Mortgage Discussion Center
What NOT to do After Applying for a Loan
Loan Programs
- Conventional - Typically conventional loans are those not backed by the FHA, but backed by the banking industry itself. The most common being a normal fixed-rate loan, though there are also adjustable rate mortgages that are conventional. They typically require a larger down payment, between 5% and 20%, and have stricter credit requirements, but less requirements on the home itself.
- FHA - These are loans backed by the Federal Housing Administration. This allows them to make credit requirements less strict, and require less in down payment. This is a great option when you are tight on cash but know you can afford the payments. It is used a lot for first-time borrowers, but you don't have to be a first-timer to use FHA, you can just only have one FHA loan at a time, and it has to be your primary residence. These loans do require that the home have an appraisal and FHA inspection. The home must meet certain standards. Typical violations of those standards are no guttering, grading, window operation, etc. The typical down payment is currently at 3.5%.
- VA - To qualify for these loans, you need to have your VA Certificate of Eligibility. These loans have no down payment requirements, but do have a funding fee in most cases. These can be funded into the loan or paid in cash, but the amount/percentage varies depending on your situation.
- USDA Rural Development - These loans are similar to the FHA but cover only certain areas, and types of homes. For the Wichita area, it covers all the surrounding county/cities except Wichita and Derby and Haysville. They generally require no down payment and have no PMI payments, though there is an up-front PMI premium charged on top of the loan and funded into it.
- HELOC - A Home Equity Line of Credit may be used to purchase a home by basically taking out the equity of your current house and paying cash for the next house. If you happen to have that much equity, this is a good way to not lose a home while you wait to sell yours.
Click here to review a list of common loan terms and definitions that you might see tossed about.
Which one is right for me?
Well, that really depends on your situation, how much cash you have, how long you plan to be in the home, etc. As far as homes go, here's how the home you want can somewhat affect loan choices as well.
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Want a fixer upper? Go Cash, Conventional, HELOC, or FHA203k
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Want move-in ready with little down payment? Go FHA, VA, or USDA
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Want to live in the Country with nothing down? Go USDA
Rates and other factors will play a part, but make sure you discuss with your loan officer the type of property you want to purchase before locking yourself into a loan. Also consider your future financial goals. Are you going to want to sell it sooner or are you hanging around for a while?
Whatever you do, make sure you're not over your head. Make sure the payment sounds like you can realistically make it, even considering all your other bills, with some cushion every month.
For help in that, use our Budgeting Worksheet below.
What NOT to do After Application!
You've found your home! You're excited, overwhelmed, anxious and more! Sometimes common sense has left the room! But hold tight to a few key rules - or that home you loved might slip away by accident.
When you apply for your loan, the bank takes a picture of your finances. That snapshot is the basis for your entire loan. They don't want those to change before closing, because that's what they're basing their loan on. So with that in mind, here's a few No-No's or What Not to Do Before Closing!
- Do NOT change jobs - if you are considering it, talk to your lender FIRST and try to stay in the same line of work, where it might possibly, could, maybe be okay. Switching careers right now could destroy your chances of your home! Do this before or after, but not during!
- Do NOT make any large credit purchases - In fact, try not to use your credit at all right now. But most definitely do NOT buy a vehicle, get another loan, etc. The car purchase is the most frequent offense and I HAVE had buyers not get their home due to this.
- Do NOT spend your savings - What you present to the bank as your liquid assets (savings, money market, etc) needs to still be there at closing. They will check to see. This is no time to loan your brother some bucks. New furniture is nice, but buy it AFTER you close or you might not be closing!
I promise we're not trying to be mean! We're really looking out for you! What good is all that furniture going to be if you don't get the house because of it. I'm not asking you to put your life on hold forever, just long enough to get through escrow and make the home yours!
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Fixed Rate – The interest rate on the loan note (different from APR) stays the same through the life of the loan.
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Adjustable Rate Mortgage (ARM) – The interest rate is usually fixed for a certain amount of time (for example, a 2year ARM or 5year ARM). After that period is up, the rate adjusts to follow the market. These new rates can be based off various economic factors, and generally have a cap (or should!) for how much it can adjust.
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LTV – Loan to Value – Percentage loaned versus value of home. A 90% LTV means they will loan you 90% of the home, you will need the 10% value down.
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Pre-payment penalty – This is usually a percentage charged on your payoff if you pay the loan off before a certain time. This is to protect the bank's interests and recoup some of their money from not being able to collect it monthly any longer. Common pre-pay penalties are at 1 year or 2 years. Most loans don't have one. Just make sure you're aware of this for future selling plans.
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Escrows – These items are paid monthly into an escrow account to pay bills that come due such as taxes and insurance. The escrow account draws no interest without your permission, so the bank doesn't make money off of it. It's just there as assurance that there's funds to keep these items paid for. Bills will be sent to the mortgage bank and they will pay them out of this account.
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APR – This is what your actual interest rate for the first year is, including the first year's note rate PLUS the closing costs. So this number will be higher than your actual loan rate because it rolls those initial costs into a “rate” for disclosure purposes.
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Mortgage Insurance – This insurance is generally put on loans where there is less than 20% equity in the home. The insurance monthly and upfront payment varies depending upon your risk factors.
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Appraisal – An appraisal is an independent evaluation done by a licensed appraiser to verify that the value of the home supports the loan being given by the bank. The appraiser looks at what other homes have sold for near the subject home and determines a fair market value for the home.
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DTI – Debt To Income ratio – The percentage of monthly payments on debt to your monthly income. This should also factor in your new house payment.
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Good-Faith Estimate – This is a rough estimate on what your closing costs, pre-paids, down payment, and monthly payment could be, given a certain scenario. This will change depending on the house you choose, but a rough estimate should be close enough and also gives you a chance to compare fees of different lenders.
Mortgage Calculators
The purpose of this worksheet is to make sure that after your ideal mortgage payment, you are allowing yourself enough room for utilities, food, gas, entertainment, savings, etc. What you'll find is that a bank will look at your debt payments only, not taking into account that you'll probably want to eat. My goal is to make sure you are well informed, educated, and have the tools at your disposal to make the decisions on how much YOU want your mortgage payment to be based on the other factors in your life.
So please take a moment to look over this worksheet and make sure you're leaving room in your budget for the other necessities of life aside from just a roof over your head!
The following loan officers are some that I have worked with in the past and my clients were very happy with. This is by no means an exhaustive list of loan officers in our area, and not even a list of all the ones I have worked with. Check with more than one bank, loan officer, credit union, or mortgage broker, to compare notes and be sure you're getting a fair deal on rates and costs!
Jan Wetta - Legacy Bank - 316-260-3755 - jwetta@legacy-bank.com - Jan works for Legacy Bank, a local brick and mortar bank. They do all sorts of loans, including conventional, FHA, VA, and USDA, and generally have moderate credit requirements, not loose, but not ultra tight. You can apply online at her website below:
Jenn Williams - Loan on Top - 316-304-2247 - jenn@loanontop.com - Jenn works for Top Mortgage, a local mortgage broker who has been around for years. They have more avenues to shop loans around, so are able to tolerate a little more blemished credit.
Janet McElroy - Capitol Federal - 316-689-3131 - jmcelroy@capfed.com - Janet works for Capitol Federal, often called Cap Fed around here. They are a conservative and strong local bank. They only loan Conventional and have stringent credit requirements, though they often have the lowest and best rates because of this. You can apply online with Janet at:
