, mortgage rates will be much higher.

If Seattle Sally’s credit score comes in lower than expected (this is all based on very preliminary information) FHA may become a better option as well.  

*rates quotes are as of 1:30pm on October 8, 2009 and are based on mid credit scores of 740 or higher.  Rates can and do change often.  Follow me on Twitter to see live rate quotes.

For your personal rate quote on a home located anywhere in Washington, click here.

Filed Under: Fannie, Freddie and FHFA, FHA, First Time Home Buyer, Mortgage Insurance, Residential Purchase Tagged With: , , , , ,

Tips for homebuyers and sellers

September 25, 2008 by Leave a Comment

Yesterday I was interviewed by Melinda Fulmer for a MSN Real Estate article.   Here were a few of my pointers (with some clarification) for buyers:

1.  Plan on having a down payment.  FHA allows for a reduced down payment which can be gifted or loaned by family members, as does USDA and VA. However I do like to see those shy on savings practice making mortgage payments to a savings account until they have at least 6 months of mortgage payments “in reserves”.   This account is not to be used for your down payment–it’s in case of an emergency.

2. Be picky when selecting your loan originator.  I do believe in getting referrals from people you financially respect.  You can also try “googling” their names to learn more about the loan originator and their qualifications.

Borrowers may be better off working with loan originators who have are able to provide FHA loans–even if they’re not considering FHA financing.  Many conventional loans are having to switch to FHA financing as the underwriting is more forgiving and rates may be better depending on mid-credit scores.

3. Get prequalified as soon as possible.  This is a good way to get to select your loan originator (this is not the same as a preapproval).  During this stage, you’ll be able to see how detailed oriented the LO is what their personality is like–what type of programs do they recommend.  A LO should provide you a Good Faith Estimate without any commitment from you.

4. Rate lock strategy.  Ask your LO what they can do if rates improve after you lock.  Right now, with the turbulent markets, many lenders are offering free rate float downs as long as the lock meets specific criteria.  This provides borrowers with the assurance that the rate will not be higher than the current rate lock and that should rates improve, they may have the opportunity to “float down” to that rate.  Do make sure to obtain a written lock confirmation.

For sellers, I suggest that they insist on a preapproval letter to be included with their offer.  They should also carefully read the letter, it should address the buyer’s credit, income/employment and where the down payment is coming from along with the type of loan they’re approved for. Preapproval letters are sadly not worth more than the paper they’re written on, however they can provide you with some clues about the lender the buyer is working with.  If a seller has two identical offers, the buyer’s lender can make a huge difference in whether or not the transaction closes smoothly.

Filed Under: First Time Home Buyer, Interviews, Residential Purchase Tagged With: , , ,

Getting on Track to Buy Your First Home

April 2, 2007 by 2 Comments

Last fall, a Mom made an appointment with me to meet with her childreImg_3528n about buying a home.  It was so cool.   First off, she was very proud of her 18 and 20 year olds.   Both were hard working individuals…being responsible young adults.  Mom thought they should look at buying a house together instead of renting.   It was a very interesting consultatation.   I was happy to meet with this family to help make sure her young adults are on the right track of becoming home owners and mortgage payers.

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Filed Under: Financial Planning, First Time Home Buyer, Mortgage, Residential Purchase Tagged With: , ,
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