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6 Important Home Loan Mortgage Tips: An Interview with Beth Quick of Golden Gate Mortgage, Inc.

By Beth Quick

Tell us a little bit about your experience, company history and the services you offer.

I have a solid background in the industry having worked extensively in banking and finance prior to entering the mortgage business in 2007. I am currently a loan officer/mortgage broker with Golden Gate Mortgage< A locally owned company that has been serving the residents of South Carolina for over 15 years, Golden Gate is a full service mortgage company offering a variety of mortgage loan types VA Loans, FHA, USDA Rural Housing and Conventional) to our customers. As a mortgage broker, we have access to a multitude of lenders which gives us the opportunity to find the best mortgage loan for each specific borrower and their unique needs.

Can you explain the difference between a mortgage broker and other mortgage provider options?

A mortgage banker traditionally works only within their own financial institution and, as such, has a very narrow set of options and guidelines within which they are able to operate. A mortgage broker, on the other hand, works with a multitude of lending institutions which allows for greater flexibility of loan programs and options. This increased flexibility allows a mortgage broker to accommodate a greater range of borrowers and their own specific financial needs. Check out our article onbankers versus mortgage brokers

What are the main factors that people should consider before applying for a home mortgage?

When applying for a mortgage, people should consider a few things to make sure they are able to be approved for a mortgage.

Credit Scores: Credit scores play a significant role in qualification and loan approval. Higher credit scores can translate into lower interest rates and a greater range of loan programs to choose from. Lower credit scores do not exclude an individual from securing a loan but can result in less loan options to choose from, less competitive rates and more extensive documentation requirements. It is extremely important for all potential borrowers to maintain excellent credit. It is key to never borrow more than one can afford to repay, to pay all bills on time and to never be late on a payment of any kind.

Debt to Income Ratios: Lenders prefer a buyer does not exceed the set ratios of 28%/36%. The front end ratio of 28% is the mortgage payment (with homeowners insurance, property taxes, and mortgage insurance included) and should not be more than 28% of the consumers monthly gross income. Though this is optimal it is not set in stone as some lenders will allow a borrower to exceed these ratios if there are compensating factors.
The back end ratio of 36% is calculated by taking all of the consumer's debt as well as the new mortgage payment and dividing it by the monthly gross income. Again, these ratios can be higher if the consumer has other compensating factors to mitigate or off-set the higher ratio. A consumer also needs to establish their own budget for a mortgage payment as the lender is not privy to debts outside of the credit report such as utilities, child care, living expenses, etc. The lender is only able to calculate the ratios based on the credit report. Often times, the lender can get you qualified for much more of a mortgage loan than the consumer can actually afford because the lender is not able to see the other debts. The goal is to obtain a home that you can afford comfortably with all of your existing obligations.

Money Down: Consumers need to know how much money they are able to put down on a home purchase. Knowing this figure will help the lender determine the best mortgage loan for you. Conventional loans require 5% of the purchase price down, FHA loans require 3.5% down, and VA and USDA Rural Housing do not require any funds down as long as you meet the guidelines to obtain those specific loans.

Mortgage Insurance: Most people do not know what mortgage insurance is and how it will affect their ability to afford the house they want. Mortgage Insurance is required when a buyer does not put down 20% of the purchase price on a home. Mortgage Insurance does not cover the buyer at all in the event of a loss, it only covers the lender in this case. This can be a significant addition to a mortgage payment that the buyer is not calculating when figuring their mortgage budget, which can lower the overall price of the home they are looking at initially.

Closing Costs: Every consumer is responsible for paying the closing costs associated with a home purchase or refinance. The closing costs can range from as little as 1% of the purchase price up to 4% of the purchase price. It is common these fees range between 2-3% usually. These fees can be negotiated in the contract for the seller to pay, but if the seller refuses, it is the buyer's responsibility. These costs can determine how much of a down payment the buyer can afford.

Time is of the Essence: Most purchase contracts allow for a full 30 days for the lender to close the loan once all parties agree on the price and ratify the contract. Although this time frame may seem like plenty of time for the lender to close the loan, it really is vital for the buyer to cooperate with the broker on items needed to get the loan approved as quickly as possible. The broker will provide each borrower with a list of items they need as well as pre-disclosures to sign and return to allow them to proceed with the loan process. Borrowers should be mindful that the broker has only a set amount of time to get the necessary documentation from the borrower, submit the file to the lender, order and obtain title work from the attorney, order and obtain the appraisal report, and obtain the needed support from the borrower's insurance provider. All of this has to be completed within the 30 day period so it is extremely important for the buyer to be as fast as possible because none of the other things can be started without the buyer's information.

Is there a difference between pre-approved and pre-qualified?

There is a difference in a pre-approval and a pre-qualification. A pre-qualification is when the customer initially applies for a mortgage loan with a lender and based on the information provided on the application, the credit report being pulled, and the lenders analysis of the information, the customer would be issued a pre-qualification to then go out and look for a home to purchase. A pre-approval is after the customer has found a house they want to purchase, they have provided the lender with all of the necessary documents to coincide with the information given with the application such as pay stubs, assets, tax returns, etc. and these items have been submitted to the lender to review, the lender will then issue a pre-approval. The final approval is issued after all of the underwriter's qualifications have been approved and the appraisal has been approved.

Are there any ways that a homeowner can help make the mortgage process move faster?

Absolutely! If a person is interested in a home purchase and is ready to proceed, they need to contact their lender immediately for a pre-approval. Once the lender pre-approves them, they will be issued a list of items to gather together for the loan process. They need to start gathering that information immediately. The quicker the buyer is in the beginning with getting everything together, the quicker the whole loan process.

What is one of the most common problems for homeowners who are applying for a new mortgage?

One of the most common problems for buyers who are applying for a new mortgage are credit issues or down payment requirements. Buyers with credit issues are often times turned down at a bank because they do not quite meet the requirements the bank has set as standard for approval. The buyer should never stop trying for approval there especially if their credit scores are not that far away from the standard 640 middle score. They need to try to contact a mortgage broker who will have several other options for them possibly. It is extremely important to always pay your bills on time and to never borrower above your means. A quick way to improve your credit scores is to maintain your credit cards or revolving credit lines at or below 10% of the credit limit. For example, on a line of credit of $1000, maintain a balance of $100 or less. This shows the credit bureau you are financially responsible with your credit and the credit bureau rewards you with a better credit rating.

The second common problem for a person wanting to purchase is down payment issues. Potential buyers need to try to save as much as they can for the down payment, but they do not have to have 20% down which many still believe they need. Depending on the area they are intending to purchase, there are programs that offer 100% financing. They should also check with the county they are interested in to see if the Community Development Department has any grant funds they can apply for to move into that area. Not all counties offer this incentive, but it is worth the extra effort to see if they do. If they do offer them, they are based on income limits set by the county and are only on a first come basis.

What advice would you give to homeowners who want to choose the best mortgage lender for them?

Always use a mortgage broker if you have that option in your area. I say this for many reasons, but a few primary factors are (1) the broker can shop for the best rate (2) they are traditionally much more accessible and flexible than mortgage bankers and (3) mortgage brokers are only paid when your loan actually closes so they are motivated to stay on top of the mortgage loan process to ensure this happens as quickly as possible.

What's the best way for people to reach you and your company?

The best way to reach me is via cell phone 803.319.0733 or they are welcome to reach me via my email beth@goldengatemortgage.net or my website .

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