Orlando Family Loses Dream Home – This Could Happen To You!
Buying your new home is exciting. Moving into your new dream home is exhilarating.
Getting a mortgage to finance your dream home is not fun or exciting. It’s a drain even with good credit and a bank full of money.
Before you buy your new home, find a mortgage professional you trust; Trust him or her to help make her new dream home come true.
If you allow lenders to compete for your business, understand that every lender competing for your business will pull your credit reports and lower your credit scores.
Of course, your scores aren’t supposed to drop as a result of credit pulls when shopping for a mortgage; however, the reality is that their scores suffer.
Rodney P. of Orlando, FL had found his family’s dream home. He and his wife received a loan commitment and began anxiously packing and looking forward to their new home. A few days before closing, Rodney’s mortgage broker called him with bad news. The lender backed out of the loan commitment, citing revised qualifications for the loan program Rodney and his wife had applied for.
“They told us we qualified… we got really excited… and they pulled the rug out from under us,” Rodney said. “Of course we’re devastated. My wife is crying…my kids are crying. I’m mad that they told us yes and then they said no. That’s not right.”
Tomorrow, the qualifying conditions may become even more rigorous.
“I started the loan process with a 619 and went down to a 589 when we got turned down right before closing. This all happened in about a month,” Rodney said.
Once you’re comfortable with your mortgage professional, get pre-approved. What you can afford and what type of mortgage loan you want.
Your mortgage professional will take the time to listen to your mortgage financing needs and fears.
In general, borrowers with a median credit score of 650 or below are considered high risk. With some lenders, albeit less and less, an acceptable median score is ~620; however, that is quickly being replaced with an average score of 650.
Those with scores of 650 to 720 are in a mid-grade category (between subprime and prime) and are considered more favorable risks.
The best rates and terms are given to “prime” borrowers with median credit scores above 720; These borrowers generally negotiate the best rates and terms.
Want to buy a home but can’t or won’t put down a down payment? For 100 percent financing (meaning 100% of the cost of the home is generally available only to people with credit scores of 680 or higher).
Not long ago, mortgage professionals were able to offer 100% financing to borrowers with a median credit score of 560-580.
Perhaps now more than ever, you need to understand mortgages: You can’t trust your mortgage broker or loan officer to have your best interests at heart.
The general belief is that mortgage brokers search among many lenders for the best loan offer for you. But the broker often makes more money by selling you a more expensive loan.
The reason subprime loans, especially ARMs, make up such a large segment of the market is simple: greed.
Do you personally know your mortgage broker?
**Get your own credit reports from the Big 3 (Equifax, TransUnion and Experian). Go to http://www.annualcreditreport.com and get free, instant access to each of your three credit reports. (NOTE: To get your scores, you’ll need to purchase them, but your reports are free under the FACT Act.)
Carefully examine your good and bad credit reports. If you don’t feel comfortable reviewing or repairing your own damaged credit, visit http://www.fixmyuglycredit.com.
Once you’ve confirmed that your credit won’t deny you the best loan programs, talk to your mortgage professional about how to qualify for the best loan programs:
1. Can you prove two years’ income?
2. Can you prove two years of work experience in the same industry?
3. Can you prove your down payment money?
Just in case, confirm the following considerations with your mortgage professional:
**Do you have a penalty for prepayment? If so, what type of prepayment penalty, ie is it a soft or hard prepayment penalty? A soft prepayment penalty allows you to sell your home during the “penalty” stage without a “prepayment penalty.” A hard penalty, on the other hand, penalizes you for selling or refinancing. How long is this sanction? How much is the penalty, i.e. a prepayment penalty can be a dollar amount or a % of the loan amount.
**What is your APR or Annual Percentage Rate? Your quoted rate may be 5.92% but the APR is 6.56%. What is the difference? The fees.
Your mortgage broker, who may not have your best interests in mind, earns more commissions by generating prepayment penalties that can prevent you from paying off the loan early by refinancing. Many brokers also make money by charging high opening and closing fees. Often, the higher the interest rate, the higher the commission the broker gets.
**What is your broker’s fee/commission? Typically, a mortgage broker earns a 1 to 2 percent commission on a loan.
The government believes that any disclosures you sign during the loan process will reduce or eliminate fraud or your misunderstanding of the mortgage financing process. The shocking reality is that many buyers ignore the legal mumbo jumbo that comprises disclosures and trust their mortgage professionals to protect their interests and not abuse them.
Buying your new home is much more exciting than learning about financing options and obtaining financing; however, this is a must-have education. Without your financing, your dream home may be another family’s dream home.