By Eric L. Frazier MBA National Sales Manager NMLS#461807 Ph: 800-261-1634 ext. 703 Intecap Lending First Time Home Buyer Presentation Contact Information: www.thepowerisnow.com/intercaplending Loan Application Website: www.thepowerisnowteam.com
Determine your debt-to-income ratio. If a loan program uses a 28/36 qualifying ratio, it means you are allowed to spend no more than 28% of your gross income on monthly mortgage payments, and no more than 36% on total debt. This includes debts such as car and school loans, credit cards, child support and alimony.
If a person earns $60,000 per year, their monthly gross income is $5,000. Under the 28/36 guidelines, their maximum monthly mortgage payment should not exceed $1,400, while their totally monthly debt should not exceed $1,800.
Down payments are generally paid in cash, due at closing, and are based on a percentage of the selling price of the home. You can make a down payment of 20% or more and avoid the cost of mortgage insurance. If you don’t have 20% to put down on a home, don’t worry.
There are many affordable mortgage programs available, including loans that require little down payment. In addition, some veterans, active-duty military personnel and reservists are eligible for zero-down-payment programs.
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All lenders require a credit report that contains various personal financial data, including loan payment information, bank and credit card accounts and more. If you are interested in obtaining a copy of your credit report with fico scores go to www.myfico.com or www.creditkarma.com or call me at 800-261-1163 x 703 for a lenders credit report.
Payment information on many types of accounts
Public record and collection items
Details on late or missed payments
Specifically, how late they were, how much was owed, how recently they occurred and how many there are
Amount owed on all accounts
Amount owed on different types of accounts
Whether you are showing a balance on certain types of accounts
How much of the total credit line is being used
How much of installment loan accounts is still owed
How long your credit accounts have been established, in general
How long specific credit accounts have been established
How long it has been since you used certain accounts
What kinds of credit accounts you have and how many of each
Total number of accounts you have
How many new accounts you have
How long it has been since you opened a new account
How many recent requests for credit you have made
Also visit www.myfico.com
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Review line-by-line: search for errors, omissions, duplications, “common name” errors. Write out exactly what should be corrected and why - on disputed items, you are allowed to add 100 words or less to your reports. Credit Bureaus have counselors who will help you. Credit Bureaus are obligated by Federal Law to contact all creditors where mistakes were made. These firms must respond in writing within 30 days. Failure to do so obligates the Bureau to remove the disputed items from your records (Fair Credit Reporting Act of 1971). Work out a “deal” with merchants that you owe. Chapter 13 bankruptcies will stay on your record for seven years. Chapter 7 bankruptcies will stay on record for seven years.
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Liens, garnishments, etc., that are recent may indicate an unstable borrower. (Any judgments, garnishments, or liens must be paid in full, and a clear credit report supplement or other evidence from the creditor in paid receipt form and proof that the judgment, garnishment or lien has been cleared must be obtained prior to closing.) IRS tax liens must also be paid in full as outlined above. A satisfactory letter of explanation from the borrower is required.
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Because of the seriousness of the delinquency/default, which in many states can cause incarceration, the child support payments must be brought current, and specific documentation evidencing the fact must be in the file-NO EXCEPTIONS! There must be evidence from the credit-reporting agency that the payments have been brought current. A letter from the court or the legal authority responsible for collection in the city/state (e.g. district attorney, sheriff, etc.) is acceptable. A letter from an ex-spouse and copies of personal checks are not acceptable, nor is an agreed upon, but not yet completed, payment plan.
Of Buying a home
Wire the funds to the title company/closing attorney for your closing costs and down payment. Bring driver’s license or valid photo ID to closing. Notify us if your employment, salary, or other compensation changes from what is noted on your loan application. Inform us if your address changes from what appears on your original loan application. We will complete rental and mortgage verification for all of your residences within the last two years.
Obtain homeowner’s insurance with minimum coverage equal to the amount of your total loan or the replacement value of the house. Call my office with your agent’s name and phone number at least 10 days before closing. Keep documentation (or a “paper trail”) on any large deposits into your account. A “paper trail” is composed of the copies of all paperwork necessary to prove a financial transaction: copies of all checks, deposit slips, loan paperwork, forms to liquidate assets, etc.
Notify us if you move funds from one account to another. Provide a “paper trail” on transactions. Make sure you order termite report on the property. If the termite report is not clear work out a resolution with the seller’s agent. Make sure you order a home inspection and possibly specialist in air and heating and plumbing if the home inspection calls out issues in any of those areas.
Acquire any additional credit lines or make any large purchases on existing credit without first consulting us. For example: Purchasing a car or buying appliances for your new home will change your debt-to-income ratios. Move any money from any account. Freeze all financial activity until the close of escrow. Change jobs without consulting us. A change in compensation may affect your ability to qualify. Borrowers must have a two-year history of bonuses and/or commissions to be counted as income. Lenders may verify employment on the day of closing as a quality control check.
Co-sign with anyone to obtain a line of credit or make a purchase. The payment will show up on your credit report as an additional debt. Negotiate your contract with an allowance and expect to get money back at closing. An allowance can be used to pay closing costs and/or prepaid. Include any personal property in the purchase contract. Personal property should never be part of the negotiations because the property will affect the value of the property as a seller concessions.
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Closing costs are one of the least understood aspects of the home buying process. However, at Intercap Lending we will take the time to answer questions and walk you through the process. Closing costs tend to vary from lender to lender, but are generally considered any costs associated with the purchases of a new home. Today, these costs range from 2 and 3 percent of the home’s purchase price and include three basic categories:
Real estate taxes, flood insurance, interest from the day of closing to the first of the month, homeowner’s insurance, mortgage insurance and costs to set up an escrow account are considered prepaid expenses. Escrow accounts are a service provided by the lender through which they will pay annual insurance premiums and various taxes on the borrower’s behalf. The amount that goes into these accounts is based on the first year’s premiums, plus an additional amount to help build the account for future premiums. Prepaid expenses are difficult to determine because they depend on the type of property and the time of the closing. These items will change throughout the life of the loan due to changes in insurance premium and real estate taxes.
A mortgage point is equal to 1 percent of the mortgage loan amount. For example, depending on prevailing rates, a $200,000 mortgage might be obtained at 3.75 percent with 1 points, or at 4.00 percent with no points. Obtaining the lower interest rate would cut the mortgage payment by about $28.60 a month, but would require $2,000 — or 1 point — up front at closing.
Out-of-pocket expenses are fees for appraisals, attorneys, credit reports, deed recording, tax services and other miscellaneous expenses. These fees are for services usually performed by a third party and directly charged to the borrower. Most out-of-pocket fees are necessary and legitimate. However, whenever the borrower sees a fee which they don’t understand, they should ask about it.
Our loan approval process called SNAP is an approval of your loan from our Underwriters. An underwriter approval increases your potential by being listed as a “cash buyer” when negotiations begin because the loan has already been approved. This is not preapproval or prequalification completed by the loan officer. A SNAP Approval is a Loan Approval by the FHA/VA/Conventional Underwriter.
Intercap Lending will research all resources to find the best financing options for your needs. Some of the many factors that come into play during this step are: ◦ What length of time are you planning on having the loan? ◦ What type of interest rate, fixed or adjustable, works for you? ◦ What kinds of costs are involved with the loan and can you afford them? ◦ Should you pay points? ◦ What is the best time to lock your interest rate for the loan?
After gathering all of the necessary information from you, your loan application will be complete. Thing to remember to give to Intercap Lending are: ◦ ◦ ◦ ◦
Outstanding Debts Other Loans Additional Assets Yearly Income
Although we live in a green age, paperwork is still needed for the mortgage process. You will submit additional paperwork with the application that includes: ◦ 2 years of W2’s ◦ 2 months of bank statements ◦ 1 months of paystubs
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Now you can start to look for your new home. Finding one can be challenging but with the knowledge of what you qualify for and the support of Intercap Lending, you can focus your search. Things to consider while negotiating for the home are price, closing costs and date, seller concessions, and possible the length or term of the escrow.
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Most mortgage lenders, including Intercap Lending, require an appraisal be done on the home. This way you can know the exact value of the home, ensuring that you are not overpaying for your potential new home.
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Most mortgage lenders also require home insurance that covers fire and hazards. If your new home is located within a flood zone, you will also be required to have flood insurance.
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Not all loans do, but some require mortgage insurance if your down payment on the home is less than 20% of the sales price. Please consult your tax attorney or CPA about the deductibility of mortgage insurance.
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With all of the final information gathered about you and your potential new home, Intercap Lending will package it together and send to our Processing department for review and underwriting for final loan approval. The Processor will look over all of the details to ensure accuracy, match numbers, check to see if the correct insurance is included, put the loan through our automated underwriting system, and see if any documents are missing. Once the review is finalized, the packet will be send to the underwriter who SNAP approved your loan.
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The Underwriter will look over your loan application again from start to finish. Once the review is complete, the underwriter will see if any additional information is required and then make the decision to approve your loan.
With the Underwriter’s approval and all of the documents packaged, the packet is sent to the escrow to be signed, funded by Intercap Lending, and then recorded by the county recorders office. This process can differ by state. This process can take an addition two to three days depending on how quickly documents are signed and sent back to Intercap Lending for funding and the funds wired to Title and Escrow for recording. This process may be different by state.
Congratulations!
It time to move in.
If you are reading this presentation please contact me at 800-261-1634 x 703 or email me at efrazier@intercaplending.com. To start the preapproval application go www.thepowerisnowteam.com