Drew Curran

Drew Curran

Residential Broker

630.484.4289

drew@drewcurranhomes.com

 

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Finance – Getting Started

Start A Green File

A Green File should contain all of your important financial documents. Regardless of the loan type, lenders will need information about you. Make copies of financial statements; bank accounts, investments, credit cards, auto loans, recent pay stubs and two years’ tax returns.

Check Your Credit Rating

Credit scores range between 400 and 800. 620 + is considered “good”. 680 + is considered “premium” and may possibly help get you a lower interest rate.

Below you will find the contact information for the 3 major credit reporting agencies to help you determine your credit rating. Ask your lender how to improve your credit score if you need to. Going forward, treat your credit like gold.

Savings & Debt

If you are buying real estate, try to accumulate funds towards your down payment, closing costs (appraisal, miscellaneous fees, escrow, title insurance, etc.) and expenses such as inspections. Furthermore, try to pay down existing revolving and high interest rate debt like credit cards.

Walk The Line

Now is not a good time to change careers, move your money around, or buy big ticket items. Lenders like stability. So if you are considering any major changes, it pays to meet with a lender and ask them how to proceed before you make any changes!

Shop for a loan

Choosing the Right Lender

Interview several lenders to evaluate the following:

  • Ability to explain things clearly and return your phone calls in a reasonable time period
  • Competitiveness of interest rates, costs & fees.
  • Availability of loan programs that suit your credit profile and desired property
  • Access to local loan approval committee that understands the kind of property you are buying

Choosing the Right Kind of Loan

Today there are so many types of loans on the market that it is beyond the scope of this page to list or explain them all. Your lender is the best person to help you select a loan program to suit your needs. Below is a summary of the three most popular loan types we see in practice.

Fixed loan: The  fixed rate loan assures your monthly payments will stay the same over  the life of the loan, which is typically between 15 and 30 years. Fixed  rate loans may be best if you intend to hold the property for a long  period of time, say over 7 years.

ARMs (adjustable rate mortgages): ARM’s may be suitable if you plan to sell or refinance your home within  the next few years. The starting interest rate is typically lower than a  fixed rate loan, saving you money initially. However, it is important  to understand the index, the readjustment interval, the capitalization  rate and downside risks of an ARM before making a final decision to use  this type of loan.

Intermediate ARMs: Also called Hybrid Loans,  these loans can offer fixed interest rates for the first 3, 5, 7 or 10  years after which the interest rate adjusts with the market every 6  months or year thereafter.

Mortgage Brokers and Lenders – Who Does What?

The mortgage broker is the person or company who is your main contact throughout your loan. They are often able to work with a number of lenders, who actually provide the funds for the loan. Typically, the lender pays the mortgage broker a fee for acting as the intermediary and providing all the customer service.

Filling Out the Application

There are standard forms to be completed when applying for a loan. Some mortgage brokers keep these on their website so you can fill out and submit the forms on line. The information will be verified and used to qualify you for your loan, so take the time to answer questions accurately.

Documentation

Here is a list of the basic documentation the lender will require which you should include in your file:

  • Most recent month’s worth of pay stubs.
  • Last two years W2 statements and 1099’s if applicable.
  • Be prepared to submit the last two years of Federal Tax Returns (1040’s).
  • If self employed and separate business returns are filed, be prepared to submit the last two years business returns.
  • If self employed, the lender will likely ask you for a year-to-date income and expense statement for the business. • Copies of your drivers licenses.
  • If you are currently renting, keep current on copies of the most recent 12 months of cancelled checks for rent showing on your bank statements. If you own a home, include a copy of your most recent mortgage statement.
  • Copies of the most recent month statement for all bank, investment and retirement accounts. Be sure to include all consecutive pages of each statement.
  • Proof of other income sources (alimony, trusts, rental income, etc.)
  • Credit card statements
  • Auto /boat / student / miscellaneous loans
  • Drivers’ license or form of ID
  • If you’re not a US citizen, then copy of your green card or visa

I would recommend meeting with your loan officer prior to finding a home and apply for a formal Pre-Approval. This differs from a standard Pre-Qualification in that your loan scenario is underwritten and formally approved by an underwriter. This step can make the difference between having your bid accepted versus the seller going to a similar competing bid. While searching for a home, it pays to be prepared when it comes to the mortgage, even if you think you are more than qualified.

Stay in Communication

The lender will have an analyst, usually called an “underwriter”, crunch your numbers and verify your documentation to confirm your ability to repay the loan. Once you are in contract on a property, there may also be a loan approval committee which will meet to review the underwriters’ conclusions regarding your creditworthiness, and to evaluate the property on which they are lending. This is called the underwriting process, and questions are bound to arise. Be sure to return your mortgage broker’s calls promptly to keep the process moving forward smoothly. Check in with your mortgage broker periodically.