Financing Lender-Lake Tahoe Real Estate Sales

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EASY ANSWERS TO FINANCING YOUR DREAM

After you have determined you want to purchase you need to consider what you qualify for and how you will finance the purchase. The following pages will provide information that should be helpful to your financing process. We suggest that you meet with a Mortgage Loan Officer as soon as possible to iron out the specifics of your purchase.

Q: How how long will it take for me to find out if I can qualify for a second home purchase?
A: Just a few minutes. A simple phone call to a loan officer and a couple of questions and they can get you on your way to achieving your dream.

Q: What kinds of questions will be asked?
A: The first thing is the amount of down payment you want to invest.
Next they will run your credit report. Normally this will be done for free, no charge to you.
Finally, they will figure your debt to income ratio to see how much monthly payment you can comfortably handle. This means your monthly payment obligations divided by your gross income. They will want the ratio to come out at 45% or less including your new vacation home payment.

Q: What is my down payment requirement?
A: The best option is a 20%, or more, down payment because then you avoid paying mortgage insurance (PMI), which is required on any loan with less than 20% down. It will also depend on whether you plan to use the residence as your primary or a second home, or strictly an investment property. If you plan to derive income from rentals to offset your overhead (monthly mortgage, taxes, insurance, homeowner’s dues etc.) a minimum of 40% down payment would probably be necessary to not have to continually contribute capital to it’s operation. If you plan to use the house often for personal use these financing issues may not concern you as much.

Q: In the second mortgage scenario, does a second mortgage traditionally have a high interest rate?
A: Again you must have good credit to use this option, but actually it’s not as high as you might think. Recently they have run about 71/2-81/2%. Through analyses lenders can find out if it’s better to use the second mortgage than to pay the mortgage insurance. The interest on the second mortgage is usually tax deductible, mortgage insurance is not. They find a typical savings of a hundred to several hundred dollars by using the second mortgage option.

Q: How long will it take to close the deal after I make loan application?
A: Traditionally you will want to have thirty-forty five days from the day you write the offer to get to closing. Depending on how busy it is lenders need about three to four weeks to get your application approved and the documents to closing.

Q: How long can you lock interest rates for?
A: Lenders can lock interest rates for as long as ninety days but the longer you lock them for the higher the rate will be. If you lock them for thirty days they can get you the best rates.

Q: Is there an up front charge for locking interest rates?
A: With most mortgage companies there is no up front charge for locking interest rates or applying for a loan. The only fee collected up front is usually $350 for an appraisal and only after you have a property under contract, everything else is collected at closing.

Q: What kinds of documentation should I be getting together for our loan rep?
A: If you are a salaried employee we will need your most recent pay stub, last year’s W-2, and a bank statement showing where your down payment is coming from. If you are self-employed they will need last year’s tax return and the bank statement. There are stated loans where you just state your income so you can qualify for a larger property, as well as no documentation loans. This means they can get you a loan even if you are self-employed and perhaps have not reported very much income for the last few years. This is an option if you do not qualify for a full documentation loan. Typically the interest rates are higher on these types of loans but lenders do have programs that allow and charge interest rates similar to the full documentation loans if your credit score is high enough.

Q: I hate to hear the word “No”, what can you say that will get me over the fear of giving you a call?
A: There are very few people that we cannot get qualified. There are many so programs that are available in stated loans and no-documentation loans now. As long as you don’t have bad credit they can generally find an investor that will be willing to loan you the money. The only issue is the interest rate you will pay. Lenders usualy will work hard to find a program that will match your needs and accomplish your goal.

Q: Any final thoughts?
A: After a consultation they will hopefully find out that you are qualified to purchase a second home. They can then issue a pre-qualification letter to give to your Buyer’s Agent. The pre-qualification letter will be presented to the Seller with your offer to purchase and demonstrates that you are financially able to close the deal. It is very important that you have a pre-qualification letter before presenting an offer as it strengthens your offer and may put you ahead of any competing offer that comes in. Again, the initial consultation and the pre-qualification letter are usually free.