Feb 6, 2017
Karen Karr, Senior Mortgage Lending Officer with Midwest BankCentre, shares with us her expert knowledge on mortgage loans, the pre-approval process, and how to achieve a smooth closing in our latest guest blog feature.
GM: Can you explain the dos and don’ts for customers when applying for a loan and also during the timeframe before closing?
Karen: Once we have taken an application for a client and looked at their credit history, current payments, and income, we can run the information through an automated underwriting system to calculate the ratios and get a pre-qualification letter. From the time an applicant applies for the loan, any new credit inquiries that have been done in the past 6 months need to have a letter of explanation to see if any new credit which does not show on the credit report has been obtained. New payments could change the ratios and the approval status if the ratios become too high due to any new additional monthly payments. Also at the closing on a home purchase, the borrower signs an affidavit which says they have not obtained any new credit since the credit report was pulled.
GM: Should buyers get pre-approved before looking at properties? Are there advantages of waiving the financing contingency for a home loan?
Karen: It is always a good idea for buyers to get pre-approved before looking at properties because it gives them a better idea of what they can qualify for and it also gives them a range to look in. Many times to spend that extra $10,000.00to $20,000.00, the buyer will see the difference in the monthly payment and they may be looking in a much lower price range than they can afford. The biggest advantage is to understand the difference it makes and let them decide what they are comfortable with on a payment. As an example, for every $10,000.00 a client finances on today’s 30 year rates of 4.00% it increases the payment $50.00 per month so if they spent an extra $20,000.00, it would only increase a monthly payment of $100.00. Also, once someone is pre-qualified, if they do not have a home to sell, or qualify for a mortgage without the sale of their current home, they can write a contract which is not contingent on financing. In the case they are in competition with other buyers, the seller will normally pick a non-contingent contract over one that has a financing contingency. Buyers should be very careful when writing a non-contingent contract and should only do so if they know they have an actual pre-approval from the lender which says their information has actually been verified and they qualify.
GM: What options do you offer first-time homebuyers?
Karen: There are many programs available for first time homebuyers such as low down payment loans, etc. and once we have a loan application and have pulled a credit report, we can suggest various programs that might fit their needs.
GM: How long can one lock in an interest rate?
Karen: The normal lock period without a fee for a loan is 60 days. You can lock in a fixed rate loan for a longer period and there will be a fee based on the amount of time needed. At Midwest BankCentre, we have a 6 month lock feature which is a free lock for our 5 and 10 year adjustable rate products. If fixed interest rates are attractive after that period of time, the client may switch to a fixed rate product. This gives the client rate protection and flexibility.
GM: What advice do you give customers to achieve a quick and smooth closing?
Karen: The best advice for a client to achieve a smooth closing is to understand the process and know what documentation they are expected to provide. The more quickly they can provide the documentation, the more quickly the loan will be able to be approved so there will not be surprises right before closing. Also, by providing documentation upfront, there may be some additional information the underwriter will need depending on the documentation which is reviewed, and letting the client know early in the process will avoid delays at closing.
GM: How should a client determine what mortgage is best for them?
Karen: The loan process should not just be about rate, but also what product is best for the client. Not everyone needs a fixed rate loan. If a client is only planning to stay in a home for a few years due to an expected job move down the road, or they are planning to expand their family in a few years, an adjustable rate product may work well for them and save them many dollars over a period of time. But it is also good to understand the risks with an adjustable rate product to avoid any possible payment increases. It is our job as a loan officer to provide information to a client so they can make an informed decision based on their personal needs.
Karen Karr, NMLS #719180
222 S. Central, Suite 300, Clayton, MO 63105
Cell Phone: 314-603-6787