GULFSIDE MORTGAGE INC, CHRISTOPHER LADD HARKER, BROKER
MORTGAGE APPLICATION WORDS & PROCESS
Chris as Your Mortgage Broker, leads the application process, but many people are involved and make various contributions to an effort to complete, verify, finalize, and approve your mortgage application. The application process involves some words and terms that you may not be familiar with. Below are some definitions you will find handy.
Chris will use your Ratified (accepted) Sales Contract to serve as a starting point for the final loan application process. You will likely have already begun the pre-approval application process. This pre-approval process can go to final approval process when you have the accepted sales contract. This means both you and the seller have signed off on the final offer. The contract is legally binding and enforceable. It specifies the amount of your down payment, the price you will pay for the house, the type of mortgage financing you will seek, the mortgage amount you will need, your proposed closing and occupancy dates, and other contingencies.
The mortgage amount is the amount of money you plan to borrow. Your mortgage amount will be based on the purchase price of the home minus the amount of your down payment.
The down payment is the money that you contribute toward the home purchase. Getting a down payment together is often one of the harder steps in buying a home. Lenders feel more secure when buyers make a down payment, indicating they are less likely to default on their loan. You have heard about the traditional 20% down payment, which will make you exempt from paying a monthly bill for lender required private mortgage insurance ( PMI ), discussed below.
Some loans offer as little as three percent down payment or no down payment if you meet certain criteria. However, if you can afford to put more money toward a down payment, it will reduce both your interest rate and your monthly mortgage payments. Sources for down payments may come from your own savings accounts, checking accounts, stocks and bonds, life insurance policies, and gifts by others.
Private mortgage insurance will be required by the lender unless you are exempt from it by making a 20% down payment.
This insurance pays the lender money to cover any losses the lender has if you as borrower default on your mortgage.
Chris will discuss interest rates and discount points and the best combination of these to determine some good options to meet your needs. Chris will also discuss types of mortgages and which may be best suited to your needs; fixed-rate, adjustable-rate, low down payment (zero to five percent), long term (40 to 50 years), and special financing programs.
Interest Rate is the monthly effective rate paid on borrowed money, expressed as a percentage of the sum borrowed. When you borrow $100,000 at a 6% interest rate means that you would pay $6000 in interest.
Discount Points are a fee that lenders charge you to get a lower interest rate on your mortgage. A point equals 1 percent of the loan amount. So, if you and your lender agree to a mortgage of $300,000, one point would equal $3,000. Each point you pay for a 30 year loan lowers your interest rate by one eigth or .125 of a percentage point. If the current interest rate on a 30 year mortgage is 6.75 percent, paying one point would lower the interest rate to 6.625. (6.75 minus 0.125 equals 6.62). Chris can talk to about paying 1, 2, or 3 discount points -- or you can choose not to pay any discount points. It can make good sense to pay discount points if you plan to stay in your home for a long time.
Chris will request a credit report for you and the co-borrowers. He will review your credit report and compare it to the application to ensure the application information is correct. He will perhaps suggest steps to be taken to correct any parts of the credit report needing fixed.
Credit Report information will come from Equifax, Trans Union, and Experian and their local affiliates. Some services allow buying a combined or merged credit report of all three. Chris also has a page on this site to allow you to order your credit report. The report(s) show how you have managed your debt over time and include the length of time you have had credit, how you have used it, and how promptly you have paid your credit bills. An inceasingly important way for lenders to decide the amont of risk they face is credit score, a math based measure of how people manage their credit obligations.
Credit score is a numerical expression based on a statistical analysis of a person's credit files, to predict the likelihood that the person will pay their debts. A credit score is based on credit report information, and each of the credit agencies has its own computer system to calculate the score. The lender is trying to predict how likely it is that you will default on your mortgage loan or become insolvent or bankrupt. Anyone can default. Donald Trump has probably lost count. If your chances are 1 in 10 that you will dafault, you are more likely to get the loan than if your chances are 3 in 10.
Default occurs if a borrower is unwilling or unable to pay their mortgage. Default is different from insolvency and bankruptcy. A person defaults on-a-given debt contract when they have not paid a debt. A person is insolvent on-all debt contracts when they are unable to pay their debts. A person is voluntarily or involuntarily bankrupt as a legal status that imposes court supervision over the financial affairs of those who are insolvent and/or in default.
Chris will request an appraisal report for your home. Everyone involved will be hoping that the appraiser will find the home to be valued at what you agreed to pay for it (the contract sales price). It is likely some other reports may be involved in application approval such as termite and survey reports.
Appraisal report is a written analysis of the estimated value of a property prepared by a qualified appraiser. An appraiser is a person who is qualified by education, training, and experience to estimate the value of real estate property. The appraised value is a home's fair market value and is based on the appraiser's knowledge, experience, and analysis of the property. The analysis the appraiser uses will involve comparable sales of similar homes.
Chris will need to verify several things as part of the application process.
- Your employment history.
- Balances and activities in your checking and savings accounts.
- Send forms to your employer asking about your job history.
- Ask financial institutions that you have accounts with about your current assets.
- Request 'mortgage history rating' on information regarding your mortgage payment history.
- Request 'rental verification' on information regarding your rent payment history.
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