All home loans require documentation to help demonstrate the creditworthiness of the borrowers. At the beginning of the loan process, your home loan professional will ask you for all of your income, asset, property and any other type of relevent paperwork needed for your loan submission. Once your file is reviewed and approved by an underwriter, you may be asked to supply additional paperwork to help clarify any questions that came up during the initial approval process, and possibly again be asked for paperwork prior to closing your loan. These steps are a tyical part of the process for a lender to ensure salability of your home loan.
Any time a home loan is paid off in full, the paid-off lender is supposed to prepare and record a “reconveyance deed” with the County Recorder acknowledging the full payment, releasing the obligation. In years past escrow and title companies had people dedicated to following up on paid-off loans to ensure this vital step had occurred. Few escrow and title companies still perform this function, potentially creating problems for the original borrower. Although they are paid-off, loans without the required “reconveyance deed” recorded can cause significant delays to both sale and refinance transactions. Whenever a real estate loan is paid in full, follow up to make sure that a written confirmation is received within 30 days of the full payment.
Unbelievably, 44% of the net worth in the United States is tied up in real estate. If people think differently about their property, they can improve their financial circumstances, increase their income, and invest in their community through a charitable donation of real estate. The benefits to you can be substantial with a charitable gift of real property, creating an income stream if a charitable trust or charitable gift annuity is created, simplifying your estate. If you’re interested in learning more, contact a licensed financial advisor who can help you explore the many options for gifting real estate, reducing taxes, and helping your community.
Many homeowners have a line of credit secured by their home as a 2nd mortgage. When deciding whether to refinance your 1st mortgage, you must decide what to do with the line of credit. Your options include (1) paying the balance off and closing it (2), keeping the credit line in place with the balance unchanged, or (3) keeping the credit line in place with a partial or full pay off of the balance. Options 2 and 3 involve a process called “subordination,” and are accomplished by application with and approval by the current lender. It can take a few weeks, can require that a fee of up to $300 be paid, and can result in the credit line amount being reduced.
Most homeowners with home loans that exceed the value of their property are having a tough time dealing with declining interest rates and home values, since they are stuck with their original loans. Most of these loans have higher than current market interest rates and many of the homeowners have experienced declining income, causing severe financial hardship. Most attempts at refinancing or obtaining a loan modification to a lower rate have not worked. There is a new government program aimed at helping these people lower their payments and stay in their homes. Log on to the internet website www.makinghomeaffordable.gov or call 1-888-995-HOPE to see if you qualify for assistance.
Prior to securing an interest rate-lock for your home loan there are a few simple steps. You will need to supply income documentation and authorize accessing your credit history. If you are buying a home, you will need to provide evidence of your assets to be used for the down payment and closing costs. Your home loan professional will collect and analyze your data, and if it is determined that that your loan will be approved, you will be eligible to lock-in, protecting your interest rate from increasing, with a specific cost and expiration date.
Homes in housing developments that have a homeowner’s association and that are identified as either a Condominium or Planned Unit Development are often covered by a blanket insurance policy. The blanket policy typically covers damage to the structure and common areas, and the pro-rated cost is included in association dues. When approving a home loan, lenders require that the homeowner also provide evidence of an additional separate “walls-in” policy which insures everything inside the dwelling with a minimum coverage of 20% of the appraised value.
It’s common practice for buyers to “shop” rates with a couple of different lending sources when they need a new loan. For best results, recognize that rates and fees vary based on your credit score, your loan-to-value ratio, loan and property type, and (1) Solicit the rate quotes within a short time-frame. Interest rates can change hourly, so the comparison shopping should be completed as soon as possible, (2) Request a written estimate of all fees associated with the loan within 30 minutes of the telephone quote, and find out when the rate and fee estimate expires, and (3) Request assurance that the lender can complete the process within the time-frame given for the rate and fees quoted.
Three major credit reporting agencies create computer generated credit scores based on our credit histories and usage as reported by various sources, including banks, collection agencies and the government. These scores are used by lenders to determine the cost of your borrowing. Knowing how to improve your score and taking action is your best defense against the high cost of borrowing money. Step one is to keep debt payments current. Step two is to access the Federally approved website to get your credit report, which is http://www.annualcreditreport.com. Notice no “free” in the web address.
Step three, work to correct errors. There are businesses that specialize in helping people improve their credit score, and the credit repair process can take a number of months with no guaranteed results. Late payments must have been 30 days late before they should be reported to the credit bureau. It is known that the most recent late payments in the past 24 months drag your score down the most. Contact your home loan professional for more information.
To preserve appraiser independence in residential real estate transactions, “Home Valuation Code of Conduct” (HVCC) rules went into effect in May, 2009. Intended to prevent collusion between lenders, real estate agents and appraisers, HVCC has changed the appraiser selection process. It stipulates that instead of loan originators having the option of selecting the appraiser for a residential financing transaction, lenders must utilize a third party appraisal management company, which in turn uses a random selection process to make appraisal assignments. Although licensed experienced local appraisers are included in the pool from which the appraiser selection is made, the required utilization of an appraisal management company increases the cost and sometimes the time required to have an appraisal completed.
