Loan Officer Tips and Information
Getting Pre-Approved before you start your home search offers multiple advantages.
TIP: If you choose a Realtor prior to choosing a loan officer, ask your Realtor for recommendations on the best Loan Officers they work with and why they choose to work with them.
You’ll need to assemble several documents to start the pre-approval process:
• Federal tax returns for the last two years.
• W2s (or 1099 statements) for the last two years.
• Bank statements for the last two months.
• Recent pay stubs and proof of any other income.
• Proof of assets (stocks, mutual funds).
• Information about your current debts.
• Information about the source of your down payment, including gifts.
Determine Your Budget
Fill out the form to receive access to our Budget Worksheet, so you know what kind of monthly payments you can safely afford!
Being on top of your finances and knowing what you can and cannot afford will make the purchasing process very smooth.
Mortgage Types and Other Resources
With a fixed-rate mortgage, your interest rate – and your monthly payment of principal and interest – will stay the same for the entire term of the loan. This type of mortgage tends to be the most popular because it protects homeowners from the possibility of future monthly payment increases (a situation faced by borrowers who select an adjustable-rate mortgage) and is very straightforward.
Fixed-period Adjustable-Rate Mortgage (ARM) or hybrid ARM
Most lenders today offer a fixed-period or “hybrid” ARM, which is an adjustable-rate mortgage featuring an initial fixed interest rate period, typically of 3, 5, 7, or 10 years. After the fixed-rate period expires, the interest rate becomes adjustable for the remainder of the loan term. Fixed-period ARMs are often named by the length of time the interest rate remains fixed.
Example: In a 5/1 ARM, the “5” stands for the five-year introductory period during which the interest rate remains fixed. The “1” indicates that the interest rate is subject to adjustment once per year after the introductory period, and for the remainder of the loan term.
Government loans (FHA and VA)
If you’re qualified, you may consider an FHA (Federal Housing Administration) or a VA (Department of Veterans Affairs) loan. These programs allow a lower down payment and credit score when compared to conventional loans.
FHA loans are helpful for applicants who don’t have a 20% down payment saved or who need more flexible income or credit requirements.
There are some differences between FHA loans and conventional loans. For example, there’s a maximum loan amount, which varies depending on where the home is located.
Also, FHA loan programs typically require you to pay mortgage insurance, similar to private mortgage insurance, or PMI. Under FHA, this is called a “mortgage insurance premium,” or MIP. Typically, you will pay an upfront mortgage insurance premium (UFMIP). Keep in mind that the UFMIP must be entirely financed into the mortgage or paid in cash; it cannot be partially financed. You will also pay an annual insurance premium, which you will pay monthly with your mortgage payment. You’ll need to factor that amount in when you set your budget.
VA loans are offered by VA-approved lenders and are insured by the Department of Veterans Affairs. To qualify, you must be a current or former member of the U.S. armed forces or the current or surviving spouse of one. These loans can help reduce your down payment requirement, sometimes to zero. They may also help you get a lower interest rate on your loan. However, there are limits on the available loan amount. If you believe you may qualify for a VA loan, be sure to tell your lender, so you can explore your options together.
When you start to explore your mortgage options, you may hear the term “jumbo loan” come up. If you do, this may be because you live in a high-priced real estate market or are looking at properties that are more expensive than average. If you are considering homes requiring a mortgage that exceeds $417,000, it’s a good idea to find out more about jumbo loans and discuss them with your lender.
Other Resources – National Websites
Federal Housing Administration (FHA)
The Federal Housing Administration (FHA) is an agency of the federal government that insures private loans that are issued for new and existing housing. This agency also makes sure that loans are approved for repairs too. To find out if you are eligible for an FHA-insured loan, contact us today!
Mortgage Bankers Association of America – Consumer Information
The Mortgage Bankers Association of America is the main association that represents the Real Estate Finance Industry. This consumer information site contains several guides for purchasing or refinancing a home.
Freddie Mac Homebuying Education
Freddie Mac is a publicly held company designed by Congress to help to increase the supply of funds that mortgage lenders can make available to homebuyers and investors. This website has step-by-step tutorials on the homebuying process, as well as a lot of useful information!
If you have any questions about Financing please contact us