mortgage company
31 Woodland Street, Suite MMA, Hartford, CT  06105,
CT DOB NMLS #103552
Mortgage Knowledge Points

CALL 860-724-8097 or EMAIL us YOUR QUESTION at: mike@makmortgagecompany.com. 

"A 10 minute conversation can give you the answers
you seek with your mortgage needs."



This page is designed to give you various mortgage knowledge points which can help you become more educated with the mortgage financing process.

How does a self-employed borrower qualify their income for a mortgage loan?
Initially, a mortgage lender considers a borrower self-employed when they have a 25% or greater ownership interest in a business.  Next, they look for a 2 year history of earnings in that business to determine the qualifying income for the mortgage loan and they will look for stability of.  Then, they will examine the filed IRS federal tax returns and usually take an average of income that income over that period.  The tax returns will be verified by the tax transcripts which are ordered directly from the IRS.  So, a newer self-employed person has to get the business established and documented over time, and it takes a couple of years to have filed tax returns to meet the mortgage lenders guidelines to determine income.


Can you explain about the Good Faith Estimate?
The Good Faith estimate is a topic which will take some time to explain in detail so we will explain one piece at a time to get a full understanding.
Since January 1, 2010, HUD and RESPA requires any mortgage loan originator(mortgage company, mortgage lender, mortgage broker, etc.) completing a residential mortgage transaction to use the new Department of HUD Good Faith Estimate(GFE) form.  It is supposed to offer a better way to understand the financial figures involved with the mortgage process, with a universal form which everyone will use.  It incorporates the details about the mortgage transaction which are important to you, the borrower, getting a mortgage loan.


What is a rate and term refinance?
A rate and term refinance is when you refinance the existing balance on a mortgage without taking additional funds out of the closing which is known as a cash out refinance.  In a rate and term refinance you might be lowering the rate on the mortgage, decreasing the term of the mortgage or sometimes paying down the mortgage amount.  The loan amount may still increase as borrowers typically roll in the settlement costs on top of the existing balance which is still considered a rate and term refinance transaction.  Alternatively, if you increased the balance higher than the existing loan amount to get cash back at closing, this would fall into the cash out refinance transaction category. 

 
Do I have to pay any advance fees with the mortgage application?
In the state of CT, as a mortgage broker, we can only charge you upfront for the credit report and appraisal fees which are part of the overall settlement charges.  These are fees we pay to third party vendors for their services, which are required to get a mortgage file underwritten, for a full credit decision by the mortgage lender.  There is a specific mortgage disclosure that explains that these fees are non-refundable in the event of cancellation or denial by a first mortgage lender.  This is due to the fact that we, as a mortgage broker in Connecticut, are obligated to pay these third party vendors for their services which are needed in the initial phase of the mortgage transaction. 


What credit score is used to qualify me for a mortgage?
When qualifying for a mortgage loan, we will pull your credit report and credit scores from our credit vendor through the 3 major credit repositories, Experian, Trans Union and Equifax.  Each credit bureau will assign you a credit score if available based on their respective credit information and scoring model systems.  Once we obtain the scores, generally but not limited to, the mortgage lender will utilize the middle credit score  if there are 3 available scores for a borrower.  If there are two borrowers, the mortgage lender will utilize the lower middle credit score of the two borrowers. For example, if Borrower 1 has scores of 695, 705 and 711 and Borrower 2 has scores of 715, 721 and 725, then the mortgage lender would utilize the middle score of Borrower 1 of 705 as it is the lower middle score of both borrowers.  The mortgage lender may have additional credit requirements such as minimum number of tradelines for a minimum number of months, etc. and the credit requirements can vary from mortgage lender to mortgage lender.


Can you explain what is a cash out refinance?
A cash out refinance is when you take out a larger mortgage on a property than is already in place.  Because you are getting a mortgage amount which is an increase over anything that is in place, you will yield what is called cash out funds from the refinance transaction at closing.  The amount of cash out funds you receive will vary based the difference in the new loan versus any payoffs of existing liens, if any, on the property plus the payment of settlement charges for the residential closing.  For example, let’s suppose you have a $100,000 1st mortgage on a single family property and you close on a new refinanced $200,000 1st mortgage with, for example, $6,000 in total settlement charges.  You will net at closing the $200,000 - $100,000 - $6,000 = $94,000 net cash out funds to you at closing.  As always, the cash out refinance transaction will be subject to any mortgage lender underwriting guidelines and criteria.
  

What is a debt to income ratio and how does impact getting a mortgage?
Based on the various mortgage programs, a mortgage lender will determine guidelines on what debt to income ratios are allowable for a specific mortgage program.  As we work to prequalify you for a mortgage loan, we will run financing figures broken down into monthly income and debt numbers for each prospective borrower.  Once we run mortgage payments, which typically includes principal & interest, taxes, homeowners insurance, mortgage insurance, and association fees, etc., the total housing payment divided by your gross monthly income computes the front debt to income ratio.  Then all other monthly debt obligations such as car loans, personal loans, student loans, credit card debt, and any other required financial obligations are added together and added to the monthly housing debt for a total or back debt to income ratio.  It is these front(housing) and back(housing + all other debt obligations) debt to income ratios that the mortgage lender will look at to determine capacity to pay the mortgage loan.



The NEXT STEP:
Step 1:  One of our mortgage loan originators will need to speak to you regarding your situation in order to prequalify you for a mortgage loan in CT.  We will need to know the details of the mortgage financing you are looking for as well as your personal financial situation.  We will have you complete a credit release form so we can check your credit and obtain your credit scores which will be used by the mortgage lender in underwriting the mortgage loan.

Step 2:
  Gather the below financial information for mortgage application:
1.  2012 & 2013 W-2 forms and Federal Tax Returns.
2.  4 current consecutive paystubs.
3.  2 months of your most recent asset statements(checking, savings, credit union, mutual funds, stock portfolio, etc.)-ALL PAGES FOR EACH STATEMENT.
4.  Legible copy of your drivers license.
5.  For refinancing, copy of mortgage statement and
homeowners insurance dec page.

Step 3:  The next step is c
all us at 860-724-8097 or email mike@makmortgagecompany.com. 

CALL 860-724-8097 or EMAIL us YOUR QUESTION at: mike@makmortgagecompany.com. 

"A 10 minute conversation can give you the answers
you seek with your mortgage needs."

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