Title:
How to Get Your
First Mortgage
Word Count:
766
Summary:
When it comes to
lifetime markers getting a first mortgage is a major event. With a mortgage
you''re magically transformed from occupant to owner and from tenant to
titleholder.
Keywords:
mortgages, first
mortgage, 1st mortgage, mortgages online
Article Body:
When it comes to
lifetime markers getting a first mortgage is a major event. With a mortgage
you''re magically transformed from occupant to owner and from tenant to titleholder.
Applying for a mortgage used to be seen as a battle of sorts, a competition
where the only winners were those who sold headache remedies and paper by the
truckload. But now finding the right mortgage is faster and easier than ever --
but only if you know how to make the system work for you.
If you compare loan applications today with the ordeals of even ten years ago
you can see a marked difference.
It used to take days if not weeks to obtain a credit report. Meanwhile a
mortgage lender could not act on a loan application because information
regarding debts and credit history were simply missing so loan processing times
have been greatly compacted.
In 1995 both Fannie Mae and Freddie Mac said local lenders should use the
credit scoring system developed by industry-pioneer Fair Isaac to evaluate
consumer credit. With credit scoring, a rigorous mathematical profile drawn
from a huge number of credit reports is used to measure credit history -- and
thus predict future credit behavior. Credit scoring benefits borrowers because
it measures how credit is handled, not how much income is earned. You can be
rich and have low credit scores; conversely you can be poor and have excellent
credit. In practice, the higher your score the lower your rate.
Many mortgage loan programs no longer require income and employment
verifications, the physical process of confirming wages and jobs.
A growing number of loan programs do not require individual appraisals --
instead lenders can use automated valuation systems based on tax records and
past sales to show the worth of many properties. Automated appraisals are
faster and less expensive when available; however they are not obtainable for
all properties.
The underwriting system itself has been automated. A conditional lending
decision can often be made within an hour of receiving an application.
Lending has gone online. The old advice used to be that borrowers were well
served by checking with three or four lenders for the best loans; now it''s
possible to compare huge numbers of lenders within minutes. The result is that
mortgage lending has become more competitive -- good news for borrowers.
Despite the growing use of computers and electrons however, the fact remains
that borrower participation is still required.
Essentially your job is to make sure lenders have application information which
is complete and correct. If there are errors in the application you may
suddenly face expensive and steeper mortgage costs.
Your lender will supply you with a preliminary loan application showing income,
assets, debts and required monthly payments. Much of the application is
produced electronically from information received by credit reporting agencies
-- but before signing anything go through this application line-by-line to make
sure all data is current and correct.
Since you know the lender will be providing an application for your review, you
can speed the underwriting process by preparing your financial data in advance.
First, make a list of all assets. You want to show the balances or fair market
values for all IRAs, stocks, bonds, mutual funds, checking accounts, real
estate, pensions and cars and other major assets. You also want to list account
numbers and contact information.
Second, make a list of all debts. You want to include all credit cards, car
loans, student debts, mortgages, etc. As with assets, show account numbers and
contact information for each liability. In addition, but sure to list required
monthly payments for each debt.
What you now have is a handy financial planning tool. It tells what you have,
what you owe and how much you''re worth (assets less debits equal you''re net
worth). Because there are account numbers, contact information and such, this
is good information to keep with wills and living wills. Also, if you enter
this information onto a spreadsheet, it''s easy to update and keep current.
Many loan programs no longer ask for income or employment verifications --
however for your records you want to have a file where you keep such things as
your last two or three pay stubs from the time of application and copies of
your tax returns from the past few years. Also keep information regarding other
sources of income such as interest, dividends, profit-sharing, etc.
You now have a way to zip through a loan application -- and you have a way to
make sure that lender decisions are not being made on the basis of information
which is out-of-date or factually incorrect.