So you have finally taken the plunge and you are going to build a new house. HOW EXCITING! But how to best finance your new home? Let’s face it there is only a very small group of homeowners that can bring an all cash offer to the table so then it becomes, Which lender to apply with? Who has the best rates….Will you qualify for these rates? Choosing a lender can become a very overwhelming process! Hopefully after reading this blog we will have provided you with some useful information to help guide you during the mortgage application process.
We at DB Homes are not lending experts but we work closely with local banks and have developed a relationship with the “experts” at these banks that we can direct our customers to if they should need this service. The first step for our customers would be to reach out to your bank and find out what their current rates are or if they offer any incentives or lending programs. If you are not happy with what your bank has to offer, shop around, different lenders offer different programs. You wouldn’t walk into one car dealership and buy the first car you like and you shouldn’t do that with your mortgage either. Once you decided on a lender, to ensure that your application moves quickly toward an anticipated conditional approval, you will most likely need to to provide the items listed below in a timely manner since the application process begins once all of your documentation has been received.
The following checklist will help you identify items required at the time of your initial application:
Primary and secondary income amounts
Pay Stubs covering the last 30 days for all applicants
W2’s for the last 2 years for all applicants
Name, phone numbers and addresses of employers for the past 2 years; if employed less than 2 years at current employer, please provide a written explanation
Verification of all monthly debt payments (such as mortgages, credit cards, automobile payments, lines of credit, second liens, etc.)
Current 60 day bank statements (include all pages even if blank) to provide documentation for amount and source of any deposit that is not direct payroll or social security
Complete signed Federal tax returns for the last 2 years
If you are self employed, the last 2 years’ complete tax returns (personal and business), K1s for all partnerships and YTD profit and loss statements
Current phone number or e-mail address, if preferred. And all physical addresses for the last 2 years
Government issued photo ID (driver’s license, passport, etc.)
Purchase contract from DB Homes
Copy of annual property taxes, homeowner’s insurance and if applicable, homeowner association dues
Typically these items can be sent directly to your processor using mail, email or faxed. Once all the items have been received and reviewed, your loan processor will contact you if any additional information is needed and once a credit decision has been made, you will be contacted by the bank. Keep in mind their goal is like yours they want to close your loan as quickly as possible too! Once a decision has been made and if you are pre-qualified you will receive the amount that you are pre-qualified for, what your monthly mortgage payment would be and how long the pre-qualification is valid through. Final approval of your mortgage is subject to the following conditions:
A fully executed purchase contract
A satisfactory written appraisal
Sufficient funds to close
Confirmation of accuracy of information provided
Standard underwriting and eligibility guidelines
Other conditions may apply based on the loan program selected
Some helpful tips to remember:
Any changes to the loan; loan amount, term or rate could change the APR (annual percentage rate) and possibly require a wait period before closing. Please make sure if you do request these changes, it is at least 15 days prior to closing.
Some borrowers may require PMI (Private Mortgage Insurance). PMI means, when you apply for a mortgage, the lender wants to make sure your home will have enough equity to pay off the loan balance should you default and go into foreclosure. But since foreclosed upon homes are often sold at a “discount,” lenders want a buffer of at least 20%. In other words, they want to be reasonably sure they can recoup the money they loaned you if the home has to be sold at a lower price than the original sales price.
- Any changes to the loan amount and it affects the PMI, you could possibly have a wait period before closing
- PMI monthly premiums can change if there is a change in circumstance; credit scores, LTV, term, loan amount, loan product etc.
Do not apply for any credit during your loan process, it may affect the approval of your loan.
Remember you have a choice when it comes to your mortgage. DB Homes can help direct you to local banks that can assist you in this important and exciting decision.