FLORIDA MORTGAGES

MORTGAGE TERMS:

    There are three basic steps to the mortgage process:  Pre-qualification - Pre-approval - Closing.  Each of these steps are uniquely different in the process of securing your home loan and yet all are inter-related to some degree.

PRE-QUALIFICATION:

    This is logically the first step in the mortgage process and is relatively simple to achieve.  To be pre-qualified, expect to furnish the following information:

*  Your full name and that of any co-borrower such as a spouse.

*  The complete address of your residence(s) for the last 2 years and the name and address of your     employer(s) for the same time period.

*  Your gross monthly income(s) and your social security number(s).

    Your Loan Officer will be able to then look at your credit report, verify with you the accuracy of the information it contains, and calculate your debt to income ratios to determine how much you can afford in a mortgage payment.  You should be told at this point what the amount of your down payment, closing costs and monthly payment will be based on the mortgage you qualify for.   Your Loan Officer can then provide you with a letter of Pre-Qualification to show to your realtor and the sellers of property you may be interested in.

PRE-APPROVAL:

   During this second step of the mortgage process, you will be asked to provide documentation to support the information you gave during pre-qualification.  This information is used during the final underwriting process of your mortgage loan application.  While this information may vary slight ly depending on your loan type, you can expect to provide the following documentation.

*  Your last 2 months bank statements

*  Your last 30 days paystub showing year to date earnings and your last year's W-2 form(s)

*  Written explanations of any credit deficiencies and recent credit inquiries.

*  If self-employed, your last 3 years business and personal income tax returns.

*  Copies of any divorce decrees, bankruptcy discharge papers and/or judgement satisfactions.

*   A copy of your fully executed sales contract for your new home.

   With this information, in addition to other documents required by the Lender and the Federal Government, your Loan Officer will submit your loan package for underwriting.  Based on the underwriting findings, your Loan Officer will receive a conditional approval along with any other documentation the Lender requires.

CLOSING:

   This is the procedure during which all legal documents are signed transferring the ownership from the selling party to you.  You will be advised in advance of the scheduled time and place and what the final amount of money will be required to close your loan.  You will bring a Cashiers Check or similar Bank Draft with you , sign the papers, give the Closing agent your money and receive the keys to your new home.  Congratulations!!

INTEREST RATES:

What’s your rate? This is the first question that I am asked with almost every potential client I talk to. Over the years, I have been able to develop a scientific yet easily understood answer for that first question. " Until I have specific information about you and what you are trying to accomplish, I don’t have a clue."

First, let’s first understand what makes mortgage interest rates go up and down. The vast majority of mortgage rates are directly influenced by and are based on the yield of the Treasury Bonds.  As the buy price of the bond increases, the yield of the bond goes down and mortgage interest rates go down also. Conversely, as the price of the bond goes down, the yield goes up and so do mortgage interest rates. The interest rates a lender charges, can fluctuate not only daily but minute by minute. The lenders can not only change their rate during a day but can refuse to lock in a rate as they choose.

   All of the recent talk about interest rate cuts in the media has been very misleading to a lot of consumers. The rate reductions or increases, by the government recently, apply to the  rate the Federal Reserve charges banks to borrow funds short term. These reductions do not apply to mortgages as has been stated in some reports. I wish it were that simple but it just doesn’t apply.

   Long story short, until your rate is locked with a lender and your loan is approved to close, there is no single answer to the "What is your rate?" question.

   Let’s talk about those rates in the paper. Lenders, advertising mortgage rates, must first have their information to the paper before a certain time to meet printing deadlines. If the rate changes before the paper comes out, most often, the lenders either can’t or don’t get the corrections back to the paper. Therefore, the rates may not still be available at the time of printing. The same premise can hold true for rates published on the Internet.

   The rates are also based on a number of parameters and should you fail to meet any of them, you probably won’t qualify for that rate. Typically, those rates are reserved for those people with credit scores of over 680, no late payments of any kind in the last 24 months, salaried, paying 20% down plus closing costs and buying a home for at least $120,000. These rates don’t apply to refinancing, homes less than the stated purchase price, and a variety of other factors too numerous to talk about here.

   As I have said before, each loan is a unique set of circumstances and there no guarantee of any rate until a lot of information is gathered and your credit report scored.

   My best advice is to be pre-qualified and credit approved BEFORE you sign a contract to buy a home. Believe me when I say that surprises after the fact are no fun for anyone.

   Comments or Questions

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07/23/2001