12 Mortgage Tips

If you are looking for a Mortgage Advisor to help you through the financing process, please give us a call at (520) 744-2292 or email Sue at sue@pcMortgageAdvisor.com.

Sue Pullen
Licensed Mortgage Professional #206048
Fairway Independent Mortgage Corp.
5401 N. Oracle Rd., #101
Tucson, AZ  85704
BK #0904162

Getting a mortgage loan has become a difficult task lately, and don't expect that to change anytime soon.

Lending standards will remain stringent in 2012, but that doesn't necessarily mean you won't be able to get a mortgage with an excellent rate. Knowledgeable borrowers who understand the rules and prepare in advance will improve their chances of getting a mortgage.

Here are 12 tips to help you stay on top of your game as you try to secure a mortgage in 2012.  First things first though, if you’re looking for an awesome lender to help you buy a home in Tucson, visit our friend Sue Pullen!

#1 Study your credit
Good credit is the key to attaining a mortgage in this strict lending environment. First, you need to get copies of your credit scores and credit history from the three main credit reporting bureaus. Then, study the reports closely to make sure there are no errors or issues to resolve before applying for a mortgage loan.

Most lenders require a minimum credit score of 680 to conform to Fannie Mae and Freddie Mac's guidelines. Federal Housing Administration loans, which are guaranteed by the FHA, allow for lower scores, but most lenders are likely to stay away from scores lower than 620.

#2 Prepare before you start
There are a few simple documents every lender will ask for when you apply for a mortgage. Don't wait for them to ask, have them ready in advance.

Take these documents with you when you walk into the lender's office: your last two pay stubs, W-2s, income tax returns and bank statements.

Scan in and save these documents and any additional ones the lender requests on the computer so you can easily resend them if anything gets lost during the process.

#3 Know how much you can afford
Be sure not to rely on your lender to tell you how much of a mortgage you qualify for and then borrow the maximum amount. As you plan your budget, make sure to leave room for unexpected expenses. This is especially important when you are buying a house.

The mortgage calculator on our See Tucson Real Estate website can help you determine how much house you can afford and also estimate your monthly mortgage payments.

#4 Shop around
Shopping around for a mortgage should go beyond comparing interest rates. While rates are definitely important, prospective borrowers also need to consider points, closing costs and different types of loans. Aim to get estimates from three banks and three mortgage brokers before you decide which combination works best for you.

#5 Time is of the essence
Once you submit your mortgage application to the lender, the clock starts ticking. Make sure you send in any documents requested during the approval process quickly.

A delay in closing the loan could kill the purchase and cost the buyers their deposits. When refinancing, a delay could mean losing the interest rate the borrower originally locked in. After you apply, ask for an expected closing date and check in with the lender periodically until the loan closes. Remember, some lenders close more quickly than others.

#6 Mortgage approved? Don’t make any changes to your credit!

After the lender pulls your credit and tells you that you've been approved, don't assume you're of the hook. Most lenders will check your credit again before the loan closes.

It's smart to avoid any transactions that may affect your credit. Don't apply for new credit cards or credit lines. Pay your bills on time. Don't close any current accounts. Don't finance a new car. Hold off until closing.

#7 Consider a refi with no closing costs
When refinancing, you don't always have to spend money to save money. Many lenders offer mortgages with little or no closing costs. But be careful, it's not a free ride. Lenders usually make up for those lost closing costs by charging the borrower a slightly higher interest rate. But sometimes the slight increase translates into a just few extra dollars in the monthly payment, while the borrower saves thousands in closing costs.

#8 Consider a shorter-term loan
Since interest rates are close to rock bottom, short-term loans have become more affordable for many borrowers.

Borrowers who currently have a 30-year mortgage with an interest rate of 6 percent or higher may be able to refinance into a 20-year or 15-year loan while keeping their monthly mortgage payments close to what they pay now. Consider this option even when the short-term loan means slightly higher monthly payments. This is your chance to pay off your mortgage in less time.

#9 Receive a gift? Be ready to explain it
Did your parents or in-laws give you a few thousand bucks as a gift to help out with the down payment? If so, lucky you! -- but make sure you can document and explain from where and why you received the money.
FHA loans allow borrowers to receive their down payment as a gift from a relative. However, for conventional loans, borrowers may receive gifts, but at least a 5% of the down payment has to come from the borrowers’ own funds.

Borrowers receiving a gift are required to present a gift letter signed by the donor, and they will also need a paper trail of the money transfer. Be prepared to present statements to show where the money came from when it was deposited into your account.

Avoid receiving large cash gifts in your bank account until your mortgage closes, unless the money is being used for the down payment. Any large deposits besides your paycheck will have to be explained in order to comply with federal rules.

#10 Don’t give up!
If one lender denies your mortgage application, don’t worry, that doesn't mean all lenders will. Most lenders follow Fannie Mae and Freddie Mac guidelines. In addition, they have their own internal underwriting guidelines, and some are more stringent than others.

Ask the lender exactly why your mortgage was rejected. Depending on the reason, you may be able to take some simple steps to quickly improve your credit, or you might just need to try a different lender (like our friend Sue!).

#11 Appraisal isn't enough? Try again
If the home appraisal your lender received isn't enough to support the mortgage loan and you think the appraiser is mistaken, try another lender.
You can't order a second appraisal yourself or pick which appraiser the lender hires, but you can dispute the first appraisal or apply with a different lender.

In a perfect world, the appraised value of a home shouldn't vary drastically from one appraiser to another, but unfortunately sometimes they do. If you believe the first appraiser is wrong, try a different lender and hope that lender's appraiser does a better job.

#12 Seek help
If you are behind on your mortgage or are struggling to keep up with your mortgage payments, seek counseling.

The U.S. Department of Housing and Urban Development has counseling services across the country. Homeowners can receive free foreclosure-prevention counseling from HUD-approved counselors. To find a housing counseling agency near you call (800) 569-4287 or visit the HUD website.