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.

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.

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.

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.

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.

Mortgage Loan Officer Qualities and Responsibilities, Part 1

mortgage loan officer qualities

When you or any other potential mortgage client contacts our Altius Mortgage offices, or our partners at Mortgage Ogden, with interest in a home loan, you’ll be directed to one of our experienced, dependable loan officers. Our team has years of experience assisting clients with every element of the mortgage process, from screenings and applications all the way through closing and a future relationship.

For many, including those entering the homebuying world for the first time and looking for the best mortgage rate, you may be wondering exactly what a loan officer does and how they assist you. This two-part blog series will go over everything you need to know here, from the basic definition of a loan officer to many of the services they provide to clients on a regular basis.

Loan Officer Definition and Basics

A loan officer can be defined as a representative of a financial institution like a bank, credit union or mortgage lender who is in charge of helping borrowers during the process. Technically speaking, there are loan officers for loan types besides mortgages – but because these are the most common, complex and high-cost loan type, they’re sometimes simply referred to as mortgage loan officers.

In most cases, the loan officer will serve as the point of contact for borrowers as they attempt to apply for a mortgage. While there are parts of this that can be done online today, maintaining contact with a specific loan officer who can answer questions and divert you away from potential issues holds significant value.

Our subsequent sections will dig into several of the areas loan officers handle.

Screening and Identifying Customers

Loan officers spend much of their day-to-day time in the realm of new customers, but moving between a few sub-categories here. For starters, they make phone calls, send emails and attend various events or meetings to try and drum up prospective customers.

In addition, they spend time interviewing and pre-qualifying potential buyers, both in person and over the phone. Through these processes, they help numerous clients understand their likely purchasing power and the sorts of mortgage rates they’re likely to receive.

Helping Clients With Options

When clients are moving a bit further down the road in the process, loan officers are here to help at every stage. They begin with homeownership goals and desires, then dig into important financials like credit history, savings, taxes and several other vital areas that will help determine the mortgages you qualify for and the rates you’re eligible for.

For more on the role loan officers play during the mortgage loan process, or to learn about any of our team members or our quality home mortgage rates, speak to the staff at Altius Mortgage today.

Determining if a Cash-Out Mortgage Refinance is Right For You, Part 2

cash-out mortgage refinance right

In part one of this two-part blog series, we went over some of the basics on cash-out refinancing and what makes it different from other refinancing formats. Cash-out refinancing, which involves the borrower being paid actual cash based on their accrued equity in the home, allows many borrowers to improve other areas of their finances or supplement their home purchase in important ways.

At Altius Mortgage and our partners at Mortgage Ogden, mortgage refinancing is one of our many specialties. We offer several different refinancing formats to meet your needs, including cash-out refinancing for those looking to capitalize on their equity. In today’s part two, we’ll go over several of the common reasons why homeowners choose to go with cash-out refinancing, plus some general tips if you choose to go down any of these roads.

Consolidating Debts

The most common use of a cash-out refinance among homeowners is to help pay down or consolidate debts in other financial areas. If you’ve build up significant credit card debt, for instance, but also have good equity in your home, you might perform a cash-out refinance to obtain the funds to pay down this credit card balance and stop interest from accruing.

Now, as we noted in part one of this series, this kind of thing must be approached carefully. Cash-out refinancing should not be viewed as a “bailout” of any kind, where one can simply overspend and get out of it later on. Rather, it should be one part of a larger overall plan to improve your finances, one that also includes better debt practices in the future so you don’t end up in the same situation all over again.

Home Projects

Another common choice for homeowners is to use a cash-out refinance to help fund various home improvement, renovation or repair projects. Such projects are often done to not only improve the space, but also increase home value as well – kitchen and bathroom remodels are good examples here.

Tax Benefits

If you do choose to use a cash-out refinance for home improvements of any kind, there’s a good chance you’ll also be eligible for tax benefits. In most cases, such improvements can be directly deducted from mortgage interest amounts.

New Car Purchase

Finally, some may use the cash-out refinance to bolster their funds for a significant purchase, such as a new vehicle. In fact, there are certain cases where you can get a better long-term deal for your vehicle than if you had gone the route of a traditional car loan, depending on how interest rates sit in both markets at the time when you’re considering this purchase.

For more on the common uses of a cash-out refinance, or to learn about any of our mortgage rates or options, speak to the staff at Altius Mortgage today.

Determining if a Cash-Out Mortgage Refinance is Right For You, Part 1

cash-out mortgage refinance right

There are several different major processes that may take place within the life of a given mortgage loan, and one of the most common and well-known is refinancing. Referring to any case where you alter or adjust your mortgage rates, insurance payments or other restructuring areas, there are several distinct types of refinancing available depending on your needs and financial situation.

At Altius Mortgage and our partners at Mortgage Ogden, we’re here to help with all your mortgage refinance questions and needs, including one format that differs from other refinancing methods in a few major ways: Cash-out refinancing. This two-part blog series will go over everything you need to know about cash-out refinancing, including how it differs from other types, some of the common scenarios where homeowners go this route, and some basic tips on when the right time for a cash-out refinance might be.

Purposes of Refinancing

For starters, it’s important to understand that there are varying different purposes for refinancing a home loan. The most common here is to lower the interest rates or payments you’re making based on changes in the market – if you bought at a time when rates were high and they’ve since gone way down, you might be able to get a far better deal by refinancing. This general field is known as “rate-and-term” refinancing.

In other cases, refinancing is done to remove private mortgage insurance, which is paid to lenders until you have enough equity built up in your home to cancel it. Some also use refinancing to consolidate or replace existing mortgages.

How Cash-Out Refinancing Differs

Cash-out refinancing, on the other hand, involves converting your built-up home equity into actual cash that’s paid to you. Essentially, it features you taking out what’s really an all new mortgage loan, one for a higher amount than what you currently owe – and this extra amount on the loan is simply paid to you in a lump sum. The additional amount covers your equity, so it will vary depending on how much you’ve built up (you don’t have to use all of your equity during a cash-out refinance, however, and there are generally limits on how much you can use).

Interest Rates and Proper Timing

Now, homeowners want to be in the right situation if they’re going to consider a cash-out refinance. For instance, if you’re using the cash-out as a “bailout” of sorts for imprudent financial decisions you’ve made – and especially if you aren’t committed to improving these overall finances moving forward – then this might not be such a great idea. Using a cash-out refinance as a temporary Band-Aid before returning to poor financial practices will just kick your problems down the line, where eventually you’ll have to face them in larger and more imposing ways. Cash-out refinancing can be used to pay down debt, but this should only be done if you have a robust future plan in place as well.

For more on cash-out refinancing, or to learn about any of our mortgage rates or other home loan services, speak to the staff at Altius Mortgage today.

Understanding Debt-to-Income Ratio for Mortgages, Part 2

debt-to-income ratio mortgages

In part one of this two-part blog series, we went over some of the basics associated with debt-to-income ratio during a mortgage application. Abbreviated DTI, this ratio helps lenders understand how much of your monthly income is going toward paying down debts, a big factor they use to assess your overall creditworthiness and the kinds of loans to approve you for.

At Altius Mortgage and our partners at Mortgage Ogden, we’ll happily detail our DTI investigation process for any of our clients, from first-time homebuyers to experienced real estate flippers and everyone in between. Today’s part two will dig into how mortgage debts compare to other types, which debt types are “good” or “bad” for DTI areas, and how you can lower your DTI ratio leading up to a mortgage application.

Mortgage Debts

We went over some various loan types in part one – how do mortgages compare to these when it comes to debt and how it’s considered?

Broadly speaking, mortgages are secured loans, with the home and property being purchased serving as the collateral used. Mortgages tend to come with lower interest rates over a long period of time. Lenders use DTI ratio not only to determine whether you qualify for a given mortgage, but also to define the limit on how much you can borrow given your finances.

Good Vs. Bad Debts for DTI

As we noted in part one, while there are general ranges lenders want to see a DTI ratio come in under (40% or 36% in most cases), there may be some wiggle room here depending on whether your debt is primarily of the “good” or “bad” variety. Lenders consider good debt to be the kind that helps increase net worth or generate income, while bad debt is used to purchase depreciating assets of some kind.

Here are some examples of each:

  • Good debts: Areas like mortgages (provide a living space, plus real estate tends to appreciate in value over time), student loans (provide an education that increases earning potential) or small business loans (help to start and grow a business) are considered good debts, and lenders may be more forgiving on them.
  • Bad debts: Personal loans (small loans with huge fees and interest rates), car loans (cars depreciate over time) and credit card loans (usually have very high interest rates and fast repayment schedules) are generally considered bad debt.

Tips for Lowering DTI Ratio

If you’re thinking of applying for a mortgage in the near future and are worried your DTI ratio is too high, here are some basic tips for lowering it:

  • Avoid any big purchases on credit for the time being
  • Do everything you can to repay current debts as much as possible
  • Do not take on new debt accounts or debt types

For more on debt-to-income ratio and its role in mortgage applications, or to learn about any of our home loan products, speak to the staff at Altius Mortgage today.

Understanding Debt-to-Income Ratio for Mortgages, Part 1

debt-to-income ratio mortgages

There are several factors that will be assessed by mortgage lenders when you apply for a home loan, and one such factor that’s very important in nearly all cases is your level of outstanding debt. Lenders want to know that you have the ability to pay back the money borrowed in any mortgage, and one of the top methods they’ll use to determine this is comparing your level of debt with your current income to get an idea of your broad financial picture.

At Altius Mortgage and our partners at Mortgage Ogden, we’re happy to walk you through all the details you need to know here for any of our mortgage loans. The most common debt-related metric, as we just noted, relates to your income and is known simply as debt-to-income ratio (DTI) – this two-part blog will go over everything you need to know about this metric, including the kinds of debt and how they play a role, plus how you can get your DTI ratio in the optimal place before applying for a mortgage.

Debt-to-Income Ratio Basics

As the name suggests, debt-to-income ratio refers to a comparison between your total debt and your gross income. It’s generally calculated on a monthly basis, with lenders dividing your monthly debt requirements by your monthly gross income to come up with a single figure, represented in a percentage format.

Generally speaking, lenders are looking for a DTI number of 40% or under, preferably under 36% in most cases. However, another factor involved here is the type of debt taken on, of which there are several. Our next couple sections will go over these types of debt and the roles they play in this equation.

Secured Vs. Unsecured Debt

For starters, there could be a big different in how a lender views your DTI ratio depending on whether the majority of your debt is secured or unsecured. Secured debt is any that uses collateral for the loan, such as a car loan where the lender technically claims ownership on the vehicle if the borrower does not pay back the loan properly.

Unsecured debt, then, refers to debt that required no collateral. Rather, lenders offer the loan based on your word and financial ability, plus a signed agreement. Unsecured loans tend to come with higher interest rates. Generally, secured debt is considered a more robust form of debt than unsecured, and you might be able to get away with a higher DTI ratio if most of your debt is secured.

Revolving Debt

In other cases, revolving debt refers to a loan where the consumer pays a commitment fee to a lender to borrow money on an as-needed basis. On a timeline agreed upon beforehand, the borrower can take certain amounts every so often. These loans are often used by those who have a variety of unexpected expenses in their lives, offering convenience that does often come with a higher interest rate in some cases. Home equity loans and personal lines of credit often qualify as revolving debt.

For more on DTI ratio and other important factors in a mortgage application, speak to the staff at Altius Mortgage today.