7 Things To Avoid After Applying for a Mortgage!

7 Things To Avoid After Applying for a Mortgage! | MyKCM

Congratulations! You’ve found a home to buy and have applied for a mortgage! You are undoubtedly excited about the opportunity to decorate your new home! But before you make any big purchases, move any money around, or make any big-time life changes, consult your loan officer. They will be able to tell you how your decision will impact your home loan.

Below is a list of 7 Things You Shouldn’t Do After Applying for a Mortgage! Some may seem obvious, but some may not!

1. Don’t change jobs or the way you are paid at your job!  We must be able to track the source and amount of your annual income. If possible, you’ll want to avoid changing from salary to commission or becoming self-employed during this time as well.

Now that being said – if you get an opportunity to obtain another job to improve your financial situation – do not over look this and give us a call to discuss before passing on this. not everything is always clear cut and we understand this.

2. Don’t deposit cash into your bank accounts. Lenders need to source your money and cash is not really traceable. Before you deposit any amount of cash into your accounts, discuss the proper way to document your transactions with us. Normal payroll and other sorts of income that are typical are not what we are discussing here.

3. Don’t make any large purchases like a new car or new furniture for your new home. New debt comes with it, including new monthly obligations. New obligations create new qualifications. People with new debt have higher debt to income ratios… higher ratios make for riskier loans and more difficult to get approved… and sometimes qualified borrowers no longer qualify.

4. Don’t co-sign other loans for anyone. When you co-sign, you are obligated – YES a cosigner is equally obligated to pay as the main borrower – no difference. As we mentioned, with that obligation comes higher ratios as well. Even if you swear you will not be the one making the payments, your lender will have to count the payment against you. Also understand that in some cases if a history of payment from another party can be documented for an extended period of time – there may be some flexibility.

5. Don’t change bank accounts. Remember, lenders need to source and track assets. That task is significantly easier when there is consistency among your accounts. Before you even transfer money between accounts, talk to us.

6. Don’t apply for new credit. It doesn’t matter whether it’s a new credit card or a new car. When you have your credit report run by organizations in multiple financial channels (mortgage, credit card, auto, etc.), your FICO score will be affected. Lower credit scores can determine your interest rate and maybe even your eligibility for approval.

7. Don’t close any credit accounts. Many clients have erroneously believed that having less available credit makes them less risky and more likely to be approved. Wrong. A major component of your score is your length and depth of credit history (as opposed to just your payment history) and your total usage of credit as a percentage of available credit. Closing accounts has a negative impact on both those determinants of your score.

Bottom Line

Any blip in income, assets, or credit should be reviewed and executed in a way that ensures your home loan can still be approved. The best advice is to fully disclose and discuss your plans with your loan officer before you do anything financial in nature. They are there to guide you through the process.

The Mortgage Process: What You Need to Know

The Mortgage Process: What You Need to Know [INFOGRAPHIC] | MyKCM

Some Highlights:

  • Many buyers are purchasing a home with a down payment as little as 3%.
  • You may already qualify for a loan, even if you don’t have perfect credit.
  • Take advantage of the knowledge of your local professionals who are there to help you determine how much you can afford.

Home Mortgages: Rates Up, Requirements Easing

The media has extensively covered the rise in mortgage interest rates since last fall (from 3.42% last September to the current 4.1% according to Freddie Mac). However, a less covered aspect of the mortgage market is that requirements to get a mortgage have eased while rates have risen.

The Mortgage Bankers Association (MBA) quantifies the availability of mortgage credit each month with their Mortgage Credit Availability Index (MCAI). According to the MBA, the MCAI is:

“A summary measure which indicates the availability of mortgage credit at a point in time.”

The higher the index, the easier it is to get a mortgage. Here is a chart showing the MCAI over the last several months as rates have increased.

Home Mortgages: Rates Up, Requirements Easing | MyKCM

Have requirements for attaining a mortgage actually eased?

Yes. Here are two examples:

  1. FICO® Score – the credit score which helps determine a buyer’s eligibility. The score required to attain a mortgage has been falling over the last five months:

Home Mortgages: Rates Up, Requirements Easing | MyKCM

  1. Down Payment Requirement – the percentage of the purchase price necessary to place as a down payment on a home. To make this point, let’s look at the percentage of first-time buyers who have put less than 5% down over the last several years as compared to the 1st quarter of 2017:

Home Mortgages: Rates Up, Requirements Easing | MyKCM

Bottom Line

Whether you are a current homeowner looking to move to a home that will better serve your family’s current needs, or a first-time buyer looking for a starter home, it is easier to get a mortgage today than it has been at any other time in the last ten years.  There are many low down payment options to take advantage of.

It’s Not Always Marriage Before Mortgage

It’s Not Always Marriage Before Mortgage | MyKCM

This is always a question we are asked as lenders – “Do I have to be married to cosign?”There are many people sitting on the sidelines trying to decide if they should purchase a home or sign a rental lease. Some might wonder if it makes sense to purchase a house before they are married and have a family. Others may think they are too young. And still, others might think their current income would never enable them to qualify for a mortgage.

We want to share what the typical first-time homebuyer actually looks like based on the National Association of REALTORS most recent Profile of Home Buyers & Sellers. Here are some interesting statistics on the first-time buyer:

It’s Not Always Marriage Before Mortgage | MyKCM

Unmarried couples jumped up to the third spot, right after their married counterparts and single women. Many couples are buying a home before spending what would be a down payment on a wedding.

Bottom Line

You may not be much different than many people who have already purchased their first home. Let’s get together to determine if your dream home is within your grasp.

The Real Estate Market is Back!

7 Graphs That Show the Real Estate Market is Back! [INFOGRAPHIC] | MyKCM

Some Highlights:

  • Distressed property sales fell to its lowest number since NAR began tracking it in 2008.
  • As you can see, with less distressed properties, sales are up in all price ranges except the $0 – $100K price range.
  • Interest rates are still at historic lows, signifying that now is the right time to buy!

A SHORT HISTORY OF “UNDERWRITING”

 

Lloyd's of London

If you’ve ever applied for a mortgage, an insurance policy or a car loan, your application went through an “underwriting process”.  Ever wonder why the underwriting process was so intense and detailed?  Well, here’s a short history that puts it all in context:

The word “underwriter” dates back to the story of Lloyd’s of London, which is the world’s oldest continuously operating insurance company.  Lloyd’s of London started as London coffee house in the shipping district of the city.  “Underwriters” were individuals who signed underneath the line on the bottom of insurance contracts that insured the merchant ships.  They offered their personal guarantee and took personal liability for the decisions they made…  If the ship went down, and the cargo was lost, the underwriters had to personally pay the claim on the insurance contract.  Needless to say, they took their job very seriously!  One wrong decision could completely wipe them out financially.

Today, the underwriting guidelines for home mortgages in the US, are determined by Fannie Mae, Freddie Mac, the Federal Housing Administration (FHA), the Veteran’s Administration (VA), the Rural Housing Service (RHS), and the US federal government itself, through the Dodd-Frank Rules and Regulations.  Please see the mortgage money flow chart below.  Because Fannie Mae and Freddie Mac buy the mortgages, and because the FHA, VA and RHS guarantee or insure the mortgages, these are the organizations that set the underwriting guidelines in the US.  Like those “underwriters” several hundred years ago in the city of London, these folks are the ones who are on the hook if the mortgages go into default.

Now of course, the banks and mortgage companies also have some liability as well.  For example, if a mortgage goes into default due to some negligence on the part of the mortgage company, Fannie Freddie, the FHA and US government can all go after the mortgage company for damages.  They can require the mortgage company to buy back the loan or pay penalties.  THAT is why the underwriting process is so intense and detail-oriented.  Please contact me if you have any questions or for further information.

Why Is There So Much Paperwork to Sign to Get a Mortgage?

Why Is There So Much Paperwork to Sign to Get a Mortgage? | MyKCM

We are often asked why there is so much paperwork mandated by the bank for a mortgage loan application when buying a home today. It seems that the bank needs to know everything about us and requires three separate sources to validate each and every entry on the application form.

Many buyers are being told by friends and family that the process was a hundred times easier when they bought their home ten to twenty years ago.

There are two very good reasons that the loan process is much more onerous on today’s buyer than perhaps any time in history.

1. The government has set new guidelines that now demand that the bank prove beyond any doubt that you are indeed capable of affording the mortgage.

During the run-up in the housing market, many people ‘qualified’ for mortgages that they could never pay back. This led to millions of families losing their home. The government wants to make sure this can’t happen again.

2. The banks don’t want to be in the real estate business.

Over the last seven years, banks were forced to take on the responsibility of liquidating millions of foreclosures and also negotiating another million plus short sales. Just like the government, they don’t want more foreclosures. For that reason, they need to double (maybe even triple) check everything on the application.

However, there is some good news in the situation.

The housing crash that mandated that banks be extremely strict on paperwork requirements also allows you to get a mortgage interest rate as low as 3.43%, the latest reported rate from Freddie Mac.

The friends and family who bought homes ten or twenty ago experienced a simpler mortgage application process but also paid a higher interest rate (the average 30 year fixed rate mortgage was 8.12% in the 1990’s and 6.29% in the 2000’s). If you went to the bank and offered to pay 7% instead of less than 4%, they would probably bend over backwards to make the process much easier.

Bottom Line

Instead of concentrating on the additional paperwork required, let’s be thankful that we are able to buy a home at historically low rates.