A DOSE OF EDUCATION HELPS THE ANXIETY GO DOWN... Understanding what you want and who you are will provide you the confidence you need when shopping for a home and more importantly a home loan. We will walk through the many different steps in the loan process piece by piece. For now let's break down some of the terminology term by term. One of the first parts of the equation that the bank looks at is your debt to income ratio.
Your debt to income ratio is just like it sounds. What are you spending monthly in payments for other loans such as credit cards and car loans compared to how much you make.
Monthly debt/monthly gross income (before taxes)
That sounds simple enough right? Now lets take that one step further what is your TRUE debt to income ratio. Your debt to income ratio for the bank is one of the things that will determine "how much" you can afford however your TRUE debt to income ratio for you should include the following budget items:
By looking at not only what you spend on the monthly loan payments but looking at your true monthly expense in maintaining your current lifestyle will give you a true idea as to not just what you can afford, but what you are comfortable with.
This is important for your confidence when shopping for a home because you will be confident in what you can afford and what you are comfortable with keeping you from making any last minute decisions based on anxiety and not on the facts about who you are that you have established.
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Are you looking for a home loan? Give me a call at 480-344-3667 or email me at lindsay.luton@academy.cc
www.academymortgage.com/lindsayluton
IS THERE PSYCHOLOGICAL TRAUMA INVOLVED IN APPLYING FOR A LOAN? I write this from the perspective of a person who has had experience with several different types of psychological trauma in life. I think we all have, but I wonder why applying for a loan for a lot of people feels so uncomfortable like going to the DR's office or something. I guess there is a lot of anticipation in going in to meet the lender for the first time. Exposing all of your personal and financial laundry for them to see. How it feels like the person behind the desk has the "control" over what happens in your future. I can see how there are several unknown variables and that makes everyone a little uncomfortable (I don't care who you are). Let's alleviate some of that trauma. What could make this experience more pleasant for you? What things could you be armed with to walk into any lender's office and confidently shop for the best loan and service available to you? After all this is YOUR house and YOUR life.
For most people their home is their single biggest investment. I don't mean just the investment of their money. I mean this is where you feed your babies breakfast, this is where you settle in on the couch with your family and watch a movie, this is where the most intimate and important life moments and memories take place. The process of acquiring this type of investment takes much more than just money. This is an emotional investment as much as it is a financial investment. The experience of purchasing a home should be fun filled and ultimately gratifying. I am going to walk you through a series of steps to make the loan pre-approval, shopping and purchasing process the feeling of achievement it should be.
Stay tuned through out the next 6 weeks for definitions of banking lingo, definitions of real estate lingo, how to take back control of the process know who you are in the credit world and what that means so you can make the best investment emotionally and financially.
I think of the numerous frustrated faces I have seen in my office because they have been exhausted by the mortgage "process" they have been through with another lender it makes me wonder why does this have to be so complicated?
Let's break down exactly what the mortgage "process" entails. You fill out a mortgage application disclosing your personal balance sheet, and review and sign disclosures that let you know different things like whether or not the bank you are dealing with services their own loans, and what fees are charged for the loan. At this time you will submit documentation of your various assets and income. No complicated physics so far the bank is just going to use the information on your application to assess your ability to pay back a loan. It is a piece of a not too complicated puzzle.
So what happens next? This is where some mortgage professionals make it a little fuzzy. Just to list a few things here are the next steps in the "process".
Once all of these have been completed and returned from their various sources your file will go to an underwriter. The underwriter is in charge of making sure that all of the various guidelines are followed, all the numbers match up like your debt to income ratio. They review your credit, your insurance coverage and your appraisal and make sure all is in line. The underwriter has the final say on the approval of your file. Are you still with me? As far as I know no one has won the Nobel Peace Prize for discovering this process.
After this is completed your file is prepared for your final documents. This is when you are contacted by your title company for signing. You are asked to sign a final application and disclosures as well as documents relating to the title and deed of your home. Your hand will be tired and your signature will get sloppy towards the end, but you are almost there.
The final step to the "process" is funding. This is when the bank releases the funds to pay either the seller of the property or in the case of a refinance, your previous bank. Guess what? That is it!
You can see by reviewing the various steps in the process how important it is to deal with a true professional company who is going to maintain a high level of integrity and efficiency when processing your loan. Getting verifications back from a variety of sources requires that your bank keeps constant vigil and makes sure that those things are returned in a timely fashion in order to move the "process" along. Still not rocket science, but requires professionalism and a true knowledge of the mortgage business.
Bottom line this is not rocket science that requires complicated mixes of things like mechanics, mathematics and aero elasticity, but there is a certain chemistry that should be achieved. The chemistry includes a good balance of ingredients like a mortgage professional with integrity, good work ethic, and communication skills backed by a mortgage company with efficient processes and upstanding core values that help to make the "process" uncomplicated for you and one that you will not be traumatized by and fear in the future.
What if I told you that we were going to drive around town all day and I mean all day from dawn until dusk? We have no purpose and no destination and by the way you are driving and I am just along for the ride. I expect that you put gas in the car and navigate us around town. I will spill my morning coffee all over your Corinthian leather and I will not be making a valiant effort to clean it up. When we get back I will expect that you email me regularly and be at my beck and call when I find something on the internet that looks just like where I want to go.
Would you go for that? Would you take me? Isn't that what you are doing when you take a client out to look at property with out any kind of pre-approval from a lender?
This scenario is all too common. The buyer has been out with the real estate agent several times and looked over many properties and now they think they are ready to put in an offer. They have found their dream home. Turns out they have no pre-approval letter from a lender to include with their offer. So the agent scrambles and calls the lender and lets them know they need to contact the potential buyer. At which time the lender contacts them only to find out they have been shopping in the $200,000 range and they don't even qualify for $100,000. So now you have the loan officer delivering the bad news that they wont be able to put that offer in like their real estate agent said. To add insult to injury that payment that the real estate agent quoted them is not even close to what the actual payment would be. So now the villain loan officer has come swooped in on them and stolen their dreams of granite counter tops and pool side cabanas like a thief in the night.
The true pre-approval from the lender is so important. The client can still have hopes and dreams, but they are more centered in reality when they have figured out what they can afford. Not only that, but you will not have driven all over town looking to and fro at homes and spending your valuable time and resources where there will be no return. In a city like Phoenix where we have much urban sprawl and one town can be 50 miles from the next don't you want to make sure that this is at least a viable lead? Just like you wouldn't take me all around town just to meander with no purpose and no destination, you shouldn't drive all over town with a client that has not been truly pre-approved and in essence wandering aimlessly around town with them with no true idea what you are looking for or even if you should be looking at all.
Northeast corner of Higley and Southern
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