Mortgage Loan Options

Q. For someone who is a first-time homebuyer, or simply interested in learning more about their options, what types of mortgage loans are available?

A. From conventional loans to adjustable-rate (ARM) loans to construction loans, there are a variety of loan types to fit all kinds of home buyers. Sometimes there are even local assistance programs available — which is why it’s always recommended to work with a local lender.

Here are some other options to be aware of:

• FHA home loan – Popular for first-time home buyers
• VA home loan – Beneficial option specifically for veterans, service members and their surviving spouses
• Fannie Mae and Freddie Mac loans – Both are government-sponsored enterprises providing affordable housing financing by purchasing loans from lenders
• USDA home loans – For low- to moderate-income households in eligible rural areas
• State Housing Authority second mortgage – A type of mortgage that can be used to help with down payments and closing costs for a first mortgage

Mortgage Types

Q. When starting the homebuying process, what factors should be considered when choosing a mortgage type?

A. Everyone’s situation is unique. You need to find what works best for you, which means comparing several options, and potentially several lenders, to make sure you choose the best mortgage option to fit your goals and objectives.

Many people make decisions based on what friends or family have told them to do. However, it’s important to seek the guidance and advice of experienced professionals who are familiar with the market and prepared to help you find the options that best match your specific needs. After all, you wouldn’t get heart surgery advice from your dentist.

So, don’t trust your mortgage loan decision to just one person — be it family or friend. It’s also a good idea to get a few opinions from multiple lenders and then weigh your options.

Mortgage Lender

Q. What should someone consider when choosing a mortgage lender?

A. First and foremost, go to someone local who knows what is available in your market. Many people often try calling a “1-800” number, but those lenders don’t typically have local knowledge or even know where to find it.

Next, you should consider talking to others and getting to know who has had a good experience with a lender recently. A real estate agent is a great source of information and can inform you on who may be reliable.

Lastly, don’t get sucked in by a rate alone. Many lenders will quote a very appealing interest rate but not tell you about the costs associated with getting that rate. If you get quoted a rate by one lender and a lower rate by another lender, verify each lender’s fees and the origination/points associated with the rates being offered. I have seen people leave for some lender they found online that advertised a very low rate only to discover right before closing that it would cost them thousands in additional fees to “buy” that lower rate.

Steps in the Mortgage Process

Q. Once you’ve narrowed down (or even selected) your mortgage loan and lender, what happens next?

A. This is where things really take off toward obtaining a home loan — but be prepared to do a little homework yourself. The mortgage loan application process can be summed up in a few main steps:

• Complete an application: Be as thorough and as accurate as you can. Don’t leave out any assets or debts that you may have, like retirement accounts or child support. You don’t need to include utilities and subscriptions, however.
• Allow the lender to pull your credit: Fears of your credit score being negatively affected by credit checks are over exaggerated. Don’t be afraid to have it pulled a few times if necessary. Just don’t go overboard. Ultimately, your lender needs the full picture to help give you realistic expectations.
• Provide ALL the documentation needed to the lender: A good lender will not typically approve you based on just an application. They need to be able to verify your income and prove your history of that income, as well as your assets. There are all sorts of requirements and formulas that cannot be done without providing all the necessary info. For example, if you receive a bonus, tips, overtime, commissions, or any sort of rental or self-employment income, those details will need to be obtained for qualification. It’s not as simple as saying you got a bonus once for $5,000 without documenting a history of receipt and the likelihood of that continuing.
• Analyze the options: With so many loans and programs available, it’s worthwhile to do a thorough review with your lender to see which options make the most sense. Some loans and programs carry restrictions — such as income limits, property location or down payment requirements — that may not work for you.

Mortgage Documents

Q. I’m ready to start the application. What documents should I plan on providing?

A. When applying for a home loan, you’ll typically need to provide the following documents:

• A government-issued identification
• A copy of your last tax return, including the 1040 form and W-2 forms going back at least two years
• 30 days of consecutive pay stubs to document employment and help lenders determine how much you can borrow
• Two months of consecutive bank statements

If you already own a home:

• A copy of your mortgage statement, property tax bill, homeowner’s insurance bill, and any applicable HOA fees

If you are self-employed or have rental income:

• Last two years of personal and business tax returns for any business you own 25% or more of (all pages)
• A year-to-date profit and loss statement with balance sheet for businesses
• Potentially several months’ worth of business bank statements, if the funds are not in your personal account for down payment

You may also be asked to provide clarifying statements if any of the provided information requires additional details. This might include addresses showing on credit reports or explanations of credit being pulled by other institutions. Large deposits may need to be sourced and documented. The key is to be transparent. A good lender’s goal in asking for this information is to help you obtain the best loan and outcomes possible.

Mortgage Application

Q. What can be done to help ensure a smooth mortgage application process?

A. Mortgages are likely the most complex financial transaction you will make in your life. Expect that it is not going to be as simple as getting a car loan. But there are measures you can take to help things move smoothly.

• Be thorough and responsive. Remember, you’re asking an institution for hundreds of thousands of dollars. Don’t be upset if they need more documents or require more statements. They are simply trying to get the best picture of your financial situation to help you obtain a loan.
• Review the documents and disclosures up-front. You will be given copies of most everything you will need to commit to at your final loan closing within the first week or so of the application. Make sure you understand what you are signing. If you don’t understand something, ask your lender for clarification. If you’re concerned about errors on the documents, such as incorrect employment info or asset info, discuss it with your lender. Make sure mistakes are addressed up front. If you feel something is wrong, make sure you get an explanation as to why it is not showing what you anticipated.
• Be flexible. Lots of things change throughout the mortgage process. Often, first time homebuyers may be right on the edge of qualifying for a certain loan and suddenly require third-party involvement. And even if a lender approves something, that does not always mean the appraiser, mortgage insurance company or homeowner’s insurance company will. Be ready to adapt or find alternate solutions when necessary.

Zions Bank is here for you every step of the way

To learn more about mortgages and loans visit Zions Bank online or stop by a local branch and speak with a Zions Bank mortgage officer today.