Things To Remember When Getting A Loan And Things To Watch Out For
Things To Remember When Getting A Loan And Things To Watch Out For
What do I need for a loan pre-approval?
1. Income: Your monthly income determines how much you can spend each month on your monthly expenses. If you are buying a home, the following things are considered monthly debt.
a. Things that can be considered as income include all of the following for your main employment: Salary, hourly wages, bonuses, commissions, dividends or interest income, net rent as well as possible other types of income.
b. Things that cannot be considered income are new part time jobs, cash payments that are not documented, income that was not reported on your taxes, expensed income and several other types.
2. Monthly Payments/Liabilities:
a. Monthly Payments including car payments, credit cards, student loans, furniture store payments and almost any other payment that you had to apply to get.
b. Home Expense payments including your principal and interest payment, monthly home owners insurance, taxes, association fees, mortgage insurance, second mortgage payments, all other real estate loans that you have with that homes taxes, insurance, etc.
3. Credit Scores: Your credit score determines the minimum requirements that underwriting will look at. Normally the lower the score, the better other things in your financial life need to be.
a. 580 is normally considered the lowest score that a borrower can get a conforming Fannie Mae or Freddie Mac loan. When qualifying for a FHA loan with under a 640 credit score, other things are taken into account:
1. Payment Shock- Is your new house payment within 10% of your current rent payment?
2. Are you putting down at least 5% for a down payment?
3. Is your down payment from your own funds and not a gift?
4. Have you been working for your current employer for at least 5 years?
5. Have you taken Home Buyer Counseling?
6. Do you have at least 1 month’s reserves after closing of the PITI from your own funds?
7. Have you paid all of your installment and/or other mortgage payments on time for 12 months?
8. Do you have other income that you are not using to qualify like bonus, overtime or commissions?
b. 620 is the minimum credit score required for a VA or USDA loan. Borrower will have to have other compensating factors to be able to qualify between 620-639.
c. 640 is normally the score that FHA, VA, USDA and Conventional loans require in order to not have to take compensating factors into consideration. Conventional Loans require a 640 or higher credit score.
d. 640 is the minimum score that is allowed for down payment assistance with MHFA.
e. 680 credit score is the minimum score for a 3% down conventional loan with no mortgage insurance (MHFA program).
f. 720 is the minimum score for a 3% down conventional loan with upfront mortgage insurance (MHFA)
4. DTI/Debt to Income Ratios: Debt to Income is the amount of debt payments per month divided by the amount of income per month. If you have a $400 car payment, $100 credit card payment and a $1500 loan payment and your income is $4000 per month, your DTI is $2000/$4000 or 50%.
a. Conventional Loans normally have a maximum DTI of 50%
b. FHA loans normally have a maximum DTI of 50%
c. VA loans normally have a maximum DTI of 50%
d. MHFA down payment assistance loans have a 43%, 45% and 50% depending on the loan.
5. Things to watch out for when getting a loan: There are many things that can cause a problem when getting a loan. Here is a quick list so you do not have any issues with your loan.
a. Applying for any other loans, credit cards or anything that requires your credit to be pulled.
b. Spending the money that you have in your checking and savings that was used for your loan approval.
c. Spending the money that you need for your down payment.
d. Spending the money that was used for reserves on your loan application.
e. Having your ending statement balances lower than your loan qualifying balances.
f. Increasing your balance and minimum payments on your credit cards.
g. Changing your employment from 40 hours a week to less than 40 hours a week.
h. Changing your compensation to bonus or commission from salary and hourly wages.
i. Not having your down payments, reserves or bank balances seasoned for 60 days.
j. Having employment or income discrepancies on your documents (and not telling your LO).
k. Not having your last two years of taxes filed.
l. Not disclosing ownership in the company that you work for.
Author:Angela D Niece Phone: 612-508-4100 Dated: July 22nd 2016 Views: 123 About Angela D: ...
Located in the 11 county metro, The Trust Team is a leader in the Minnesota real estate market. The Trust Team was founded in 1978, yet represents the best of traditional market knowledge, cutting edge technology and top -notch customer service - all provided by 10 of the most experienced agents in the industry.
We combine the very latest in proprietary internet marketing, and make use of the most current and relevant real estate and social media platforms. We are considered leaders and innovators - always willing to try what is new, and use what is proven. Joe Niece, has more than 3000 past real estate clients, and is an information and renowned internet Guru. His wife Angela Niece and partners, Nikki Moeller, Matt Wolfe, Mike Finstad, Joe Jones, Cory Kingbay, Mary Ellen McGlone, and Stieg Strand have created a most unusual real estate team. 2015 was our best year ever with 498 satisfied clients which gave us the honor of being the #2 team in all of Minnesota. We want your business, promise your complete satisfaction and we are committed to your success !
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"I tried to sell last year and I was unsuccessful so I decided to get some new opinions on what I should do. I interviwed two agents when I was getting ready to sell my home the second time. Angela and the other top person in the area. I was very impressed with both and both she and Angela came up with similar values for our home. The problem was that Angela's value was with me doing three projects and the other Realtor told me that I did not have to do anything. My wife and I were leaning on going with the other Realtor and Angela asked if she could come over and go over a few things with us.
She pulled out the comparable homes that we had picked together when she first met with us and she asked us to look at the pictures. All of the things that Angela was telling us we should do were done on those homes.
She then asked us to think about the signs that we have seen in the area that were his and the signs that we have seen in the area that were hers. Then she asked us one really good question. she said "Do you want to list with the agent that has his signs go up, quickly have a sold sign and then the sign disappears or list with the agent that seems to have the signs up forever. It seemed really logical but we had never thought about it that way. I had always thought about how many signs I saw for the other agent. It made sense that the other agent was not doing more business than, it's that her signs stayed up much longer.
We were convinced to list with Angela but we told him that we thought that our home would be able to sell without doing the things that Angela had suggested. she told us she would market our home like it was the best thing on the market. A month later our home had not sold. she told us we could do the things that she had suggested or drop the price to match the value.
Being a stubborn German, I did two of the things that Angela suggested but not the third. Three weeks later, Angela was talking to me about feedback. she told me that we were going to hurt ourselves unless we decided on one path or the other. Either finish the last project or drop the price before we were stale on the market.
I finished the last project, we went back on the market and sold three showings later. I tell my friends that it was just luck but I know different. Everything that Angela told us she was going to do, she did. Everything that Angela told us was going to happen when we first met with him happened. The price we would get for our home if we did the projects she said we needed to do, we got (once we did the project) she told us the truth and I am grateful that we listed with him and I would suggest that anyone selling a home interview him.