In a perfect world, paying for a home with cash would be optimal. But let’s be realistic, paying for a home in cash isn’t practical for the majority of us. So, taking out a home loan, better known as a mortgage, is the next best option. That’s where a mortgage lender comes into play.
Jennifer Pack is a Mortgage Loan Officer for Centier Bank and Dan Komarchuk is a Mortgage Loan Originator for Horizon Bank. We sought out advice from both of these mortgage lending professionals.
What is the role of a mortgage lender?
A mortgage lender listens to the buyer’s financial goals, such as how much they can afford to pay for housing. “A mortgage lender is primarily here to give you access to borrow money to buy a house,” said Komarchuk. “To qualify to borrow that money, you must fit into the guidelines required to be eligible to borrow money to purchase property.”
When is it appropriate to reach out to a mortgage lender?
If you’re a seller preparing to list your home on the market and search for new property, Pack recommends reaching out to a mortgage lender as soon as you begin the listing process. “During these times of everchanging mortgage guidelines, a seller shouldn’t assume that they can turn around and obtain a mortgage again.” Pack said credit, employment, and debt are all subject to change over time, and are all factors when obtaining a new mortgage. “I advise all sellers to become pre-qualified to become a buyer again.”
Pack suggests the same for potential buyers. “A trusted mortgage advisor can provide education links and mortgage options based on buyer’s needs. This will also enable a realtor to have a price point in mind. Knowing the payment price point is key,” said Pack. “Often times there is a max payment to remain qualified, and if the home has higher property taxes or homeowner’s association dues, this could actually push the maximum payment over, even though the price of the home is within the qualified range.”
Before reaching out to a lender, Pack recommends having some of your financial documentation on hand. “Be prepared with items such as your last two pay stubs, most recent bank statements, any recent large deposits, and two years of W2’s and federal tax returns.”
What are some of the most common home loans available to potential homebuyers?
“The most common home loans out there are Conventional, Fair Housing Act (FHA), United States Department of Agriculture (USDA), and Department of Veterans Affairs (VA),” said Komarchuk. “There are also specialized home loans such as – construction, PhD/Doctor loans, low credit score (580) programs, land loans to build on later, etc.” Komarchuk said while he works with people who decide to put 20 percent down, many of Horizon’s programs specialize in down payments of 0-5 percent.
How do you determine which loan is right for your clients?
“Most of the time I find a mortgage that the borrower didn’t even know was available, including Indiana’s down payment assistance programs,” Pack said. “Often times, I like to start with the least down payment options, in the event the buyer finds a home that they will need to put some cash money into after purchase to update and or improve.”
Komarchuk said he works a bit differently than others when it comes to finding the right loan for his clients. “I listen to what they want and then work backwards to figure out if they qualify for it, if we need to do some work to get them to a position where they qualify for it, or if it’s truly going to end up being what they want,” said Komarchuk. “Sometimes people call me saying they want a $200,000 house but don’t want to pay more than $700 a month. That’s not realistic unless you’re planning on putting down a huge down payment.”
What factors can affect your chance at receiving a particular loan?
According to Pack, “Your credit score. Not just the score though, payment history as well. Disputed credit accounts can cause issues for some loan types, debts that were “settled for less” can be an issue, judgements are always an issue, and income can pose an issue as some loans have income caps.” She said some loans have lower debt-to-income ratio guidelines, “Which is why some buyers have to go with FHA loans, because FHA offers a 49.9 percent debt-to-income ratio for some borrowers, whereas conventional loans vary from 42-45 percent depending on credit scores.”
What other advice do you have to offer?
“In a world full of HGTV and instant access to real estate information online, I really wish people focused on talking and communicating with lenders first before setting their expectations – that way we can work through what you can afford together,” said Komarchuk.
For Pack, she recommends working with a local agency. “Work with a lender that is available to you, on your schedule. You can have the best of both worlds with an entrusted local leader,” Pack said. She also suggests that if you’re going to shop for lenders, try to keep you shopping window within 14 days, 30 days max. “For borrower’s with low credit scores, or limited credit history, having multiple inquiries can hurt,” Pack said. “The borrower is protected by the Truth in Savings Act, which allows them to shop lenders, and while the multiple mortgage inquiries appear on their credit report, if kept within 14 days, all of the inquiries are considered one “soft” pull.”