Credit Score

The Home Loan Process

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The Home Loan Process - Portland Oregon Mortgage

Here’s a brief overview of what to expect in the home loan process when we work together:

Step 1: Pre-qualification

Pre-qualification is a relatively quick initial step in the process of attaining a mortgage loan. Getting your pre-qualification helps you determine what you can afford so you can set your home search parameters appropriately from the start. If you’re thinking about purchasing a new home, I suggest you learn about how things like your credit score can impact your home loan numbers.  If you’re ready to get started on the home loan process now; click the link to fill out my secure online loan application form and I’ll get back to you right away to discuss the numbers so you can start shopping in earnest!

Step 2: Pre-approval and underwriting

Obtaining a pre-approval will allow you to quickly and confidently present your strongest offer to the seller when you find a house you love. I’ll help you lock in the best home loan rate possible and will take all the necessary steps to move your funding from start to finish without stress, keeping you informed and educated throughout the process. If you run into any questions or concerns during this early phase, I’m here with answers and support.

Step 3: Find your new home

With your qualified pre-approval letter in hand, you can now start shopping for your new home. If you need referrals to great real estate agents in the Portland, Oregon or Vancouver, Washington areas, I’d be happy to connect you with one of my exceptional colleagues. Even with the right agent, you may find a home you want to make an offer on quickly, or it may take a bit longer. If things in your life change during the home-shopping period, we’ll work together to make sure your loan information stays up to date.

Step 4: Make an offer

This is one of the most exciting times in the home buying process! Everyone from your agent to your mortgage broker is on your team and rooting for you and working together to help make it happen. Once you’ve found a home you love, your realtor will work with you to submit a competitive offer and real estate contract, along with our pre-approval letter to ensure your offer is taken seriously.

Step 5: Close the deal!

As we approach the closing date on your new home, we’ll ensure all final conditions of the sale are signed off and proceed towards a successful closing. It’s my goal to help get you the financing secured for your new home without any stress – and I’m on your team until the keys are in your hand and you’re all settled in.

If you’re ready to start the home loan process I’d love to learn more about what your goals and dreams for home ownership are. Give me a call anytime, or start your home-loan prequalification now by submitting your info directly to me using this handy online form.

Mortgage Do’s and Don’t’s

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When you plan a trip, you most likely spend time researching your destination, your method of transportation, where you’ll stay, any local events you might be interested in, the best places for a dinner out or a glass of wine. If you’re traveling with family or with kids, you’ll spend time finding special interests and activities for them. You might price shop hotels or plane tickets. You might map out different roads. However you get there, the point is, you put a lot of time, energy, and money into planning your trip so that it goes off without a hitch; so that you can truly enjoy the experience of traveling.

The home loan process is no different really and deserves an equal amount of time and attention invested to ensure you can fully enjoy the process of shopping for and finally moving into your new home. Securing a mortgage loan so that you can buy a home doesn’t have to be stressful. To help you through the mortgage process, use this quick-reference list of Do’s and Don’t’s to follow when applying for a mortgage:

Mortgage Do's and Don't's | Mathew Mattila Mortgage Professional, Portland Oregon

DO

  • Provide all documentation for the sale, including sales contract, closing statement, employer relocation/buy-out program (if applicable) to your mortgage professional.
  • Keep all original documents organized, and have access to all of your pay-stubs, bank statements, and other important financial documents.
  • Keep an eye on your credit report. Learn more about how your credit report can impact mortgage rate.
  • Provide your earnest money deposit from your own personal bank account or acceptable gift funds. Ideally, these funds have been in your personal bank account for a minimum of three months prior to seeking the home loan.
  • Continue to save money to the bank account you provided for verification of assets.
  • Notify your mortgage professional if you plan to receive a monetary gift toward closing.
  • Notify your mortgage professional of any employment changes such as recent raises, promotions, transfers or pay status changes such as salary to commission.
  • Alternately, be sure to notify your mortgage professional of any loss of income.
  • Stay employed if employment income is being used for loan approval.
  • Notify your mortgage professional regarding any changes to your employment status.
  • Make regular, timely payments on all current debt obligations, including any current mortgages, car loans, student loans, or credit cards.
  • Notify your mortgage professional of an unexpected depletion of the funds needed to close.
  • Notify your mortgage professional of changes in your contact information.
  • Notify your mortgage professional if you expect to make a financial deposit that is not related to your regular payroll, pension, SSI, or income tax refund.
  • Notify your mortgage professional if you expect to receive a financial gift from a relative, employer, union hall or non-profit organization.

DON’T

  • Close or open any asset accounts or transfer funds between accounts without receiving the correct documentation required for your loan.
  • Change jobs or employers without inquiring about the impact this change might have on your loan.
  • Deposit any monies outside of your payroll deposits, particularly cash or sale of personal property. Many guidelines require substantial documentation as to the source of these deposits.
  • Open or increase any new or existing liabilities, including credit cards, student loans or other lines of credit during the loan process.
  • Make major purchases prior to or during your contract, such as new car, furniture, appliances, etc. as this may impact your loan qualification.
  • Advance any cash from credit cards or borrow funds for closing.
  • Change your legal name.
  • Take any unpaid time off from work, such as unpaid vacation time, as the change in income for that period can negatively impact the loan process.
  • Alter any of your legal or financial documents in any way.

If you have questions or concerns about any of the points listed here, please don’t hesitate to get in touch with me.

If you’re just getting started shopping for a home in the Portland, Oregon or Vancouver, Washington areas, check out this online Mortgage Calculator and learn more about how much you can afford to spend on a new home purchase.

How Credit Score Impacts Mortgage Rate

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Growing up in my family’s mortgage business here in the Portland-Vancouver area, I was taught that it’s not a matter of if someone can achieve the goal of owning a home but only a matter of when.

I also learned that credit scoring is perhaps the number one thing standing in the way of someone achieving that goal. Sometimes, it’s as simple as paying down a high-credit utilization credit card or disputing an incorrect late payment on a credit report that will make or break someone’s ability to qualify for a mortgage.

My ability to educate and help my clients with understanding what their credit score means, and advise them on how to raise their credit score can go a long way in helping secure better home loans for their families. Better credit scoring can secure better mortgage rates and sometimes minor tweaks can help people qualify for products and rates that might otherwise seem unavailable.

The small amount of time I can spend educating and instructing people on what to do to raise their credit scores can produce a change that will create a lifetime of difference and thousands of dollars in savings on the life of a mortgage. Taking that time to help my clients is one of the most important things I do when I work with a family on their home loan.

My latest blog post covers the basics of credit scoring and easy to implement tips for a better credit score:

According to data from the various credit reporting agencies, the average credit score in the United States hovers around 695. Though each credit reporting agency utilizes different scoring models to calculate credit score they all place the average American’s credit score somewhere between 660 and 720. In Oregon, the average credit score is 682.

How Credit Score Impacts Mortgage Rate

Your credit score will impact your mortgage rate

For all lenders, including mortgage professionals, your credit score is used to measure how viable your particular loan application is in terms of how likely you are to make good on and pay back the loan over its lifetime. Having no credit history (also referred to as being a ‘credit invisible’) or holding a very low credit score (being high-risk) can lead to a lender not being able to offer a mortgage loan at all.

Depending on where your credit score falls within the range (300 to 830 or 850 depending on the credit reporting agency) will also impact the lending terms you’re offered – in particular, your interest rate. The higher your credit score, the lower your APR (annual percentage rate) will be.

Credit score is usually classified as follows:

  • 720-750 – 830/850: Excellent Credit
  • 660 – 719: Average/Fair Credit
  • 620 – 659: Poor Credit
  • 600-620 or lower: Bad Credit

According to Credit Sesame, “the minimum score [needed to qualify for a mortgage loan] also depends on the type of loan you’re applying for. With a conventional loan for a house that’s backed by Fannie Mae or Freddie Mac, for example, the minimum score required is set at 620. But the lowest credit score to buy a house with an FHA loan is 580.” With all of this in mind, in order to get a great rate and save thousands on the cost of your mortgage loan, it’s best to go into the transaction with the highest credit score possible.

If you knew that spending the next 6 months working on your credit score could save you interest over the life of your loan and keep more dollars in your pocket, wouldn’t you do everything you could to boost your credit? If credit your score is relatively low, or even if you just want to give your credit score a boost in preparation for your home purchase, here are Do’s and Don’ts to help you work toward a higher credit score and a relatively better mortgage rate:

Get a copy of your credit report

You are legally entitled to one free credit report from each of the three major credit reporting agencies once each year (Equifax, Experian, and TransUnion). Contact the agencies directly to obtain your report(s).

From the FTC website: “The three nationwide credit reporting companies have set up one website, toll-free telephone number, and mailing address through which you can order your free annual report. To order, visit annualcreditreport.com, call 1-877-322-8228, or complete the Annual Credit Report Request Form.”

You can also search Google for ‘free credit report’ to access any number of other options, like Credit Karma or Credit Sesame, to obtain a free copy of your credit report. These companies even have a free app that sends alerts if your credit score changes or there is a change in the data on your credit profile. It’s important to note that while this data might be a good indication of credit scoring, the numbers provided by these services can vary by 30-50 points from the actual credit bureau scores.

Note, many of the bigger credit card companies offer basic free credit score monitoring and notification of a shift in your credit score. Check your account benefits to see if you already have access to this feature. It’s an easy way to get a good estimate of your current credit score.

Check your credit report(s) for errors

A recent report from the Federal Trade Commission exposed approximately one-fourth of the reports examined by the commission held at least one error.

If you find errors, file a dispute with the credit agencies. The FTC advises the following action if you do find an error on your credit report and even offers a link to sample dispute letter:

“Tell the credit reporting company, in writing, what information you think is inaccurate. Use our sample dispute letter. Include copies (NOT originals) of documents that support your position.”

A full write-up of the steps to disputing an error on your credit report and following up to ensure the error is addressed is also provided at the FTC website.

Bear in mind, most mortgage lenders will require credit disputes to be resolved before awarding a loan, and the dispute process can, unfortunately, take months. If you do have issues on your credit report that you wish to dispute and you’re preparing to apply for a mortgage, either start the dispute process early or wait until after you’ve secured the loan. If you’re uncertain which route makes the most sense, talk to a qualified mortgage professional.

While you’re investigating your credit score and your recorded credit history, keep the following things in mind:

Pay your bills on time

Paying bills late or not at all may seem like an obvious negative when it comes to your credit score, but did you know that even one late payment can lower your credit score – even if you already have excellent credit.

According to FICO data, a 30-day delinquency could cause as much as a 90- to 110-point drop on a FICO Score of 780 for a consumer who has never missed a payment on any credit account.

Obviously, paying your credit cards in full and on time is critical to a good credit score – issues like charge offs, debt collections and bankruptcy will absolutely impact a mortgage loan rate, if not prevent acquiring the mortgage altogether. Actually, late payments on any bills: utilities, rent, phone and other loans can have a negative impact too.

Keep an eye on credit card balances

Maintaining high credit card balances or maxing out credit cards is another issue that will negatively impact your credit score, making your mortgage more expensive.

You want to aim for under 20% credit utilization overall, and about the same on any one card for optimum. If you’re using more than 20% of your credit, be strategic about paying balances down before applying for a home loan. According to FICO, “[Credit utilization] below 10 percent is better, and people who have the highest credit scores average just 7 percent credit utilization.”

Don’t close old credit accounts

It may seem counterintuitive, but don’t look to close any cards in the near future if you’re looking for a mortgage. Closing a credit card with a balance actually tips you away from ideal credit utilization because closing the card lowers the available credit on the account to $0 while you’re still holding a balance.

Closing any credit cards, even if they carry a low balance, can have a negative impact because this action lowers your overall available credit, thereby skewing your credit utilization higher.

If you absolutely must close a card, try to pay it off first. And bear in mind that closing a credit account can negatively impact your score, especially if you’ve held the account for a long time. 15% of your credit score is the length of your credit history. Closing a card you’ve had for a long time will drag your score down.

Don’t open new credit accounts

While it would seem that more cards equating to a higher overall available credit amount would be a good thing for your overall credit score, opening a bunch of new cards is going to take a hit on your credit score. The very act of pinging your credit report for the purpose of opening a new credit account can impact your credit score, and opening multiple new cards all at once drags the average length of your credit history down.

 

If you’d like to discuss how your current credit score could impact your future mortgage loan and get the information you need to put a plan in place so you come into your new home purchase in the best shape possible, please get in touch.

 

 

 

 

 

 

 

 

 

Should You Continue to Rent or Is It Time Buy a Home in Portland?

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Renting a home or apartment can certainly have advantages over homeownership. If you have a good property with a great landlord and a rent you can afford it might seem pointless to purchase a new home in the Portland area, especially with home prices spiking in certain neighborhoods. Renting (usually) means someone else must plan for, execute, and pay for repairs, upgrades, and upkeep. When you rent, you’re off the hook for the big-ticket issues that can crop up with home ownership. On the flip side, you’re subject to regular rent increases, little control over your environment, and no real guarantee the apartment or house you’ve been calling home will continue to be the place you make your coffee each morning once your lease comes to an end.

According to Zillow at the time of this post, the median price of homes currently listed in Portland, Oregon is $429,900 while the median rent price in Portland is $1,935.

For renters who are considering buying their first home, a $430K mortgage might feel daunting and even impossible at first glance, especially when compared with the average $1900 a month for rent. But it’s not that simple, and the only way to sort out whether or not purchasing a new home makes financial sense for you is to do the math.

Should you rent or buy a home in Portland Oregon

Rent or Buy?

Here are two calculators to help you crunch the numbers: Zillow’s Rent vs Buy Calculator; Discover has another calculator with a unique format that’s kind of fun to play with.

Play the Numbers Game

Of course, the amount of cash you bring to the transaction for a down payment will impact the overall cost of your loan, so use the most accurate numbers possible with these calculators, but do play around with them to see what would change in this equation if you managed to put down just $5k or $10k more.

Also important to remember, your credit score, and the credit score(s) of anyone on the loan with you, will impact what size loan you qualify for as well as how much interest you pay over the life of your mortgage – and that’s something these calculators can’t take into account in real time.

Check Your Credit Score

Check your credit score now so you have an idea of where you stand and what you’re working with. If you have an ‘excellent’ score, coming in at 800 or above, you’ll qualify for the best mortgage rates. A score of 700 or higher is considered ‘pretty good’ and will still qualify for decent rates. Scores below 700 can present more of a challenge to the transaction and you’ll pay for it in higher interest rates on your mortgage loan. This handy calculator at MyFico will help you understand exactly how your FICO® score can impact the interest you’ll pay on your loan.

While you’re doing the homework and preparation toward the purchase of your new home, why not start working toward a better credit score as well? Even a small jump in your credit score may help with saving a bit on the principal of your mortgage.

According to The Motley Fool: “On a $250,000 mortgage, the difference between a 620 credit score and an “excellent” 760 adds up to more than $86,000 in interest savings over the life of a 30-year loan.”

If you knew that a little bit of work on your credit score over the next few months could save you $86,000 over the life of your mortgage loan, would you do it? Well, now you know.

Ultimately, the only way to determine if purchasing a home is a better financial option for you than renting is to sit down and go over the numbers with a local mortgage professional.

Talk to a Mortgage Professional

If you feel you’re ready to move forward with the process of buying a new home, get in touch. Together, we’ll take a closer look at how each of the different factors like credit score, down payment, and current expenditures and debt will come into play when it comes to the size and cost of your new mortgage. I may even be able to give you the insight you need on raising your credit score before you take out the loan, in order to help you get a better overall value on your new mortgage.

Not the right time for you purchase a new home? If you played with the Rent or Buy calculators linked above and it’s just not coming out in your favor, if your credit score is low, or you feel you don’t have the overall budget to make the jump from renting to buying right now, I’d encourage you to get in touch with me anyway. I’ll give you the information and tools you need so that you can start working your way toward achieving your goal of home ownership.