How to Sabotage Your Loan
What does it mean to “lock the interest rate”?
How to Shop for Interest Rates
How We Can Give You Cash At Closing
Understanding Your Credit Report
4 Credit-Scoring Myths
8 Big Mortgage Mistakes & How To Avoid Them
How To Sabotage Your Loan
You would be surprised at how hard some people work to sabotage their loan application. In many cases it would take a Herculean feat to accomplish, but some find innovative and creative ways to totally mess things up and get their loan application cancelled or denied in the process. Here are just a few:
Fail to provide accurate and complete information
Those forms may look long and complicated but if you don't take the time to fill them out in complete and accurate detail, you put your loan approval in jeopardy. If you make $57,788 a year in annual gross income, don't round it up to $60,000. If your car payment is $361, don't round it down to the nearest 50.
Hide all that embarrassing stuff
Have judgments, liens, or collections on your credit history? Been through a bankruptcy recently? Sure, it's embarrassing. Completing a loan application is much like undressing financially before your mortgage doctor. But shun the inclination to hide the ugly parts. If we don't know it's broken, we might not be able to fix it in time. However, if we know about it early on, we have a higher chance of using our years of experience to help you overcome those unsightly financial boo-boos. So, bolster your courage, and fess up so we can help you - that's our job. Giving us an accurate financial picture of your credit history is your job.
Procrastinate sending us requested documentation
Look, we don't like doing extra paperwork any more than you do. However, we do know what it takes to get your loan approved. So, if we ask for a certain document - be sure to send it to us as soon as possible. Otherwise you may be delaying your settlement date.
Quit your job before settlement and don't tell us
This is a sure fire way to say "hasta-la-vista-baby" to your loan approval. Most lenders will conduct a final quality control audit of your file to ascertain that what you were doing when you made loan application is the same now that you are going to settlement. They don't like it when people quit their jobs and lose a valuable source of income - which, for some strange reason, they think is important in order for you to pay back your loan in a timely fashion.
Rack up tons of consumer credit
Well, you know, you’ve gotta have all that great new furniture to go with that great new home you're going to buy. You can't move in with the junky unmatched and outdated stuff you've had since whenever. So why not finance it with that gold or platinum card you fortuitously received in the mail just yesterday?
Better yet, you don't want to be embarrassed by that old clunker graciously called a "car" sitting in the driveway of that exclusive new neighborhood. How 'bout a new 4X4, Beemer, Lexus or whatever is your going status symbol...? Problem is, you might throw your debt-ratio totally off the scale. So, before you buy a new car or furniture or whatever big ticket item, call your loan officer first to make sure you will still qualify for the loan and actually be able to have the house and driveway in which to put it.
Don't pay your student loans
You pay all your other debts on time - but for some reason this one just doesn't seem important to you. Well, if getting a home is important, pay your student loans on time!
Be late in paying your credit card bills
You're a busy person. Who has time to make that minimal payment of $15-20? And who cares anyway? Chalk up enough of these and say bye-bye to your loan approval.
Pay Your Mortgage Late
More To Come...
Be assured that, as people continue to sabotage their loans, we will dutifully report the messes to you so you won't have to go through their agony.
What does it mean to “lock the interest rate”?
It's just a fact of life that interest rates and points fluctuate according to market conditions and are based primarily on what it costs to obtain money in order to make mortgage loans.
At Corridor Mortgage Group we understand such fluctuations may have a serious impact on borrowers. So, at the time of loan application, we offer our borrowers two options for determining the interest rate and total number of points for their loan.
Choice # 1 = Lock-In
There are five components to a rate lock:
- Loan Program
- Interest Rate
- Points
- Length of Lock
- Property serving the lock
To "Lock-In" means you elect to reserve the interest rate and points according to the present market conditions for a specific length of time for a specific loan program. This means that the interest rate and points will not change during the lock-in period irregardless of the changing market conditions whether they are favorable or unfavorable.
This is a valuable protection in the event the market gets worse and interest rates rise. However, no one can predict the future, and it is just as likely that rates could get better. You must use your best judgment at the time you make your loan application.
Choice # 2 = Float
To "Float" means to defer the decision to lock the interest rate and points until a later date. The prevailing market conditions will then determine the terms of the lock-in at that time.
The option to lock-in or float the interest rate and points is entirely your choice. Employees of Corridor Mortgage Group have no authority to direct your choice on such matters nor should you rely on such advice.
The decision to "lock-in" or "float" will be made on a document entitled the "Financing Agreement" which is filled out when you prepare your loan application.
Other Things You Should Know About Locks
- Rate Locks Are For A Specified Period Of Time
The longer the length of the lock, the higher the points or the interest rate. That's because the lender takes a greater risk in guaranteeing an interest rate for an extended period of time. So, it is important to choose a period of time in which you can close the transaction. - What If A Lock Expires?
If the transaction does not close in the specified time, then the lock is said to "expire." Again, lenders lose money if your lock expires. In that event, most lenders will offer an extension. However, market conditions will likely determine the cost of such an extension. - Loans Must Be Locked Before Settlement
Corridor Mortgage Group requires loans to be locked within 3 calendar days prior to settlement. This is necessary in order to properly draw up the closing documents in a timely fashion in preparation for settlement. - Lock and Shop Programs
If you are purchasing a new home, most programs will not allow a lock until the property is actually selected. However, there are a few programs that will allow you to "Lock-and-Shop" allowing you to lock-in before you find a house. This would be very helpful in a market where rates are expected to climb.
How To Shop For Interest Rates
Everyone wants to get the lowest possible interest rate on their mortgage loan. On the surface, it looks pretty simply - who has the lowest rate? However, to be an educated consumer, there are a few things you need to keep in mind when shopping lenders for the best rate.
Don't Compare Apples With Oranges
Make sure you are getting information that takes into account all the variables associated with getting a rate quote. The variables to consider include:
- Loan Amount
- Loan Term (10-Year, 15-Year, 20-Year, 25-Year, 30-Year)
- Loan Type (Conventional, FHA, VA, Jumbo or Super Jumbo, Alternative)
- Loan Program (Fixed Rate, ARM)
- Loan Purpose (Purchase, Rate & Term refinance, cash-out refinance, primary residence or investment property, etc.)
- Lock Period (15-day, 30-day, 45-day, etc.)
- Credit Score Requirement
- Points or Origination Fees
- Application Fees/Brokerage Fees
- Always compare Good Faith Estimates & APR Disclosures
For example, you shouldn't compare the rate for a 30-Year Fixed Rate FHA loan for $125,000 with a conventional loan even with the same terms. And, if you get a good quote from someone, you will want to know what the credit score requirement is in order to get that rate. For the same program, lenders may charge a different rate to someone who has an excellent score as compared to someone else who has a poor credit score.
At Corridor Mortgage Group, we have access to a wide variety of lenders with literally hundreds of loan products. We will compare apples with apples to help you obtain a good program at a good rate.
Get Current Information
The lender with a good rate today, may not have the best rate tomorrow. Here's why: when business is slow, lenders will offer a competitive rate in order to attract business. When they offer fantastic rates, they will generate lots of business. When their pipeline gets too full, and they reach their limit in ability to process their business, they will then raise their rates in order to put a brake on their business. So, if you got a great rate from Lender A a week ago, you can't automatically assume that they have the best rate today.
At Corridor Mortgage Group, our loan officers monitor the daily interest rates of many lenders. They stay on top of the lenders who have the best rates at any given time. They will do the research to make sure you get the best loan at the best price.
Be Aware Of Other Costs Associated With Your Loan.
In addition to knowing what rate a lender will charge for a particular loan product, you will also want to consider the other costs associated with obtaining and processing your loan. Other items to consider:
- Application Fee (if any)
- Processing Fee
- Underwriting Fee
- Commitment Fee
- Appraisal and Credit Report Fees
At Corridor Mortgage Group, we will fully disclose to you all of the other costs associated with the origination, processing, and closing of your mortgage loan. Our loan officers will go over with you in detail all the expenses as they are listed in the "Good Faith Estimate" as well as the "Truth-In-Lending" statement which allows you to compare loans based upon the Annual Percentage Rate or "APR."
Understand How Credit Scores Affect Loan Programs And Interest Rates
With the practically universal adoption of credit scores for evaluating borrowers, you should understand how a person's credit score affects interest rates. Many programs set a lower limit for acceptance into the program. So if you get a great quote on a loan product, you should also ask what minimum score is required to get that rate. If your score is below that lower limit, the quote is no good to you for that particular loan program.
For more information check out the FYI article on Credit Scores.
At Corridor Mortgage Group we will disclose to you in writing the information about your credit score when your credit report has been ordered. Our loan officers will then research the wide variety of loan products from a variety of lenders to find the right rate for your situation.
In Conclusion
At Corridor Mortgage Group, we will be open and honest in saying that you may find a better rate with someone else. While we generally offer great interest rates, we do not always offer the absolute lowest. However, our team of loan officers and mortgage analysts have the knowledge base and experience to get you from loan application to settlement in the face of complicated and potentially devastating circumstances that would otherwise cancel your transaction.
How We Can Give You Cash At Closing
At Corridor Mortgage Group we can offer our customers what is called "Par Pricing." This is an interest rate for a particular loan product in which no points are charged. Because the markets are always changing, this interest rate will vary from day to day, and sometimes hour by hour, depending on the volatility of the market.
Some of our customers prefer to get a reduction in their interest rate and are willing to pay "discount" points to obtain a lower interest rate.
However, if you are in a situation in which you need extra cash at closing, we can offer you a broker credit by reversing the process and obtaining a higher interest rate. Since the lender pays us a higher amount for a higher interest rate, we can turn around and extend that extra cash to you.
For example, you have a 30-Year fixed rate loan of $100,000 with a rate of 6.0% with no points. But you need $1000 extra cash at closing to meet all your closing expenses. By raising the rate to 6.50%, we may then offer you a broker credit at settlement of $1,000.
But how will that affect your monthly payment? In this case, here is how it works out:
Monthly payment for $100,000 at 6.00% = $600.00
Monthly payment for $100,000 at 6.50% = $632.00
Understanding Your Credit Report
When applying for a mortgage loan, there are 4 major factors that are evaluated:
- Income
- Employment
- Indebtedness
- Credit History
Perhaps the greatest concern that most people have is how their credit history will impact the lender's decision in granting loan approval. Some people underestimate the impact of a poor payment history and think their credit is better than it actually is. Others worry excessively that minor infractions will exclude them from obtaining a mortgage loan. At Corridor Mortgage Group, we want our customers to be informed consumers. Here are a few items that you should know about your credit report, history and credit scoring.
Credit Bureaus
There are three companies that collect credit information. You can contact them by phone or go online to obtain a copy of your credit report. Since not all creditors report to all three, it is recommended that you obtain a report from each of them. The nominal fee they charge is well worth the expense.
Equifax
PO Box 105873
Atlanta, GA 30348
(800) 685-1111
Experian
PO Box 2002
Allen, TX 75013
Consumer Credit Questions
(888) 397-3742
TransUnion
PO Box 390
Springfield, PA 19064
(800) 916-8800
(800) 851-2674
What is a credit report?
A credit report or credit profile is a picture of how you paid back the companies you have borrowed money from, or how you have met other financial obligations. There are usually five categories of information on a credit profile:
- Identifying Information (Name, Address, Social Security Number, Date of Birth)
- Employment Information (Employer, length of employment, etc.)
- Credit Information (Creditor, Account Number, Type of Account, Opening Balance, Present Balance, minimum payment obligation, payment history, late payments)
- Credit Score (See article on FICO Scoring)
- Public Record Information (judgments, collections, charge-offs, liens, bankruptcies, etc.)
- Inquiries (A request for a credit report when the consumer applies for financing, such as applying for a credit or store card, purchasing an automobile, etc.)
What about inaccurate information on my credit report?
When you receive your report, we encourage you to study it thoroughly and verify the accuracy of all information contained.
It's not hard to imagine that in the processing of information for millions of people, that mistakes are made. However, you have the right, under the Fair Credit Reporting Act, to dispute the completeness and accuracy of information in your credit file.
When a credit reporting agency receives a dispute, it must reinvestigate and record the current status of the disputed items within a "reasonable period of time," unless it believes the dispute is "frivolous" or "irrelevant." If the credit reporting agency cannot verify a disputed item, it must delete it.
If your report contains erroneous information, the credit reporting agency must correct it. For example, if your file showed an account that belongs to another person, the credit reporting agency would have to delete it. Also, at your request, the credit reporting agency must send a notice of correction to any report recipient who has checked your file in the past six months.
What about accurate, but derogatory information on my credit report?
For those items in your credit profile which you feel deserve further explanation (such as an account that was paid late due to the loss of job, military call-up, or unexpected medical bills), you may send a brief statement to the appropriate credit reporting agency. The information will be placed on your credit profile and will be disclosed each time your credit profile is accessed.
But what about more serious credit problems such as judgments, collections or bankruptcy? We understand that discussing such information is much like undressing financially before your mortgage doctor. However, if you have had credit problems, be prepared to discuss them honestly with one of our loan officers and come to your application meeting with a written explanation.
As experienced mortgage professionals we know there can be legitimate reasons for credit problems, such as unemployment, illness or other financial difficulties. If you had a problem that has since been corrected, and your payments have been on time for a year or more, your credit may be considered satisfactory.
Our loan officers, with your permission, will pull your credit history and discuss it with you in full detail. They are experienced in dealing with bad credit and no credit. So even if you think your history is bad, let us be the judge.
Protecting Your Privacy - Credit Report Access
The Fair Credit Reporting Act (FCRA) is the federal law regulating credit reporting companies like Equifax, Experian, and Trans Union. It specifies who can see your credit profile.
Businesses must have a "legitimate business need" and a "permissible purpose," as stated in the federal law, to obtain your credit file. Otherwise, only you, and only those to whom you give written permission, can access your credit files.
Some examples of those who can access your credit files are:
- Employers
- Insurance Companies
- Credit Grantors
- Collection Agencies
Overcoming Credit Obstacles
At Corridor Mortgage Group our loan officers are experienced in overcoming credit obstacles. Even if you have been turned down by other lending institutions, there may still be hope for you.
Give us a call and let one of our loan officers examine your credit history to see if indeed you may still be able to qualify for a mortgage loan.
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