Posted by: Bill & Gayle McCord | October 4, 2010

The Basics of Getting a Loan

No one can overstate the importance of home. Knowing you can trust your mortgage company to deliver a quick, trouble-free and easy loan is priceless.  My friend and business colleague, Glenn Colley, is a wonderful loan officer and is doing us the honor of sharing some basics about the process of what goes into getting a loan.

Basics of Mortgage Financing in the new Mortgage Arena

News flash……mortgage bankers are still lending money for home financing, contrary to what you may hear from the media.  We are helping clients each day realize the dream of home ownership, moving up buyers or refinancing their current home.

Income, Assets, Credit and Appraisal are the most important areas of financing today.  One hiccup in one area of these can kill the transaction all together.  Let’s explain each area in more detail:

Income

You need income. You need to be able to afford the home. Without it, forget it! But what is acceptable income? Basically, it all depends on the type of loan that a borrower applies for. Let’s just say that there are two ratios:

1.      First Ratio – The first ratio, top ratio or housing ratio. Basically this is your total proposed house payment compared to your gross monthly income.  Most guidelines state you should go over 33% of your gross incometowards your house payment.

2.      Second Ratio– The second ratio, bottom ratio or debt ratio includes the housing payment, but also adds all of the monthly debts that the borrower has that reports on your credit report plus alimony or child support.  What qualifies as income? Basically, it’s income that has at least a proven, two year history of being received and pretty high assurances that the income is likely to continue for at least three years.

Assets

For the most part this is fairly simple. Do you have enough assets to put the money forth to qualify for the down payment that the particular program asks for.  FHA, for now, has a 3.5% down payment. Some loans require as much as  20% down. These assets need to be validated through bank accounts and sometimes gifts. Can you borrower the down payment? Sometimes. Generally if you’re borrowing a secured loan against a secured asset you can use that. But rarely can cash be used as an asset.

Credit

This can be the bane to every borrower, every loan officer and every lender……and yes, to every realtor. How many times has a borrower said my credit’s good, only to find out that it’s not nearly as good as a borrower thinks or nearly as good as the borrower needs. Big stuff for sure. 620 is the bottom score (again with few exceptions) that lenders will permit. Below a 620, then you’re in a world of hurt. Even at 620, people consider you a higher risk that other folks and are going to penalize you or your borrower with a more expensive loan. 700 is when you really start to get in the “as a lender we love you” credit score. 720 is even better. Watch your credit!!  Call me for a free credit report!!

Appraisal

In many ways this is the easiest box. Why?? Generally, there’s nothing you can do to affect this. Bottom line here is…..”is the value of the house at least the value of what you’re paying for it?” If not, then not good things start to happen. Generally you’ll find fewer issues with values on purchase transactions, because, in theory, the realtor has done an accurate job of valuing the house prior to taking the listing. The big issue comes in refinancing. In purchase transactions, the value is determined as the lower of the value or the contract price. That means that if you buy a $1,000,000 home for $100,000, the value is established at $100,000. Conversely, if you buy a $200,000 home and the value comes in at $180,000 during the appraisal, then the value is established at $180,000, big issues

For each one of these boxes, there are over 1,000 things that can affect if a borrower has reached the threshold to complete that box.   Call us to discuss what we may be able to do for you.  We would love to help you  and/or your family and friends.


Glenn Colley
Senior Loan Officer
NMLSR # 171039

Office: 972-599-5245
Mobile: 214-876-3678
eFax: 866-679-6806

gcolley@wrstarkey.com
www.GlennColley.com

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Responses

  1. […] Sometimes. Generally if you’re borrowing a secured loan against a secured asset you can use that. But rarely can cash be used as an asset. Credit. This can be the bane to every borrower, every loan officer and every lender……and yes, … View full post on secured loan – Google Blog Search […]

  2. […] The Basics of Getting a Loan « McReal Estate…from our home to yours […]

  3. […] these folks so you will be meeting my fellow networkers each Monday.  You have already heard from Glenn Colley with WR Starkey. Now I would like to introduce you to Brian Burcham with Burcham Insurance. […]

  4. […] folks so you will be meeting my fellow networkers each Monday.  You have already heard from Glenn Colley with WR Starkey and Brian Burcham with Burcham Insurance.  This week, we’re hearing from Cheryl Williams, […]

  5. […] folks so you will be meeting my fellow networkers each Monday.  You have already heard from Glenn Colley with WR Starkey, Brian Burcham with Burcham Insurance, and Cheryl Williams with Hexter-Fair Title Company. […]

  6. […] folks so you will be meeting my fellow networkers each Monday.  You have already heard from Glenn Colley with WR Starkey and Brian Burcham with Burcham Insurance, and Cheryl Williams with Hexter-Fair.  I also added a […]

  7. […] Monday!  You’ve already met some fabulous colleagues of mine  from my networking group : Glenn Colley with WR Starkey and Brian Burcham with Burcham Insurance, and Cheryl Williams withHexter-Fair, as well as Bill and […]

  8. […] Monday!  You’ve already met some fabulous colleagues of mine  from my networking group : Glenn Colley with WR Starkey and Brian Burcham with Burcham Insurance, and Cheryl Williams withHexter-Fair, as well as Bill and […]

  9. […] Monday!  You’ve already met some fabulous colleagues of mine  from my networking group : Glenn Colley with WR Starkey and Brian Burcham with Burcham Insurance, and Cheryl Williams with Hexter-Fair, as well as Bill […]

  10. […] Monday!  You’ve already met some fabulous colleagues of mine  from my networking group : Glenn Colley with WR Starkey and Brian Burcham with Burcham Insurance, and Cheryl Williams with Hexter-Fair, as well as Bill […]

  11. […] Glenn Colley: your loan officer […]

  12. […] Glenn Colley: your loan officer […]

  13. […] Glenn Colley: your loan officer […]


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