Mortgage Finance Blog

Hello All!

The next three blogs will deal directly with the home-buying process. I will discuss the procedure quite generally, so if you have questions please feel free to comment online, send me an email, or do what many others have done - pick up the phone and call me. I would like to hear from you anyway!

The first steps are fairly simple. The first thing you need to do is get a pre-approval. Some agencies call this a loan commitment, a loan status report, or a conditional loan approval. It is basically a form that represents a loan amount that you can afford. Many mortgage brokers will give you the 'maximum' loan approval, be careful! Please make sure that it is something that you can afford and want to afford.

In order to obtain a loan commitment, your mortgage broker will request your full name, date of birth, present address, and your social security number. This is to review your credit report and discuss any findings. Furthermore, the broker will be able to obtain your FICO score, which will ultimately determine whether you are 'bankable' or not. If you are scoring a 720 or greater, you are doing very well and will be able to obtain the best financing available. Visit my site map, and look for "What is my Credit Score," to get more information on FICO scores.  

Your pre-approval will also entail the submission of your personal documents such as: the last month of pay stubs, the last two months of bank statements, the most recent portfolio account statement, and the last two years of tax returns and Form W-2's. These are integral to obtaining loan approval and in today's tight credit markets, banks are being more careful to review this data.

After you have obtained your loan approval the next logical step is to work with a Realtor. Your mortgage broker will be able to refer you to a seasoned professional, always ask! Your real estate agent will follow your lead. Is there a particular town that interests you, a specific neighborhood, or a specific home? This is a great time to share your desires and listen to professional opinions about those preferences. Feel free to interview  the agent, if you need to make sure that he/she is the best fit for your family's needs. Afterall, you are trusting this person with a very large investment.

The common phrase used to buy a home is "location, location, location." Use this philosophy as you keep in mind the costs or the time to drive to your favorite destinations. Where are family, friends, schools, work, professional sporting venues, or even your favorite restaurants in relation to where you want to live? In the event of emergencies, it is always helpful to be close to home. There are lots of factors to consider when choosing the right house so make sure to ask lots of questions.

I am always open to writing about the topics that you want to read about. This three-part series is a request from Connecticut. Keep a look-out for the two segments that follow. We will discuss topics regarding 'making offers' to 'obtaining appraisal reports,' and more. Read on!

As always, feel free to call, email, or post a comment online! Take care everyone!

Your friend & mortgage broker,

Diego L. Quintero

Part one of this series dealt with pre-approval, finding a realtor, choosing a location, and finding the right home. With these steps in mind, you have located the home of your dreams - now, what? If the home is listed for sale at or near the same price as your "comfortable" approval amount, then you should make an offer. Consult your realtor and get his/her expert opinion, since each transaction has its own variables to consider. I will provide a typical scenario, but if you have additional questions, please take the initiative to ask.

In this buyer's market, the buyer can be somewhat aggressive in the offer price. After all, if it does not work-out, there are plenty more homes to choose from and the level of motivation differs from one seller to another. We are seeing lots of "low-ball' offers, and most are getting accepted. It is important to maximize the benefits from your offer, right? So, talk to your agent about the possibility of having the seller cover your closing costs or purchase a home warranty. Those are two ways to get a little more out of the purchase.

Once the contract is approved, and all disclosures are made to both parties, the realtor must open escrow. It will be opened with your earnest money deposit. The escrow account is a trust account that is opened at the Title company or attorney's firm. It is designed to collect all of the funds for the transaction and disburse them at the close of escrow. This 'third-party' will be in a position to decide how and when to disburse the funds whether or not the transaction is consummated.

For example, when the escrow is opened, the buyer has a ten-day inspection period. During this inspection period the buyer may order a home inspection, a termite report, a mold inspection, an appraisal report, and a contractor to quote some of the repairs. Now, while this is an extreme case of inspections ordered during this time period, a buyer may find that the investment is not suitable. The result is a cancelled contract and the attorney/title agent must decide if it is appropriate, per the contract, to give the money back to the buyer. If the inspection period has expired and the buyer cancels, the monies may be awarded to the seller. Make sure to expeditiously order services during that time period and take the time to 'walk' the property with your family. Your earnest money is at risk and time is of the essence, beware!

While a buyer may cancel the contract during the inspection period, he/she may also provide the seller with a "BINSR." This form is the buyer's inspection notice and the seller's response. The buyer may identify items that need repair or address the method of resolving the costs of the repairs. The seller has the option to accept making the repairs or provide the buyer with the funds to do-so afterward. This is a critical point in the negotiations and basically sets the rest of the transaction in a position to close, once the bank funds reach the escrow account.

If you require financing, the bank will help protect your interests as they are trying to protect their own. For example, if you are buying a home that is in a Homeowner's Association (HOA), the bank will ask for their yearly budget, their current financial statements, and an additional questionnaire. These items will indicate the level of stability of the HOA. If the bank does not approve of their position, they will deny the loan. While this may upset you, you need to make sense of it. If they disapprove the financial position of the HOA, do you want to take the risk of living in such a community? The same example goes for the appraisal report. If the sales price is greater than the appraisal value, you may want to reconsider your offer. You may ask the seller to accept the appraised value as the purchase price or cancel the contract. Again, the details may need to be evaluated by your Realtor. Make sure to ask for his/her professional opinion on the matter, your earnest money is still at-risk.

The final blog of this series will entail discussion on; obtaining final loan approval, locking rates, and signing the closing documents. Read on!

As always, I am here to help with all of your real estate, development, and financial needs. Take care.

Your mortgage broker,

Diego L. Quintero