OC Real Estate
One of the most common questions prospective buyers of OC real estate have today is will I qualify for a loan. The days of zero down stated income, fog a mirror and get a mortgage are over. Today buyers need to properly prepare themselves to qualify for a loan.
Typical paperwork you are going to want to have on hand includes:
- Past two pay stubs
- All bank account statements
- Verification of all assets
- Verification of all debts
- Past two years tax returns
- All addresses and employers over the past two years
- Verification of any additional income you want the lender to consider
- If self employed: Year to date Balance Sheet and P&L statement & past two years business and personal tax returns
Where to get your loan? This really is deciding whether to go to a bank direct or go through a broker. Mortgage brokers are commonly used in South Orange County, they act as a middleman between you and different banks, can typically do more difficult deals, have a host of options to offer you, and usually are easier for clients to work with. Going to banks direct is a good idea if you have a relatively easy deal to finance and an existing relationship with the bank. Your loan just has to fit into one of their defined boxes. A good agent will be able to give you a couple referrals to help secure you mortgage, once you speak with them you need to decide which one you are most comfortable working with. Much like selecting a realtor to work with picking the right person to handle your mortgage comes down to selecting who you think will do what has to be done to successfully close your transaction, its really a matter of trust and who you want to work with. If an agent your working with only provides you one mortgage person its in your best interest to find at least one additional one on your own, remember this is your mortgage and you are the one who has to comfortable and trust in the person you are having handle your loan.
Its best to do a credit check ahead of time to be sure you know exactly what lenders will be looking at when you submit your application. Always be honest and disclose anything that might be an issue to the person handling your mortgage, nothing will kill your deal quicker than being dishonest.
While there are still a few zero down programs (such as VA loans) out there most lenders want you to have some skin in the game. Down payments will range from 3.5% for FHA loans to 5% for loans requiring Private Mortgage Insurance (PMI). A buyer with 20% down or more can get a loan without PMI. Since we have many self-employed buyers in South Orange County it’s of note that many banks have higher requirements for self employed borrowers regardless of assets, credit or financial situation. It is not uncommon for self employed borrowers to be asked to put 40% or more down so if you are self employed prepare to shop more, jump through more hoops to qualify and be asked for a larger down payment. Mortgage rules are getting more and more reasonable as we move away from the real estate bubble collapse so they should return to more common sense lending guidelines at some point.
Now that you picked who is going to secure your loan, you pulled your credit, prepared all your paperwork and determined your down payment the questions becomes how much to borrow. This really is two questions the first is how much can you qualify for and the funding source will answer that for you. The second is how much you should borrow, meaning how much are you confortable paying every month for your home and how much debt you want to take on. The payment will be greatly effected by the type of loan you select (30 year fixed, 15 year fixed, adjustable loans etc.) so be sure to weigh all your options. The total amount of debt you take on also has to be considered so weigh that as well then make a decision based on what your most confortable with.
Now that you have the mortgage handled let’s get to looking for your new South Orange County home!
If you have any questions feel free to contact me, I am here to help.