By Tricia Morris President,
Premiere Mortgage
As printed in the Maui News

I get many calls a day and countless website requests for mortgage loan information. The most frequently asked questions are how to start the loan process. For first time home buyers, the process may be confusing.

What is helpful to have a mortgage loan?

• Past two (2) years W-2 statements.
• Pay stubs covering the last (30) thirty days.
• Most recent two months banks statements.
• Most recent transaction summary of 401K, IRA, Mutual Fund Accounts, Stocks or Certificates of Deposits.
• Copy of the Purchase and Sale Agreement.
• Name and address of your current landlord if you are renting.

For self employed borrowers, employed in sales, paid by commission, or owns rental real- estate:

• Two (2) years signed personal tax returns- including all schedules.
• If self employed through a corporation the last two years corporate returns.

What is the Loan Approval Process?

Once your loan application has been received the loan approval process will begin immediately. This involves verifying your:

1. Credit history
2. Employment history
3. Assets including your bank accounts, stocks, mutual fund and retirement accounts 
4. Property value by way of appraisal.

Some loans do not require income verification.  Based on your situation, additional documents or verifications may be required since each loan is both borrower and lender specific.

How do I improve my chances of getting a loan approval?

• Fill out the loan application completely or have your lender complete it with you.
• Respond promptly to any requests for additional documents. This is especially critical if your rate is locked or if you plan to close by a certain date.
• Postpone any major purchases. Do not buy a car, furniture or another house till your loan is closed. Anything that causes your debts to increase might have an adverse affect on your current application.
• Do not move money into your bank accounts unless it can be traced. If you are receiving money from friends, family or other relatives, please contact your lender.

Why do I need an appraisal?

An appraisal establishes the value of the collateral property for the lender. A licensed professional appraiser determines the real estate value by gathering, analyzing, and applying pertinent information to the property. That determination is done using commonly accepted standards within the appraisal industry and that helps to prevent the inflation of a property’s estimated worth, which could undermine the value of the loan.

What is a “Good Faith Estimate?”

A Good Faith Estimate (GFE) is a non-binding estimate of your mortgage closing costs, including points, fees and impounds (normally property taxes and homeowners insurance). Fees are based on the type of mortgage, the timing of your loan, and the specific terms of the lender. Your mortgage broker works to insure that you receive the best loan terms for your particular financial requirements and the property being purchased.

It is important is remember that the Good Faith Estimate is an estimate of charges you are likely to incur at the closing of your loan. On the GFE, the fees listed conform to the U.S. Department of Housing and Urban Development (HUD 1) settlement statement, and will itemize out the actual costs paid upon closing.

What meant by Mortgage Insurance, when do I need it and when can it be dropped?

Mortgage Insurance protects the lender in the event of a loan default. It is generally required when the down payment is less than 20 percent of the purchase price or appraised value, whichever is lower. Mortgage insurance is on a sliding scale, a 10 percent down payment would require less mortgage insurance than a five percent down payment.

Normally a lender will require the mortgage insurance to be on the property for a minimum of two years.  An exception would be when the owner has paid verifiable cash for improvements to the property or made a principal pay down to bring cash into the property to 20%.

Mortgage Insurance can be eliminated when the equity in the property reaches 20 percent of the appraised value at the time you wish to drop the insurance. This is an important distinction. For example, you may have had the property for 5-10 years and during that time the value of the property has increased. Keeping an eye on this detail and eliminating unnecessary mortgage insurance can reduce your payments in the future.

Premiere Mortgage has offices in Kihei and Kahana. Tricia Morris may be reached at 808-874-8800 or toll free at 800-813-7711.