This article is provided to answer many of your questions about how to obtain a Las Vegas home loan. At the very least, it will clarify to some extent just exactly how much your credit report, job history, and bank accounts matter to your mortgage company.
There are four types of mortgage programs; Conventional- non-government loan which is primarily used by investors and/or those putting 10% or more as a down payment. Interest rates usually are slightly better for owner occupied loans. FHA- government loan which is for owner occupied buyers ONLY, and is quite lenient in their guidelines with regards to credit unlike Conventional. VA- government loan which is for those who have served in any branch of the military only! JUMBO- Are loans over $417,000 (NV, varies by State!) that are not Fanniemae/Freddiemac purchased loans. They require more down payment and higher interest rates due to the lack of Wall Street’s interest in the “higher risk” loans.
In general there are four basic factors used to qualify a borrower for a loan, regardless whether its Conventional, FHA or VA (Slight differences between the programs).
-Credit Worthiness
-Cash
-Job/Income Stability
-Debt/Income Ratios
(1) CREDIT WORTHINESS
It is not necessary that you have accumulated pages and pages of excellent credit references. In fact you don’t need much credit at all. Having very little credit history is sometimes better than having poor credit history. Even if you have no credit at all, we can still verify that you have paid your rent, telephone bill, and utilities on time for the past year. If you do have some credit history, it is not necessary that you “walk on water”. Whether you have a lot of credit accounts or only a few is not important. What matters is that these accounts have been handled in a responsible manner. Special focus is given to payments made in the last 12 to 24 months. Never, under any circumstances, should you make a late payment on a mortgage if you intend to apply for a new mortgage in the next year. This can be “the kiss of death” on a loan application. If you must take a late payment on some credit account, why not make it a big one? One late car payment of $350 hurts you no more than a late payment of $10 to Sears- and it may be easier to explain.
(2) CASH
Believe it or not, even if you have all your ducks in a row, and you have 10 years on the job, with gold card credit and plenty of income, your loan will not be approved unless you can prove ahead of time that you have sufficient funds to close the deal. Only a portion of the cash must come from your own pocket, 3.5%-10% (depending on program). *FHA allows 100% gift from a family member for all your down payment and closing costs. You will need cash for four things.
-DOWN PAYMENT (this is a set figure that is not negotiable. 3.5% up to 10% of the purchase price)
-PREPAID TAXES, INTEREST, INSURANCE and PMI (private mortgage insurance), (lenders will usually collect up to 6 months of taxes and 14 months of homeowners insurance and 2 months of PMI)
-CLOSING COSTS (lender fees include 1% origination fee, Doc prep fees $200-$400, Underwriting fee $400-$700, appraisal $450, Realtor Transaction fees $400-$600, Title and escrow fees $700 +, etc…)
-RESERVES (Cash in the bank AFTER closing to prove 1-6 payments can be made! Varies per program)
(3) INCOME/JOB STABILTY
The underwriter wants to make sure that the income used to qualify you for this loan is likely to be ongoing for the foreseeable future. Since there is obviously no way to guarantee that any job will last forever, it makes sense to look at job stability. Basic FHA/FNMA guidelines require that the borrower(s) be on the job for at least 12 months. There are currently programs available for those who have recently moved or changed jobs but remained in the same field. It can be a problem if a borrower changed jobs, more than 3 times in the last 2 years. Each case is treated individually and you should consult your loan officer for a program that fits your situation.
(4) DEBT RATIOS
The only part of the whole loan process that is more or less written in stone is the debt ratio. There are two ratios that matter most, the FRONT END & BACK END. They are pure math and are calculated as follows:
The front ratio is equal to your proposed mortgage payment, including principle, interest, taxes and insurance (P.I.T.I.) divided by your combined monthly gross income. The back end ratio is your proposed mortgage payment (P.I.T.I) plus all other monthly credit obligations (that will be ongoing for more than 6 months) divided by your monthly gross income.
*The front-end ratio must be less than or equal to 31% Most loan programs require that the back end ratio must be less than or equal to 41%. **We have programs that allow up to 55% on the back end ratio. (must “walk on water” financially!)
**FIRST** SECURE THE MORTGAGE
Home buyers in the Las Vegas Valley are constantly surprised at the fact that it can take as little as one day to find a home they are happy with: Since it may take longer to process a loan application than it does to find a suitable property, it makes sense to begin the mortgage process first. Everyone benefits from a “head start” on the mortgage process. The seller, because he knows he has a qualified buyer. The agent, because they have not wasted time with an unqualified prospective client. The buyer because he is confident he is getting a home he is approved for and can afford. Any problems with credit, employment, ratios or cash can be addressed early on so that a timely closing can be expected.
Should you need an estimate on a home you would like to buy, please email me the request and I’ll prepare one for you!
Courtesy of:
“Doug Yates Mortgage Team!”
Direct: #702 521-LOAN
Fax: # 702 577-1065
Email:Doug@DougYates.com
Website:www.dougyates.com
{ 1 comment… read it below or add one }
Hello, just wonna know if there is any program for good paying homeowners. I am not in any financial hardship and pay all my debts on time, all I want to know is that if there is also program for me that can help me lower my home payment since I am paying on time and of course home value is down.