Mortgage Process Paperwork

At The Polder Group, we find that borrowers often comment about the amount of paperwork mandated for mortgage loan applications. Many buyers are told that the process was much less complicated fifteen or twenty years ago.

There are two main reasons for the change: government guidelines, and the fact that banks do not want to be in the real estate business.

Turning Problems into Solutions

During the run-up to the housing crisis, many people “qualified” for mortgages they could never payback. This led to millions of families losing their homes, and something the government wants to make sure won’t ever happen again.

As a result of that foreclosure crisis, banks were forced to take on the responsibility of liquidating millions of foreclosed homes and negotiating millions of short sales. Just like the government, they don’t want more foreclosures. The combination of those factors spurred the banks to tighten up their lending practices.

Consider this scenario: If you loan your friend $20 to cover dinner, you expect them to eventually pay you back. There’s no paperwork, and you know they’re good for the money. On the other hand, loaning a friend $5,000 to buy a car is something entirely different. It’s not quite the same easy transaction as a bar tab.

Now imagine you have to loan your friend $500,000 to buy a home! You can see why all lenders, including PG at Summit Funding, want to make sure the property is valued correctly, the seller is the legal owner, and the buyers earn what they say they earn.

Paperwork You’ll Need

What kind of paperwork will you expect to see throughout the process? Things usually start with the loan application. Underwriting your loan requires documents and signatures, and you may be required to produce, in hard copy or electronically:

Tax Returns

Pay Stubs

W-2s (or other proof of income)

Bank Statements (and other assets)

Credit History

Gift Letters

Photo ID

Renting History

When your loan closes, you’ll also be asked to sign the loan documents, and vouch that you have received the loan and title documents.

The good news is that stricter paperwork means lenders, feel more comfortable offering low mortgage interest rates. People who bought homes fifteen or twenty years ago experienced a simpler mortgage application process but also paid a higher interest rate. The average 30-year fixed-rate mortgage was 8.12 percent in the 1990s and 6.29 percent in the 2000s.

Important Documents to Save

The busyness of life can quickly cause things in our lives to pile up— especially when it comes to mail, statements, and other important documentation. Although it may be tempting to just throw all of this clutter out, there are important mortgage documents you should hold on to, rather than toss out.

Mortgage Statements

A mortgage statement is a document prepared by your mortgage holder. It’s then provided to you with the current status of your loan. You’ll receive these on a monthly basis after you close your loan. You’ll want to hold on to these statements for the life of the loan, at the very least.

Deed

Your deed is the document you need to prove you have a claim to your property. It’s recommended that you keep this document for as long as you own your home. Even though most municipalities keep online land records with a virtual deed, you should still hold on to your personal paper copy in case you need to quickly prove ownership of your home.

Purchase Contract & Seller Disclosures

A real estate purchase contract is a binding agreement between two parties for the transfer of a home or other property. Equally important is the seller disclosure, which is a set of documents completed by the seller of the home that lists any known issues with the property during the time of ownership.

Both of these documents provide the new owner with written evidence of the home’s condition in case a problem is discovered that was not originally disclosed by the seller. Keep these documents for as long as you own your home.

Home Warranty

In the unfortunate event that you need to replace or repair a portion of your house, the home warranty will include all the information you need. This form can be thought of as a written record of protection. Keep this document for as long as you own your home.

Final Settlement Statement

After closing a buyer (and seller) will receive a copy of their final settlement statement. It’s a good idea to keep this document since it lists out the distribution of all the fees and who paid for what, as well as confirms the official settlement date.

 

Do you still have questions about getting a mortgage? Contact The Polder Group at Summit Funding To Learn More.

DO CREDIT PULLS LOWER MY SCORE?

It’s a common misconception among borrowers that multiple credit pulls will drop their credit score. However, the three big credit bureaus (Experian, TransUnion, and Equifax) state it plainly: a borrower’s score will not drop when a mortgage lender pulls their credit more than once in a two-week period. So, why is this the case?

Not all credit checks are weighted equally. A credit card application carries more weight on credit than a mortgage loan. Credit card debts have a tendency to increase over time, make for larger risk which lowers credit. Mortgage debt, by contrast, eventually pays down to $0, so mortgage loan checks don’t have as much weight on overall credit score.

Soft Inquiries

Soft credit inquiries usually happen when a person who is not a potential lender, looks at someone’s credit score. This happens when you check your own credit score, an employer looks at your credit for a background check, or a lender pre-approves you for a credit card or loan offers. However, there may be instances where your lender will need to do a soft inquiry at the end of your loan transaction. (Ask your lender for more information about this.)

These credit checks can be done without permission and are not customer driven so they will not affect the credit score.

Hard Inquiries

A hard credit inquiry is when a financial institution, such as a lender or credit card company checks a person’s credit while deciding whether or not to extend an offer of credit. They most often take place when a person is making a large financial decision such as applying for a mortgage, loan, or credit card.

Typically, a person must authorize the third party to do this, so you should always be aware of any record of hard inquiry on your credit report. Hard inquiries can lower a credit score and can remain on the credit report for two years. But with time, the damage to the credit score decreases or disappears altogether.

A hard inquiry will happen when you apply for:

A mortgage

Credit cards

Auto loans

Student loans

Business loans

If you’re going through the home buying process, but still shopping around for the right lender for you, avoid hard inquiries at all costs. You’ll want your credit to be as high as possible when you decide on your lender, and credit inquiries make up 10% of your credit score.

It’s also important to sort out your mortgage shopping within a 14-day timeframe. If the inquiries are properly managed, the credit bureaus will acknowledge the first credit pull but will ignore each following check.

Another Credit Myth

Credit pulls aren’t the only misconception when it comes to how your credit score impacts your home loan. Some borrowers assume they won’t qualify for a home loan if they don’t have an outstanding score. Although your score is a factor in the approval process, there are loan options specifically for homebuyers with a lower credit score.

The truth is this, you might have more loan options than you think. Each person’s financial situation is different, so it’s important to speak with a Mortgage Advisor about your specific needs. However, The Polder Group at Summit Funding has multiple resources that can help get you started on your journey toward homeownership.

Let’s start with the minimum FICO credit score needed for our low credit score loans:

FHA Loan: 580

USDA Loan*: 600

VA Loan: 580

Government-backed loans remove the risk of default off of the mortgage company because the government insures or guarantees the loan, which in turn allows the minimum credit score to be lower.

Now, what about your down payment? Chances are, if you’re working toward paying off debt, you don’t want to front the traditional down payment amount. Thankfully, loan options that require a lower credit score usually require a lower down payment as well.

FHA Loan: minimum 3.5% down payment required

USDA Loan*: 100% financing

VA Loan: 100% financing

The opportunity to buy a home, despite a low credit score, is a dream come true for many homebuyers. At TPG, our Mortgage Advisors are here to make this dream a reality.

Contact us today to learn more.

Benefits Of Selling During The Holiday

Each year, the holiday season seems to arrive quicker and quicker. Now that we’re officially in October, it’s time to start thinking about what the holiday market looks like.

Are you considering selling your home soon? There’s no denying that spring is one of the best times to sell your home, but there are also benefits to selling during an off-peak season. Let’s break down the benefits of selling in the last few months of the year and look at tips to get your home off the market faster.

The Benefits

Shopping, and baking, and houseguests… oh my. As busy as your holiday season can be, it may be worth it to take a year off from decking the halls to sell your home.

There’s less competition is cooler months. A large reason for seller success in the springtime is due to the warming temperatures and longer days. Both of these benefits actually create a very competitive market, so sellers listing in the cooler months will find fewer homes to compete with.

Buyers are more serious. In the spring and summer, buyers tend to shop without a clear plan to purchase because they know their options are plentiful. During the holidays, on the other hand, buyers are less likely to waste their already limited time browsing multiple homes.

Transfers are looking for housing. As the end of the year draws near, employees who need to transfer to a new city, or even a new state, will be home shopping through the holidays. These homebuyers don’t have time to wait until the spring, so time is on your side in this scenario.

Your neighborhood is decorated. With Thanksgiving just a few weeks away and Christmas shortly after that, homes in your neighborhood will be adorned with plenty of pumpkins, and later, Christmas lights or decorations. As buyers drive by, they will have the chance to experience what their own holiday festivities will look like in the upcoming year. You can also make your home festive on the inside with warm scents and colors that are welcoming to visitors.

Holiday Selling Tips

Are you ready to take the leap and sell your home? Selling in the last few months of the year can be tricky, but we have a few tips to make the process easier.

 Get your finances in order. No matter what time of the year you sell, you’ll need a trusted lender to guide you through the home loan process.

Hire a reliable real estate agent. Your agent will be just as busy, if not busier than you are as they juggle the holidays on top of selling your home. Ask around, read online reviews, or ask your Mortgage Advisor to recommend an agent that will take the time you need to sell your home. We know all the top agents in Tucson.

Seek out, motivated buyers. Request that your Realtor find buyers or investors on specific deadlines to buy if you’re also on a deadline to sell. College students and military personnel are two more recommended groups that sellers target during October through December.

It might also be beneficial to price your home to sell, right off the bat. Rather than slowly dropping the price, list your home at a reasonable price from the get-go.

Decorate… to an extent. Curb appeal should be a top priority of buyers during winter months. This means clearing out dead plants, raking leaves, and keeping gutters cleaned out. On top of yard maintenance, minimal outdoor decorations are welcome. For example, single-colored string lights and door wreaths. Large blow-up displays or overwhelming lights could distract buyers from the house itself.

This rule goes for inside the home as well. By all means, embrace the holiday spirit and decorate, but don’t clutter shelves and walls past the point of enjoyment for potential buyers. Their main focus should still be on the home, rather than your festive display.

Have photos taken of your home? When the cold winds start blowing, no one wants to begin their home shopping journey outside. Listing your home with professional photos will allow buyers to get a good idea of what your home features before ever stepping inside.

Could this holiday season be the time you decide to sell? Contact The Polder Group at Summit Funding Your Real Estate Experts to learn more.