Everybody who makes the leap into buying a home, especially first-time homebuyers, and even those who already own a home and are looking to improve their mortgage must eventually confront the pre-approval process. That means a mortgage application and a credit inquiry, also known as a hard credit pull.
Would it surprise you to know that this is a MAJOR stopping point for some? Even before they really even started. And the reason is because many have become conditioned to think that even a single credit inquiry will send their perfect FICO scores into a free fall. Let alone the multiple credit inquires that sometimes accompany shopping for the best mortgage rates and terms.
So let’s not back down and let’s have some rockin’ fun with how credit inquiries and mortgages really work.
Marin Office: 324 Sir Francis Drake Blvd., San Anselmo, CA 94960
*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate. In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate’s Human Resources Department.
Living in a “crowded house” but can’t find a way to buy that perfect new home before selling your existing one? Don’t dream it’s over! There are mortgage programs that are specifically created to allow you to use proposed rental income from your existing home — also known as a “departing residence” in this case — to help with your mortgage qualification. After all, most Americans are working hard enough to afford one mortgage payment, let alone two.
If you’ve been told that you don’t qualify for a new home until you sell your current home, but you otherwise have a down payment saved and ready to go, get in touch and let’s see if a departing residence mortgage is a good fit for you.
Marin Office: 324 Sir Francis Drake Blvd., San Anselmo, CA 94960
*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate. In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate’s Human Resources Department.
Buying your first home is a daunting task and can be a huge undertaking for the first-time buyer. Shoot, even for a move-up buyer, the experienced downsizer or a seasoned investor, it can sometimes be difficult to know where to begin. But getting a mortgage pre-approval often remains the best first step in the process, and it’s also a likely reality that your Realtor won’t seriously consider showing you property until you are either pre-approved or pre-underwritten by a mortgage lender or broker. After all, it’s really tough to know your purchase power and your budget if you don’t know how much of a loan for which you can qualify.
But buyers and borrowers got it bad (so bad!) because they don’t teach “how to buy a home” in school. So it’s less about the education that you missed and probably more about the education you never got. But in just five fun minutes we’ll cover:
What’s a pre-approval?
How much does it cost to get a pre-approval?
Will a pre-approval application hurt your FICO score?
What happens once you’re pre-approved?
How long is a pre-approval good for?
Grab your pencil and let’s learn how to rock a mortgage pre-approval!
Marin Office: 324 Sir Francis Drake Blvd., San Anselmo, CA 94960
*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate. In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate’s Human Resources Department.
If you searched unsuccessfully for a home and suffered one heartbreak after another in 2021, 2022 hasn’t necessarily greeted you with open arms either. Near non-existent inventory in many areas, fierce competition and rising interest rates have all conspired to make the landscape rockier still.
Despite this, I’ve found five tips can be a universal help in getting you into contract, regardless of your own individual circumstances. Rock them with me on Youtube:
Ready to find Paradise City? Please give me a like or subscribe on YouTube!
Marin Office: 324 Sir Francis Drake Blvd., San Anselmo, CA 94960
Berkeley Office: 1400 Shattuck Ave., Suite 1, Berkeley, CA 94709
*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate. In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate’s Human Resources Department.
What’s the one thing you can do to make your offer to buy a home stand out? What’s the secret sauce, the magic bullet, the key to success?
If you answered, “There isn’t one,” you’re pretty close. Truth is, I haven’t found any singular aspect of any offer that assures success. All-cash offers, zero-contingency offers, overbid offers, offers with colorful “love letters,” etc., none of them provide any guarantees to the hopeful buyer. But there is one thing I’ve noticed that does increase the odds dramatically — stacking advantages.
More often than not, we observe that the winning bid is a combination of the right price, the right terms and the right people. The weight given to each will vary, but these three elements seem to be common ingredients in the proverbial taking of the cake. Ideally, you can exert a great degree of control over these aspects: You can offer the price you want. You can set the terms as they fit your situation and you can choose your Realtor and lender. You have every reason to be optimistic.
The Price Is Right
I once had a seasoned Realtor tell me, “it’s often about price, but rarely exclusively about price.” This is good advice and it’s also why financed buyers are sometimes surprised to learn they beat a competing cash offer. Perhaps the “sure thing” its assurances of a fast close were not compelling enough to entice to the seller to forego the higher price you may have offered, sometimes because you were using financing. So determining when to bid under, over or right at list price matters and it’s a foundation for the rest of the offer you’ll build.
The Terms-inator
Having the right terms on your offer helps appeal to the seller’s confidence level (or lack of it) in you, the buyer. Your terms also speak to the seller’s preferred timing and need to control a sequence of events. One might assume that a fast close is always the ticket here, but…not so fast. Some sellers actually need more time to close and recognizing their key thresholds will help you craft the terms you’ll state for releasing your inspection, appraisal and financing contingencies, as well as the timing of the close.
Not Everyday People
If you’re ever so bored that you need to kill an afternoon, look up how many real estate licenses have been issued in your area. Next, look up how many of those active licensees transact one or less purchase or sale per year. My point here is that you have a choice of your real estate representation and choosing wisely makes a big difference in your success ratio, even before you set foot in an agent’s car. Locating a Realtor who knows the market intimately, has current negotiation experience and who garners respect in the community provides an edge perhaps greater than all the others. Of course, choosing your lender wisely matters too, and in many areas where competition is fierce, we have learned firsthand that the listing agent will accept or not accept a buyer’s offer based on who is providing the financing. If the listing agent knows a lender can be reached as needed and has been accountable to them and their colleagues in the past, your offer takes on new meaning.
Hundreds and hundreds of transactions have given me a window into what it takes for buyers to succeed when they place an offer on a home they wish to buy. The results of that perspective confirm that it’s rarely any single aspect of their offer that has the ability to seal a deal, but instead the right combination of factors. By “stacking advantages,” including offering a compelling price, setting the most appealing terms and using strong professionals on their team, a buyer’s odds increase exponentially. And the best part about all of this? Buyers control each block in that stack — so use great care!
Marin Office: 324 Sir Francis Drake Blvd., San Anselmo, CA 94960
Berkeley Office: 1400 Shattuck Ave., Suite 1, Berkeley, CA 94709
*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate. In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate’s Human Resources Department.
Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood Chicago, IL 60613 – (866) 934-7283
You’ve decided to make the leap and enter the real estate market as a buyer. You’ve been looking at homes online, the temptation has become too strong and you realize it’s time to hit the street and actually start looking at properties. Your Realtor almost immediately informs you that not only will she not participate in your search before she knows you’re pre-approved, but also that in this pandemic day and age, without a pre-approval letter no serious listing agent will even let you step foot in the home for a viewing. And so you reach out to your preferred lender and you get pre-approved for a mortgage. Now, how long will that preapproval be good for?
There are a few elements involved in the lifecycle of a pre-approval so let’s look at some of the ones that typically govern the validity of your profile and the day it may expire:
Credit Report
It’s safe to say that your credit report has a 90-day expiration. Even in cases where a lender will permit 120 days, we have to assume that a purchase timeline might be 30 days. Since it’s largely not in your control, you never want your credit report expiring while you’re in contract. At some point between 75 and 90 days, credit expiration becomes a material factor. Now, if the original credit pull has you with 800 FICO scores and you’ve done nothing that would jeopardize your strong credit rating, it’s highly unusual for your credit report to suddenly become an issue, but a re-pull is warranted if you think you may enter a non-contingent contract when you’re coming up on your expiration date.
Tax Filing Deadline
In 2020, the income tax filing deadline was July 15, but in most years, April 15 is the day by which you either need to file your tax returns or file an extension. If your pre-approval did not include this year’s filing and you’ve since filed your return (including e-file), your pre-approval must be updated accordingly.
End of Year
During January and February, most of us get our W-2 forms, our 1099s, K-1s and other year-end statements of earnings. All of these must be included in your file, so if your property search crosses the end of the year, your pre-approval would need to include the newly released information.
Life Events
If you get a new job, your hours on your current job are reduced or changed, if you get divorced, buy a new car, etc., all of these events could impact your pre-approval. A good way to conceptualize your pre-approval would be to assume that anything that impacts your income, assets or credits could influence your mortgage application. Let us know when these things happen and we’ll make the necessary adjustments.
Your mortgage pre-approval is always a work in progress until you go into contract. We can make any necessary changes and advise on financial aspects in advance too. We’re here to help and ultimately our goal is to build and maintain and strong and ready file so that you have the best chance of winning your offer. We need your help to do that and we, in the industry, can all help by reminding you it’s not over until the keys are in your hands.
Marin Office: 324 Sir Francis Drake Blvd., San Anselmo, CA 94960
Berkeley Office: 1400 Shattuck Ave., Suite 1, Berkeley, CA 94709
*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate. In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate’s Human Resources Department.
Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood Chicago, IL 60613 – (866) 934-7283
Every so often in popular music, movies, art and culture, the unconventional becomes the rage, the “alternative” becomes mainstream. When it does, it usually reshapes people’s ideas of what’s “normal” and it can redefine what’s acceptable — even preferred — for a generation or more. But…mortgage lending is not quite that exciting.
No, instead, alternative mortgage lending, also known as “non-QM” or “unconventional mortgage” or even yesteryear’s “Alt-A,” simply provides a viable solution to home loan scenarios that don’t quite fit in the relatively narrow box of conventional mortgages. Conventional loans include mainstream conforming loans, FHA and VA programs and even the widely-accepted jumbo mortgage options for those who need loans with higher amounts. But for now, let’s focus on some of the main alternative mortgage programs and how they help buyers and homeowners in the real world.
Asset Depletion
An asset depletion loan allows a buyer or borrower to leverage his/her cash equivalents, investments and sometimes even retirement accounts to derive a hypothetical income stream that can be used for qualifying. These assets do not need to be moved or liquidated, just documented. For those who have sufficient net worth but insufficient traditional qualifying income, an asset depletion loan (also known as asset-backed, asset utilization, asset amortization, etc.) can prove an ideal solution.
Bank Statement Qualification
Business owners who show strong income into their business may want to consider a bank statement loan as an alternative to a stated income loan. For a bank statement qualification, we will typically examine 12 months of business bank statements. We’ll total all of the legitimate business deposits and we’ll apply an expense ratio to that sum. The resulting figure is the qualifying income. For those who “write off” a lot of business income on tax returns, a bank statement loan may circumvent that age-old challenge, because for these programs, no tax returns are required.
Debt Service Coverage Ratio (DSCR)
For the real estate investor who will struggle with a conventional mortgage qualification, we now have the debt service coverage ratio, or DSCR, home loan option. This program looks at the property’s income and nets out the housing payment on it. As long as the ratio is positive (and all other qualifying criteria are met), we have a deal.
Another great aspect of alternative lending is that some of the features above can be combined, or other positive aspects of a borrower’s profile can be added. For instance, those who have a lot of equity in real estate may be able to parlay some of it into qualifying income, then combine that with regular asset depletion and circumvent an issue a conventional lender may be having because this same person’s tax returns don’t really show the fair story.
The moral of the story is that there’s a “makes sense” element to approving alternative mortgages and if you feel that the mainstream lending industry hasn’t given you a fair shake, we are here to help match you to a program that sees the light and gets you a great outcome.
Marin Office: 324 Sir Francis Drake Blvd., San Anselmo, CA 94960
Berkeley Office: 1400 Shattuck Ave., Suite 1, Berkeley, CA 94709
*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate. In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate’s Human Resources Department.
Whether buying or refinancing a home, when obtaining a mortgage it can be expected that an appraisal will be required. I talked in a previous post about how we are able to use appraisal waivers in certain instances, but still, most residential real estate transactions that involve a mortgage also involve an appraisal. An appraisal is a professional opinion of value, completed on a standardized report by a licensed appraiser. Are there steps the buyer or homeowner can take to assure that this value comes in as favorable as possible? Here are a few tips from the experts:
Choose a lender that uses an appraisal management company (AMC) with access to local appraisers. At Guaranteed Rate we place a high degree of importance on contracting with appraisers that know any area first-hand. This has the obvious advantage of bringing “boots on the ground” perspective to the property being appraised. But let’s not forget too that local appraisers are also often well-known appraisers to local real estate agents and these relationships are valuable.
Clean the house and yard. The cleaner the home the better it shows, and the higher value you will get.
Prepare a list, including cost estimates, of improvements completed to the property in the last year. If any updates have been done to the kitchen and/or bath within the past 15 years, include them on this list as well.
If you, or your Realtor, know of a good sale (or two) in the area within the last six months, you can give the address and sales price to the appraiser.
If refinancing, tell the appraiser the predominant feature of your home — the reason you bought it and the characteristic a future buyer may find most important and desirable. This may seem everyday obvious to you, but could easily be lost on even the best appraiser — who doesn’t live in the home each day.
Be mindful of “health and safety” issues, regardless of how minor. An opening in a wall, water stains on the ceiling, a disconnected faucet, peeling paint or a missing handrail on a staircase may all seem trivial, but they could require further notation in the report, potentially stalling your transaction. Make the small repairs in advance (or have the seller do so), even if it means hiring a handyman.
Install smoke and carbon monoxide detectors because in many areas (if not all!) it’s the law. Also, here in California, if you have a water heater, it must be double-strapped for earthquake safety.
Stacking the deck in your favor using the tips above, and working together with us before and after the appraisal is complete, you can maximize your potential to attain the highest value. This can then open up financing options and opportunities, and even factor into the interest rate you’re able to obtain. When you are refinancing a home, the home’s value relative to your existing loan balance determines your eligibility. When you are buying a home, you and your Realtor will want to know the appraised value supports the contract price. In both instances, if you have questions about the appraisal process, and especially if you have concerns about the subject property’s value, we are here to help.
Marin Office: 324 Sir Francis Drake Blvd., San Anselmo, CA 94960
Berkeley Office: 1400 Shattuck Ave., Suite 1, Berkeley, CA 94709
*The views and opinions expressed on this site about work-related matters are my own, have not been reviewed or approved by Guaranteed Rate and do not necessarily represent the views and opinions of Guaranteed Rate. In no way do I commit Guaranteed Rate to any position on any matter or issue without the express prior written consent of Guaranteed Rate’s Human Resources Department.
Guaranteed Rate. Illinois Residential Mortgage Licensee NMLS License #2611 3940 N. Ravenswood Chicago, IL 60613 – (866) 934-7283
