When you shop for a mortgage loan, you have certain rights that are guaranteed by the federal government’s Consumer Financial Protection Bureau. Knowing your rights will help you get the best loan possible.
You have the right to:
- Receive equal treatment by the lender, so that a credit decision isn’t based on your race, color, religion, national origin, sex, marital status, age, or whether any of your income is from public assistance.
- Shop for the best loan type for you, whether adjustable or fixed rate, and compare the fees of different lenders.
- Be informed about the total cost of your loan including the annual percentage rate (APR), points and other fees. Your interest rate is based on your credit history and credit scores, the borrowed amount and how much you’re putting as a down payment.
- Receive a Loan Estimate and Closing Disclosure Form, formerly known as a Good Faith Estimate, before you agree to the loan and pay any fees. Compare the exact loan product you want as offered by two or more lenders.
- Know which fees are not refundable if you decide to cancel the loan agreement, such as the fee to research your credit.
- Ask questions about loan terms and fees that you don’t understand.
- Know the reason if your loan was turned down.
Ask your lender to show you the advantages and disadvantages of each loan product so you can choose the best one to suit your needs. As always, consult your financial advisor before making any decision.
Fast Market Mortgages
Just as your Berkshire Hathaway HomeServices network professional wants you to be successful in your quest to buy a home, so does your mortgage lender, which means being ready to compete in a fast market.
A good lender will get you preapproved for a loan before you make an offer to buy a home. There’s really no way to speed up this process, so it’s best if you start now. Your lender will need time to run your credit, check your employment history, and see what loans you can get and for how much.
You may find a home you want to buy, but in a fast market, sellers know they have the advantage. They may refuse to consider FHA, VA or other conforming loans because they don’t want to go through the more rigorous appraisal process. Sellers may ask that you make your highest and best offer by a certain date, which is often over list price. You’re competing with all-cash buyers and 20-percent – down buyers, so consider shopping for homes under your highest price range.
Communicate often with your lender. Send them the MLS numbers of the homes you’re interested in. They’ll tell you what you need to offer, how much you’ll need to put down, and how high you can go, as well as provide a preapproval letter for the seller to accompany your offer. For example, something like HOA fees will raise your monthly debt and impact how much home you can buy.
About Jumbo Loans
Each year, the Federal Housing Finance Agency (FHFA) publishes conforming loan limits for all loans eligible for purchase and guarantee by government-sponsored entities Fannie Mae and Freddie Mac. The current limits are $424,100 and $636,150, or higher, depending on housing costs in U.S. counties or territories. Jumbo mortgages are simply loans that exceed conventional limits.
Jumbo mortgage are non-conforming loans designed for the purchase of single-family luxury properties or homes in high-cost areas. They’re only available for owner-occupied homes, not vacation or second homes, or investment properties.
Without federal guarantees, lenders require unique qualifying and loan underwriting standards. Borrowers must have credit scores of 700 or above in order to lower their down payments to as little as five percent down. Income-to-debt ratios must fall between 36 percent and 43 percent, and borrowers must show liquid reserves equal to three to 12 months of mortgage payments, depending on the loan amount.
Lenders may have other requirements, and the final loan product must meet the Consumer Financial Protection Agency’s standards for a “qualified” mortgage. For example, a borrower who puts five percent down may be limited to a $1 million loan, while another borrower obtains a $2.5 million loan with 10 percent down. With 20 percent down, a $3 million mortgage is possible.
There are many advantages to obtaining a jumbo loan. Interest rates can approximate or equal those of conventional loans for qualified borrowers and can be deducted from federal income taxes on loans up to $1 million. As always, please consult your tax professional before making these decisions.
Contact our local BHHS Hodnett Cooper Real Estate Team to learn more!
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