WHAT YOUR MORTGAGE LENDER WISH YOU KNEW

Katherine Stanislawski
Published on March 23, 2016

WHAT YOUR MORTGAGE LENDER WISH YOU KNEW

An Interview with Mortgage Lender Ted Haas, US Bank

Spring is officially here. Spring seems to be the prime time for real estate in Rolla, Missouri and the surrounding area as home Buyers and Sellers start making a game plan. Buyers are anxiously checking to see which Rolla, Missouri and surrounding area homes are for sale. Sellers are prepping their homes to get them in tip-top shape. As a Buyer, you’ve been browsing listings online and perhaps driven by a few homes. Maybe you’ve even contacted a REALTOR. Your REALTOR® will want to know whether you’ve spoken to a local lender to get pre-approved. When I get a call from an excited Buyer, I often find that they have not yet talked to a lender. Meeting with a lender before looking at properties will provide you with several advantages. First, you’ll find out exactly the amount of house for which you qualify. Also, you’ll be given a pre-approval letter, which is significant ammo when submitting an offer.

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Ted Haas has been a leader in the banking industry for 17 years. He’s processed numerous loans over the years, including my own! I sat down with Ted to discuss what process he uses to get Buyers to closing and to learn what he wishes every Buyer knew. Whether you are interested in a home in Missouri or in another state, you will want to hear what Ted Haas with US Bank has to say about buying a home.

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Katherine: What’s the difference between a prequalify letter and a preapproval letter?

Ted: With a prequalify letter, there is no credit check or score obtained. This letter is based on what a Buyer tells me such as their self-reported credit score and their income. A prequalifying letter isn’t the same thing as a preapproval letter. A prequalifying letter is basically a letter stating that the Buyer has disclosed information and, according to this information, he qualifies for a mortgage. A prequalify is only as good as the information submitted by the Buyer. If a Buyer forgets to mention that they’ve had a bankruptcy or a debt in collections, it will affect the type of loan for which they qualify. You can get a prequalified letter here but understand that there is a significant difference between prequalifying and a preapproval.

ftr_448_imageKatherine: What documents should a Buyer bring when they visit with you to obtain their preapproval?

Ted: They should bring their most current pay stub with their year-to-date (YTD) information on it, the last 2 years of their W-2’s and two of their most recent bank statements. It’s important that these statements include all the pages. Don’t just bring in the page that shows the balance in your checking and savings. Make a copy of the entire months statement. If you already bank with us here at US Bank then I can get those for you. If there are any deposits made in your bank statements they need to be verified. We want to know if these are payroll deposits, gifts or cash advances.

Katherine: Please explain why a cash advance may be an issue for a Buyer.

Ted: Sometimes a Buyer will try to make their finances look better than they actually are by taking out a cash advance on a credit card and depositing that into their checking or savings account. It’s not a good idea because you’ve taken out debt and have increased your debt-to-income ratio.

Katherine: Are cash gifts ever an issue?ftr_427_image

Ted: With conventional and Federal Housing Administration (FHA) loans, the borrower and the gifter will need to sign a Gift Letter. The gifter must be a blood relative. On FHA loans, a gifter must prove that they did not borrow the funds themselves. We have to be able to track their gift through their most recent bank statements as the source of large deposits must be verified. This can be an issue if the gifter doesn’t want to provide this necessary verification.

Katherine: Once a Buyer has their letter of preapproval on hand they can begin their home search. Does the preapproval ever expire?

Ted: A Buyer who has been preapproved has 90 days to execute a contract. If they don’t find a house in that timeframe it’s okay, but we do have to check their credit to be certain that nothing has changed and that there are no delinquent bills or large deposits that have been made. We have a fraud guard that works behind the scenes. If there are any inquiries on the Buyer’s credit, we get an alert and have to look into it. It’s best not to open any new line of credit or make major purchases during this time. Wait to buy that new furniture or appliances until after closing.

Katherine: I’ve been hearing a few clients discuss cleaning up their credit report because of medical bills that have gone to collections. It seems that some people think that lenders don’t look at medical collections or bankruptcies in the same light as other collections. Is this true?

Ted: Medical bankruptcy is filed under one of the three main types of bankruptcies: Chapter 7, 11, and 13. Even a $20.00 copay could end up in collections – and it all shows up on your credit report the same way. There are two types of collections: a collection with a balance and a collection without a balance. A collection without a balance means you’ve paid the collection, but your credit score still takes a hit because the account went to collections. If a collection is on your credit report and is under $1000.00, it doesn’t have to be paid off. If the total of all collections is over a thousand dollars then it must be paid off. As such, a bankruptcy or medical collection does affect your credit score. However, if there was an extenuating circumstance, something that was out of the person’s control, then we can often work together to secure a mortgage.

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Ted: Same goes for tax liens or judgements. If you have a judgement or tax lien against you, they have to be satisfied.

Katherine: What questions do you ask potential mortgage applicants and what would you like for them to know before visiting you?

Ted: Every mortgage loan applicant needs to complete an application. I ask if they know their credit score and I want them to be honest about it. Do they have established credit? If not, we can build alternate credit, we need copies of utilities and rental history, all which should be in the applicant’s name.

Ted: If you don’t know your credit score, you can visit AnnualCreditReport.com or credit.com for a free credit summary of your score. Credit Karma also provides a free summary but they use a blended scoring formulation which often shows a higher credit score than the formulation I use at US Bank. The second option gives you the opportunity to review your score. The great thing about these sites is that they are considered soft inquiries and won’t affect your credit score. Once you have a report from one of these, print out the summary and bring it when you meet with me. Be warned: going lender to lender and having them all run your credit could jeopardize your score.

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Ted: If you are serious and ready to move forward and have completed the application, then we do run a credit score check, review your deb-to-income ratio and your down payment.

Katherine: What are some final things you’d like to add?

Ted: Don’t shop by rates alone. Posted rates at any bank may not be the rate you qualify for. The posted rates are assuming you have a really good credit score. Be aware of the teaser rates. Many online lending institutions add 1-2 points to buy down the rate but you end up paying for the additional points. It’s not always worth it to buy down points. US Bank keeps the servicing rights on all our loans.


 

If you are planning on making your dream of homeownership come true contact me, Katherine Stanislawski, to start the home buying process.

I provide real estate services in Rolla, Missouri and surrounding areas.

 

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