Mortgage 101

While going through the process of a mortgage, the chances are you will hear terms and strategies that are unfamiliar. Friends who have gone through a mortgage process will tell horror stories or brag about the great deal they received. The "horror stories" usually coincide with a borrowers lack of an organized paper trail. When looking for proof of income, the considerations are 2 years of tax returns, 3 months financial assets statements, and most current pay stubs equaling one month. Remember, if you hide money while claiming taxes, the investor will not recognize the funds either. Therefore, the funds cannot be accounted. Understanding that the great deal or a great rate is just a variable of timing is key. For instance, if a person was buying a home in the 1980's; then a ten to twelve percent rate was considered market value. With the emergence of a strong economy mounting year after year, the rates dropped considerably.

Another misconception with mortgages comes from the media: "The Fed has dropped the Prime Rates a half point today..."- leaving individuals with the perception that they will get a better deal on their mortgage. Unfortunately, those drops usually have no effect on long-term mortgage rates.

The best way to get a great deal is choosing a loan officer that can compete with every bank's rate and a broker that has a high "funding" ratio. Choosing a mortgage broker means that you now have access to hundreds of banks. There are special programs in place, so if a borrower cannot qualify with one investor- the broker can move the file immediately to another quickly. Sometimes great deals require rigid qualifications. The broker will have all options open- depending upon his company's relations. It is the broker's job to find the best deal. When the broker finds the best deal- they will want to "lock" the rate. This way the rate is guaranteed for a predetermined amount of time while the loan is processed-underwritten, inspected, approved, etc.

The best way to get the best deal is to understand the key terms, align all of your paperwork immediately, and choose a broker that can provide competitive rates with a team that is equipped to process the work efficiently. By having the paperwork ready, you will not miss opportunities in the market. By choosing the right broker, you will not lose your rate and have access to "all" the deals. By having your paperwork aligned correctly, you will give the processing teams, attorneys, and banks enough time to grant loan approval before the "locked rate" expires. Some people actually lose an approval because they do not keep accurate financial records. This is why you should choose a broker and prequalify for a determined amount before contracting a purchase of a new property.