When should l begin to talking to lenders?
What lenders should I talk to?
How much money will I need for a down payment on my Outer Banks home?
What is PMI?
How should I be shopping for an Outer Banks loan?
What do I need to know about getting an Outer Banks loan?
How can I improve my score?
Typically what will be needed for a loan application?
The best time to talk to a lender is prior to looking at Outer Banks property. This will help you narrow down your search to a specific price range of property and will save you time in the long run. Furthermore, prequalified buyers are viewed as more serious by sellers. Being prequalified may make the difference on which offer a seller accepts.Back to top
If you are using the Outer Banks property as collateral for your loan then it is a good idea to talk with a local lender.They are used to dealing with vacation rental homes. Many out of town lenders don’t understand many of the unique features of vacation rental property. Just about every Realtor on the beach has a story about a buyer who insisted on using their mortgage friend from out of the area who ended up not being able to do the loan for one reason or another. Local lenders have competitive rates and can avoid the pitfalls inevitably found by the out of town lenders.Back to top
There are many different types of loans available for each type of buyer of Outer Banks property. There are home loans available to primary home buyers that offer financing up to 100%. Outer Banks vacation or second home owners also have many options available. The vacation home buyer can often borrow up to 90% of the purchase price through an 80% first loan plus a 10% second loan. Loan programs and criteria change frequently with the lending market. It is likely a local lender will have a program that meets your specific criteria.Back to top
PMI is private mortgage insurance, which insures the lender if the borrower defaults on the loan. Typically the lender will require buyers to pay PMI if they borrow in access of 90% of the value of their primary residence. Sometimes PMI payments can be avoided with a small second mortgage of 10% to 15%.Back to top
In order to make an informed decision, most prospective Outer Banks borrowers go from lender to lender asking about their interest rates and discount points. Unfortunately, the best rates and points quoted over the telephone may end up being nothing more than a lure. Mortgage lenders are required to provide you with a good faith estimate. This estimate lists all the fees associated with the loan. By comparing good faith estimates you can best compare ‘apples to apples’.Back to top
Besides your ability to pay the loan back, today’s Outer Banks lenders rely heavily on your credit score A credit score is determined by a computer program that looks at numerous aspects of your financial history. There are only a small number of companies nationwide that provide credit scores for lenders. The higher the credit score the better chance of receiving the loan. Factors in determining your score include your payment history, your outstanding debt, your credit history, credit use and negative information. A good payment history on current and recent loans will positively affect your score. Higher and multiple credit card balances will lower your score. The diversity of your credit use will also make a positive difference. Lastly, negative information like bankruptcies, late payments and maxed out credit cards will have a significant effect on your credit score. Typically a score above 720 is acceptable for most typical Outer Banks loans. Lower credit scores may result in a less desirable loan program or no loan available at all.Back to top
Close unnecessary accounts. Typically the less credit you have available to use the higher your credit score. Get debt-free. Pay off credit card balances and never let the balances exceed 50 percent of the available credit. Pay your bills on time. This includes rent, utilities, mortgage or other monthly expenses. Clear public records. Clean up all liens and judgments and make sure full payment is reflected on your credit report.Back to top
Outer Banks Loan originators look at three basic aspects of your financial situation prior to giving loan approval. Those areas are income/employment, assets and information on the property you are purchasing. Below is a list of these items in each area typically needed qualify for a loan.Back to top
- The past two year’s original W-2 or K-1 forms as applicable
- The past two year’s personal tax returns with all schedules.
- Original consecutive pay stubs covering the most recent 30 day period.
- Social Security Awards Letter
- The past two year’s original 1099R forms.
- A copy of your divorce decree if paying or receiving child support or alimony.
- Corporation owners should also have:
The last two year’s corporate tax returns complete with all schedules.
Copy of page 1 of corporate tax returns or page 1 of the corporations Articles of Incorporation which will evidence that it has been in business a minimum of three years
Year to date P & L and balance sheet
- Account numbers and addresses for checking, savings and credit union accounts
- Current balances in each bank account as well as 2 months bank statements for each account
- An estimate of replacement value for all household goods and personal items
- Retirement fund information, life insurance cash values, stocks and bonds (with ID numbers )
- Rental/lease agreement on any rental property you own, together with the loan number, address of mortgage holder and your monthly payment account.
- Outstanding loans and charge accounts showing account numbers, present balances, and current monthly payments. For all loans with finance companies, please show street addresses. (Please show the bank name for VISA and MasterCard, and address where payment is sent).
- Current and previous mortgage information including the type of loan, the loan number and the name and address of the mortgage company
- Savings Bonds List
- Gift Donor letter if applicable
- A contract original
- If there is a current home to be sold, a copy of the pending contract is needed. At closing, a certified copy of the closing statement and warranty deed is required.
- Two (2) years W-2s and year-to-date paystub.
- Check for appraisal and credit report. Amount to be determined at time of loan application.
- Copy of HUD1 Settlement Statement at closing