I attended a training session with Mike Lesmiester of Core Lending to get update on getting a mortgage. Mike said these the following are the things a lender is looking for when we apply for a loan:

The 4 C’s of Credit are:

Character: How you run your life; character refers to your financial history; are you a person that saves; or are you or spender; they are looking at your financial habits.

Credit: How do you pay your bills: They are primarily looking at your credit score here (or FICO) to determine whether you are credit worthy. Credit scores range from 450-850. Factors that affect your credit include: Total debt/ Available Credit/ Late Payments/Delinquent accounts.

Capacity: Refers to your ability to pay back a loan and documentation that verifies that you’re qualified: Their looking at your gross monthly income and monthly payments, called your debt to income ratios. The ratios should not exceed 28% to 33% of gross monthly income. and 36to 45% of your total payments

Collaterial: If you fail to repay the loan, there has to be something of value to take back. In the case of a home purchase; the mortgage company will conduct an independent Appraisal to determine the value of the property. The value is usually determined as the lessor of the sales price and market valuation appraisal.

Loans Available:

Conventional:
(Backed by Fannie or Freddie) Credit score of 660 with a limit of $417,000.
People that usually seek conventional loans have the following: Better Credit/More Money/Higher Credit Scores/Higher Home Prices
Needs Reserves: Reserves equal an amount equal to down payment/closing cost and prepaids – 2 to 6 months of reserves in bank.

FHA
Typically first time buyer up to $271,050
Upfront PMI OR MIP fee of 1.75%
Does not need reserves, more flexible; lower credit score or little credit/higher debt to income ratios
620-640 credit score
Pays MIP or PMI of 1.3%-1.33% monthly on the full term of the loan.

Conventional Rates may be high but MI is lower so it’s usually a wash.

VA LOAN
NO Money down/No MI /Funding Fee of 2.25% – Loan up to $417,000

USDA
No money down/ Guarantee Fee of 2% (must appraise if the 2%is added to the loan. ) Annual guarantee fee of .40% Income restrictions/Geographic Restrictions

PRE APPROVAL – Means lender has even and reviewed all documentation and has run it through the automatic underwriting system.

houstonmortgagepros.com

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