Brenda Rogers is a mortgage banker with Primary Residential Mortgage working in Miami.
Every week, we ask a real estate professional for their Short List, a collection of tips and recommendations on an essential topic in real estate. This week, we talked with Brenda Rogers, mortgage banker with Primary Residential Mortgage, who shared her details to know before applying for a mortgage.
6. Review your credit report – The very first thing you should do before speaking to a lender is to review your client’s credit report. A credit report will be one of the most important pieces of information to determine eligibility for a loan, and yet won’t come directly from the client. Instead, the lender will pull his or her credit report from the three major credit bureaus. Contact them yourself first and ask for a copy.
On a credit report you’ll see every entry that affects your client’s credit score, as recorded by creditors. If any of the entries seem false or questionable, either investigate them, speak to an attorney or bring them up with us at the first consultation. It’s important to get these straightened out before your lender starts investigating your client’s eligibility for a loan.
Similarly, if there are any items that have hurt your client’s credit score but cannot be disputed, talk to us about those, too. Many seemingly trivial actions, such as applying for a new credit card or even closing a credit card can hurt your credit score. These don’t necessarily have to bar someone from getting a home loan, so help us work on them.
5. What’s your price range – Before approaching a lender, you want to have some idea of what your client is looking for, but not necessarily the exact home they’ll be buying. It’s important to look for a loan application before they make an offer on a home. Even if it takes months to find a good home, you can still use this time to find your preferred lender and obtain pre-approval.
While you’re doing so, take some time to work out how much your client can comfortably spend each month on mortgage repayments and still maintain their lifestyle. They don’t want to be living on beans for the next ten years. This will give you a better insight into what loan products they should be going for, instead of the simple: “whatever I can get.”
4. Employment history – Next up is employment history for the past two years. Ideally, this history should be one of stability.
A stable employment history is important because it shows your client will have the financial means to keep making payments. During the loan application period, your client’s employment situation should not change at all. They should not change jobs, nor enter self-employment. Even if their expectations are high for a career move, it will throw a spanner in the works by making it harder for the lender to evaluate their income history.
If they have a few gaps, these can be addressed by a good lender. Just talk to us. We’ll work with your client to help find a mortgage option that works.
3. Other income sources – If your client has other sources of income, be able to provide details. But importantly, do not simply lump everything together. If they get a certain amount of money from one job, and hold an extra job or have other assets that give additional income, the lender will need to see this breakdown. The more detail they can provide, the more accurate the application will be, meaning less investigative work required by the lender.
2. Down payment and other assets – The assets your client has will be important in determining which loans they are eligible for. Assets can include anything that can be verified, such as savings, bonds and a 401K.
Savings are important. A down payment of 20 percent or more puts your client in the strongest position for making a loan application. However, if they don’t have that, there are still options. Some loans, like the FHA loans, allow applicants to get by with a down payment of as low as 3.5 percent. Some very special loans, such as those offered by VA, allow for no down payment.
1. Outstanding debt – Lastly, your client need to document all of their outstanding debt. This includes any car loans, student loans and credit cards. Document both the minimum monthly repayment as well as the actual monthly repayments they have been making. Having a low debt-to-income ratio (total monthly debt compared to total monthly income) is important for showing the applicant is capable of repaying the mortgage.
This is self-explanatory, but it’s important to not hide anything. Some borrowers will have different credit cards, including store credit cards. While these may seem small, they will be investigated by lenders. Hiding anything will create suspicious gaps in your bank accounts.
Above all, don’t take out any new loans. Every new loan your client starts will affect their credit score. Something as frivolous as applying for a store credit card can affect a person’s chances of a new loan.
Once your client has all this information, get in touch with a mortgage lender and start talking. Most lenders offer free consultations and will be more than happy to work with you and your client to help refine their search. The sooner you start, the stronger position they’ll be in for finding a home that your client wants, at a great rate.
Take the first step to move into your new home. Receive a free, no-obligation consultation to learn your mortgage options. Brenda Rogers has been helping borrowers through this process for 17 years. Put her experience to work for you and your clients today.