Welcome to Loan University by Guardian Mortgage! We’ve provided you with all of the needed information to gain insights about every part of the home loan approval process. If you are looking to understand the mortgage approval and closing process better, you are in the right place. Class is in session!
Mortgage Demographics 101
Anyone with dreams of homeownership should have the opportunity to realize that dream. Guardian Mortgage is excited to collaborate with all buyers to assist in this process. Many potential buyers are hesitant to pursue homeownership because they believe it is not for them or only certain types of people can qualify for mortgages. This is simply not true and results from the National Association of Realtors’ 2022 Profile of Home Buyers and Sellers supports this fact.
- First-time home buyers made up 26% of all purchasers in 2022.
- Average first-time buyer age was 36 in 2022, up from 33 in 2021.
- Sixty-one percent of all buyers were married couples, and 10% of buyers were unmarried couples, the highest percentage ever recorded for this demographic. Single females represented 17% of buyers, followed by a 9% representation of single males.
- Among first time buyers, unmarried couples represented 18% of buyers, while 5% were other household compositions, both all-time highs.
- Fourteen percent of home buyers purchased a multigenerational home for several reasons that include taking care of aging parents, children over eighteen moving back home, or cost-savings, amongst others.
Digital Mortgage Resources 101
Technological advances have made it easier than ever to apply for mortgages, explore loan options, refinance your mortgage, and everything in between. Updated mortgage websites, mobile apps, and other tools remove the uncertainty and guessing from the mortgage process. Utilizing these tools can make a world of difference in finding your dream home.
Extra Credit: Guardian Mortgage provides potential homebuyers with the tools they need to kickstart their home purchase. Gather information and apply for your mortgage directly on our website.
Tips 101: General Mortgage Readiness
The mortgage loan process is long and winding on its own, so potential buyers should take advantage of any method to simplify their home purchase.
1. Check Your Credit Score: There are several items that go into a lender’s decision about whether a homebuyer is creditworthy; however, the most important factor is your credit score. Knowing your score before meeting with your mortgage lender will make your process more straightforward. Not only will a lender use your score in the loan decision, but it will also dictate your interest rate. The better your score, the lower your rate.
Extra Credit: Use sources like www.AnnualCreditReport.com and www.MyFICO.com to access your credit report and be prepared to answer questions about derogatory credit items.
2. Assess Your Financial Situation and Budget: Your mortgage loan is a 15 to 30 year investment, so it is imperative that you are comfortable with the payment for the long haul. Estimate your monthly mortgage payment on the home values you are exploring and determine how this payment fits into your current budget, as well as how future life events (kids going to college, retirement, etc.) will change your budget. Be sure to consider all factors in your assessment including income, expenses, current and projected earnings, current debt, and all of the costs associated with your new mortgage (insurance, taxes, HOA fees, etc.)
Extra Credit: Use the calculators on the Guardian Mortgage website to assist in your financial assessment. These calculators can help you estimate monthly mortgage payments, compare renting costs vs. buying, and assess your overall home buying power, amongst other things.
3. Prepare to Provide a Down Payment: While the VA loan program allows for 100% financing, non-veterans are left with a minimum of 3.5 percent down payment on Federal Housing Administration (FHA) financing and a 5 percent down payment on Conventional financing. Most buyers need to prepare to provide a down payment on their home loan. Keep your down payment fund in cash or cash equivalent accounts, so that market movements don’t thwart your plans. This also allows you to supply the required documentation during your pre-approval.
4. Know What You Want in Your New Home: When shopping for a home, list the features or amenities that are most important to you, such as a fireplace, fenced-in yard or new appliances. Establishing your criteria for what you want and don’t want early on will help save time on shopping and use your time more efficiently. Additionally, having a checklist of your “non-negotiables” on your tours may keep you from buying a home on a whim.
Extra Credit: Keep in mind that buying a house is an investment, so one of your top reasons for buying a home should be the value you are receiving from acquiring this new asset. Must-have amenities should logically be sacrificed if an incredible value is available.
5. Be an Informed Buyer: Don’t just fall for an online photo – do your research. Review other homes, school information and crime statistics in the area you’re considering. A useful online resource for information is www.CityData.com. Doing your due diligence ahead of time ensures you’re getting a fair price in a safe location.
6. Obtain a Home Inspection: Even if the home you plan to buy appears to be flawless, remember that nothing can replace the peace of mind that comes with a home inspection conducted by a trained professional. Should your inspection reveal serious defects with the house, such as serious foundation issues or a termite infestation, you’ll generally be able to get your deposit back if these issues were not previously disclosed by the seller. The home inspection is a worthwhile investment prior to closing to ensure you have the ability to get the seller involved on any repairs that are needed. Unexpected repairs are simply a result of homeownership, but clearly identifying necessary repairs and issues prior to closing is crucial to reducing buyer remorse.
7. Purchase Home Insurance: Contact your lender to understand their insurance coverage and deductible requirements for your loan program. Review your options and make sure that you understand the difference between insuring your new home’s structure and the fixtures and contents that will be inside.
Extra Credit: If you are buying property that is close to water, make sure that you have an agent who can help you enroll in the National Flood Insurance Program.
Tips 102: Changes That Could Derail Your Closing
The following situations could delay your purchase closing date or put your loan pre-approval at risk. To avoid this risk, disclose all pending issues to your loan advisor as quickly as you can to ensure that solutions can be established, and your closing process continues as planned.
1. Late Receipt of Insurance Policy: Details of a borrower’s homeowners insurance is a required inclusion in their closing instructions and preliminary HUD-1 Settlement Statement. Closing instructions and documents cannot be prepared until the declarations pages for your policy are received from your insurance agent.
2. Contract and Loan Program Changes: Last-minute changes to your contract terms—including amendments to the contract, changes to agent or seller concessions as well as changes to your loan program at the “eleventh hour” can be problematic. A complete change in the loan program—such as from an FHA to a Conventional—or changing details of your loan program, including a late decision to be non-escrow, will likely trigger any or all of the following additional steps:
- Additional underwriter review
- Update of the appraisal by the appraiser
- Re-disclosure of the Good Faith Estimate and/or Truth-In-Lending Statement
Any of these steps could delay your closing for more than 3 days, therefore it is critical to get any last-minute negotiations and changes resolved as soon as possible to prevent an unexpected delay.
3. Changes in Financial Condition: Major changes to your financial situation can derail your closing process, drastically prolonging it or preventing you from closing altogether. Avoid these potential pitfalls.
- Expensive Purchases: Lenders must verify the borrower’s down payment and/or closing costs are being paid from acceptable sources. Reductions in available cash to close and cash reserves after application can negatively affect your opportunity for approval.
- Incurring Additional Monthly Debt: Additional debt payments may increase your debt-to-income ratio (the ratio of your total monthly payments to your gross monthly income) to a level that exceeds allowable guidelines.
- Change of Employment: Any variation of employment status prior to closing, even if the change results in a more favorable compensation package, complicates the underwriter’s ability to document the job stability and secure the income documentation required by lending guidelines. Lenders are required to verify employment within 10 days of closing, so please advise your loan officer or loan processor if you are contemplating any change to employment prior to closing.
- Switching Banks or Moving Money Around: For compliance with Anti-Money Laundering and Patriot Act requirements, underwriters must document the source of all funds. Changing banks or transferring money to another account prior to supplying bank statements to verify assets could make it difficult for the lender to properly document your finances. Please consult your loan officer or loan processor if you are planning to transfer money in preparation for the loan closing.
- Last Minute Gift Funds: If gift funds are a possibility in your transaction, please notify your loan officer in the beginning of the loan process to ensure verification of the entire amount of cash estimated to close. Specific documents are needed to verify the source and receipt of gift funds prior to closing. Last-minute requests to use gift funds could delay a closing as the lender awaits the required documentation from the gift giver and confirmation of the receipt.
4. Unacceptable Source of Closing Funds: In general, funds from the buyer beyond $1,499.00 provided at the closing table must be in the form of a cashier’s check or official check from the depositor’s bank or financial institution. Please check with your specific title company prior to closing for details.
5. Missing Government Issued Photo ID: All signors present at closing must bring a valid government-issued photo ID to closing, and the closing agent will collect a copy of the photo ID.
Graduation: Ready to Pursue a Mortgage Loan for Your Dream Home?
Congratulations! You’ve completed Guardian Mortgage Loan University! You should feel informed and empowered to pursue your new home, but this isn’t the end of the road. Guardian Mortgage is your mortgage loan partner before, during, and after the homebuying process, so utilize the additional resources on our website for additional guidance and information and, apply for your home loan directly on the Guardian Mortgage website when you’re ready to take the next step. For a more personalized experience, find and contact a Guardian Mortgage Loan Officer near you that can help you get your mortgage process started.