You’ve made the big decision: You’re ready to buy a home! What’s next? A great first step is to receive a Pennymac BuyerReady Certification. With this certification in hand, you’ll know precisely how much you’re qualified to borrow. It’s about as close to obtaining your mortgage as possible without actually finalizing it.
Let’s explore what a BuyerReady Certification is and how it can give you peace of mind as you begin your home buying journey.
What Is a BuyerReady Certification?
The BuyerReady Certification process is Pennymac’s unique loan certification process that confirms precisely how much of a mortgage you are likely to qualify for.
Here’s how it works:
Talk to a Pennymac Loan Expert and complete a mortgage application.
Submit documents that will provide an overview of your finances. Documents typically include:
Recent pay stubs
W-2 Forms and 1099 statements
Bank statements
Statements for other assets, such as stocks, bonds, IRAs and 401ks
Additional documents related to income, like child or spousal support, rental property income or gift funds
Our underwriters will review your documents, credit history, income and debt-to-income (DTI) ratio. We’ll also consider the type of property you’re planning to purchase.
You’ll receive BuyerReady Certification confirming you are likely to be approved to borrow a designated amount, as long as certain conditions and the home meet requirements. While it’s not a loan finalization, it is a significant move in that direction. Keep in mind that a BuyerReady Certification is valid for 120 days. (If you do not find a home within that period, you can apply for a new Certification with your most current financial information.)
Begin your house hunting with confidence! You’ll know exactly which homes fit your budget and be ready to put in your offer.
How Is a BuyerReady Certification Different Than a Pre-Qualification?
As you embark on the path to homeownership, you may hear about mortgage pre-qualification. How does a BuyerReady Certification differ from mortgage pre-qualification?
While a pre-qualification also involves working with your lender to determine how much of a mortgage you can afford, BuyerReady Certification takes it further.
A BuyerReady Certification is used to provide proof of your financial ability to secure a home loan for a specific amount, given there are no materially adverse changes to your situation or to the loan requirements, and the property you want to buy is determined as eligible. It can also be seen as a conditional approval — meaning, you are likely to be approved for the loan as long as you and the property meet all of Pennymac’s conditions.
Mortgage pre-qualification is a more informal process than BuyerReady Certification. It doesn’t require any official documentation, and is therefore considered more of a ballpark estimate than a precise confirmation of the specific amount you may be able to borrow to buy a home.
The Benefits of Receiving a BuyerReady Certification from Pennymac
Obtaining BuyerReady Certification has many benefits that can help facilitate the homebuying process and make it a more positive experience.
Enjoy peace of mind as you shop for a home
BuyerReady Certification shows the maximum loan amount you would likely qualify for, so you can limit your search for homes that fit your budget. You can avoid looking and falling in love with homes out of your price range. And remember, just because you have a BuyerReady Certification for a certain dollar amount, that doesn’t mean you have to borrow the entire sum . You’ll also want to consider other expenses that come with homeownership, such as taxes, association dues and new home furnishings, so leaving some wiggle room in your monthly budget could be very useful.
Get ahead of competing buyers
Many sellers prioritize accepting offers from potential buyers who have been BuyerReady Certified over those who are only pre-qualified. It shows that you’re a serious, credible home buyer who can secure adequate funding to proceed with the purchase.
Move faster on your offer
Found a perfect home? Since you already know what you can afford, you can make an offer immediately — a big plus in a competitive market.
Expedite loan processing
Since you’ve already submitted the majority of the documentation and information you’ll need for the mortgage, your loan process can be smoother and faster.
Qualifies you for rate lock
BuyerReady Certified homebuyers qualify for Pennymac’s Lock & Shop program, which allows you to lock in a rate before locating a property. Protect yourself from future rate increases and potentially save thousands of dollars in the lifetime cost of your mortgage.*
For an estimate of how much money you may be able to borrow, check out our Pennymac mortgage calculator. And if you’re ready to start home shopping, talk to a Pennymac Loan Expert and get BuyerReady Certified today!
*Lock & Shop Program allows consumers who have a Pennymac BuyerReady Certification for a purchase loan with Pennymac to lock a rate prior to locating a property. The program requires a non-refundable fee of $595 due at the time of the rate lock. Consumers with a Pennymac BuyerReady Certification for a purchase loan with Pennymac must meet appropriate underwriting conditions to obtain a mortgage loan. Consumers may choose between a 60-day, 75-day or 90-day lock period. Consumers must initiate a mortgage loan application for a specific property and be under purchase contract for the property at least 30 days prior to lock expiration in order to extend the locked rate. All rate lock extensions are subject to Pennymac’s standard rate lock extension fees. After the rate lock and subject to favorable market conditions, consumers may be eligible for a one-time reduction in rate once the loan application for a specific property has been initiated (0.50 % maximum reduction in interest rate allowed). Eligible loan products are Conventional Fixed, Conventional ARM, FHA Fixed and VA Fixed. Program excludes Jumbo, refinance, third-party and in-process loans. Program subject to termination in Pennymac’s sole discretion and without notice.
Buying a new house or building a dream home is a milestone for all – and with affordable home loans, the goal is certainly achievable. However, sometimes, the loan approval process may be time-consuming, potentially delaying your plans, particularly at a time when the demand and cost of real estate are on the rise. This is where a pre-approved home loan comes in. It can reduce the wait time for your loan approval and disbursal and also put you in a better position to negotiate with the lender. Before we get to the various benefits of a pre-approved home loan, let’s find out what it is.
What Is a Pre-Approved Home Loan?
A pre-approved home loan, as the name suggests, is a loan that has already been sanctioned in principal before the deal is finalized. The process is the same as getting a regular loan sanctioned, the only difference being you need not submit any documents or paperwork related to the purchased property.
The lender offers financing depending on your creditworthiness and repayment history and issues a pre-sanction letter after a quick verification. One thing to keep in mind is that the pre-approved home loan offer comes with a 3-to-6-month tenor, within which the property deal must be finalized. However, in case you fail to do so in the given timeframe, you can re-apply.
Top 3 Benefits of Pre-Approved Home Loan
Here, take a look at the top benefits of pre-approved home loans:
1. Faster Loan Disbursal
Since the majority of your loan verification is done at an early stage, the home loan disbursal process becomes prompt and easy once the property is finalized. You will only need to get the property documents verified at a later stage. The lender disburses the loan amount as soon as the document verification is completed. This proves beneficial when you are urgently looking for finances and need to book an apartment or house at the earliest.
2. House Hunting Made Easier
The real estate market hosts a pool of housing options, including independent homes, apartments, villas, and more. With a pre-approved home loan and pre-determined budget, the search for a suitable home becomes easier. For example, if you have a pre-approved sanctioned amount of INR 75 lakhs, you can shortlist houses or flats that cost anywhere between INR 70-80 lakhs. However, make sure you have enough savings for a down payment as it is not included in the Home Loan amount.
3. Better Scope for Financial Planning
A pre-approved home loan makes you aware of your home loan eligibility. That way, you can plan your finances accordingly and apply for a suitable loan amount that can be paid off comfortably without the fear of the loan application being rejected.
Now that you are well-versed with the advantages of a pre-approved home loan, check how to apply for one.
How to Get a Pre-Approved Home Loan Offer?
The process to apply for a pre-approved loan is no different from a regular loan application process. You can simply head to the bank’s or the lender’s website and fill out the online loan application form while providing a handful of documents to get pre-approval on your housing loan.
Documents Required for a Pre-Approved Home Loan
The documents needed to get your home loan pre-approved are listed below:
Identity Proof: Lenders require valid identity proof issued by the government, such as your Aadhaar card, PAN card, Voter’s ID, Driver’s license, and Passport among others.
Address Proof: Apart from the above ID proof, lenders may ask for your ration card and utility bills (gas, water, phone, electricity bills) to be furnished as proof of address.
A copy of Form 16
The last 3 months’ pay slips
The last 6 months’ bank account statements
The last 3 years Income Tax Returns filed
A cheque used for paying the non-refundable loan processing fee
Note: This is an indicative list, you might have to submit additional documents as per your lender’s requirement.
Why Opt for a Pre-Approved Home Loan?
If you are still apprehensive about a pre-approved home loan, here are all the reasons why it may prove to be the best option for you.
With a pre-approved home loan, you will have an idea of the maximum amount you are eligible for. You can shop around and pick a property listed online by the lender.
Lenders offer pre-approved home loans only on properties that have already passed valuation and quality checks. Thus, you need not worry about your loan application being rejected due to poor construction.
There is no requirement for stacks of documents. All you need are documents related to the property, which means less time is needed for verification and approval.
Unlike regular loan applications, where you need to submit documents after finalizing the property, with a pre-approved home loan, you can get on with the document verification (other than property-related documents) beforehand and then search for a house or property best suited for the budget.
5 Things to Consider When Applying for a Pre-Approved Home Loan
If you are planning to get your home loan pre-approved, here are a few things you should keep in mind:
1. Effect on CIBIL Score
Before the pre-approved loan sanction, the lender will look into your CIBIL score closely. If you have a history of multiple credit card or loan applications, your CIBIL score may not be as impressive. Hence, the loan application may get rejected, which will further reduce the credit score.
2. Chances of Rejection
If you do not meet the eligibility criteria laid down by the lender and instead account for poor credit history, low CIBIL score, inadequate income, etc. then your loan application may get rejected.
3. Same Rate of Interest
The rate of interest applicable at the time you receive the pre-approved home loan offer may be the same at the time you apply. Thus, even if the home loan interest rate goes down later, you may not be able to avail of the lower interest rates.
4. Limited Property Selection
Pre-approved home loans are offered on limited properties. This may narrow down the hunt for your dream home as you would only be able to choose from the properties that are listed and have passed the quality check.
5. Limited Period Offer
A pre-approved home loan is a limited period offer with an expiry date ranging up to 6 months. Therefore, once you get a sanction on your pre-approved loan, you will have to buy a property and apply for the home loan within the validity period.
Conclusion
Easy, hassle-free loan application, faster disbursal, and better negotiating power are some of the top benefits of a pre-approved home loan. And while these can be of huge advantage, a pre-approval on your home loan does not necessarily mean that the loan will be finalized. There are a dozen other factors, such as credit score, repayment history, income, property documents and so on that determine one’s home loan eligibility. However, to reap the benefits of a pre-approved home loan, it is important to complete the loan application process within the given period.
Shopping for a mortgage has never been easier, thanks to the array of online options. Brick and mortar lenders may still be a viable option, but you may find that an online lender has even more to offer.
Furthermore, exploring online mortgage lenders allows you to compare mortgage rates. You can also receive customized mortgage loan offers in your inbox in minutes. Even better, you’ll have direct access to a loan officer in case you have questions.
Who are the top online mortgage lenders for 2023?
If you’re in the market for a new home and ready to start your search for online lenders, here are some reputable options to choose from.
Best Online Mortgage Lenders of 2023
loanDepot
loanDepot is an online lender, but don’t think that means they are lacking in customer service. They provide over 150 loan stores across the country for customers that prefer in-person service.
The lender is a suitable option for anyone who wants to take out a mortgage with the assistance of a loan officer.
loanDepot offers various mortgage products, including fixed and adjustable-rate mortgages. You can also apply for jumbo loans, VA loans, and FHA loans. You’ll need a minimum credit score of 620 to qualify for a mortgage.
loanDepot ranks high in customer satisfaction and most buyers seem to have a good experience working with them. However, they do charge higher fees than other mortgage lenders.
Quicken Loans
This online lender takes the hassle out of securing a mortgage by letting you complete the entire process online.
You’ll need to provide a few key details about your finances using this form to get started. A Home Loan Expert will review your application and contact you to discuss loan options.
And no need to worry about getting overwhelmed. Quicken Loans offers online tools to help you understand loan options and the home buying process. Plus, the customer service is excellent; a live representative is always standing by.
You can also upload all your documents and monitor the status of your application directly from the portal. This means you never have to pick up the phone if you don’t want to.
And when you’re ready to close, you have the option to schedule the closing when it’s convenient for you.
Better.com
If you’re looking for an online mortgage lender, you should check out Better.com. The company uses technology to simplify the lending process for its customers. Better.com promises a fast and transparent mortgage experience.
The lender is willing to work with all different kinds of buyers, including individuals who are self-employed or have unique job situations.
At least a third of its mortgages are taken out by first-time homebuyers, and over 70% of all buyers pay a down payment that is less than 20%.
Better.com mortgages don’t come with any hidden fees; there are no application or origination fees. To get started, you can visit the company’s website and get pre-approved in just a few minutes.
Rocket Mortgage by Quicken Loans
Rocket Mortgage is a division of Quicken Loans. Their key competitive advantage is the asset importer tool, which takes the guesswork out of determining whether you’re approved.
Instead of uploading documents, importing them from the information provider guarantees the accuracy of the numbers and allows you to receive loan offers using real-time interest rates in a matter of minutes.
And once you’ve selected a loan that works for you or created a custom option, you’ll be able to close in record time. Plus, Rocket Mortgage customer service experts are standing by to assist with questions you may have every step of the way.
NBKC Bank
NBKC Bank is not as widely known as many of the other lenders on this list. But that doesn’t mean you should rule them out as a potential mortgage lender.
There are several features that make the Kansas City-based lender a great option. The bank promises fast home closings and provides exceptional customer service.
NBKC Bank focuses mostly on online mortgages and offers its customers competitive interest rates. It does have several brick-and-mortar locations but focuses mostly on processing online mortgages.
You’ll need a minimum credit score of 620 to qualify for a mortgage, so this is a suitable option for borrowers with fair credit. NBKC Bank offers various mortgage products, as well as personal accounts. This makes them a great option for anyone looking for a full-service lender.
Guaranteed Rate
You can apply for a mortgage in a matter of minutes from the homepage of this digital mortgage provider’s site.
All you have to do is answer a few questions about your desired home, credit, and finances to receive a comprehensive listing of loan types and interest rates you may qualify for.
Guaranteed Rate has plenty of no-down-payment loan options like VA loans and USDA loans. They also offer a knowledge center to help you understand mortgages and how the process works.
Once you decide on a mortgage product that best suits your needs, you’ll work directly with a loan expert to upload and sign documents and finalize the loan. If you prefer to meet with a loan expert, there are 170 Guaranteed Rate branches across the United States.
Truist
Truist is known for its brick-and-mortar presence, but they also have an impressive online mortgage platform. Available in English and Spanish, Truist mortgage offers an array of mortgage solutions to choose from.
You can initiate the application process online or directly from your mobile device through the SMARTGUIDE tool.
You can also call 877-907-1020 to speak with a loan officer or chat online from the website. Or if you wish to meet with a loan officer, use the locator tool to find a Truist branch near you.
You can also take advantage of their Doctor Loan program if you’re a medical professional and meet select income criteria.
SoFi Mortgage
SoFi mortgage is another online lender that stands out from the masses. Although they don’t offer government-backed home loans, SoFi mortgage has programs that require a down payment as low as 10 percent, and they do not assess mortgage insurance.
Customers also enjoy a seamless prequalification and application process, along with no origination fees. Even better, it may be possible to close on your loan in under 30 days.
Penny Mac
If you’re searching for flexibility, Penny Mac may be the ideal lender for you. They offer several options to consumers of varying financial backgrounds. To date, they’ve served over 1 million customers and funded over $5 billion in loans in 2017, alone.
You can request a no-obligation free quote online, chat with an expert, or call (888)870-6229 to get started.
Reali
Crediful’s rating
Reali caters to consumers looking to purchase or refinance their homes. Through their Interactive Loan Dashboard, you can apply, upload any documents needed, and track your loan’s progress at the tap of a fingertip.
You’ll also have access to a Home Loan Advisor 24/7 to address any concerns you may have. And because of their streamlined process and low fees, you can expect to close in record time without spending a fortune.
Unfortunately, Reali does not offer government-backed products, like FHA loans, USDA loans, and VA loans.
This can be a turnoff to first-time, credit-challenged, or cash-strapped buyers.
Another major drawback is that they only operate in Arizona, California, Colorado, Florida, Georgia, Illinois, Michigan, Oregon, Pennsylvania, Texas, Virginia, and Washington.
The good news is they plan to expand their offerings to more states soon.
Pros and Cons of Online Mortgage Lenders
The rise of the internet has revolutionized many industries, and the mortgage industry is no exception. Online mortgage lenders have steadily been gaining a more substantial market share due to their distinct advantages. However, as with anything, they come with their own set of disadvantages. Here, we break down the pros and cons of opting for an online mortgage lender.
Pros of Online Mortgage Lenders
1. Lower Costs: Operating primarily online, these lenders often have fewer overhead costs compared to traditional brick and mortar lenders. This can translate into competitive mortgage rates and lower lender fees, making online mortgage lenders potentially cheaper.
2. Convenience: The ability to initiate and complete the entire application process online is a significant advantage. You don’t have to schedule meetings with a loan officer or travel to a bank branch. Instead, you can apply anytime, anywhere, which fits well with busy schedules and modern, on-the-go lifestyles.
3. Range of Loan Products: Online mortgage lenders often offer a broad range of loan products, including FHA and VA loans, USDA loans for rural properties, conventional loans, and jumbo mortgages. These lenders often cater to a diverse demographic, meaning whether you’re a first-time homebuyer seeking down payment assistance, a veteran, or someone with less-than-perfect credit, you can often find an online mortgage product that suits your needs.
Cons of Online Mortgage Lenders
1. Technological Hurdles: Not everyone is tech-savvy. If you’re not comfortable navigating online platforms or don’t have reliable internet access, you may find the online mortgage process daunting. The learning curve associated with digital platforms can be a deterrent for some people.
2. Lack of Personal Interaction: Some people prefer a high-touch, personalized service when dealing with significant transactions like buying a home. With online lenders, face-to-face interaction is usually minimal or non-existent, which can be a downside for those who prefer a more traditional approach to their financial transactions.
3. Negotiability of Fees: While online mortgage lenders are often cheaper, certain costs like origination fees and closing costs may not be as negotiable as they could be with a traditional lender. Also, mortgage insurance may still be required for government-backed loans, like FHA or VA loans, and the requirements for jumbo loans may be stricter.
4. Trustworthiness: The online space can be a breeding ground for scams and unscrupulous practices. Not all online mortgage lenders are trustworthy, making it crucial to do your homework. It’s important to research each online lender thoroughly, checking their reputation, reading customer reviews, and ensuring they are registered with appropriate financial oversight institutions.
Despite these potential downsides, many homebuyers find that the convenience, competitive rates, and the ability to shop around from multiple lenders offered by online mortgage lenders outweigh the cons. But the best online mortgage lender for you ultimately depends on your personal finance needs, comfort level with technology, and unique home loan situation.
Factors to Consider when Choosing an Online Mortgage Lender
Finding the right online mortgage lender for your home-buying journey involves more than just hunting for the lowest interest rate. You need to consider a variety of factors, from loan types to the speed of loan processing. Here’s a breakdown of what to look for:
Interest Rates
As a prospective borrower, interest rates are often one of your first considerations. The interest rate can significantly influence your monthly mortgage payment and the total cost of your loan. Due to their lower overhead costs, online mortgage lenders often advertise competitive rates. However, it’s essential to compare rates across different lenders to ensure you’re getting the best deal.
Fees and Hidden Charges
While interest rates play a crucial role in determining your loan cost, it’s equally important to consider fees and potential hidden charges. This could include origination fees, appraisal fees, closing costs, and other service charges. Some lenders may also charge additional fees for rate locks or early repayments. Always ask for a comprehensive cost breakdown and be wary of lenders who are not transparent about their charges.
Loan Types
Each online mortgage lender may offer a variety of loan types, such as FHA loans, VA loans, conventional loans, and more. Depending on your personal circumstances and needs, you might need specific loan products like USDA loans for rural properties, FHA or VA loans for a low down payment, or jumbo loans for larger properties. Ensure that the lender you choose caters to the type of loan that suits your situation best.
Customer Service and Support
Excellent customer service is crucial when dealing with online lenders as your primary communication methods will be via phone, email, or online chats. Lenders who offer high-quality customer service can significantly streamline the mortgage process, making it less stressful for you. Consider checking customer reviews and ratings for insights into a lender’s customer support.
Speed of Loan Processing
The time it takes for online mortgage lenders to process your loan application and close your loan can vary. If you’re working within a specific timeframe, you may prefer a lender known for quick processing. This is particularly crucial in competitive real estate markets, where being able to close swiftly could make all the difference.
Pre-approval Process
A seamless pre-approval process can signify an efficient online mortgage lender. Pre-approval offers you a rough estimate of how much you can borrow and helps you stand out in competitive property markets. Seek lenders that provide easy pre-approvals, preferably with only a soft credit check to avoid impacting your credit score.
User-friendly Technology
With most of your interaction with online lenders taking place digitally, user-friendly technology becomes paramount. Consider factors such as the simplicity of the application process, online document upload functionality, digital signature capabilities, and the ease of online loan tracking. A lender with a robust, intuitive platform can significantly simplify your online mortgage process.
Tips for Applying for a Mortgage Online
Embarking on the journey of applying for a mortgage online can feel overwhelming, especially if it’s your first time. But don’t worry – we’ve got some helpful tips to guide you through the process.
How to Prepare
Before you start your online mortgage application, it’s important to get your financial house in order. Here’s how:
Check your credit score: Your credit score is one of the main factors that lenders consider when evaluating your loan application. Make sure to check your credit reports for any errors and dispute them if needed. If your score is low, you might want to consider improving it before applying for a mortgage.
Verify your income: You will need to provide proof of income, so gather your recent pay stubs, W-2s, or tax returns. If you’re self-employed, you may need to provide additional documentation, like bank statements or profit and loss statements.
Get your documents in order: Apart from income verification, you’ll need other documentation, like identification, proof of assets, and information about your debts. Having these documents ready can speed up the application process.
Navigating the Application Process
Once you’re ready to apply, keep the following in mind:
Understand the terms: Make sure you understand the terms of the mortgage, like the interest rate, whether it’s fixed or adjustable, the length of the loan, and any fees involved.
Use online tools: Many online lenders offer useful tools like mortgage calculators. These can help you understand what your monthly payments might be based on different interest rates and down payment amounts.
Stay organized: Keep track of where you are in the application process. Most online platforms will save your progress, but it’s good to have your own record too.
Questions to Ask Your Lender
Securing a mortgage can often feel like a daunting process, particularly when applying online. To navigate this path with more confidence, it’s crucial to arm yourself with the right questions when engaging with potential lenders. The responses to these questions will not only give you a clearer idea about the mortgage terms but also about the lender’s transparency and commitment to customer service.
What types of loans do you offer?
The world of mortgages encompasses a variety of loan types designed to cater to different borrower needs. This includes conventional loans, government-backed loans such as FHA, VA, and USDA loans, and jumbo loans for larger mortgages.
Understanding the unique benefits and requirements of each type is important. For example, FHA loans may be suitable for those with lower credit scores, while VA loans are primarily designed for veterans. Your potential lender should be able to provide a comprehensive explanation of each option and help guide you towards the loan type that best fits your unique situation.
What are the interest rates and APR?
While the interest rate of a loan often takes center stage, the Annual Percentage Rate (APR) should not be overlooked. The APR provides a more comprehensive measure of cost as it includes the interest rate, lender fees, and other loan charges, offering a more complete picture of the long-term cost of the loan.
What fees are involved?
Beyond the interest rate, mortgages often involve several other fees that can impact the overall cost of the loan. These include origination fees, appraisal fees, home inspection fees, and potentially prepayment penalties. Some lenders may even charge for rate locks, which secure your interest rate for a specified period. It’s critical to ask for a detailed breakdown of all fees involved to ensure that there are no hidden costs that might surprise you down the line.
What Is the estimated timeline for approval and closing?
Mortgage approval and closing timelines can vary greatly among different lenders. Knowing the expected timeline can be crucial, especially if you’re working with a specific move-in date. In a competitive real estate market, a quick approval and closing process could make all the difference when multiple offers are being considered.
What are your minimum credit score and down payment requirements?
Understanding a lender’s minimum credit score and down payment requirements can help you gauge your chances of approval. These requirements can vary greatly depending on the loan type and the individual lender’s policies.
Do you consider alternative credit data?
For those with a limited credit history, some lenders may consider alternative credit data such as utility bill payments or rent payment history. Asking about these possibilities could potentially help you qualify for a loan even with less conventional credit information.
What is your process for loan servicing?
Understanding whether the lender will service your loan or if they intend to sell it to another company is important. If they plan to sell it, knowing who your point of contact would be for any issues or inquiries is crucial.
Bottom Line
Choosing an online mortgage lender is a significant decision that can impact your financial situation for years to come. Therefore, it’s critical to take the time to carefully evaluate each lender. From comparing interest rates to analyzing the type of customer service they offer, there are many factors to consider in this selection process.
We’ve touched upon some of the best online mortgage lenders available today. These lenders were chosen based on their competitive rates, comprehensive loan options, excellent customer service, and user-friendly platforms. However, remember that the “best” lender will vary depending on individual circumstances, and the top choices for others might not be the best for you.
While online mortgage lenders offer convenience and often competitive rates, they also come with their unique set of challenges. It’s vital to remember that transparency, trustworthiness, and a clear understanding of the terms and conditions are paramount in any financial decision, including choosing a mortgage lender.
We encourage you to conduct your own research and take advantage of online tools and resources that many of these lenders offer. Shopping around and comparing multiple lenders will help you find the best mortgage fit for your specific needs.
Remember, a mortgage is a long-term commitment. The time and effort spent in making a careful, well-researched decision now will pay dividends over the life of your loan. Happy home hunting!
It’s all about those LO partner points Gifts are accessible through what are called “LO partner points,” DeCiantis said. “Through our partner point program, we have for years allowed partners to redeem partner points to send a closing gift to the borrower,” she told MPA during a telephone interview. “It was in a separate platform … [Read more…]
When most people think about what it’ll be like to buy their first home, they think about their ideal floor plan or how they want to decorate their home. But before you can even get to that point, you need to make it through the underwriting process.
During the underwriting process, your mortgage lender evaluates whether you’re a good candidate for a mortgage. Going through underwriting may sound intimidating, but knowing what to expect can make the entire process run more smoothly.
What is mortgage underwriting?
Mortgage underwriting is simply a method used by your lender to assess your eligibility for a mortgage loan. This evaluation is performed by reviewing your credit, conducting a comprehensive analysis of your finances, and appraising the property.
After this, the lender will determine if you’re a suitable candidate for the loan. The majority of this process occurs discreetly, but your participation is vital.
As the borrower, it’s your responsibility to furnish your lender with all the financial information they require. By being transparent and forthcoming with information, you facilitate the lender’s decision-making process and increase the chances of approval for your mortgage application.
What does a mortgage underwriter do?
A mortgage underwriter’s role is to evaluate risk and assess if you’re a suitable candidate for a mortgage loan. They analyze your financial information to determine the likelihood of you defaulting on your mortgage payments.
The underwriter focuses on four key areas in their assessment: credit, assets, income, and the home appraisal. Let’s take a look at what they consider in each area:
Credit: Your credit score is a major factor in the underwriting process. A high credit score indicates a strong track record of repaying debt and could increase your chances of getting approved for a mortgage. To qualify for a mortgage, you must have a minimum credit score of 620, but to secure the best interest rates, you should aim for a score of 740 or higher.
Income: Your lender will want to see evidence of a stable source of income to ensure that you can make your monthly mortgage payments. You can verify your income by providing W-2s, bank statements, tax returns, and if self-employed, business tax returns and profit and loss statements.
Assets: To mitigate the risk of default, your lender will consider all your assets, which can act as collateral. Relevant assets include savings, retirement accounts, stocks, and investment properties. A substantial number of assets also shows the lender that you have the means to cover your down payment and closing costs.
Appraisal: Before finalizing the mortgage, the lender will perform an appraisal of the property to ensure that you’re not overpaying. An appraisal protects both you and the lender by providing a fair assessment of the home’s value.
5 Steps of the Mortgage Underwriting Process
The underwriting process can feel pretty overwhelming when you’re in the beginning stages. Here is an overview of the five steps you’ll need to take to purchase your home.
1. Get preapproved for a mortgage
The first step in the home buying journey is securing preapproval for a mortgage. This crucial step should be taken before starting the search for a house. The preapproval process involves an evaluation of your financial information and a credit check by your lender.
Documents like bank statements, tax returns, and employment verification must be submitted to the lender. Upon preapproval, your lender will issue a letter indicating the amount you have been approved to borrow.
Getting preapproved is important as it gives a clear picture of your budget for the home purchase. Additionally, having a preapproval letter enhances the credibility of your offer and makes you a stronger candidate in the eyes of listing agents and sellers.
2. Get your home appraised
With preapproval for your mortgage in hand, it’s time to start your search for your dream home. Once you’ve found it, a home appraisal is the next step.
A professional appraiser will assess the value of the property based on its location, neighborhood, and features, ensuring that you don’t end up borrowing more than the home’s actual worth.
3. Perform a title search
Before purchasing a home, it’s essential to check for any existing claims, unpaid taxes, or liens. After the appraisal of the property, the title company will conduct a thorough search to ensure its clear legal standing.
Upon confirming that the property is free from any legal disputes, the title company will secure a title insurance policy. This insurance provides protection for the lender and verifies the home’s eligibility for purchase.
4. Find out whether you’ve been approved for a mortgage
Once your mortgage loan application has gone through underwriting, you’ll find out if you’ve been approved for a mortgage. Hopefully, your application is approved, and you’ll be all set to close on your home.
However, you could receive one of the following three decisions:
Approved with conditions: Your mortgage application may be approved on the condition that you provide additional information. For instance, you may need to provide more financial documents or further proof of employment.
Denied: The lender may reject your loan application. If this happens, you want to understand why so you can figure out your next steps. For instance, you might have been turned down because your debt-to-income ratio is too high. Or your credit score may have been too low. Knowing this information gives you tangible steps you can take to improve your finances and reapply in the future.
Suspended: Your loan application may get suspended if something is missing from your file. If this happens, the lender will let you know what information they need to continue the underwriting process.
5. Close on your home
Once your lender has cleared any loan contingencies and locked in your interest rate, you’re free to close on your home. Once you’ve closed on the mortgage and received the keys to your new home, the loan process is finished.
How long does the underwriting process take?
There really is no standard time frame to complete the underwriting process; it can take from a few days to a few weeks. The length of time depends on the type of home loan you’re applying for and any issues that arise along the way.
A lot of this will be outside your control, but there are steps you can take to make the experience easier. The best thing you can do is to respond quickly to any requests from your lender.
For instance, if they contact you and request additional bank statements, then try to provide that information as quickly as possible. The underwriting process cannot proceed without this documentation.
What can I do to ensure a smooth underwriting process?
To prepare for the mortgage underwriting process, it’s essential to compile all the required documents and verify the accuracy of your credit report. Additionally, ensure your income and work history are recent and correct and follow these guidelines:
Manage your debt level: Avoid incurring new debt or making significant financial changes that may impact your debt-to-income ratio during the loan processing period.
Stay connected with your lender: Respond promptly to any questions or requests for additional information during the underwriting process. Utilize online resources to stay organized and easily communicate with your mortgage loan officer.
Be transparent about your finances: Provide accurate and complete information about your income, credit history, and assets. If there are any discrepancies, include explanations for them to help the underwriter make a faster decision.
By keeping these tips in mind, you can make the mortgage underwriting process easier and increase your chances of becoming a homeowner.
Bottom Line
During the mortgage underwriting process, your lender assesses your financial information and decides whether you meet the criteria for a loan. For first-time homebuyers, this stage can be overwhelming, but there are steps you can take to simplify the process.
Take the time to carefully compare and choose your lender, opting for one that is willing to support you and provide you with the best terms possible. Additionally, collaborating with a well-informed real estate agent can make the journey smoother.
Don’t be discouraged if your credit score is lower than you’d like. There are many mortgage programs available that are designed to assist borrowers with bad credit. With these options, buying your first home can still be a possibility.
“Once brokers choose which thank you item they’d like to send, they simply select when they’d like it sent, and UWM will handle the rest,” the wholesale lender said in its release. “Memory Maker is a simple and efficient way for brokers to make a lasting impression with borrowers and real estate agents long after … [Read more…]
United Wholesale Mortgage, the country’s top mortgage lender, announced an enhancement to its PA+ service on Saturday, allowing brokers and their processors to choose which part of the loan process they would like a lender’s loan coordinator to handle.
Launched in May 2023, PA+ is a service that provides a dedicated UWM loan coordinator for brokers and their borrowers to make the loan clear to close. That’s the most time-consuming part of the loan process.
According to the company, brokers can select a combination of support for setup, underwriting or closing for a reduced fee. However, brokers can still decide to have the UWM loan coordinator handle the entire process.
“The purpose of PA+ is to give independent mortgage brokers and their processors more flexibility, control and support,” Mat Ishbia, president and CEO of UWM, said in a statement. “This gives brokers the access they need to scale their business immediately, which will become more critical when rates come down and volume increases.”
Ishbia announced the enhancement during AIME Fuse 2023, the Association of Independent Mortgage Experts‘ conference held Oct. 4-7 in Las Vegas.
Ishbia also announced “Memory Maker,” a tool available through UWM’s EASE platform that sends thank-you emails and handwritten notes to borrowers and real estate agents. The tool also offers gifts for borrowers, such as cutting boards or welcome mats.
Handwritten notes and gifts can be purchased with a credit card or by redeeming LO partners’ points, the company explained.
Ishbia said in a statement that building a relationship “can lead to referrals and repeat business down the road.”
Before most of us can even think of buying a home, we must shop around for a mortgage. In fact, a 2013 study by American Community Survey revealed that two-thirds of all housing units are occupied by a mortgage-holder.
As you might imagine, a mortgage is serious financial business involving credit reports, bank statements, and other methods of verifying your income and stability as loan grantee.
Fortunately, you do have some negotiating power in the mortgage process as a buyer— mainly by establishing a rate lock.
What Is a Rate Lock, You Ask?
A rate lock protects the borrower from unpredictable, rising interest rates. In basic terms, a rate lock is an agreement between you and your lender to freeze the interest rate on your mortgage.
It is a guarantee to freeze your interest rate wherever it is at the time of signing. The way mortgage companies arrive at the specific interest rate is on a point-based system that takes your finances into account as well as the size of your loan amount.
Essentially, every point you earn in this system translates to a better interest rate at a certain price and for a specific time period.
It’s important to remember that mortgage rates change daily or even hourly based on the market. As The Wall Street Journal once pointed out, following the weekly rates on 15-year and 30-year mortgages is a bit like a roller coaster.
But through rate locks, you might have the ability to freeze a low rate and therefore get a better deal on your mortgage. Obviously, this will save you money that you can put toward furniture, movers, and other living expenses associated with buying a new home.
Timing Is Everything.
The art of rate locking requires a knowledge of loan processing and a steady eye on market fluctuations. A rate lock is good for only a window of time, usually either 30, 60, or 90 days.
The goal is to sign your rate lock agreement at a time when the interest rates are down and when you have firm knowledge that the loan will be processed within that window of time. For those reasons, most experts recommend that you sign a purchase agreement before discussing rate locks.
It is critical not to lock in a rate too early because loan processing may take longer than expected. In a worst case scenario, your rate lock would be nullified. If this happens, you might incur some extra costs for a re-lock or be subjected to a worse rate.
So what’s important here is to hit the sweet spot between a low interest rate and a workable window of time.
Making the Most of Your Lock
Agreeing to a rate lock is usually binding, meaning that you are stuck with it even if the market rates fall a day later. There are, however, some exceptions to this rule.
When reading over your lender contract, make sure that there is a so-called “float down” provision, which would state that if the rate drops during your lock period, you can take advantage of the lower rate (typically, this provision is stated at the top of your Loan Estimate).
Lenders may charge a small fee for the flexible rate lock, but don’t be afraid to ask. And if all else fails, you could request to renegotiate your contract.
Are Rate Locks Worth It?
In a word, yes. With the correct approach, you could potentially earn huge savings on your mortgage. There is a definitely a difference in terms of short-term or long-term rate locks to consider.
Short term rate locks are often free or cost up to .25 or .5 percent of the total loan, or even as little as a few hundred dollars. Meanwhile, long-term rate locks while cost higher percentages, but offer a better security blanket should the loan process take longer than expected.
The best advice when choosing a rate lock is to do some research beforehand. Follow the fluctuation in mortgage rates for a few weeks. Find out the average time for processing loans in your area or ask your lender to estimate the time needed.
Take into account any other factors that could delay your settlement, such as unanticipated construction delays on a house or mistakes on your paperwork.
Quick Questions to Ask Your Lender About Rate Locks.
When will the lender let you lock in the interest rate? When you apply? When the loan is approved?
When will the lock-in be in writing? (This is a way to have a record of the lender’s agreement, in case of a dispute.)
Does the lender charge a fee to lock in your interest rate? Does that fee increase for longer rate lock periods?
How long does the lender expect the process of your loan to take?
If your rate lock expires and you want to get another, will the lender charge an additional fee for the second one?
State-owned Bank of Baroda (BoB) on Tuesday announced the launch of the “BOB Ke Sang Tyohaar Ki Umang” festive campaign, which will run up to 31st December, 2023. Under the campaign, BoB launched a festival offer with an attractive rate of interest on home, car, personal, and education loans.
BoB launches festive offer
Bank of Baroda’s festival offers include the launch of 4 new savings accounts with a host of benefits &concessions and attractive interest rate offers on Home, Car, Personal & Education Loans. The Bank has also tied up with Top Brands across categories such as Electronics, Travel, and Food to provide festive offers and discounts for its Debit and Credit Card holders.
Bank of Baroda home, auto loans
During the festive period, Bank of Baroda Home Loans will be available at a highly competitive rate of 8.40% p.a. onwards – with a complete waiver of processing fees. Baroda Car Loans start at 8.70% p.a. onwards with a nil processing fee.
Bank of Baroda education loans
On Education Loans, the Bank has introduced a special rate beginning at 8.55% p.a., a discount of up to 60 basis points, and without collateral for students who have secured admissions in identified premier educational institutions in the country. Baroda
Personal Loans start at 10.10% p.a. – a discount of up to 80 basis points, with a nil processing fee and higher loan limits of up to ₹20 lakh. The Bank has introduced a fixed rate of interest option. Personal and car Loans and borrowers can now choose between fixed and floating rates of interest.
Further, the Bank has established 112 Retail Asset Processing Centres (RAPC) in various cities for faster mortgage-based loan processing.
BoB launches four new savings accounts
The Bank has also introduced a range of Savings Accounts for the benefit of its customers. These include the Bob LITE Savings Account – a Lifetime No Minimum Balance Account; the BOB BRO Savings Account – a Zero Balance Savings Account for Students (16 to 25 years), the My Family My Bank/BOB Parivar Account – a Family Savings Account designed to meet the needs of the entire family and the Baroda NRI PowerPack Account. The Bank has also launched the BOB SDP (Systematic Deposit Plan), which is a recurring deposit scheme. During the festive period, these Savings Accounts come with a range of benefits & concessions.
Debadatta Chand, Managing Director & CEO, of Bank of Baroda said, “The festive season is upon us and we are already seeing the early signs of a spur in demand with high-frequency indicators such as car sales and credit card spending registering record highs. Bank of Baroda’s festive campaign “BOB Ke Sang Tyohaar Ki Umang” brings together a suite of attractive offerings across savings accounts, loans, and credit & debit cards. These attractive festive offers coupled with the convenience of our digital platforms will make the festive season even more rewarding and joyous for people, thereby giving a significant boost to demand.”
BoB offers discounts for its debit, and credit card holders
Bank of Baroda has also introduced attractive exclusive offers and discounts on Bank of Baroda Debit and Credit Cards and EMI offers this festive season. The Bank has tied up with leading brands across categories such as Electronics, Consumer Durables, Travel, Food, Fashion, Entertainment, Lifestyle, Grocery and Health.
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The latest buzzword on the street is “shutdown,” and apart from being buzzworthy, it’s actually very real. National parks are closed and hundreds of thousands of government workers have been told to stay at home.
Fortunately, active military continues to serve and air traffic controllers, prison guards, and border patrol agents remain on the job.
But how does the shutdown affect the mortgage industry? Well, it depends on the type of loan involved, though just about everything will be impacted to some degree.
FHA Loans
The most popular government loans are insured by the Federal Housing Authority (FHA), which operates under the Department of Housing and Urban Development (HUD).
HUD noted that it has 8,709 employees “on board as of pay period ending September 7, 2013.”
In the event of a shutdown, limited staff will remain on hand to handle certain business activities, including FHA loan processing.
Take a look at the chart above to see how few employees would be working during a shutdown…not very many.
In other words, while FHA loans will still continue be processed, there will definitely be delays.
Fortunately, FHA lending has become a lot less popular due to higher premiums, which should offset some of the carnage.
Also note that Ginnie Mae, which guarantees mortgage-backed securities (MBS) backed by federally insured or guaranteed loans, will see its staff slashed, though it said it will “continue to perform its critical and essential functions.”
VA Loans
Despite the U.S Department of Veteran Affairs (VA) being very much a government agency, it will continue to operate many of its operations, including its core medical facilities and home loan processing.
So borrowers looking to obtain a VA loan should expect business as usual, barring any delays that result from the overall shutdown.
If you’re attempting to get a VA loan, patience should probably be exercised as precautionary measure.
USDA Loans
The USDA, while seemingly an agency dedicated to agriculture, also operates a popular zero down home loan program reserved for rural locations.
As a result of the shutdown, the entire USDA website is currently down. Well, there’s a nice little message about the shutdown, but you can’t access any key information.
Additionally, the USDA Rural Development Guaranteed Housing Loan Program appears to be on hold during the shutdown. In other words, nothing is doing at the USDA until politicians learn to get along.
However, the USDA will continue to handle existing customers funds, such as processing escrow accounts to avoid tax penalties.
Fannie Mae and Freddie Mac
While Fannie and Freddie aren’t technically government entities, despite being in government conservatorship (don’t ask), these conventional loans are also being impacted by the shutdown.
First off, government workers whose employment is directly affected by the shutdown could run into snags during the loan underwriting process, seeing that lenders need to verify employment in order to sell their loans to Fannie and Freddie.
As a result, Fannie Mae released guidance on a few workarounds, advising lenders that they can obtain verification of employment (VOE) after the loan closes, but before it is sold. This is actually already permitted, so perhaps just a reminder.
The pair also require lenders to complete requests for borrower tax returns (IRS) and social security numbers, both of which will be difficult to obtain in light of the government shutdown.
Fannie is revising its policies temporarily to allow lenders to obtain the transcripts and complete validation after loan closing, but before loan delivery. In other words, buying some time.
So the hope is that lenders who sell their loans off to Fannie and Freddie will continue to underwrite and process loans on the basis that the shutdown won’t last long enough for them to be stuck with the loans.
Additionally, loan servicers have been advised to waive late payment fees if the borrower’s mortgage payment is late because of a government furlough.
Servicers are also being encouraged to offer Unemployment Forbearance to employees affected by the shutdown, assuming they’re unable to make housing payments.
For the record, even non-conforming loans and jumbo loans will be affected by the shutdown, seeing that lenders may still need to call on government agencies for certain information, so no loans are entirely exempt.
At the end of the day, patience is the name of the game here. Ideally, the shutdown won’t last too long and none of this will matter. But in the meantime, expect delays if you’re attempting to get a mortgage. And pray mortgage rates don’t spike in the process.