Blog / Home Buying
Real estate agents are an important part of the mortgage process. As an agent, you work with purchasers who have varying amounts of experience buying homes and acquiring mortgages. For the first-time home buyer, more support will be necessary to explain the different types of mortgages, the process of applying for a loan and financing a home. Kent Hackman of United Mortgage provides answers to some of the most frequently asked questions below:
What is the difference between a pre-qualification and pre-approval for my buyer?
Many home buyers believe that a pre-qualification is the same as a pre-approval. This is incorrect. A mortgage pre-qualification is an estimate only of how much a buyer can borrow. A mortgage pre-approval, on the other hand, is what every home buyer should obtain prior to looking at homes. A mortgage pre-approval is a written commitment from a mortgage lender. To obtain a mortgage pre-approval a buyer will be required to provide the same documents that are required when formally applying for a mortgage, such as W-2s, pay stubs, and bank statements. At United Mortgage we know your closings matter and we make sure your buyers have been pre-approved fully for you.
What documents will my buyer need?
Proof of income and assets for down payment, personal identification, and information about your credit history. If self-employed, up to 2 years tax returns will be required. What can the buyer do to avoid slowing down the process? Fully complete all required loan documents, be readily available to answer any questions from the loan officer, and avoid adding any new debt or changing jobs during the loan process.
How long does it take to get a mortgage?
The length of time it takes for a mortgage loan to get approved and closed will vary from lender to lender. United Mortgage strives to make sure loans are closed as quickly as possible, and even guarantee closing dates! When shopping around for mortgages, it’s extremely important to ask how long a mortgage lender will take to get their loans approved and closed. We are able to close loans in less than 30 days and guarantee your buyer’s loan request will be our priority.
Do all loans have PMI over 80%?
No. We have numerous loan programs that don’t require PMI or even reduced PMI rates.
Are you a Mortgage Broker or Direct Lender?
We are a direct mortgage lender which means we fund and control our loans throughout the entire loan process. We ensure that your clients get the best loan, and that the loan process is smooth for everyone involved. We believe that being a direct lender is the best way to ensure satisfaction for you and your clients.
What does APR stand for compared to the Note Rate for my clients?
Mortgage APR is the cost of the loan expressed as a percentage, taking into consideration different loan charges including interest. The APR is the true cost to the borrower for the mortgage assuming they keep the loan for the entire term. If they pay more to principal or refinance, then the APR will be affected accordingly. Consumers’ payments are based on the note rate and borrowers should be aware of inflated APRs, which would imply higher than normal fees.
Can United Mortgage guarantee we will close my buyer’s loan on time?
Yes! Over 3 years ago, United Mortgage created an “on-time closing guarantee” to ensure just that, including a credit back of up to $500 if we don’t meet or exceed our guarantee.
Is there a fee charged to begin the application process for my buyers?
With United Mortgage, your buyers can apply for a home loan at no charge. With their permission, we will review their credit report and supporting documentation to ensure everything is ready to move forward!
How long is the pre-approval valid for my buyers?
As long as the information originally provided does not change, pre-approvals remain valid for 90 days. If information does change, such as income or debt, then we would need to pre-approve the borrower based on this information.
Can my buyer bring a personal check to closing?
Unfortunately no, they will need to bring certified funds, such as a cashier’s check from the account that was disclosed on the application. Many title companies will also accept a wire transfer for an additional fee.
Can a Veteran have more than one VA Loan?
Yes. Under certain eligibility, the veteran can have more than one mortgage which could save a deal if trying to close before their other house sells.
What are the steps of the mortgage process?
1.) Prospective client contacts United Mortgage for pre-approval
2.) Loan officer gathers all required items for pre-approval and issues the pre-approval letter
3.) House shopping time!
4.) House Under Contract
5.) Loan application disclosures are compiled to get loan into underwriting
6.) The appraisal can be ordered once loan disclosures have been signed, and inspections go well
7.) Initial Underwriting approval
8.) Loan conditions are sent to processor and loan officer to review and gather anything needed for loan to get cleared for close
9.) Appraisal received
10.) Resubmittal of any outstanding conditions to get loan into a final approved status
11.) Initial Closing disclosure preparation started and 3-day clock starts
12.) Closing day setup with title and realtor partners
14.) Funding—this occurs when all parties have signed and agreed to the final terms
If I had a dime for every time I am asked this question, I probably wouldn’t be writing this article. I would most likely be on a beach somewhere. This is a tricky question to answer as there are several issues that contribute to the complexity of the lending process, but essentially it comes down to three primary areas: risk, regulation and salability.
What is the risk? Well there are several layers of the risk but ultimately when dealing with a potential borrower, I always ask people the same question. If you had the means, would you lend this person your money? If the answer is yes, great. If it is no then my question becomes, “Why should I as a lender?” Believe it or not, if a borrower goes into default there is a potential that a lender would have to buy that loan back and having a bad asset does not help anyone.
The second is regulation. Most people think the worst thing that can happen is a hand slap of a fine from a regulator. This is true; however, there is a lot more damage done. There is reputational risk, financial risk and obviously getting in trouble with a regulator could affect your ability to do business in the future. There are also the little know pitfalls. For example, fines are not just sought out from lenders. Individual loan officers, title agents, and realtors have been involved in personal fines. There is also the fact that most of the lending laws can influence the foreclosure of a property. If a lender fails to check a box or present a borrower with a single piece of paper, it can wind up being a defense against foreclosure or entitle a borrower to a refund of all interest paid over a certain period.
The last item is salability. What does this mean? Simply put, can we sell this loan into the secondary market? Why is this important? Most lenders and even banks do not have enough assets to fund all the loans they make in any given year. After several stops along the way, they are sold into the secondary market as a Mortgage Backed Security (MBS). These MBS are a popular investment for not only mutual fund holders, but 401K and other investors as well. I would be willing to bet that if you looked at your portfolio or your retirement plan you probably own some. Which brings me back to my initial question about would you lend your money, because ultimately, it may be your money. Along with the impact to investments, it frees up capital for us to lend to more customers, which helps us all.
As you can see, these major areas of risk, regulation and salability are very important to the day to day operations of a lending institution, but as an agent, you need to be aware of these as well. Why? It ultimately affects your clients and your bottom line. That is why choosing a partner that will help you navigate through these issues and give you straight, accurate and timely answers is so important. If you are frustrated with this process and need a hand, don’t hesitate to reach out to one of your United Mortgage representatives and we will be happy to help you out.
By David Pearson | Chief Operating Officer at United Mortgage with over 25 years experience in the Mortgage Industry
Top factors blocking first-time homebuyers
The elusive and seemingly unattainable 20% down payment for a home restricts potential first-time homebuyers from jumping into the market, according to a recent survey of mortgage industry executives.
However, while the fact might not be too surprising, it is interesting to note that even the borrowers who understood a 20% down payment is not mandatory to purchase a home still thought it would be difficult to get into a house with less.
The survey of 150 mortgage professionals was conducted at the 2017 Mortgage Bankers Association Secondary Market Conference recently held in New York City and echoed recent concerns in the market about first-time homebuyer misconceptions.
The survey found that 28% of respondents said consumers still mistakenly believe that a 20% down payment is a requirement for purchasing a home. Then, an additional 41% of industry executives surveyed believed that even among prospective borrowers who understand a 20% down payment is not mandatory to purchase a home believe it would be difficult to get into a house with less.
Beyond misconceptions around the down payment, 39% of mortgage industry professionals believe that consumers’ lack of knowledge about the homebuying process is one of the greatest impediments to first-time homebuyer demand.
Following closely behind was lack of inventory (28%) and excess student debt (27%). Rising interest rates came in at 6%.
“While first-time homebuyers continue to drive the purchase market, we believe many are being kept on the sidelines due to the misconception that a 20% down payment is required to secure a mortgage,” said Rohit Gupta, CEO of Genworth Mortgage Insurance. “There are various low down payment options available today that allow prospective homebuyers to reach their dreams of homeownership sooner. It is crucial that, as an industry, we proactively educate eligible borrowers about solutions that will enable them to buy a home when they’re ready.”
“The more we can work together to educate consumers, the better the opportunity for us to put qualified borrowers into homes and fulfill homeownership aspirations.”
By Brena Swanson | Originally published on HouseingWire