Is Your Mortgage Broker Licensed?

When applying for a mortgage it's hard to know whom to trust. There are two simple online searches you can perform right now which will greatly increase your chances for a positive experience.

In the state of Florida it is very easy to find out if a mortgage broker is licensed. Simply go to the following Florida Department of Financial Services website and search for your broker.

https://cf.fldfs.com/pubinqry/pub1/individuals.cfm

It is also wise to make sure you are dealing with a professional who has taken the time and made the commitement to belong to the NAMB (National Association of Mortgage Brokers) and in Florida, the FAMB (Florida Association of Mortgage Brokers.)

Go to that FAMB website:
http://famb.org/nonmembers.asp and click on the "Search Membership Directory" Link.

Free Credit Report

If you're like most people, you see offers for free credit reports every day. Unfortunately, many of these offers are either not "real" or not useful for you.
The problem is compounded by the fact that most people are vaguely aware that there is a new law that does indeed entitle them to a free credit report (This new law is called the Fair Credit Reporting Act (FCRA)).

First and foremost -- there is ONE and ONLY ONE place to get the free credit report that is the result of this new law. The site is https://www.annualcreditreport.com and the way to verify this is to go to the FTC's website at http://www.ftc.gov/bcp/conline/pubs/credit/freereports.htm
The Federal Trade Commission (FTC) is the government bureau which oversees the Fair Credit Reporting Act (FCRA)

The next important fact to realize is that a "credit report" is not a "credit score".
This is a crucial fact! To get a mortgage or other type of loan the lender looks at your credit score. The credit report does NOT give you your credit score.

See the next post for details on credit scores.

Mortgage Contingency Clauses

If you do not have the money to pay cash for a home, do NOT sign a real estate contract without a mortgage contingency clause.
Everyone seems to think it is their inalienable right to be lent huge sums of money! The fact is, you may be turned down for a loan. At the very least, you may be approved for less than you expect, a higher rate than you want, or it may take longer to get the loan than you anticipate. If there is no mortgage contingency clause in your real estate contract then you are still obligated to close on the property. If this happens you may lose your deposit.

Sales Price versus Appraised Price

The sales price you agree upon IS NOT the amount your mortgage is based on.
This fact has caused many financing problems in a "seller's market" as exists right now. The mortgage lender will order an appraisal by a certified appraiser. The appraised value will often be less than the sales price. This does NOT necessarily mean you are overpaying. Hopefully your realtor or attorney has helped you negotiate a fair price for your home. What this DOES mean is that you may need more cash at your closing than you originally anticipated.

As an example: You signed a contract to purchase a home for $500,000. You have $100,000 to put down and plan on financing the remaining 80% ($400,000.) As the loan process progresses the appraisal report shows the value as $475,000. Your 80% loan is now $380,000 and you are "short" $20,000!

Most Pre-Approvals Are Worthless

Most loan pre-approvals are worthless!
Unless a qualified professional has obtained (at the very least,) your bank statements, pay stubs, W2 statements, and credit report there is no way you can obtain preliminary approval for a loan. The Washington Post recently published an article on this topic. You can read it here: Washington Post pre-approval article