Neja Fedrigo, Associate Broker

Coldwell Banker Weir Manuel

nfedrigo at cbweirmanuel.com

 Office: 734-930-0200

 Fax: 734.930-0552

International Connections, Global Reach, Local Expertise®

  Mortgage Information

    Financing your Dream Home

Most buyers need some form of financing. Be proactive, be cautious, and save money. Each lender sets its own terms and rates, so comparison-shopping is critical. Research, shop around to ensure you get the mortgage that best meets your needs at the lowest cost to you.  First check your credit report.  It's free. The federal Fair Credit Reporting Act guarantees you access to a free credit report from each of the three nationwide reporting agencies — Experian, Equifax, and TransUnion — every twelve months. Some people choose to check their report every four months, rotating  the three agencies. Make sure the facts are correct, and fix what's not.

AnnualCreditReport.com is the ONLY federal government authorized source to get your free annual credit report

The Federal Trade Commission's Information on Free Annual Credit Reports

How much home can you afford? Federal Government site

Be proactive, get informed. It can save you thousands of dollars. US government site

Note:

When interest rates increase by one percentage point, the mortgage loan funds available at the same monthly payment goes down by 12%. For each quarter point interest rate change, buying power changes by approximately 3%.

Mortgage info, free apps for your phone, and more

To help you save money, and pay a lower interest rate, three-five months earlier, check that all information on your credit history is accurate. It's critical to have credit cards paid on time. However, if you have 20 cards with a $20k limit, banks will see a risk of you charging $400,000 and perhaps being unable to pay it back. The higher the risk, the higher the interest rates lenders will charge you. Even if you avoid charging more than  50% of your limit in any card. Make sure any accounts that you've closed are reported as "account closed at consumer's request."  Three-five months before shopping for a mortgage, avoid opening or closing accounts, purchasing large items (any new installment loans) even test-driving new cars, or moving funds around.  I highly recommend you consult with your financial advisor. Get your W2 earnings statements or 1099 DIV income statements for the last two years.

Because credit inquiries (each time you apply for credit, a lender requests a copy of your credit report - an inquiry) lower your FICO score, and increase the interest rate you'll pay for your mortgage -large numbers of inquiries mean greater risk because people with six inquiries or more on their credit reports can be up to eight times more likely to declare bankruptcy than people with no inquiries- the federal government advises that consumers do their rate shopping within a short period of time, so it will count as one inquiry,  not lowering your FICO score. For FICO scores calculated from older versions of the scoring formula, the rate-shopping inquiries period is any 14 day span.  For scores calculated from the newest versions, this shopping period is any 45 day span. But caution:  Each lender chooses which version of the FICO scoring formula it wants the credit reporting agency to use to calculate your FICO score  -ranging between 300 and 850. Above 759 is more desirable. There are many lending institutions that offer a variety of mortgage products. Financing options and rates can vary widely.

Be proactive. Two weeks before starting your house hunting contact as many lending companies as you wish.  Start with your favorite bank, or credit union. The one you've been a client of the longest. Analyze and carefully select the very best lender for you.

Consider asking these questions before selecting a lender:

A. What type of lender should I use?
There are three basic types of lenders.  Mortgage BROKERS promote a broad product menu, competitive pricing, and an entrepreneurial approach; however, BROKERS cannot lock, commit, or approve your loan because they are not actual lenders.  Banks and Credit Unions rely on financial strength, direct lending capabilities, and stability; however, they sometimes have limited product offerings.  Mortgage BANKERS blend the best of both: direct lending ability, financial strength and stability, wide product offerings and competitive pricing.

B. What loan products should I consider?
Make sure your lender offers multiple loan products (Conventional, FHA, VA, MSHDA, etc.).  While most people today do choose a 30-year fixed, it is not always the wisest choice.  Consider how long you'll be staying in the home and any anticipated income changes before settling for the same loan as everyone else.  Additionally, buyers acquiring properties in need of repairs may want to consider the FHA 203K Program.

C. Should I lock or float my interest rate?
Weighing numerous factors ranging from your projected closing date to upcoming economic reports, look for counsel regarding future interest rate projections.  While no one can predict with absolute certainty, you need to reach a comfort level that the lender you choose has the best information and hopefully your best interest at heart.

D. What are mortgage rates based on?
The pricing of Mortgage Backed Securities, not the 10-year Treasury Bill.

E. What upcoming economic data will impact rates?
How will a Jobs Report, a Fed Board Meeting or Inflation Number affect your home loan? Your mortgage planner should explain it to you, and keep you informed.

F. How can I improve my chances of getting approved and at the lowest possible cost?
Sometimes even minor improvements in a credit score, or how you position your assets can make a big difference. Consult with your financial advisor.

Compare Mortgage Rates                         FHA Mortgage Limits                                                FHA 2010 Policy Changes

Lenders explain all loan fees — the up-front costs of originating, processing and closing the loan. If you like a lender but the offer is missing something you saw in another offer, ask for it. If you’re going to refinance in a few years, ask if there is no prepayment penalty (prepayment penalty should be disclosed in the truth-in-lending statement.) To be safe, consult with your financial advisor.

Lenders assess the borrower for risk by examining their income level, debt-to-income ratio, credit repayment history, and expenses.

Typically lenders require that  the principle, interest, and insurance (PITI) or your house expenses, to be less than 25 %-28% of your monthly gross income. That's what they call the "front end" ratio.

The "back end" ratio: In general,  lenders require that your housing expenses plus long-term debt to be less than 33%-36% of your monthly gross income.

In conclusion: The longest your good credit history, the highest your credit score, and the safest investment you seem to be to lenders, the lowest interest rate they will typically charge you. This is what makes sense to banks, and lending companies.

Take your time, assess, and select wisely. Then get a pre-approval letter from the lender you select, and go find your dream home.

Caution during the loan process:

1. Don't apply for any new credit. Every time that you have your credit pulled by a potential creditor or lender, you lose points from your credit score. Depending on the elements in your current credit report, you can lose anywhere from 2-50 points for one hard inquiry.

2. Don't pay off collections or charge off during the loan process. Paying collections will decrease the credit score due to the date of last activity becoming recent. If you want to pay off old accounts, do it through escrow, and make sure that 1) you validate that the debt is yours, and 2) that the creditor agrees to give you a letter of deletion.

3. Don't close any credit card accounts. If you close a credit card account it will appear to the FICO that your debt ratio has gone up.

4. Don't max out or over charge on your credit card accounts. This is the fastest way to bring your score down 50-100 points immediately. Try to keep your credit card balances below 30% of their available limit at all times during the loan process.

5. Don't consolidate your debt onto 1 or 2 credit cards.

6. Don't do anything that could cause a red flag to be raised by the scoring system. This would include adding new accounts, co-signing on a loan, changing your name or address with the bureaus.

7. Do join a credit card watch program. This way you will know immediately if something does show up on a report that could cause your score to go down.

8. Do stay current on existing accounts.  This applies to your mortgage and car payments. One 30-day late can cost you anywhere from 30-75 points.

9. Do continue using your credit as usual. If it appears that you are changing your pattern, it will raise a red flag, and your score could go down.

10. Do call your loan originator,  if  you receive something in the mail from a creditor or collection agency.