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Many people have heard the phrase “jumbo mortgage” and most likely know that it refers to a really large loan.  But did you know that some houses in your neighborhood may require a jumbo mortgage and do you know what the loan limits currently are?

So how exactly do lenders define what qualifies as a jumbo mortgage? Actually it’s the government that sets this designation for loan amounts higher than what is considered a “conventional” or “conforming” loan.  This means that, as of 2011, any amount borrowed over $417,000 in most states and $625,500 in some areas where property values are higher, including Hawaii, Alaska and California is a jumbo mortgage.

Considerations for jumbo mortgages

Keep in mind that a jumbo mortgage is not always given to those who can afford to make the payments on it. This is because there is a significantly higher amount of money going out to pay for this type of home mortgage , the risks are higher to the lender. This leads to limitations on who will purchase these loans.

If you want to obtain a jumbo mortgage, it is a good idea to invest in it only if you are confident you can qualify. There are often more limitations on things like the following:

1. The interest rate is likely to be higher than that of a conforming loan. There is more risk and therefore that means a higher cost to the borrower in the form of interest.
2. Most lenders require at least, if not significantly more than, 20 percent of a down payment. The higher the down payment, the more likely the lender will provide the loan to you. In fact, it is best for borrowers to put down enough to keep the loan under the jumbo mortgage rate if possible.
3. Because of the high foreclosure rate for homes of this value, many lenders have restricted lending for these types of purchases. Finding a lender who is willing to provide you with this type of loan can be limiting.
4. Limitations to the property.  Jumbo loans are often used for larger homes and estates – but those can often be difficult to establish a market value for, especially if the home is somewhat unique or there is a lack of comparable sales.

A jumbo mortgage is a good option if you have no risk of losing your job or not having the money necessary to purchase the home. Keep in mind that your mortgage payment, interest and the terms for these loans vary just as they will vary for any other type of mortgage loan. Comparing interest rates is also very important for those individuals who plan to obtain a jumbo mortgage. If you want to buy a home, and the value is high, find out from your mortgage lender what you need to do to qualify.

It’s one of the most stressful things mortgage originators, realtors and buyers ever face – last minute emergencies with closings.  Without careful and considerate management, it is easy for a client to find themselves in a strung-out paperwork battle and a fight against time.  But fortunately, the mortgage lending process doesn’t have to be this way for you.

Let’s take a look at the different steps in the lending process and how you can avoid being left with little to no time left on the clock!

The Lending Process explained

In theory, the lending process shouldn’t be a difficult process to tackle; it essentially breaks down into six basic steps:

1. Application
2. Pre-approval
3. Contract
4. Conditional Approval
5. Final Approval
6. Closing

Theoretically, once the mortgage application  is complete, it can be pre-approved with validating documentation and a contract can be drawn up so that the client can progress. This should take a reasonable length of time and come with as few complications as possible.

However, not every lender makes life as simple as NOLA Lending!  But even NOLA Lending sometimes gets stuck with last minute issues during verification (usually things the buyer didn’t disclose) or if someone such as a 3rd party drops the ball.

Common problems in the lending process

Unfortunately, some lending agents from other companies often choose to incorporate drawbacks into the lending process. NOLA Lending always advocates against these tactics and aims to secure your loan as quickly and accurately as possible.

Other lenders can delay your closing by a few extra weeks for any number of reasons such as:

• Lack of experience
• Poor management
• Incompetence
• Lack of communication

How a 30 day contract can be misused

Let’s take a look at how you could lose time and money by negotiating with an irresponsible lender.

First, understand that if you write a 30 day contract to close but you have the lender wait 10 business days for inspection and responses the close date is already in jeopardy.  A lender cannot get officially started without ordering an appraisal, so if you put that on hold for inspections the lender may not have enough time to close.

Below are steps to understanding a 30 day contract, title, and submitting the file for approval from a lender’s prospective:

1. Receive ALL client docs including the contract.  Delaying sending the lender a document can “pause” the whole process.
2. Order title
3. Order appraisal
4. Order insurance
5. Request additional documentation from clients and/or agents
6. Lender waits…
7. Documents are returned (hopefully quickly)
8. The loan is presented to the underwriter
9. Lender waits…
10. Underwriter issues conditional approval
11. Lender works approval and requests all required items from 3^rd parties
1. Updated income or assets should be obtained
2. Missing signatures on real estate forms should be completed including amendments, etc.
3. Explanation letters may be required
4. Updates or corrections to appraisal or title, or any other issues should be addressed
12. Lender waits… until everything is received from ALL! We cannot submit for final approval without these final docs!
13. Once ALL documents are received from ALL parties, submit for final approval and Clear to Close.
14. Receive final approval and Clear to Close
15. Send closing package
16. Close!

After a successful closing!

This may seem like a simple process, but let’s take a look at what is really going on here.

• The contract is written – so far so good
• The clock starts 30 days counting down – Those 30 calendar days are really only about 22 business days
• Lender waits on inspections (only if Agent or Client requests the lender to do so).  This may mean up to 10 – 12 days of additional delays
• Now there are only 18-20 days left and counting down quickly
• All paperwork must ordered from different parties which can take time while we wait on what we asked for
• The time in between dwindles down to about 5 business days or less of close very quickly

As you can see, not everything is quite as simple as it seems. Unfortunately, these delays are all too common.

How a 30 day contract can be further delayed

Other legitimate examples of how the lending process can be delayed can include:

• Insurance company waits until the last minute to submit insurance as it is needed long before the close date (express a sense of urgency with your insurance agent)
• Clients employer takes a while to provide information (same as above)
• Client takes a while to produce docs (work urgently and diligently to provide info & docs)
• Agents may take a while to produce required certificates or inspections

So if a poor lender wastes valuable time and everything doesn’t come back to the lender within 48 hours from the closing, and it takes 24-48 hours (generally) for an underwriter to review submissions; last minute issues can appear quickly, and worst of all, appear to be all the lenders fault although it really is not.

Study documents at the closing!

How to get the most from the lending experience

NOLA Lending wants you to know there are many responsible lenders out there and we hope you chose one of us to work with, and that there are simple ways you can help combat unnecessary delays in the lending process.

Here are some quick tips NOLA Lending advocates to help you save valuable time and money:

• Research the company you are going to work with
• Talk to an loan agent and see if you agree with their attitude and competency
• Make sure you uphold your part of the contract and submit paperwork immediately
• Feel comfortable being able to discuss the progress with your lender
• Feel comfortable being able to discuss any discrepancies
• Use “Full Disclosure” with your lender

NOLA Lending wishes you the very best in your lending process and hope that you have a fulfilling and profitable experience. If you have any questions regarding something you have seen here, or about lending in general, please feel free to contact one of our friendly agents at NOLA Lending in Covington who will be more than happy to answers any and all questions, with no obligation.

So what are you waiting for? Find out how NOLA Lending in Covington can help you today!

A second mortgage is a second loan taken on a home where a current mortgage is in place behind your first mortgage. This type of loan is commonly called a home equity loan.

To get one, you need to have equity in your home, which means you need to have a home where the value of the property is higher than the amount of money you owe on the home through your current mortgage. If you have this, you may be able to qualify for a second loan.

How do you get a 2^nd mortgage?

Here is a quick explanation of how a second mortgage works. If you own a home that is appraised at $200,000, for example, and you currently have a mortgage on the home where you still owe $140,000, you have up to $60,000 worth of equity in your home. You may potentially be able to borrow from that $60,000 through a second mortgage.

Here are some facts about these loans:

• This is a second secured mortgage. If you default on this second loan, you could lose your home because of doing so.
• You can use the money from a secured loan for anything you need to, including consolidating debt, doing home improvement or even taking a dream vacation. However, keep in mind that you are putting your home under more debt to do so.
• The interest rate on a second mortgage is generally lower than on unsecured loans, such as credit cards and personal loans. The repayment terms are often affordable. It is because of these factors that many people turn to second mortgages instead of getting a credit card out to make that expensive purchase.
• You will need to qualify as you would any other loan. You will need to have a high credit score and have the income available to repay your loan. If you are not employed or have a low credit score, you may not qualify for the loan.
• Most lenders will not give you a loan that would put you at 100 percent of your home’s value. Some lenders require 20 percent of the home’s value to remain in place.

For many people, a second mortgage is an ideal way for you to invest. However, there are limitations and risks. Before borrowing, be sure you are getting the best loan available, with the lowest interest rates. You may also want to consider your ability to repay the loan in a timely fashion as a default on a 2^nd mortgage can lead to foreclosure even if you stay current on your first mortgage!

Find out if you qualify for a 2^nd mortgage by completing our Quick Online Application today!

This is a very common question, especially with first time home buyers. A parent may wish to cosign on a mortgage loan if he or she wishes to provide help to their child to qualify to purchase a home. Many adult children may not have good credit or adequate experience with credit to obtain a mortgage on their own. By cosigning, a parent can help the child to get the loan he or she wants or needs. However, there are good and bad things about this process that you should know about.

How it works

When a parent cosigns on a mortgage for a child, the child and the parent partially own the home together. While the child may live in the home as a primary residence and be the primary person responsible for repayment of the loan, the lender can come after the parent as a way to get payment if the child stops making payments towards the loan. This can negatively affect both the child and the parent’s credit score.

The parent will need to go through the application process with the borrower and will sign legal documents with the lender at the time of the loan closing. As a result, the parent’s credit score and employment information is taken into consideration during the application process. In addition, the child’s information is also used.

Words of caution

It is possible that a parent cosigning on the loan can actually help the child to get the loan, but he or she still needs to be able to make monthly loan payments. It is often necessary then for borrowers to consider whether they can afford to make payments and if the loan is the right one for their long-term needs. If a parent does not want to make payments for the child, he or she needs to ensure that the child has the ability to make payments on his own.

Lenders may have special limitations or restrictions for borrowers who wish to apply in this manner. It is a good idea to ensure that you provide all information to the lender at the time of your application to ensure that the lender considers the borrower’s ability to have a cosigner on the account. When this happens, it could help the individual to qualify for a lower interest rate, better terms or just to get the loan when he or she may not have otherwise been able to do so. For the right situation, cosigning can be an ideal way to get the loan you want.

Getting behind on payments can happen to anyone, but not getting help to get caught up can mean a significant risk of losing your home. And for those who become behind or facing the prospect of foreclosure, there may be government help for late mortgage payments. Keep in mind that the government is not going to simply give you money to get your loan caught up.

However, today’s government regulations do offer some protection for homeowners, and many lenders are at least making an effort work with borrowers to get their loans back on track.

First steps you can take

The government suggests individuals to take their first step by calling their mortgage lender and determining if the lender can help them directly. Oftentimes, lenders are willing to adjust interest rates or to help individuals to get caught up by making home loan modifications. For example, the lender may agree to tack on the missing payments at the end of the loan or may agree to allow you to repay the missing payments over a period of time.

Making Home Affordable

Another option that may work if the lender is not immediately willing to work with you is the Making Home Affordable Modification Program , called HAMP. This is a form of government help for late mortgage payments. You may qualify under certain circumstances, if you meet the right requirements, such as the following.

• You are living in the home you are behind on mortgage payments (it must be your primary residence).
• You owe less than $729,750 on your mortgage and began it prior to January 1, 2009.
• Your payment on the loan is more than 31 percent of your gross income at this point.
• You cannot afford to make your mortgage payment due to some type of financial hardship, such as a job loss or because of medical bills.

In these situations, the lender may agree to work with you under this government help for late mortgage payments. You will need to apply for this type of help through the federal government’s website for the program. You may or may not receive help. It is important to consider your long-term goals here. In some situations, if you do not have the financial means of being caught up, you may lose your home due to the inability to pay your loan.

When applying for a mortgage , your lender may ask you to sign and submit a Form 4506. It is a form we get directly from the IRS which some mortgage lenders may require you to complete as part of your loan application.

What is a 4506 used for?

Form 4506 T, as it is most often requested, is also called a Request for Transcript of Tax Return. This document allows for a copy of your tax return to be obtained from the IRS directly. A mortgage lender may request this to verify your income documentation that you have provided as part of your loan application.

There are a few things to know about it.

1. This form may be necessary if you are a self-employed borrower and the lender wishes to see official documentation of your most recent earnings from the IRS.
2. This form is also used to detect fraud in cases where there is an apparent discrepancy. If there is some reason the lender does not believe your reported income is accurate, they may take steps to verify it through this manner.
3. Many mortgage companies also use this tool randomly within their business. For example, during the course of the day the lender may request a certain number of these documents. This is often for a quality control measure and those who receive the request are selected randomly.

4506 as part of the loan process

The fact that your lender has asked for a signed 4506 doesn’t necessarily mean they suspect fraud or have identified an issue with your loan.  It may simply be part of their regular process.

During any loan application, it is necessary for mortgage lenders to verify the information you provide to them.  So as a rule, when filling out documents to obtain a loan, always provide the most accurate information. Ensure that all statements you make are accurate and verifiable to avoid any problems with this step or other verification steps the lender will take.

A mortgage calculator is a handy tool, but it cannot replace a mortgage professional. A mortgage calculator can give you a ballpark figure for what you can afford, however, based on your income and, depending upon how sophisticated the calculator is, the local tax rates and the cost of homeowner’s insurance for the properties you’re considering.

Caveats

Homeowner’s insurance rates will vary considerably depending upon where the home you’re looking at is located – especially in southern Louisiana – where the ability to get private coverage or having to go with the state Fair Plan may make or break your mortgage application!

You have to take this into account and using national averages is really not that useful as a means of determining how much you’re going to end up paying for this necessary cost. An insurance company is really the only reliable source for this info, or a mortgage broker that can find out from an insurance company for you.

You’ll also want to make sure that you consider taxes into the equation. These will vary from place to place and not all online mortgage calculators even consider this. If your taxes are around $3,000 per year, you can count on that amount being added to the cost of owning your home. This may put the cost of the home over the edge for you where affordability is concerned.

Make sure you take into account the fact that a mortgage calculator just gives you a number based on a percentage. For instance, a mortgage broker works with you in a way that mirrors how a bank will determine your suitability for a loan. This will include taking into account the amount of expenses you have already. Your car loan, insurance payments, credit card debt and so forth will all factor into how much you can afford in the way of a mortgage.

A mortgage calculator will usually just give you a percentage, somewhere between 28 and 33 percent, of your total income and factor in a few other numbers to determine how much you could borrow.

Calculators Have No Lending Authority

A mortgage calculator is handy and can give you some rough ideas of your borrowing capacity. However, it’s important to remember that banks don’t make lending decisions based on what these calculators say you can afford.

So while a mortgage calculator can get you started, give you an idea of how much you should seek and so forth, it takes a home mortgage professional to really determine how much you can borrow.

In days past, if you had a less than perfect credit rating it usually meant that someone was irresponsible or simply unethical in how they handled debt. Today, many hard working people have less than perfect credit due to a number of reasons not all of which are under their control.

At the same time, banks are being much pickier about whom they lend money to and that means that the credit ratings required to get loans are higher than ever. Finding a mortgage lender that can help you if you have less than ideal credit will require that you accept a couple of things.

You May Pay Higher Interest Rates

Credit ratings improve when you’ve been on time with payments for a while and when you’re re-established that you’re not an extreme risk to creditors. One way of doing this is to take out a high interest loan for a while and, when you’ve been paying on it regularly, to re-apply for a better loan.

Higher Down Payments

Another effect of having weak credit is that you may have to come up with more money for your down payment on your loan. This does have some advantages, however. Principally, it lessens the amount that you have to pay interest on and that means that your home is more affordable from the start.

Mortgage Insurance

Everyone needs mortgage insurance for higher LTV loans.  However the amount and rate of mortgage insurance may increase if your credit isn’t so good and this will have to be factored into the loan. A good mortgage broker that helps people with less than perfect credit can make sure that you understand this insurance and can make sure that you don’t end up overpaying for it. This insurance may well be the only reason that you’re even able to finance a home, so don’t be put off by the additional cost that it adds to the purchase price.

A good mortgage broker that helps people with less than perfect credit can find most anyone an affordable, valuable loan that will make a home a realistic option for them.  And at NOLA Lending, we take pride in serving the needs of our customers so that you get Your Loan, Your Way!