Lynn D'Avolio
Century 21 North East | 801-597-2857 | lynn1@soldbylynn.com


Posted by Lynn D'Avolio on 12/11/2018

Applying for a mortgage is a big step towards homeownership and financial independence. If it’s your first time buying a home, you might be curious (and a little intimidated) about all of the things that go into your mortgage application.

When reviewing your application, mortgage lenders are trying to determine how risky it is to lend you money. If all goes well, and they determine that lending to you would be a worthy investment, you’ll get approved for a mortgage.

There are three main things that lenders will use when weighing your application (however, there are other factors as well).

First, they’ll run a detailed credit report. This will tell them how much other debt you have, what kind of accounts you have open, how long you’ve had this debt, and how responsible you are when it comes to making your monthly payments in time.

Second, they’ll consider how much money you’ll be using toward a down payment. A larger down payment alleviates some of the risk associated with lending to you. Therefore, people with little or no down payment saved can have a difficult time getting approved for a mortgage. And, if they do get approved, they’ll have to pay monthly private mortgage insurance on top of their regular mortgage payments.

Finally, the third main consideration will be your current income. Lenders will look at your previous two years of income (including tax returns) and will seek out current income verification from your employer.

The latter is a key part of getting approved, as lenders will want to ensure that you are in a stable financial situation and will be able to immediately start making mortgage payments.

Today’s post will center around income verification and how mortgage lenders will use your income to determine your borrowing eligibility.

How Do I Verify My Employment?

If you’re employed with a company, most lenders will reach out to your employer directly to verify your employment. You’ll be asked to sign a form that authorizes your employer to share these details with the lender, and then your part of the job is done and you can move on to the next step of your application.

Things get trickier when you’re a freelancer, are self-employed, or work with several clients as a contract worker. In these situations, lenders will typically require you to file a Form 4506-T with the IRS. This form allows your lender to obtain your tax returns directly from the IRS.

Can I submit additional information to verify my income?

There are some situations where providing additional income information can bolster your case in terms of getting approved for a mortgage.

If you own a business, your lender of choice may ask for a profit and loss statement. If you’re an independent contractor or freelancer, your clients who have paid you at least $600 or services or $10 in royalties will be required to send you a Form 1099-MISC.

If you have mixed income, such as a full-time job with freelance work on the side, showing these 1099-MISC forms can help increase your income on paper so that lenders will approve you or a higher mortgage amount or lower interest rate.




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Posted by Lynn D'Avolio on 11/20/2018

If you’re a first-time homebuyer, odds are you’ve thrown the words “prequalified” and “preapproved” interchangeably. However, when it comes to home loans, there are some very important differences between the two.

For buyers hoping to purchase a home with a few missteps and misunderstandings as possible, it’s vital to understand the procedures involved in acquiring financing for a home.

Today, we’ll break down these two real estate jargon terms so that you can go into the mortgage approval process armed with the knowledge to help you succeed in securing a home loan.

Mortgage prequalification

Let’s start with the easy part--mortgage prequalification. Getting prequalified helps borrowers find out what kind and what size mortgage they can likely secure financing for. It also helps lenders establish a relationship with potential customers, which is why you will often see so many ads for mortgage prequalification around the web.

Prequalification is a relatively simple process. You’ll be asked to provide an overview of your finances, which your lender will plug into a formula and then report back to you whether or not you’re likely to get approved based on your current circumstances.

The lender will ask you for general information about your income, assets, debt, and credit. You won’t need to provide exact documents for these things at this phase in the process, since you have not yet technically applied for a mortgage.

Prequalification exists to give you a broad picture of what you can expect. You can use this information to plan for the future, or you can seek out other lenders for a second opinion. But, before you start shopping for homes, you’ll want to make sure you’re preapproved, not prequalified.

Mortgage preapproval

After you’ve prequalified, you can start thinking about preapproval. If you’re serious about buying a home in the near future, getting preapproved will simplify your buying process. It will also make sellers more likely to take you seriously, since you already have your financing partially secured.

Mortgage preapproval requires you to provide the lender with income documentation. They will also perform a credit inquiry to receive your FICO score.

Mortgage applications and credit scores

Before we talk about the rest of the preapproval process, we need to address one common issue that buyers face when applying for a mortgage. There are two types of credit inquiries that lenders can perform to view your credit history--hard inquiries and soft inquiries.

A soft inquiry won’t affect your credit score. But a hard inquiry can lower your score by a few points for a period of 1 to 2 months. So, when getting preapproved, you should expect your credit score to drop temporarily.

After preapproval

Once you’re preapproved for a mortgage, you can safely begin looking at homes. If you decide to make an offer on a home and your offer is accepted, your preapproval will make it easier to move forward in closing on the home.

Once the lender checks off on the house you’re making an offer on, they will send you a loan commitment letter, enabling you to move forward with closing on the home.





Posted by Lynn D'Avolio on 5/29/2018

For those who want to acquire a house, it helps to get your finances in order. That way, you can quickly and effortlessly navigate the homebuying journey without having to worry about how you'll afford your dream house.

There are many quick, easy ways to straighten out your finances before you embark on the homebuying journey, such as:

1. Assess Your Credit Score

Your credit score ultimately can play a major role in your ability to secure a great mortgage. If you understand your credit score, you may be able to find ways to improve it prior to conducting a home search.

It is important to remember that you are entitled to a free copy of your credit report annually from each of the credit reporting agencies (Equifax, Experian and TransUnion). Request a free copy of your credit report today, and you can take the first step to evaluate your credit score.

If you find that your credit score is low, there is no need to worry. You can always pay off outstanding debt to improve your credit score over time.

Also, if you identify any errors on your credit report, you'll want to address these mistakes immediately. In this scenario, you should contact the agency that provided the report to ensure any necessary corrections can be made.

2. Look Closely at Your Monthly Expenses

When it comes to buying a house, it generally helps to have sufficient funds for a down payment. The down payment on a house may fall between 5 and 20 percent of a home's sale price, so you'll want to have enough money available to cover this total for your dream residence.

If you evaluate your monthly expenses, you may be able to find ways to save money for a down payment on a house.

For example, it may be beneficial to cut out cable TV for the time being and use the money that you save toward a home down payment. Or, if your dine out frequently, cooking at home may prove to be a substantial money-saver that could help you speed up the process of saving for a down payment.

3. Get Pre-Approved for a Mortgage

With pre-approval for a mortgage, you can enter the housing market with a budget in hand. Then, you'll be better equipped than ever before to narrow your search to houses that fall within your price range.

To get pre-approved for a mortgage, you'll want to meet with banks and credit unions. These financial institutions can teach you about different mortgage options and help you assess all of the options at your disposal.

Furthermore, don't hesitate to ask banks and credit unions about how different types of mortgages work. This will enable you to gain the insights that you need to make an informed decision about a mortgage based on your financial situation.

If you need extra help as you prepare to pursue a house, you may want to hire a real estate agent as well. In fact, a real estate agent can help you find a high-quality house at a budget-friendly price in no time at all.




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Posted by Lynn D'Avolio on 3/6/2018

If you are thinking of buying a home, you probably have been getting your finances for some time. First-time homebuyers need the right information to avoid making big mistakes when they purchase their homes. The leap into home ownership is a big one, and you’ll want as much information with you along for the ride. Below, you’ll find a crash course on mortgages for first-time homebuyers. 


Think Ahead


Every homebuyer needs to prepare ahead of time for the process to be smooth. Research different lenders in your area and see what their rates are. If you talk to your lender about your goals and what type of loans you’re looking for, you’ll understand all of the costs that you’ll face ahead of time. You don’t want any surprises when it comes to signing a contract for a home.


Every Mortgage Is Different


It’s easy to think that all home loans are created equal, but they aren’t. The diversity in types of home loans is why you need to research and meet with a lender ahead of time. Talk to your real estate agent and see who they suggest. Your agent is a useful resource because they want your entire transaction to go smoothly for everyone involved. There are many different kinds of mortgages, and you need to make sure you’re getting the loan that’s right for you. Be sure you understand the specifics of each loan before you sign on.       


What You Need In Order


Before you even head into the home buying process, there are a few things that you’ll need including:


  • Cash for a downpayment
  • A budget
  • Knowledge of all of your finances
  • Where you’d like to look for a home
  • An idea of how much you can spend on a home
  • Information to get pre-approved including tax returns, proof of income, and bank statements


Once you have saved up cash for a downpayment, it’s time to take a look at your budget. Can you afford a monthly mortgage payment in the price range that you hope to buy? How much money will you have left over each month? Should you adjust your expectations? 



You’ll need to save up a bit of cash before you know that you’re ready to buy a home. It’s recommended that you have at least 20 percent of the purchase price of a home to put down towards your loan. The more you put down, the lower your monthly payments will be on the mortgage. So saving is the next big step in securing a mortgage in the smoothest possible way.     




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Posted by Lynn D'Avolio on 5/3/2016

With mortgage rates at all time lows, you might be wondering if you should be considering refinancing your home. While it may seem like a great thing to do, there are a few things to consider before you decide. An obvious reason for refinancing to a lower interest rate is the monthly, and even more importantly the long term, savings you will get. Depending on the decrease in interest rate and the amount of the loan, you could see a savings of at least $50/month or $600/year or $6000/10 years. Refinancing to a shorter term loan can also help save on the interest you pay over the life of the loan so if you can afford a 15 year mortgage the benefits outweigh that of a 30 year. Some things to consider - If you have owned your home for a long time, your monthly payments are going more towards the principal of the loan, not the interest. Refinancing would cause you revert back to monthly payments of more interest than principal, losing the equity that you have built in your home. You may be charged for an appraisal on your home which can be around $500. The bank will want to make sure that you are refinancing for an amount your home is worth so some out of pocket expense is required. If you plan on moving in the next few years, refinancing may not be worth the amount you will pay in closing costs. There are several refinancing calculators available on the web including at http://www.zillow.com/mortgage-calculator/refinance-calculator/ and http://www.smartmoney.com/calculator/real-estate/should-i-refinance-my-mortgage-1302835660427/. No matter what you choose, being fully informed of all the options, costs and advantages/disadvantages is key to a successful refinance. Make sure you talk with you current lender, as well as other lenders to get the best refinance possible.




Tags: Mortgage   loans   refinancing  
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