Consumers disqualify themselves for home loans

Consumers Misjudge Max Debt-to-Income ratios… and Disqualify Themselves from home loans

According to a survey by Fannie Mae’s Economic and Strategic Research Group, many consumers think it’s difficult to get a mortgage in today’s market.images98735

And forty five percent of those respondents cite too much existing debt as a top reason. Yet, in that same group, more than half don’t actually know the maximum debt-to-income ratio (DTI) required by lenders.

The result — potential buyers may be wrongly disqualifying themselves before they even apply for a mortgage.

That’s why it’s key to provide information, resources, and tools to educate consumers on the mortgage process, and any perceived barriers, including Debt-to-Income guidelines.

This is also why it is key for the consumer to work with a fully licensed and experienced Loan Officer, versus the more common unlicensed mortgage loan application clerk, who can help you determine the best home loan program, and explain the various program rules and guidelines. On a regular basis, I come across clients who think they can’t be approved for a home loan, yet they can. On the other hand, I also run across plenty of people who have no chance of getting a home loan today, yet they apply.

The bottom line is that it never hurts to apply. You may be given a pre-approval for your dream home, and if not, you’ll be given details on how to improve your situation to be able to qualify later.

Learn more about how to choose a mortgage loan officer here.

Download more insight on DTI and learn about the overall study here.


Get pre-approved, not just pre-qualified

Everyone knows it is smart to get lender Pre-Approved before starting to look for a home, yet many people are actively looking at homes thinking they are Pre-Approved, when in reality, they are only Pre-Qualified.

Pre-Approved or Pre-Qualified? So what is the difference?

welcome2_FTHB_1As a Loan Officer for over 20-years, I can tell you story after story of people who thought they were Pre-Approved, signed a purchase agreement, gave notice on their apartment, only to be told a week before closing that they were denied.  The vast majority of these people, calling me to see if I can magically help them had two big items in common:

  1. They applied at a bank or credit union
  2. They NEVER supplied the lender with all (or even any) basic supporting documents up front.

Simply put, if you didn’t supply current pay stubs, bank statements, W2’s, and Tax returns, YOU ARE NOT PRE-APPROVED – No matter what they tell you!

Looking to buy a home in Minnesota, Wisconsin, or South Dakota? Don’t have your dream fall apart at the last minute, get properly Pre-Approved for a home loan today.

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Twin Cities real estate market hits 10-yr high

Minneapolis, MN: The Minneapolis, St Paul area real estate market reached a 10-year milestones in June 2015, with signed purchase agreements rising 19.2 percent to 6,266. Last year, closed sales had increased 22% to 6,928.

Real Estate, Minnesota, Minneapolis, for sale, mortgage rates, interest rates
Get Pre-Approved Today – Click HERE to Apply Online

This is all welcome news, because the last time demand was this strong was back in June 2005, according to a release Monday from the Minneapolis Area Association of Realtors.

The June 2015 median sales price climbed 4.7% to $229,900. This puts the AVERAGE home price to within just 3.5% of the record high set back in June 2006, which was at a then record median high of $238,000. Typical price per square foot, now at $128, is about 18.5 percent below its June 2006 record high.

The local real estate market continues to be a sellers market, because of the ongoing imbalance between the supply of homes for sale, and the number of active buyers looking to buy a home.

Sellers are getting on average about 99.6% of their last list price, with large numbers of homes selling within days, with multiple offers, and over list price.

For buyers, this means you need to be fully mortgage lender pre-approved, with pre-approval letter in hand, and ready to make an offer immediately on anything you love.

 MN first time home buyer programs


The importance of Mortgage Lender Pre-Approval

The Importance Of Full Lender Pre-Approval 

Initial mortgage loan pre-qualification and full lender pre-approval are two of the most important steps you can take towards owning a new home. In most areas, Real Estate Agents either won’t even show you homes, or for sure, will not let you make an offer on a home without a full lender pre-approval.

Basic Pre-Qualification

house_from_wordPre-qualification is the first step to securing a home loan. Essentially, it is an initial “how do you look”, and “feels good” start.  Pre-qualification is quick and involves answering only a few questions about your income, existing debt and accumulated savings. It is also important that we discuss your long-term financial objectives. With so many loan options available, we want to select the one that meets your goals. With this information and your consent, lenders can access your credit report and begin to determine which loans you may qualify for, how much house you can afford, what the payments might look like, and how much money you will need to make it all come together.

Full Pre-Approval

Full pre-approval is the next step up up from basic pre-qualification. In this step, the lender verifies your basic supporting documentation, like pay stubs, W2s, tax returns, and bank statements. Upon review, the mortgage lender will provide a written Pre-Approval Letter. While never a loan guarantee, this is written documentation showing that a lender have taken an application, reviewed your documents, and believes once you find the exact dream house, you will make it all the way through the underwriting process.

If you’ve never given any documents to your lender, you are NOT pre-approved.

With a pre-approval in hand, you can shop almost as a cash buyer! This gives you strong negotiating power because the seller will take your offer more seriously. A lender’s pre-approval will often convince the sellers to accept a lower offer for the home because they know the financing is in place and the deal is safe.

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Joe Metzler is a Senior Mortgage Loan Officer for Minnesota based Mortgages Unlimited. He was named the 2014 Minnesota Loan Officer of the Year, and was ranked #98 of the Top 100 Loan Officers in the Nation by Origination News. He provides Home Mortgage Loans in MN, WI, and SD. He can be reached at (651) 552-3681



Why Mortgage Pre-Approval is Important

Successful house hunting starts with mortgage pre-approval – Not talking to a Real Estate Agent.

What Is Mortgage Pre-Approval

Minneapolis, MN:  Mortgage pre-approval is what happens when you talk to a Loan Officer and find out how much house you can afford. It’s an important step because it helps your real estate agent zero in like a laser beam on the correct house price for you. Your mortgage consultant will ask questions about your financial situation, including job, income, assets, debts, and more. Then you’ll talk to them about your comfort level when it comes to a monthly mortgage payment. It’s important to know this, in order to avoid buying a home you really can’t afford.

 

FHA Mortgage Loan Expert in MN and WI
FHA Mortgage Loan Expert in MN and WI

At this point, you are NOT pre-approved.  The next step to full pre-approval is submitting all your documents to the lender. Common items include; photo ID, pay stubs, W2’s, and bank statements. Once the mortgage company reviews these documents, THEN you will be pre-approved!

Here’s a look at some of the benefits to getting pre-approved before you house hunt:

  • Powerful Buyer. Sellers often give preferential treatment to pre-approved buyers since they know for sure that you can finance the purchase. If you get into a bidding war with another buyer, the seller might look at your offer in a better light than someone who hasn’t talked to a mortgage consultant.
  • Interest Rates. As interest rates go up and down, you can get in on a locked rate before they go up again. You can lock in an interest rate if you are pre-approved, as soon as you have a signed purchase contract. A lower interest rate will save a lot of money over the life of that mortgage.
  • Credit Surprises. Mortgage pre-approval reduces credit surprises.  If you wait until the last minute to secure financing and find that you have a few issues that need to be resolved with your credit, you could miss an opportunity to purchase your dream home.  Getting pre-approved will help you head-off surprises so you can go look for the perfect home.

Mortgage pre-approval is as close as anyone can get to insuring you’ll be able to obtain a mortgage loan in advance of finding a home.  Pre-approval gives MN and WI first time home buyers a definite idea of what they can afford and shows sellers that they are dealing with a serious buyer.


8 things that will screw up your mortgage closing

Minneapolis, MN:  In the home mortgage approval process, things are not what they used to be.  Underwriting now goes over your entire life with a fine tooth comb.  It really isn’t something to be scared of, if you deserve a loan, you will still get one.

FHA Mortgage Loan Expert in MN and WI
FHA Mortgage Loan Expert in MN and WI

But, there are several places buyers often do things that can turn an approval into a denial. In the excitement of purchasing their new home, they may prematurely make financial moves that impact their mortgage loan approval. Lenders now run a final credit check within a few days of closing, and if it is different from the original credit report, it may be a deal breaker.

Here is a list of 8 things that will screw up your mortgage closing.

1.      Don’t change employment status.  Seems simple, but I’ve had many people over the years quit their job, be laid off, or even terminated

2.      Don’t make any major purchases:  Furniture for the new house sounds great, but can blow your debt-to-income ratio right out of the water.  So can new cars.

3.      Don’t increase credit card debt or miss any payments.

4.      Don’t change bank accounts or make undisclosed large deposits. Any large non-payroll deposit on your last two months bank statements need to be explained and proved.

5.      Don’t apply for a credit card, co-sign on a loan or make a credit inquiry.  Any changes to the original credit report need to be explained and documented.

6.      Don’t spend money set aside for closing, not any, not ever.  Again, seems like common sense, but I once had a client spend their down payment money on a moving truck.

7.     Any delay in providing all paperwork asked for by the mortgage company can and does cause huge problems. When the Loan Officer asks for something, don’t argue or question why they want it, just drop everything and get it to them ASAP.

8.      If you change anything…  anything, let the lender know. You’d be surprised how many times deals get to the closing table and this is the first time the lender finds out the purchase price changed.

Buyers must be sure there is nothing happening personally or financially that might put the closing at risk.  It is too common for buyers, being approved for a mortgage loan, to think that relatively smaller financial issues won’t matter.

The bottom line is tell your Loan Officer everything, and we’ll make sure you have a smooth, stress free, no surprises closing.


Are you a Serious Buyer or a Time Waster?

Serious Home Buyer?

Minneapolis, MN:  As a professional licensed Loan Officer, I encounter people everyday that say they want to purchase a home.  But when it comes down to it, they may not be ready for that responsibility of a home,  or they are can not get pre-approved for a home loan.

In our society, it seems everyone wants everything now.  Learning that it may take a little time and some effort on the buyers part frustrates many of them them.  Being told “no” simply doesn’t register.  It amazes me the number of people who apply with me, and when I look at their credit report, I see that they’ve applied with 9 other lenders.  Face it, it you’ve been told no 9 times, the 10th time is going to be a no too. Stop wasting my time.

When I deny applicants, we always tell them,  “you don’t qualify right now, but if you do these certain steps you will be able to purchase a home in the future.”

These people are not serious buyers, and just waste the precious time of Real Estate Agents and Mortgage Loan Officers though out all of Minnesota, Wisconsin, and the rest of the country.

Don’t take your frustration out on the messenger.  We want to approve you, but if you are not ready today – you are not ready. We will let you know that you need to alter to get an approval in the future.  Maybe pay off some debt, improve your credit score, or come up with more down payment money.  Sometimes this may mean you don’t get the latest iPhone,  or you keep your older car while you pay down your debt.

Maybe you have had some trouble paying your bills on time in the past and have poor credit.  I’m amazed at those who want, but don’t even come close to proving to a mortgage company that you are ready.  In today’s world, easy options, and loans for everyone don’t exist. You have to prove to lenders you are ready.  This means on time payments,  a good credit scores, prove your income, and have some skin in the game (down payment).