Sponsored: 5 Tips for Getting a Mortgage This Fall

• September 9th 2010

by UrbanTurf Sponsor

Despite historically low interest rates, getting a mortgage these days remains challenging for many buyers. Lenders have tightened their standards, and the criteria they use to judge the creditworthiness of a potential home buyer shifts constantly. In light of this, Lance Horsley, principle of The Lance Horsley Team, asked Jonathan Okun of local firm Prosperity Mortgage to chime in and provide some guidance about getting a mortgage in the current climate.

Below are five tips from Jonathan for prospective home buyers that are planning to get a mortgage this fall. If you have any questions, contact Jonathan at 202-243-2931 or jon.okun@prosperitymortgage.com.

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Don't take out another loan once you are pre-approved.

It used to be that home buyers could get pre-approved for a home loan, and that pre-approval would last through closing. But recently, Fannie Mae instituted "credit repulling", which means that the lender will check your credit again within ten days of settlement to be sure your overall finances haven't changed since your initial pre-approval.

"This is an important point, especially for borrowers who have tight debt-to-income ratios or borderline credit scores," explains Jonathan. "So make sure you speak to your loan officer before you buy a car or apply for a new credit card between your initial loan application and when you settle."

Jonathan notes that Freddie Mac will likely follow Fannie Mae's lead and soon implement credit repulling as well.

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Be completely honest with your loan officer.

Because of tightened lending standards, lenders require much more documentation than in the past. These days, lenders expect to look at your tax records from the past two years, not just your pay stubs. "About 90 percent of borrowers get their tax transcripts pulled by the lender," says Jonathan.

Since the lender will have access to all your income and expenses over the last two years, it is best to also make your loan officer aware of them from the start.

Jonathan had a client who was a salaried worker with a small business venture on the side that he was taking losses on. The client didn't initially cite these losses on his loan application, then got stung when the lender saw them on the previous year's tax returns.

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Have gift money in your account before applying for a loan.

Jonathan says that "gift" money from a parent or relative has become a popular way for home buyers to make a down payment, particularly first-timer buyers. He recommends that any such money be deposited into the borrower's bank account before the loan application is filed.

"If you apply for a loan with a certain balance in your bank account, then your balance jumps because of the gift money deposit, you're going to have to provide a lot more documentation than if the money was in your account to begin with."

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Don't take published rates at face value.

Many publications (including UrbanTurf) regularly publish what the current rate is on a 30-year fixed-rate mortgage. This rate is an average -- an industry benchmark -- of the lowest rates found across the mortgage industry, and may or may not be available to you depending on your creditworthiness. In other words, just because the current rate is 4.32 percent doesn't mean that you will get that rate on a home loan. The best thing to do to understand what you actually qualify for is to find a lender you trust and go through the pre-approval process.

Jonathan says to be particularly wary of rates published on mortgage websites and online marketplaces, which are typically teaser rates that come with points and are not as compelling as advertised.

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If you're here for a new job, get documentation from your employer.

The DC area's relatively healthy economy and job supply is attracting people from across the country. If you are just such a person relocating to DC for employment, and you want to settle on your home before you start your new job, you need to get a non-contingent signed offer and acceptance letter from your future employer. That documentation should include your exact start date, salary, and position.

This isn't as important for people who plan to settle on their new DC home after they've already started their new job. But for those who want to close on their home and get settled before starting their job, this documentation will be necessary. "Lots of people like to do it this way so they can get situated and not have to stay in temporary housing," explains Jonathan.

This article originally published at https://dc.urbanturf.com/articles/blog/sponsored_5_tips_for_getting_a_mortgage_this_fall/2455.