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COVID-19 Mortgage Market Update from Laith Daik

Like almost all industries, COVID-19 has had an adverse effect on the mortgage industry.  The changes have been happening daily and at a rapid pace.  The changes include new processes, procedures, and verification’s required.  Some of the major changes have included the appraisal required in some circumstances has been changed to allow an exterior only inspection or a desk review.  There are additional verification’s required to confirm the borrower is gainfully employed.  The verification’s apply to both W2 wage earners and self-employed individuals.  The federal stimulus has both helped and hurt the mortgage business.  The Federal government is working closely with industry leaders to help resolve unintended consequences resulting from the stimulus.  Many mortgage companies have tightened credit standards making it more difficult to qualify for a mortgage loan.  Just this week, Chase Bank one of the largest originators and servicers of mortgage loans implemented an underwriting overlay requiring a minimum credit score of 700 and minimum down payment of 20%.  We are hopeful that the market settles and we can start focusing exclusively on assisting our customers.

Our team at Texas Loan Star has been working tirelessly to adapt new processes and procedures with goal of continuing to serve our customers and business partners- realtors, bankers, builders, financial planners, and CPA’s to name a few.  Thankfully, all loan products that Texas Loan Star provides are still available at this time. Conventional, FHA, VA, Jumbo, Portfolio, Renovation, Refinance, Cash-Out and Construction loans. Rates are still at an all-time low.  Our average close time for purchases is 30 days and for refinances are averaging 45 days.  Lending requirements are changing daily but we are keeping up and informing our borrowers so they are aware and have clear expectations.  We are anticipating low rates for the foreseeable future which should help keep buyers in the market. If anyone has other questions, don’t hesitate to reach out. We are all in this together! We are #YourHomeTeam.

Laith Daik

President of Texas Loan Star

Laith@texasloanstar.com

713-802-0606

Conditional Approval vs. Pre-Approval?

What you inquire about qualifying for a home loan, you’ll likely hear the term “conditionally approved” but might not be sure what that means or how it differs from a pre-approval. A conditionally approved loan is closer to closing than a pre-approved one but it comes with a few conditions, usually concerning documentation and income, that must be met before a client can be pre-approved to close.

A conditional approval occurs once the client has provided the necessary documentation to get their loan set up, such as supplying the following documentation:

  • Employment and income verification
  • Pay stubs
  • Tax returns
  • Bank statements
  • Debt obligations (credit cards/other loans)
  • Utility bills
  • Asset statements

All this information is required before the loan is completely approved.

Conditional Approval vs. Pre-Approval

People often confuse conditional approval and pre-approval when talking about mortgages. Loans are pre-approved by a lender who has reviewed your income and credit information. Your information must be verified and approved before a final decision can be made.

The pre-approval is based on what the client tells the banker and their credit report information. Conditional approval differs from pre-approval in that the loan may not have been reviewed by an underwriter when pre-approved. After your information is reviewed, you’ll receive a pre-approval letter stating your eligibility for a loan up to a specified amount.

Conditional approval comes after pre-approval and involves going a little deeper. An underwriter conducts a strict documentation review before your loan is conditionally approved. This documentation is reviewed by an underwriter, and provided the client’s information matches up with what was initially stated to the mortgage lender, they are conditionally approved. This means the loan is moving forward, but there are or may be additional conditions that will need to be met in order to finalize and close the loan. If the conditions aren’t met, the client might not be able to close on the loan.

Conditions on a Conditional Approval

There are a few common conditions attached to a conditional home loan approval. Additional documentation, such as pay stubs, paperwork for business income and tax documentation, is often required for final approval. This might also include written verification of employment from your employer or additional asset statements, depending on what’s needed for your loan.

Conditional approval can also require purchase agreement addendums. Title verification, an appraisal, an inspection and home owners insurance are usually needed to verify the market price of the home, the loan-to-value ratio and other details. This can also include confirmation that there are no unexpected liens or judgements on the home.

Denial of a Conditionally Approved Loan

Clients with a conditional approval for a home loan are at risk for denial if they fail to meet any of the conditions laid out by the lender.

Here are a few reasons why a client might be denied:

  • The underwriter is unable to verify the data provided by the client
  • The home the client is trying to purchase has an unexpected lien.
  • The client has a judgment on their record
  • The home inspection or property appraisal came in with unexpected issues
  • The client experienced a decrease in income
  • The client had negative entries on their credit report

Call us today for more information or if you want to start the process to get pre-approved!

6 Things to Know Before Applying for a Home Loan

There are some thing to keep in mind to ensure that your home buying process is simple. Here are six tips to help you feel confident when applying for a new home loan.

1.Pay All Your Bills on Time

When Applying for a home loan, it’s important you have good credit history, which includes paying all your bills on time, every time. A late payment may negatively affect your credit score and that can play a part in whether you’re approved financing and ultimately, the rate and term you may receive. Even after your home loan closes, it’s still important to pay your bills on time.

2. Be Wary of Employment Changes

A stable employment history is important when preparing to buy a new home. After all, you have to show that you have the stability and continuity of income to repay the loan.

Requirements may vary based on the type of employment you have, but for most salaried borrowers, there is no specific time on the job required. Generally, lenders will request to review at minimum a two-year work history.

3. Do You Own Research

With so many home loan options available, it may be difficult to determine the ones that’s right for you. While your lender will work with you to find the best option, it’s important that you learn the basics about fixed-rate and adjustable rate loans.

4. See What You Can Afford

After you’ve taken the time to do your own research, it’s time to see how much you can afford to spend on a home. For example, most budgets call for earmarking 28% of your post-tax income for a house payment, including your homeowner’s insurance and property tax.

5. A Few Things to Consider

What options are available in rates, points and fees (and yes, there’s more than one rate).

Hold off on opening any new accounts.

If you’re looking for a new home, there’s a good chance you’re going to be looking to furnish and decorate it as well. While that “5% discount on all furniture purchases” credit offer may look good at the moment, it’s best to put off opening any new credit accounts or lines of credit until after your loan has closed. Taking on more debt could impact the type of loan you receive or change the one already in process.

6. Hold Off on Closing Any Existing Accounts

Each item on your credit report contributes to your credit history or the record of your responsible repayment of debts. The longer your credit history, especially with a good payment record, the better. When applying for a new home loan, don’t close any existing accounts, even if they have a $0 balance.

Following these tips may help set you up for a success with a smooth home buying experience. Call us today with any questions you have! 713-802-0606