Complete Homebuyer’s Mortgage Guide

You’re ready to purchase your own home, where do you start?
Choosing the right mortgage lender is a critical part of your home buying plans; a professional lender with a proven record of excellence and customer care is the right way to go.

Pre-qualification is where your journey begins.
When you first contact your MidCountry consultant, he or she will look into financial information that includes your income level, savings, time on the job, and what kind of debt you have. With this information, your consultant will know what loan options are most beneficial for you.

Provided as a complementary service by MidCountry, pre-qualification can educate, favorably, homebuyers who believe they can’t qualify for a mortgage because they “simply can’t afford it.” The good news is that pre-qualifying for a mortgage, with the help of your consultant, will open your eyes to the fact that there are many types of mortgage loans that offer opportunities that you can live with comfortably. There are many instances, in fact, where the price differential between rental payments and monthly mortgage payments is minimal—a very pleasant surprise for “first-timers” and “return buyers” alike!

Lenders Look at the Big Picture
MidCountry will work with you to discover the “big picture” of your mortgage plan. The underwriter of your loan will review your overall financial history (including savings and credit history) and your job stability. (This also applies if there is a co-signer on the loan.) The simple question the underwriter wants to answer through this process is whether you are a reasonable risk—if you’ll be able to pay off your mortgage by the end of its term.

Should it happen that you do not qualify for a mortgage currently, MidCountry wants to keep working on a professional relationship with you; we will stay in contact with you and offer guidance on when you should try again, depending on your situation.

Working with You to Bring You Home
Our mortgage experts know that in today’s complex world, sweeping life changes are a common phenomenon. Divorce, child support payments, bankruptcy, and unexpected shifts in the economy add to this scenario. Our consultants want to work with you through these challenges by offering mortgage products with little down and manageable monthly payments.

Lining up your budget, wish-list, real estate agent, etc. are good preparation measures for a smooth house hunting experience.

The following are key “to-do’s” to consider before buying your new home.

Budget
Your mortgage will likely be the largest payment you make each month. Before jumping into a new home, you’ll want to do your homework to see what you can afford without significantly changing your style of living. First, sit down and track all of your expenses. You will want to base your budget off of this number. A good rule of thumb is that your home and home-related expenses, such as utilities, shouldn’t exceed 30% of your total income.

Make a Wish List
Once you know what you can afford, it’s time to determine what you want. Make a list of everything that you’d like in a new home.

Finding Your Realtor
During your first home search, a good realtor can make all the difference. He or she can help you to find the home you’re looking for, tell you what it’s worth compared to other homes in the area, and be an educated advocate for you during negotiation.

Buying your first home can be a little bit easier if you take the time to think about how ready you are to commit. Job and credit stability, what you can comfortably afford, and what kind of community and maintenance level you prefer will confirm your priorities.

Asking the right questions when buying a home will help make your experience flow more smoothly.

The following are some key questions to ask yourself (and others) prior to buying a new home.

What Type of Community Do You Want?
Consider where you want to live: parks, crime rate, schools, and taxes. Is it important to live in a community with people who reflect your own age, income and stage of life?

What Are My Priorities?
In addition to your community, what else is important to you in your first home? Should it be move-in ready or are you ready to fix it up? How many cars do you want in the garage? Do you want a garage? Do you want a yard to maintain, or would you prefer to buy a townhouse that offers maintenance-free living ?

What First-time Homebuyer Programs Are Available?
There are many programs available for first-time homebuyers that can affect your required down payment, terms, and rates. Your mortgage expert will help you find the program that best fits your needs and personal situation.

The process of becoming a new home owner may seem a bit overwhelming at times. Keep in mind these four easy tips for staying on course!

1. Go Easy on those High-ticket Items
Keep your mortgage buying power strong by avoiding the purchase of major appliances and furniture. (It’s best to buy these items after you have closed on your mortgage.) Buying or leasing a new car can put your debt-to-income ratio (DTI) into overdrive; and buying that new boat may be very nautical, but not at all nice, as your DTI may capsize qualifying for a lower mortgage interest rate. All it takes is an extra payment of a few hundred dollars a month to reduce that mighty mortgage buying power by tens of thousands of dollars. You also want to maintain the credit rating/FICO score that helped you qualify for the mortgage in the first place. Making a major purchase any time before you close on the mortgage can affect the terms of the agreement—the loan amount or interest rate, for example—or may even disqualify you from mortgage approval.

2. Embrace the Paper Chase
Liquid assets are stable and easily-accessible funds: Cash, savings accounts, money market accounts, stocks, investments, and government bonds are common examples. Availability of liquid assets and showing proof of cash ownership means providing your mortgage expert with a “paper trail,” or physical copies of account statements, cancelled checks and deposit records. Keep in mind, too, that it’s easier to keep track of your liquid assets if they stay put (stay in the same accounts) during the mortgage process.

3. Rules of Employment
While not really a hard-and-fast rule, a minimum two-year engagement at a place of employment, where you receive bonuses and overtime pay, is a near-ideal situation if you’re looking for a mortgage. While starting a new job that offers a better salary is obviously a terrific move, a stop-and-start work history has the opposite effect. Job stability—it’s the name of this game.

4. Bills Are Faithful Things
It’s absolutely guaranteed—your regular bills will continue to be a part of your life while you move into your new home buyer status. Keep up the good payment habits, and your credit score (and mortgage interest rate) will be the best your mortgage lender can offer.

By applying the above “Fast Forward 4” tips to your mortgage process, you will stay on the right track for your first mortgage.

Hunting for a new home can be stressful. Here are a few tips to consider when looking for your dream home.

Location, Location, Location
You’ve heard the mantra, “when it comes to real estate, its location, location, location.” And the saying is true. When you think about it, you can change your home, but you can’t change where you put it.

When analyzing location, look at factors that will add value:

• A good school district
• Close proximity to outdoor recreation
• Scenic views
• Convenient entertainment and shopping
• Economically stable areas

Avoid areas with depreciating factors:

• Industrial buildings
• Railroad tracks
• Heavy traffic
• Hazards such as landfills, power plants, or transformers

Get Pre-qualified
Pre-qualification will tell you how much a particular financial institution is willing to lend to you.

The pre-qualification process typically requires completion of a mortgage application and will involve an in-depth review of your finances.

A pre-qualification will help to focus your hunting efforts, narrowing down your options to those that meet your pre-qualified loan amount. This step can also help with price negotiations, as you are pre-qualified for the loan.

Use a Check List
It’s important when house hunting to compare. You may find the perfect home on your first walk through, but it is a good idea to visit at least three to five properties before making a selection.

Be patient, you may need to walk through many, many homes before you find a winner.

So, how do you keep track of the pros and cons for each house in a process that could stretch over days or weeks? The best method is to use a checklist. With a checklist, you can record important information about each house and compare apples-to-apples.

Record items like:

• The asking price
• Estimated real estate taxes
• Square footage of each room
• The age of the home
• Your likes and dislikes
• Necessary improvements
• Commute distance or time
• Notes about nearby schools, entertainment, and shopping

Keep in mind that you will likely be making some compromises. Few buyers ever find a perfect home, but a checklist will help you determine the best one that you’ve seen for the money you can spend.

Be Ready to Move Fast
Depending on your market, you may need to make an offer quickly. By knowing the location that you’re interested in, the amount you are pre-qualified to spend and having a detailed checklist of the homes you’ve seen to quickly reference, you’ll be prepared to act quickly when the right home comes along.

The Importance of a Realtor
When purchasing your first home, a friendly, knowledgeable realtor can be an undeniable asset.

A good realtor is client-focused, results-oriented, and in good standing with the National Association of Realtors®. The right realtor can make your first home buying experience a pleasant one.

You’ll want your realtor to be a consummate professional who understands the current housing market, knows you unique style and financial capability, and above all else, keeps your best interests in mind!

How to Find a Realtor
Referrals
Ask friends, family members and co-workers if they can recommend a good realtor. Word of mouth is perhaps the most valuable referral you can get in regard to a good real estate agent. Also, ask your potential realtor if he or she gets a lot of work from referrals.

Attend an Open House
Use the Internet to find a location in an area you want to live. At the open house, you can engage in a one-on-one conversation with a solo realtor to get the scope of his or her career stripes.

Attend a Home Buying Seminar
You’ll see a number of real estate agents in action, and can ask questions of many, evaluating which agent’s communication style works best with yours.

See a “Neighborhood Specialist”
Some realtors hang their shingle on a specific neighborhood or section of town. They know the area’s history of the homes, how long homes have been listed, and other real estate agents in the neighborhood who will share “insider” information about local trends.

What to Expect from a Realtor:
After you have been pre-qualified or pre-approved by a mortgage lender, your realtor should meet with you to discuss your requirements for a new home. He or she will set up house showings and will work with you until you have found one that suits your needs (and matches your budget).

A Realtor Should Assist you as a Homebuyer by:

• Completing a Market Analysis, ensuring the house is reasonably priced
• Negotiating the offer with the seller
• Working as a friendly “go-between” for buyer and seller
• Drawing up the purchase contract for all parties to sign
• Delivering your purchase contract and earnest money to your mortgage lender and the title company
• Coordinating inspection
• Walking through the property with you

Happy closings mean both parties (buyer and seller) leave the table feeling like they’ve struck a fair deal. A realtor with the right “can-do” attitude will act as a friendly conduit between the buyer and seller in house purchase negotiations, keeping his or her clients’ interests in mind.

A homebuyer should understand what an earnest money deposit means, what a down payment is, and the amount and purpose of the cash required at closing—before you find yourself the perfect home.

Earnest Money
Earnest money is the deposit check you write when you commit to purchasing a particular home, and your down payment and cash-to-close encompass the money you must have when you come to the closing table. In every case, the new home buyer should be aware of how much cash will be needed to navigate through the “rules” of down payment, cash-to-close, and earnest money. The amount of your down payment is dictated by your loan program, your available savings or your desired monthly payment. Your closing costs include all the fees you pay to get your mortgage. Some of these costs can be negated to be paid by the seller.

Buying a home can require a lot of planning, legwork, and saving. Being knowledgeable and prepared with the cash reserves you’ll need is a great way to keep the home buying process moving forward.

Buying your home will be a more positive adventure when you are well-informed of the differences in earnest money, down payment and cash-to-close during the mortgage process.

Getting your credit “mortgage ready” involves understanding how your credit works, and your rights involving credit information.

To be mortgage ready in regard to your credit report score, let’s look at what each credit score component means:

Timely payments
Making timely payments has the most impact on your credit report (at over one-third of the total evaluation). It refers to prompt payoffs of debt vs. late payments, or any financial judgments or delinquencies accrued. Delinquencies of any kind in the past two years are the smartest risks to avoid.

Debt ratios
Outstanding balances on your credit lines determine how much available credit you have. Having a 30% or below (of credit you are using) is a good outstanding balance.

Credit history
The longer you have a good credit history, the better candidate you are for obtaining a mortgage. (But this is not, by any means, a requirement for a good credit rating.)

Credit types
Auto, credit card, and student loans make a good mix of credit types.

Past credit applications
When you apply for credit, each inquiry impacts your credit score. Be sure to hold off and apply for credit only when you are ready. This includes applying for credit cards, student loans, or buying a car.

Credit Ability
During the mortgage process, it’s important to keep your credit rating as strong as possible.

Due to guidelines of some mortgage programs, your credit score is subject to a second review just before your mortgage closes. This means that if you used your credit for something after the initial mortgage application (and first credit score review), you will lower your credit score. This can complicate matters, possibly delaying your scheduled closing, decreasing your mortgage amount, increasing your interest rate, or risking denial of the mortgage altogether.

Don’t max out credit cards, close paid off accounts, take a self-funded trip to the Bahamas, quit your job, make late payments, co-sign on a loan, or change your name or address.

Opt out on risky mortgage leads: Solicitations from unfamiliar finance companies (called “trigger leads”) may promise “great deals” on mortgage loans. See the web site Opt out Prescreen.com, to avoid unwarranted businesses that buy your name and information without your specific instructions.

Be sure to ask your mortgage expert any questions you may have about your credit score. MidCountry knows how credit works, and we are here to help in the pursuit of your dream of new homeownership!

Moving to a new city is both exciting and stressful. You have the opportunity to expand your life experiences, but you also want a healthy dose of normalcy…

The following are tips to make yourself at home in your new city…
Research
Before you pack your first box, you can begin new-city reconnaissance. Get online and research the city by searching for the local newspaper’s site, finding a neighborhood or entertainment publication, and reading the local business publication. As with anything else, the largest contributor to fear and anxiety is a lack of knowledge. Learn all you can before you move.

Find the Essentials
Before you start exploring too far, set up a base camp around your new home. Find the nearest grocery store, gas station, gym, and place of worship. Collect carry-out phone numbers and find the best shopping.

Also, research multiple routes for your work commute and try to understand traffic patterns. There may be roads that you want to avoid at rush hour – you’ll feel like a local when you know alternate routes.

Stick With What You Know
The fastest way to make yourself at home is to get back to life as normal. If you’re a regular at the gym, make it a priority to find a similar gym nearby. If you eat sushi every Thursday night, find the closest or best sushi restaurant. You’ll be surprised at how much of daily life you can re-create in your new environment.

Explore
Every city has a unique character, those special spots that make it special. Spend some time and be a tourist. Visit historical monuments and local museums. Hike, run, or walk your dog in the parks. If the city is known for a particular food, become a connoisseur. When you spend some time visiting the sites and learning the culture, you’ll discover the heart and soul of your new city and begin to love it for what it is.

Meet People
No city will ever feel like home without a support network. You may already have friends or family in your new city. Use them as a base and build your network around them.

Concentrate on your interests and find people who share them. Take classes, join clubs or get involved in church activities. Nearly every city in America has a running club or book club.

Give it Time
Most importantly, give yourself time to acclimate to your new hometown. Try not to dwell on the things you miss, but rather focus on what makes your town great. Before you know it, this too will be “home” and you’ll never want to leave.

From pre-qualification to closing, your mortgage expert or assisting loan processor will request and gather documentation, answer questions, and prepare your mortgage file for the underwriter.

The processing of your mortgage is the gathering of all documentation required by the underwriter, in accordance with lender guidelines. The loan processor is in charge of the timely and accurate assemblage of the documentation, which ultimately determines whether your mortgage will be approved.

From Pre-qualification to Closing
Initially, your mortgage expert encouraged you to quickly pre-qualify for your mortgage simply by verifying your income, job status, savings and debt. This is a great first step facilitating into the loan processor’s job. Once your file is given to the processor, he or she will contact you to request outstanding documentation, and answer any questions you may have about your file and the status of the mortgage.

Your mortgage expert and loan processor are available to you throughout the entire mortgage process, until you close. No matter “where you are” in the mortgage process: just pre-qualified, securing the appraisal, or ready to set up your closing on your new home, your mortgage professionals are a trusted resource to contact for assistance.

An appraisal of your new home will help ensure that its fair market value reflects the amount you’ve agreed to pay.

An appraisal is a report that states the value of a property based on the sales price of similar homes in a specific area, at a specific date and time. The appraisal is not only for the house itself, but includes all the other permanent structures along with the land upon which the house was built.

Market Analysis and Appraisal Report
By completing a market analysis, your realtor may assure you that the property is reasonably priced, but an appraiser’s report is much more detailed and will “officially” protect you from purchasing overpriced real estate.

An appraiser will call to make an appointment for a visit to the property. When the appraiser contacts you or your realtor, offer to supply information about the “subject” property, such as the square footage of the home, the number of bedrooms and baths, the year the house was built, and the square footage of the lot. Giving the preliminary facts upfront allows the appraiser more time to evaluate the comparable properties in the area.

Your mortgage underwriter reviews the appraisal information with other documentation you have provided.

“Fair market value” means the buyer and seller of a property are knowledgeable and comfortable with its estimated worth. The appraisal of your home provides a professional assessment of its current market value, protecting you from purchasing overpriced real estate.

Locking in the lowest interest rate possible makes a big difference in what you’ll pay over the life of your mortgage loan.

Mortgage interest rates can change daily, due to fluctuations in the market and other economic factors. Locking in your interest rate can give you the security that eliminates the risk of market volatility during the mortgage process. And while locking in a rate does not obligate you to commit to a mortgage until closing, you cannot close on a mortgage without a rate lock. On average, a rate lock expires between 35-50 days.

Rate Lock Advantages
The most obvious advantage of locking in a rate is the rate and payment will not go up between purchasing and closing. This protects the Borrower from changes in the rate that could effect their ability to qualify for the loan. Borrowers who would like to wait and “float” run the risk of rates increasing, as well as the possibility of them improving. Lower interest rates can also decrease other mortgage costs, such as points (one point equals one percent of the loan amount). Even one quarter of a percentage point can save you thousands of dollars over the life of your mortgage.

Interest Rate Information

Your mortgage expert can confirm your rate if you’d like it locked at time of application. Or if you prefer to wait for the possibility of a lower interest rate, you can contact your mortgage expert to lock in the rate at a later date.

Understanding the advantages of locking in the lowest interest rate possible on your mortgage empowers you on your journey to new homeownership.

Based on the information you’ve provided your mortgage expert, the underwriter review determines whether your mortgage is approved or denied.

Once your application and required documentation have moved into the underwriting phase of the mortgage process, the underwriter will verify that your file information conforms to the guidelines and qualifications of the mortgage program you’ve chosen.

The underwriter will review your employment history, previous debt and credit histories, and the property’s title and appraisal information—risk analysis to determine if you qualify for a mortgage loan. If additional information is required by the underwriter, your mortgage processor will contact you as soon as possible.

Application Approval
When your mortgage application is approved, the underwriter sets “prior to closing” conditions, which are conditions that must be satisfied in order to generate the mortgage documents that will be sent to you to complete prior to closing on your new home.

Application Denial
A mortgage application can be denied if conditions in your mortgage file do not meet established underwriting guidelines, determining that lending money to you is too great a “risk.” The underwriter may require you to make some changes before approving you for a loan, or you may need to re-apply for a loan after making the changes required.

Your mortgage expert will keep you informed of the status of your mortgage while the file is in underwriting. Whether your application is approved or denied, we will continue to work with you to find the mortgage program that best suits your requirements as a savvy home buyer.

You are in the home stretch of becoming a homebuyer when you close on your mortgage loan.

Your mortgage file has progressed into the closing department. The closer prepares all closing documents and forwards the package to the title company or settlement attorney.

What to Expect at Your Closing
At the closing, you are required to sign all the legally binding and non-binding documents. Documents include the Closing Disclosure, the Deed of Trust, the Promissory Note, and various certification documents in conjunction with your mortgage agreement.

Closing Disclosure
The Closing Disclosure will show the terms of your loan, your payment amount, and break out the fees that are associated with your loan. A Closing Disclosure will be sent to you no later than 3 business days prior to closing for you to review the terms of the loan and the fees associated with your closing. A final Closing Disclosure will be provided at the closing to be signed as well.

Deed of Trust
The Deed of Trust is the security instrument (mortgage) that requires the owner’s signature. After closing, the Deed of Trust is recorded by the county with a legal description, creating a public record of the borrower’s contract to repay the Promissory Note (see below) using the property as collateral. In addition to showing the loan entitlement, amount and term, the Deed of Trust identifies the provisions of protection in the event that the owner defaults on the mortgage.

The Promissory Note
The Promissory Note is the borrower’s contract to repay the loan: Principle amount, rate of interest, and loan term, the payment due dates, grace periods, late charges, and general default provisions.

Closing on your mortgage means you have officially transferred the title of the property into your name. Enjoy your new home!