Don’t Sabotage Your Home Loan!

Here’s the scenario: You’ve found a great house, and you’re excited about the prospect of moving in. You have an agent making sure all the I’s are dotted and all the T’s are crossed to get you to the closing table. It’s just a matter of time.

You drive by the house at least once every couple of days, you peruse the floor plan picturing where everything is going to go, but you just can’t envision most of your old furniture being the right style for the new space. You’ve upgraded your housing, you’re furniture needs to match, doesn’t it? You can just picture it – a living room straight out of HGTV’s Divine Design.

You plan a shopping trip for a new sofa, entertainment center, end tables, lamps…. Whoa! Stop right there!  Your shopping spree could actually keep you from moving into that dream house of yours.

How, you ask?  Well, it all has to do with a little thing called your credit score.

Yeah, I know.  Your lender checked your credit score, and it was stellar.  You think it’s a done deal, and all those financing worries are behind you, right?

Wrong.  Maxing out your credit cards buying new stuff for your house, or financing the furniture through the store could be all it takes for you not to qualify for the loan you thought was a sure thing.

When your loan goes to underwriting at the lender, they’re going to take a look at your financial picture to make sure nothing has changed.

Look.  A consumer credit score is made up of five key components which each contribute a different amount to your overall score:

• 35% comes from your Payment History.  This includes accounts such as credit cards, consumer loans, and mortgages.  Be sure to make your payments on time while you’re waiting to close on your house.
• 30% of your score is figured from the Balance Owed on your accounts.  This is where you can really mess up.  Don’t go putting a lot of new debt on your credit cards.
• 15% is from the Length of  your Credit History.  This would include the length of time since you opened your accounts, the most recent activity, etc.  There’s not a whole lot to worry about here.
• 10% from New Credit.  Don’t apply for any new credit cards or take out any new loans before you close on your house.
• 10% is Types of Credit Used  Such as mortgage, credit, and retail accounts.  If you pay attention to the first four items, you’ll be okay here.

Thanks to RIS Media for this info.

If you’ve gotten far enough along the path to your dream home or your first home, you’ve been disciplined enough to save money for a down payment and to manage your credit wisely enough for a lender to want to lend you money.

Now is the time to be patient just a little longer in order to be able to sit down at the closing table, sign papers until your fingers go numb, and feel the weight of that house key in your sweaty palm.

Don’t sabotage that moment by running up debt between the contract and the closing.

GoodWin Team Realty

Heather Goodwin, Broker
Shreveport, LA
318-918-8248

Heather@GoodWinTeamRealty.com

Serving all of Shreveport and Bossier City

Specializing in Southeast Shreveport Gated Communities
St. Charles Place, Hidden Trace, Norris Ferry Landing, Provenance, Norris Ferry Crossing,
Twelve Oaks, Acadiana Place, and the Ellerbe Road Corridor

Licensed by the Louisiana Real Estate Commission

Mortgage Application Checklist

As I stated in an earlier post, getting pre-approved for a loan can go a long way in your negotiating power when buying a home. It puts you in a much stronger position than someone who hasn’t yet talked to a lender, but thinks he can get the financing, no sweat.

A seller will think twice about accepting an offer from a buyer who hasn’t even approached a lender. In fact, most sellers these days will insist that at least a pre-qualification letter from the lender accompany any purchase offers. Sellers aren’t willing to take their home off the market while waiting for you to arrange your financing, and you can’t blame them.

So, what records is the lender going to want from you? Most or all of the information below. So, go dig out the boxes of old tax returns and bank statements. Looks like you’re going to need them.

Income and Assets

Pay stubs for the last 30 days
For the past two years: names and addresses of each employer and W-2s
Statements for each bank, mutual fund, and/or investment account for the last three months
Estimated value of personal property and furniture

If you have made any large deposits to your accounts: explanation and source for deposit
If large deposit was a gift: signed gift letter (lender can supply), copy of gift check, copy of deposit receipt

If you own more than 25% of a business: corporate or partnership tax returns

If self-employed: tax returns for the last three years (with schedules), Year-to-Date Profit and Loss Statement prepared by an accountant

If you own rental property: tax returns for the last two years and current rental agreements

If you are retired: pension award Letter

If you receive Social Security: social security award letter

If you are counting child support as income: copy of divorce settlement, copy of twelve months of cancelled child support checks

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Debts

Names, addresses, account numbers, balances and monthly payments on all current loans
Explanation of credit report anomalies, including: late payments, credit inquiries in the last 90 days, charge-offs, collections, judgments and/or liens
Bankruptcy filed within last seven years (bring a copy of your bankruptcy papers)

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VA Loans

Copy of DD Form 214, Report of Separation

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Miscellaneous

Photo ID and proof of social security number
Residence addresses for the past two years
If applicable, a copy of your divorce decree
If you are not a citizen, a copy of the front and back of your green card

I know it’s a lot of information, but it’s necessary in order for the bank to ensure that you can pay the loan back.  Call me, and I can help you through it!

GoodWin Team Realty

Heather Goodwin, Broker
Shreveport, LA
318-918-8248

Heather@GoodWinTeamRealty.com

Serving all of Shreveport and Bossier City

Specializing in Southeast Shreveport Gated Communities
St. Charles Place, Hidden Trace, Norris Ferry Landing, Provenance, Norris Ferry Crossing,
Twelve Oaks, Acadiana Place, and the Ellerbe Road Corridor

Licensed by the Louisiana Real Estate Commission

The First Thing Every Buyer Should Do

If you’re in the market to buy a house, you may think the first thing to do is to hop in the car with your agent and go look at houses.  I’m sorry to have to tell you — you’d be wrong.

The first step in your home-buying journey is to secure your financing. Do this before you contact your agent to look at houses, and he or she will be your bff (best friend forever, for those of you that don’t text). And that’s a pinky promise. Also known as getting pre-approved for a mortgage, it does several things to make a real estate agent’s job a bit easier.

First, the agent knows you’re serious about buying a house and not just using him or her for an afternoon’s diversion.

Second, it tells the agent what price range of homes to search for. You would be amazed at the number of 3 bedroom 2 bath homes for sale even in one neighborhood. Knowing how much you’ve been approved for will save you both a lot of time finding just the right house.

When you do find that house, your negotiating position will be much stronger than someone with just a pre-qualification letter or nothing at all. With a little bit of income and expense information, you can be pre-qualified for a loan over the phone.  That means the bank thinks that, yes, you have what it takes to make monthly payments on a certain amount of money at a certain interest rate for a certain length of time. It means they are willing to work with you to help you finance your home purchase.

Getting pre-approved, however, goes beyond that. To get pre-approved for a home loan, the lender gets all the details of your financial life which includes such things as income, assets, debts, expenses, and employment history.  The savvy home buyer will get all of this out of the way before they attend the first open house or call a real estate agent.

So, do you wanna be an agent’s bff?  A good place to start the process is by gathering the 8 Must-have Documents your mortgage lender will ask for.  It’s a great place to start before you hop in the car to begin looking for your next home.

GoodWin Team Realty

Heather Goodwin, Broker
Shreveport, LA
318-918-8248

Heather@GoodWinTeamRealty.com

Serving all of Shreveport and Bossier City

Specializing in Southeast Shreveport Gated Communities
St. Charles Place, Hidden Trace, Norris Ferry Landing, Provenance, Norris Ferry Crossing,
Twelve Oaks, Acadiana Place, and the Ellerbe Road Corridor

Licensed by the Louisiana Real Estate Commission

How Do I Know If I Should Refinance?

Thanks to my associate, Marshall Graham, a lender with Aulds, Horne, and White for the following information to help you decide whether refinancing is right for you in your situation.

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The question whether to refinance or not can seem overwhelming to most. After all, we’re speaking of your number one asset! How does one know when the right time to refinance is? The mortgage industry is notoriously popular for statements such as, “My cousin Vinny said that you shouldn’t refinance until a 2% reduction in rate”. My intention is to shed some light into the mystery question, “When Should I Refinance?!”

The answer cannot be summed up as easily or as blatantly as a 1% or 2% rate differential. Why? Because a 1/8th of a percent increase in the rate of a $10 million commercial loan is a lot bigger deal than a $50,000 residential loan! The size of the loan plays a very important role in determining the rate spread necessary. The following chart, based on loan size, may be used for quick reference:

$300,000 – 3/4%
$200,000 – 7/8%
$100,000 – 1%
$75,000 – 1.5%
$50,000 – 2%

Obviously, if two people at work are discussing whether to refinance that have two completely different loan sizes, the general statement of a 1 or 2 percent differential would be mathematically skewed. The client with a loan size of $300,000 with a 1.5% rate differential would far exceed the benefit of a refinance than a client with a $50,000 balance, because many of the closing costs associated with conducting the loan are fixed, not based on loan size.

The amount of closing costs plays a key factor in determining whether or not to refinance. After all, it wouldn’t make sense to try to lower your payments $40 if your costs to do so were $9,000. It is here that one can determine a financial break-even point. The break-even point, which is defined as how many months and/or years must one reside in the property for it to be cost effective to refinance, is calculated by taking the total amount of closing costs and dividing that figure by the estimated payment reduction.

Break Even Point = (Total Closing Costs/ Estimated Payment Reduction)

The break-even point calculation assumes that only one variable is changing within the equation; the client is not moving from a 30yr to a 15yr term etc. Typically, we are finding our clients breaking even in 7 to 12 months.

Another important facet of refinances is based on the length of time one plans to remain living in the home. If a person plans on selling his or her home in 4 months, he or she definitely should not refinance. If you plan on staying in the property, (even one month) longer than the break even point, than you SHOULD refinance.

Lastly, much discussion is based on at what interest rate and when should one lock in. Personally, I am currently witnessing clients with a $200,000 + balance with a rate at 6.25% who would NEVER even consider purchasing a lottery ticket, not locking in at 4.75% with No Loan Origination Fee, because they are holding off for 4.25%?!? Are you serious? So what I’m being told is , “Marshall, a $188 reduction in my mortgage is not good enough….” Yet if that client continues to pay exactly what he’s currently paying , but instead at a rate of 4.75%, the client would reduce the term by 8 ¼ years! ($2,256 * 8.25) = $18,657. Or, take that $18,657 and invest it at a rate of 5% in the following 10 years, and you just saved $31,909……..the amount of your newborns college education. If the Haynesville Shale has taught us anything, it’s that greed can lead to nothing in the end. An old saying in poker comes to mind, “It’s better to win a small pot, than to lose a big one!”

Marshall F. Graham
Aulds Horne and White
318.869.4444
Marshall.Graham@AuldsHorneWhite.com 

GoodWin Team Realty

Heather Goodwin, Broker
Shreveport, LA
318-918-8248

Heather@GoodWinTeamRealty.com

Serving all of Shreveport and Bossier City

Specializing in Southeast Shreveport Gated Communities
St. Charles Place, Hidden Trace, Norris Ferry Landing, Provenance, Norris Ferry Crossing,
Twelve Oaks, Acadiana Place, and the Ellerbe Road Corridor

Licensed by the Louisiana Real Estate Commission