How do I obtain a mortgage?
Now that you have a better overview of how much your condominium will actually
cost and what your mortgage options are, the next step is for you to actually
obtain the mortgage.
Financing is where most deals can encounter complications. One of the best
strategies to ensure you get the condominium you want is by applying and getting
pre-approved for a loan prior to your condominium search.
The loan application process is simple:
- Contact a mortgage broker you would like to work
- Review you loan options
- Fill out the loan application and corresponding paperwork
- Submit application with the a non-refundable application fee
The broker or lender will review your information and check your credit. Once
you choose the property you want to purchase the lending institution will hire
an appraiser to value the property and ensure it is worth the price of the loan.
Should you be rejected for your first loan application – don’t
become overly concerned. There are several situations when a lender finds it
to risky to extend a loan. Remember, as there are several types of lending institutions
–if one rejects you simply move on to the next. Consult with your Condosource
agent who will help you find a lender that specializes in granting loans to
individuals with special circumstances.
Following are the most common situations why loans are rejected and recommendations
on how to overcome them
- Accumulating More Debt: Some buyers will make large purchases,
such as a car or boat, after being approved for a loan and the lender
learns about the purchase. As lenders consider new large purchases an obstacle
in making mortgage payments, they may cancel the loan. If you’re considering
making a large purchase around closing time, it is highly recommended that
you wait until after the close.
- Problems with Credit: There are dozens of credit problems
that may cause a lender to reject a loan. The common denominator they all
work from is a credit report. Your credit report is a concise record of all
of your debts, accounts, and payment habits. If you were late making a credit
card payment a couple of years ago, it will probably appear on your credit
report. If you defaulted on a loan or filed for bankruptcy, it will definitely appear on your credit report.
Because your credit report is so critical to being approved for a loan you
should be aware of what is on your report. Before applying for a loan, request
a complimentary copy of your report from each of the 3 major
credit agencies and review it. If you find information which is inaccurate
you can and should contest it directly with the credit reporting agency. If
this process is ongoing while you’re applying for a loan, explain the
situation to your lender and provide your lender with the same documentation
you are submitting to the agency.
- Employed Less Than Two Years: Lenders by nature are low
risk and only want to give mortgage to people they believe can pay the loan
back. Lenders require a stable income and prefer someone who has worked at
the same company for at least two years - It shows consistency and financial
security. Be prepared with an answer if this question comes up. Lenders generally
do not object if you changed companies for a higher salary.
- Job Loss: If your lender rejected your loan application
because you recently lost your job, you’ll want to focus on getting
a new job before you resubmit your application. At that point, consult with
your agent. Depending on the circumstances, you may want to resubmit your
loan to a different lender or wait several months until you have found another
job. Also, if your spouse’s or domestic partner’s income is enough
to support the mortgage, you may want to have them apply for the loan instead.
- Self-Employed: To a lender self-employment falls under
the two-year rule, they want to see an established and consistent income level.
If you’ve recently started a home-based business, you may want to wait
before you apply for a mortgage. If your income is largely based on commissions,
you may encounter some difficulty securing a home loan.
- Unapproved Building or New Development: This is a rejection
totally beyond your control. Remember, when a lender grants you a loan, they
are investing in the property just as you are. The lender wants a secure investment.
Lending institutions have a set of guidelines that dictate whether a property
is a good investment (i.e. 70% occupancy rate).
How can I get copies of my credit reports?
Your credit report is a vital part of the loan decision process, it is important
to make sure it's accurate before you apply for a loan. Contact each of the
major credit reporting agencies to get copies of your:
Equifax - www.equifax.com
call 800-685-1111
Write: POB 740241, Atlanta, GA 30374-0241
Experian - www.experian.com
call: 888-EXPERIAN (397-3742)
Write: POB 2002, Allen TX 75013
Trans Union - www.transunion.com
call: 800-888-4213
Write: POB 1000, Chester, PA 19022
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