Whether you’re applying for a home loan for the first time or you’re an experienced buyer, there are some important things to keep in mind to ensure that the process is as simple and painless as possible. You found the deal, you have a 20% down payment money and you’re ready to apply for the mortgage to help finance the rest. Now what? Here are 6 things you need to know when applying for a mortgage:
1. Mortgage Advisor vs Mortgage Lender
A mortgage advisor is the person that shops around for you to see which one of their connected banks can provide you with a mortgage. (ex. Will shop you around to national banks, community local banks, etc).
Mortgage lenders can only offer you financial products that specific bank offers to the marketplace. (ex. If you got to wells fargo and ask for a loan they can only offer you mortgage products that specific bank provides).
Use major banks for credit cards. However, 100PF recommends using small local community banks or portfolio lenders for mortgages. Why? Mortgages from Major banks show up on your credit report; whereas, mortgages from small local community banks do not show up on your credit report.
2. Leverage your Broker
Always bring a copy of your credit report, past 2 year tax returns, 2 recent bank statements, etc to these lenders to get a pre-approval before they run your credit. Do not allow them to ‘take a look at it themselves’ that’s allowing them to put a hard inquiry on your credit profile without knowing if you are going to get approved or not.
Have this pre-approval ready in hand when you go look for a deal, contacting an agent to find a deal for you knowing you already have the money will prove to the agent that you are serious. Not all commercial mortgage advisors will provide a pre-approval; therefore, request an email from your mortgage advisor verifying that you are prequalified to close on a deal depending on the performance of the future property.
3. Residential Mortgage vs Commercial Mortgage
Residential mortgages are a lot harder to qualify for, reason being, they are pulling all of your personal financial docs and are doing a thorough audit before approving you 80% of approval is dependant on your personal financial standing.
Residential mortgages are typically 1-4 units. Anything beyond will be qualified for a commercial loan Commercial Mortgages are a lot less stringent when providing you with a loan, 80% is about the property and the cash flow, that said, you must documents verifying the performance of the property before being approved.
4. The Devil Is In The Details
When you are getting pre-approved for a loan, ask the lender to be very specific to what you qualify for. Ask them what the interest rate is, amortization period, fees involved with the loan, ask for the rate sheet, etc get ALL of the details before walking out. If they cannot provide this without running your credit, ask them for a ballpark of the numbers.
Even if you don’t get approved, ask them WHY and what you need to do in order to get approved.
5. Get Proof
If you are approved for the loan, get a pre-qual letter stating that you have been pre-approved for your loan.
If they do not provide this, ask them if they would speak or email on your behalf because they will be receiving a call from your agent seeking verification that you have been pre-approved for a loan with them.
6. Mom & Pop are at the Top!
100PF loves to invest with your local, small, community banks that provide loans from their portfolio (Portfolio Lenders). Reason being, small mom & pop banks don't have to adhere to a lot of the underwriting regulations which gives you a better chance of getting approved.
They may be a tad bit more expensive with the interest rates & points or even with their amortization periods being shorter in contrast to major banks
We invite you to download ourPromissory Notethat acts aslegal lending agreement between the lender and the borrower. It's similar to a handshake, but a bit more formal.