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Avoiding First-Time Homebuyer Mortgage Pitfalls, Part 1

avoiding first-time homebuyer pitfalls

As a first-time homebuyer, there will be several elements of the mortgage and home search process that may be unfamiliar to you. It pays to have an ideal loan officer on your side who has experience with the process and can guide you through it, helping you check the right boxes while avoiding pitfalls.

At Altius Mortgage and our partners at Mortgage Ogden, we’re proud to offer a wide range of home loan options to first-time homebuyers, plus numerous areas of expertise to assist you with parts of the process you’re unsure of – including avoiding some of the common mistakes sometimes made by first-timers on the market. This two-part blog will go over some of the most frequent such errors we’ve seen throughout the years, plus advise you on the proper approach in several of these important areas.

Home Before Mortgage

While we know it’s tempting to be scouring the market for homes in your area the moment you decide it’s time to buy, you must resist this urge until you’ve begun the mortgage pre-approval or pre-qualification process, at the very minimum. This is because the home market is constantly changing and evolving – homes might fly off the market before you’ve completed your mortgage in many cases, or could change in price.

More importantly, starting the mortgage process allows you to understand your own purchasing power through the kinds of home loan programs and rates you qualify for. Without this knowledge, you might be spending significant time investigating homes that will be outside your budgetary range, which is simply a waste of your time.

Credit Score and Other Prep Issues

A mortgage application is an area that often requires some advanced prep in terms of your finances, and one key area here is your credit score. You should be checking your score well in advance, plus auditing it for any possible mistakes if you think they might be present and artificially lowering your score.

In addition, be sure you have other financial documents like tax returns, pay stubs or other account statements available and up to speed.

Lacking Down Payment

Another vital prep element is saving up funds for a down payment, which will vary depending on the program you qualify for. Standard down payments are 20% of the purchase price, but there are many first-timer programs, such as FHA loans, that allow for lower amounts – but may also come with mortgage insurance requirements. Wherever possible, try to build up as much money as you can for a down payment to avoid larger interest and insurance payments through the life of your loan.

Missing Incentives

There are several incentives possibly available that you should not miss out on:

  • First-home incentives: Various organizations, government entities and even regions offer programs to incentivize first-time buyers, from discount housing to ideal loan terms or improved financial services.
  • FHA loans: Backed by the Federal Housing Administration and complete with much lower rates and down payments.
  • VA loans: For veterans, spouses and active military members.
  • USDA incentives: For rural buyers, farmers and similar individuals.

For more on avoiding mistakes as a first-time homebuyer, or to learn about any of our mortgage loan services, speak to the staff at Altius Mortgage today.

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Avoiding VA Loan Application Denial Causes, Part 2

VA loan application denial

In part one of this two-part blog series, we went over some basics on behaviors or application errors that might lead to a higher chance of denial for a VA loan. Backed by the Department of Veteran’s Affairs, VA loans offer no down payment and several other benefits, but do require meeting some basic thresholds and avoiding various issues to qualify.

At Altius Mortgage and our partners with Mortgage Ogden, we’re happy to offer a wide range of loans to first-time homebuyers and many others, including VA loans to qualified service members, veterans and spouses. In today’s part two of our series, we’ll go over a specific set of circumstances to be aware of here: The possibility for a denial based on automated underwriting, plus what you can to do get around this issue if it shows up for your application.

Underwriting Formats

In today’s modern age, there are many mortgage lenders who utilize automated underwriting as part of their loan application and approval processes. Automated underwriting refers to an online portal lenders use to upload loan applications and all their relevant information, with algorithms meant to evaluate the application data and come up with an approval or denial based on it.

Manual underwriting, on the other hand, is the traditional method of underwriting. An actual underwriter reviews the documents and application, then determine eligibility. For many VA loans, FHA loans and other programs, the preference among many lenders is automated underwriting, with manual underwriting serving as a secondary method.

Automated Underwriting Denials

In some cases, however, the automated underwriting system may deny a VA loan application for reasons that aren’t fully correct. Maybe there was an incorrect input from the lender into the portal, for instance, or perhaps there’s an error on your credit report that the automated system is viewing as correct.

If you are denied by an automated underwriting system for a VA loan and you believe one of these issues was at hand, do not give up.

Request Manual Underwriting

Rather, request manual underwriting done by an actual home loan underwriter. There are many cases where such an individual will approve a given application once they’ve been informed of an issue like an input error or a credit report inaccuracy – but automated underwriters are incapable of this due to their computerized nature. There are ways you can supply additional documentation that allows the underwriter to grasp a larger picture of your finances, understanding why an issue that appeared like a blocker to approval initially might not actually be as large a concern.

For more on underwriting formats and VA loan approval, or to learn about any of our mortgage loan  services, speak to the staff at Altius Mortgage today.

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Avoiding VA Loan Application Denial Causes, Part 1

avoiding VA loan denial

For many military service members, veterans and certain military spouses, the US Department of Veterans Affairs guarantees mortgages under the VA loan program. This program, which involves zero down payment and several other benefits, is enormously helpful to many of those who have served our country – but it does come with qualification thresholds and the need for an application, and there are some cases where applications may be denied.

At Altius Mortgage and our partners at Mortgage Ogden, we’re proud to provide VA loans and excellent VA loan rates to a variety of clients, including first-time homebuyers this program is often ideal for. We’ll walk you through the basic requirements for qualifying for VA loan, plus areas that might prevent you from qualifying. While some of these are based around credit score and other firm requirements, there may be certain errors or other controllable variables that also play a role here. This two-part blog will begin by looking at certain errors you may have some control over, while part two will dig into issues with automated underwriting and how this area may impact your application.

Application Errors

The single leading cause of VA loan application rejection, and also the area you have most control over, is errors on the application itself. VA loan applications are just like any other mortgage application: They require precision and exact details in every area, and even minor mistakes can cause issues.

Underwriters who view these applications, whether manual or automated, are perfectionists. You must be clear about things like sources of income and family size, plus be detailed in all debt disclosure and related areas that will impact how a lender views your financial situation. Be sure you’re clear and precise on every single area of the application.

Employment Changes

Once you’ve begun the loan application and approval process, you should do your best to avoid major employment changes if possible. Underwriters may view this suspiciously or be concerned about the reliability of your new income.

If such a change is unavoidable, speak to your loan officer in advance. There may be new documentation to verify or other steps you can take to make this a more presentable situation to the underwriter that does not ruin your chances at approval.

Credit Changes

Another big area to try and keep consistent in the lead-up to a VA loan application is your credit. Avoid taking out new debt or undergoing major credit checks during the application process, as these may alter your credit and raise suspicion from underwriters. Keep your debt-to-income ratio good as well, avoiding major credit purchases during the application process.

For more on avoiding risks of a VA loan application being denied, or to learn about any of our mortgage loan services, speak to the staff at Altius Mortgage today.

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Meaning and Uses of Escrow in Homebuying Situations, Part 2

meaning uses escrow homebuying

In part one of this two-part blog series, we went over some basic details on escrow, or good-faith deposits made during many homebuying situations. Used to protect both the buyer and the seller from scams and other monetary risks as negotiations heat up, escrow also has purposes within mortgage and various home fee payments once a home has already been purchased.

At Altius Mortgage and our partners with Mortgage Ogden, we’re happy to spend time explaining various terms or factors of any of our mortgages or homebuying programs, whether you’re a first-time homebuyer or an experienced real estate flipper. In today’s part two, we’ll go over how escrow is managed and some factors to consider when determining whether you actually need to go with an escrow account during your home purchase.

How Escrow is Managed

As we noted in part one, escrow accounts are managed by a third party independent of both the buyer and seller. As we also went over, however, there are multiple types or uses of escrow accounts, and which you’re using may dictate who is managing the account. A couple possible management sources include:

  • Escrow agents or companies: During primary escrow usage, when a buyer places funds in the escrow account as an earnest money deposit to the seller, the account will usually be managed by an escrow company or agent. This company may be the same as the title company in some cases, or may be different. In most such cases, this company is also responsible for the deed and other sale documents. Generally, the fee for this company or agent will be split 50-50 by the buyer and seller.
  • Mortgage company: When you’ve purchased the home in question and have begun making mortgage payments, plus various insurance and tax payments, an escrow account will sometimes be used for these payments and managed by your mortgage company. This will usually be your lender, though not always. The company in question makes such payments directly from your escrow account.

Escrow Doesn’t Cover Everything

Now, it should be noted that escrow accounts don’t necessarily cover all fees or homeownership expenses. Utility bills, for example, are not included in escrow account contributions, and neither are homeowners’ association fees if applicable. Supplemental taxes will also not involve escrow.

Do You Need Escrow?

It’s important to note that escrow is not a firm requirement for a home purchase, in either form it’s used for. There are certain cases where escrow is required, or where you’ll need certain qualifications to opt out of one. There also may be situations where you can use an escrow account for certain expenses, then pay others on your own to save money. Your lender and loan officer will be happy to explain the important factors and whether you might benefit from an escrow account.

For more on escrow and good-faith deposits in a mortgage or homebuying situation, or to learn about any of our mortgage loans or services, speak to the staff at Altius Mortgage today.

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Meaning and Uses of Escrow in Homebuying Situations, Part 1

uses escrow homebuying situations

There are several terms that may be new to you if you’re purchasing your first home, and a great example here is escrow. Used for a couple different reasons within a mortgage and homebuying situation, escrow is in place to protect multiple parties – buyers, sellers and even lenders – during such processes.

At Altius Mortgage and our partners with Mortgage Ogden, we’re happy to explain escrow and any other important terminology for any of our mortgage loan options, from ideal first-time homebuyer programs to mortgage refinancing and numerous other areas. In this two-part blog series, we’ll go over everything you need to know about escrow within a homebuying situation, including how it protects both parties and how it’s used.

Understanding Escrow

Simply, escrow refers to any situation within a transaction where a third party holds funds, valuables or other items of value as part of the transaction. Escrow may be used for several different high-value transaction types, but perhaps the most common is within a home purchase.

During escrow in a homebuying situation, money or property will be held by a neutral third party to protect it from potential scammers. The money in question can only be accessed for pre-arranged purposes agreed upon by both the buyer and seller of the home.

Escrow and “Earnest Money”

Escrow use within a homebuying situation ties in directly with a theme known as “earnest money.” Also called a good-faith deposit, earnest money refers to a buyer’s investment in the purchase in question, which should match the seller’s – but they come in different forms.

When a buyer and seller reach a certain point in their negotiations, you see, the seller will generally make their own good-faith move by pulling the house off the public market to negotiate solely with this buyer. This is an investment – putting the house back on the market costs money. In return, the buyer will put down between 1% and 3% of the home’s listed price in escrow. If and when the sale goes through, this money is simply applied to the purchase amount. If the deal falls through, the seller retains the earnest money to cover the cost of re-listing the home.

Types of Escrow

There are actually two types of escrow used during home purchases:

  • To protect the buyer’s good-faith deposit and bring the money to the right party based on sale conditions, as detailed above.
  • To hold a homeowner’s funds in a separate account for taxes and insurance payments, which will be handled by your lender in most cases.

For more on escrow and good-faith deposits during a home purchase, or to learn about any of our mortgage loans or services, speak to the staff at Altius Mortgage today.

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How Employment Gaps Impact Mortgage Applications, Part 2

employment gaps mortgage applications

In part one of this two-part blog series, we went over some of the basics on employment gaps and related issues that may crop up during a mortgage application. Income is a very important part of any such application to lenders, and red flags may appear if your recent employment or income history has any major concerns.

At Altius Mortgage and our partners at Mortgage Ogden, we’re happy to walk you through the application process for any of our home loans, including providing assistance to those who worry a recent employment issue will impact their application. In today’s part two of our series, we’ll go over a few of the additional steps you may need to take, either before or during your application period, to ensure there are no employment-related concerns with your mortgage application.

Proof of Payment

For most lenders, any issues with employment history are viewed in a practical sense. Lenders aren’t dinging applicants for job-related issues just for the sake of following the rules – they’re only doing so when the issues appear to have a real impact on whether the potential borrower can repay the loan properly.

For this reason, one method of clearing up employment issues on an application is to provide a lender with proof of payment of either rent or a previous mortgage you’re currently under. Even if you’re between jobs or recently had a gap period in your employment, showing that you’ve been meeting housing payments for a significant period of time will often reassure the lender that you can continue to do so moving forward. This is also a common outlet for those who are self-employed or work temporary or seasonal jobs.

Avoid Job Changes

Wherever possible, try to avoid a major job change ahead of applying for a mortgage. We recognize this isn’t always possible – if you must make such a change, such as if you’re relocating from one location to another, ask your employer for a role change letter (for a shift within a current company) or an offer letter (for a new company) that you can present to the lender to show proof of legitimate reasoning for your change.

Job Loss Type

If you recently lost a job and you’re worried it may impact your application, one important area is whether or not you were fired for cause. If you can prove that you were not, and that your job loss came for any other reason, you’ll be in a better position with lenders – being fired for cause is looked upon as something of an employment red flag in many cases.

For more on how to handle employment gaps or related issues on your mortgage application, or to learn about any of our mortgage loans, speak to the staff at Altius Mortgage today.

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How Employment Gaps Impact Mortgage Applications, Part 1

employment gaps impact mortgage applications

There are several factors that will play a role in how lenders view your mortgage application, and one such factor is employment history. Lenders need to know that their approved borrowers have a stable income and a history of such an income, and significant issues in this area may lead to concerns with your application being approved.

At Altius Mortgage and our partners at Mortgage Ogden, we’re happy to offer a wide variety of home loan programs and services, including for first-time homebuyers who have not been through the process before and might require some guidance. In this two-part blog series, we’re going to look at everything you need to know about employment gaps or other issues with your employment history that may impact your mortgage application, including the ranges at which gaps become an issue and what you can do about such concerns in your history.

General Employment Gap Ranges

In most cases, such as the general definition used by the FHA and other housing programs, any extended absence from employment longer than six months is considered a red flag. If you leave one job and take a three-month absence period before obtaining another, this usually won’t be an issue; if you are gone a full year without any sort of employment, on the other hand, expect it to come up.

Now, it’s important to note that lenders are looking at the past two years – before the gap in question. Some assume they only go back two years from the present day, but this is often not the case. So if you have a gap in your employment that ended 18 months ago, expect a lender to go back to that point and then two years prior from there.

As we’ll detail later on, situations like temporary disability, intent and ability to return to work will all be considered by lenders in many cases.

Related Red Flags

Employment gaps are one significant income-related issue that may come up during mortgage applications, but not the only one. Some others include:

  • Frequent job changes: If you change jobs more than three times in the 12 months before your application, this could be a red flag.
  • Major line of work change: If you changed your entire career recently, lenders will want to look into this.
  • Major income change: Either a big windfall or a major drop in income could both be issues to lenders.

Explanation Themes

As we noted above, there are situations where lenders will be more understanding toward an employment gap or one of the other issues we raised here. This is best accomplished with legitimate documentation explaining why the issue took place – maybe you were on maternity leave, for instance, or temporary disability leave. Especially if you have passed through the gap and are now properly employed, lenders will generally look favorably on truthful, documented, legitimate reasons for a work absence.

For more on dealing with employment gaps or other income-related issues during a mortgage application, or to learn about any of our mortgage lender services, speak to the staff at Altius Mortgage today.

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Preparation Tips Ahead of Mortgage Pre-Approval, Part 2

preparation tips mortgage pre-approval

In part one of this two-part blog series, we went over some of the basics for preparing yourself for mortgage pre-approval. Pre-approval is a valuable process that helps you understand and obtain purchasing power in advance of hitting the housing market, and having your finances in order before applying for it is a valuable pursuit.

At Altius Mortgage and our partners at Mortgage Ogden, we’re happy to walk any of our clients through pre-approval or other processes for our various mortgage loan programs. In today’s part two of our series, we’ll go over a few other valuable areas of preparation for pre-approval, including several important documents you’ll need to have on-hand and a couple other themes we recommend.

Documentation

During the pre-approval process, you may be asked for several different documents by the lender or loan originator. Some document areas to consider and keep handy as you enter this process:

  • Income and employment documents: You will need to supply various information on your income and employment, including recent federal and state tax returns and W-2 forms, rental income and any self-employment income (if applicable).
  • Assets: You’ll also generally be asked to provide documentation on your current assets, including two months of recent bank statements and basics on all retirement, brokerage and investment accounts.
  • Debts: Lenders will also want to know about your current debt, including your monthly debt (which can be used to calculate debt-to-income ratio, a vital factor) and any outstanding real estate debt you carry.
  • Others: Other documents you may need could include proof of recent rent payments, any bankruptcy or foreclosure documents that apply to you, divorce or child support orders if applicable, and gift letters if you plan to use gifted funds as part of a down payment.

Begin Saving

Speaking of a down payment, it’s another area you can begin thinking about during the pre-approval process. Pre-approval will give you a good idea of the sort of down payment ranges you might be looking at – use this information to begin your savings process, if you haven’t done so already that is. The more you have saved up once it’s time to make a down payment, the better your interest rates will be for the life of the mortgage.

Speak to a Loan Officer

Finally, be sure to speak to one of our friendly, experienced loan officers during the pre-approval process. We’ll assist with numerous potential areas, from how your down payment figure will affect monthly payments to how you can proceed with imperfect credit and many others.

For more on navigating the pre-approval process optimally, or to learn about any of our mortgage loans or refinancing services, speak to the staff at Altius Mortgage today.

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Preparation Tips Ahead of Mortgage Pre-Approval, Part 1

preparation mortgage pre-approval

There are several processes you might go through as part of obtaining a mortgage for a new home purchase, and one potential such process is known as pre-approval. One that involves providing financial and other information to a lender ahead-of-time to get a broad idea of purchasing power, plus a letter of pre-approval that often plays a big role as you scour the market, pre-approval is not a required process, but one many buyers choose to go through for several different reasons.

At Altius Mortgage and our partners at Mortgage Ogden, we’re happy to walk you through pre-approval or any other process involved in our mortgage or refinancing services. Being prepared is a regular theme in the mortgage world – this two-part blog series will go over several areas we might recommend when it comes to preparing various financial areas and documents you’ll need for a smooth pre-approval process.

Early Preparation

Here’s this big theme again: Get started early, and don’t leave thigs for the last minute. A big part of the value of the pre-approval process is gaining advanced knowledge on the kind of purchasing power your finances allow you – what kinds of loans you will likely qualify for, the sorts of interest rates you can expect and similar factors.

The earlier you learn this information, the better you can position yourself throughout the process. Even if you end up delaying your actual home purchase somewhat, you’ll have a great idea of the landscape in front of you and what you can expect when it’s time to finalize things.

Checking and Improving Credit

Credit is an area that’s important across several parts of the mortgage application or homebuying process, including for pre-approval. For starters, take the time to check your credit using one of several free resources available today (these don’t ding your score anymore, generally) – if your score is lower than you had expected, it’s time to get to work repairing this situation.

For one, ensure the report does not have any errors, and dispute these if they’re present. These are uncommon, though, and the larger area here involves paying down your debts and taking similar steps to improve your score. The higher it is, the more trust a lender can place in you to repay the funds.

Bank Accounts and Income

Lenders will also look at your sources of income and your primary bank accounts, so ensure everything is in order here. This is usually a relatively straightforward process.

One exception: Cases where you have recently deposited a large sum of money that’s not part of your normal income, such as a gift or an inheritance of some kind. Lenders will need to know the source of such funds – there are rules against receiving certain other kinds of loans. As long as you can explain the unrelated fund increase, you should be just fine.

For more on how to prepare for mortgage pre-approval, or to learn about any of our mortgage rates or other mortgage services, speak to the staff at Altius Mortgage today.

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Mortgage Loan Officer Qualities and Responsibilities, Part 2

mortgage loan officer qualities

In part one of this two-part blog series, we went over some of the primary roles and responsibilities carried out by loan officers during the mortgage process. Often referred to as mortgage loan officers because this is by far the most common type of loan they cover, these individuals play a vital role in several areas of the loan process.

At Altius Mortgage and our partners at Mortgage Ogden, we’re proud to maintain a large team of loan officers to assist you with all your potential mortgage needs, from determining the interest rates you qualify for to helping you refinance a mortgage if needed. In today’s part two, we’ll go over a few additional areas loan officers are tasked with handling through the process, both in terms of client-facing areas and a few you may not be directly exposed to, but are still very important.

Maintaining Timeliness

As you move along in your mortgage process, from the application to home searches to potential closing and purchasing situations, the loan officer will be there to help keep things timely and in order. For instance, they’ll coordinate with others on the loan side of things, helping you understand your mortgage rates and the factors involved in them.

For another, they’ll handle dealings with a few other entities who might be involved in this process, particularly in later stages if you’ve found a home and are moving forward with the purchase. They’ll work with title companies, for instance, to ensure the home’s title is clear. They’ll also speak to loan processors, private mortgage insurance companies and other vendors who might be involved in loan closing.

Closing Attendance

One of the more enjoyable areas loan officers also get to take part in: Attending many home closings. This is the occasion when final documents are signed and the home purchase is finalized, often a celebratory event for many homebuyers. Your loan officer will often be present, both to join in the celebration and to ensure all the details are processed properly.

Trends and Future Education

Finally, loan officers are constantly tasked with maintaining their knowledge of mortgage trends and continuing their mortgage education The mortgage world is one that’s constantly changing based on market trends and other factors, and those involved in assisting clients in this world must stay current on these. They often take classes or attend workshops to hone certain particular skill areas, plus will regularly review new mortgage materials and programs as they come up.

For more on the role and responsibility played by loan officers during a mortgage application and process, or for information on any of our mortgage loan products, speak to the staff at Altius Mortgage today.