To Lock In or Not? How to Decide if a Mortgage Rate Lock is a Good Idea

If you are thinking about buying a home in the near future, you’re probably paying really close attention to what happens with mortgage interest rates. In recent months they have gone down, which is great for homebuyers who are able to get a lower rate, since even a small difference in your interest rate can dramatically reduce the amount of interest you will pay over the life of a 30-year mortgage loan. One of the most common questions that comes up is whether you should lock in a mortgage rate, and if you should, then when?

With rates hovering historically low, is now the right time to lock in your mortgage rate?

What is a Mortgage Rate Lock?

Locking in a mortgage rate with your lender means that you are guaranteed to get a certain rate—it freezes the interest rate for your loan so it cannot go up. Since mortgage rates are always changing, the ability to lock in a rate that you feel comfortable with can be great to avoid the surprise of a higher monthly payment if rates do spike right before you close.

Some lenders require that you pay a fee to lock in a rate, while others will let you do it without a fee provided you close within a certain period of time—usually between 30 and 60 days. This should give you plenty of time to get through loan processing and underwriting.

When is the Right Time to Lock In?

You don’t want to lock your rate too soon, since you need to close on the loan before your lock expires. Generally the best time will be when:

  • You put in an offer on a home that was accepted
  • Your loan application was approved
  • You feel comfortable with the current mortgage rate
  • You can close on the loan within the lock period

Are There Times When You Shouldn’t Lock Your Rate?

Locking in a mortgage interest rate can be beneficial for you as the buyer, but only if you think that rates might go up in the near future. If rates are going down over time or staying relatively steady, it may not benefit you to lock in a rate. Some mortgage rate locks do allow you to have a one-time “float-down”, which means that if rates continue to drop you can adjust your locked rate downward once, but not all of them include this provision. Without this provision, if you lock in and rates go down, you will still have the higher rate.

There are factors that could void or cause your rate lock to expire, such as:

  • Underwriting or loan processing issues
  • Credit score changes that disqualify you for that rate
  • Income or employment changes
  • Loan revisions (such as changing the length or type of mortgage)
  • Low property appraisals

Talk to Integrity First Lending today about options for mortgage rate locks. With rates at historic lows now is a great time to lock in yours.

Understanding How Underwriters Calculate What You Can Borrow for a Home Loan

Before you can get a loan for your mortgage, your request for the loan has to go through underwriting. The underwriting process is fairly straightforward—your lender takes the information you provide about your income, assets, property, and debts to determine whether they should give you a loan. You won’t be involved in the process except to provide any necessary information to your lender.

Underwriters play a crucial role in determining how much risk you present as a borrower.

What Underwriters Look for in Home Loan Applications

During the process, an underwriter is looking for two main things: how much risk they believe you present as a borrower, and whether you will be able to afford the loan. In the underwriting process they review:

  • Your credit history, including your credit score from a credit report
  • On-time payment history for other loans, including mortgages, auto loans, student loans, rent, and revolving credit lines
  • Bankruptcies or other negative financial events in your past
  • Credit balances on your revolving credit lines (overuse of credit could be a red flag that you are not in a good financial position)

Once they review this information, the next step is to order an appraisal of the property you are planning to purchase. This is done by a third-party appraiser who looks at the home you’re planning to buy and compares it to home values in the area to ensure that it is worth the amount of the loan you’re requesting.

Next they look at your current income and employment status. You will need to provide proof (usually in the form of pay stubs) of your total monthly income and how long you have been employed in your current position. If it’s a new job, they may request information about your previous employment and require proof of income from a past employer in addition to your current pay stubs.

An underwriter will also check your debt-to-income ratio, which is a term for how much money you are paying each monthly on debt payments as a percentage of your income. If you have a lot of debt and are paying a lot of your income toward debt each month, the underwriter may decide that you can’t borrow as much because their job is to make sure you will have enough cash flow to pay your mortgage.

Finally, the underwriter will look at your current bank accounts, including checking and savings, to make sure you have enough cash for things like a down payment. They are also looking for any irregularities in your accounts, so if you recently made a large deposit, be prepared to explain and provide documentation about where it came from in case the underwriter asks. For example, if you made a deposit of $30,000 into your savings account after selling your last home, you may be asked to provide documents from the closing.

The underwriting process is an essential part of a home loan. Understanding what’s involved and what you need to provide can help you move through the process quickly to get approved for your loan. Contact Integrity First Lending today for information about mortgage loans.

Should You Consider Postponing Your Mortgage Payments Using Forbearance?

Refinancing may be a better option than forbearance to save money.

You may have heard of the CARES Act that has been making headlines offering relief to those affected by COVID-19, and you may also be wondering how this applies to your mortgage. This law allows borrowers, with federally backed mortgages, to request a payment reprieve in the form of forbearance. The law has raised a lot of questions, and we want to support you and be as clear as possible to help you avoid landing in a more difficult situation down the road.

The main point we want to convey is that forbearance should not be considered unless you have lost your job. Refinancing may be a better option.

Above all, borrowers should know that forbearance is NOT forgiveness. If a mortgage loan is delayed, it has to be paid back once the forbearance ends. Delaying the loan could lead to significant financial hardship in the future, as this scenario illustrates:

You currently have a mortgage of $1,500 per month.
Your friend tells you that you should request forbearance because you won’t have to make a payment for the next six months.
You call the servicer and ask for forbearance.
In one phone call, you get six months “off” from paying.
Seven months later, forbearance is lifted and servicer says,

“That will be $9,000 + $1,500, which is due now”. ($10,500 total)

You almost pass out and say, “WHY??”
Servicer: “That’s the 6 months of forbearance plus the current month.”
You: “I can’t do that, can we work something out?”
Servicer: “Sure, we will spread out the $9,000 over 12 months.”
You: “Phew….ok, good. What will that look like?”

Servicer: That will be $2,250 a month for the next 12 months.”

You: “I can’t afford that.”
Servicer: “Sorry…..”
You: “Can I refinance?”
Servicer: “No because the loan went into forbearance.”

As you can see, requesting forbearance is a very big deal because of the potential haunting consequences. It should only be considered as an option in extreme, job loss, circumstances.

As an alternative to forbearance, you may want to consider refinancing. When refinancing, you can delay up to two mortgage payments and potentially reduce your rate. Please don’t hesitate to contact us with any questions, we care and we are here for you. Give us a call at 801.542.0961 or live chat with a loan officer below!


Does it Pay to Compare Mortgage Rates from Different Lenders?

When you are thinking about getting a home loan, one of the first things most borrowers do is look at the current mortgage interest rates. These rates play a significant role in what your payment will be, which can affect how much money you can borrow and what home you can buy.

It is a good idea to shop around, but with the caveat that it’s important to also understand that different lenders can have different requirements or different loan options that may not make sense for every borrower, so before you just jump on the lowest rate you find, make sure you understand the loan you’re getting.

It can pay to compare rates from different mortgage lenders when buying a home.

Rates are Tied to Borrower Risk

The mortgage rate you can get is tied to the level of risk a lender assigns to you as a borrower. A borrow with higher risk will have a higher interest rate than a low-risk one. Lenders use various measures, beginning with your credit score, to predict risk—if you have paid your bills on time in the past and have steady employment, you will be seen as less risky than someone with poor repayment history, bankruptcies, or other financial red flags.

Other things that the lender takes into account when determining your interest rate could include:

  • Analysis of your current financial position
  • Credit history
  • Employment history
  • Debt-to-income ratio (how much debt you owe as a percent of your monthly pay)
  • Down payment

Different Lenders Evaluate Risk Differently

While the general metrics for measuring a borrower’s risk are pretty standard from one lender to another, different lenders have different models and algorithms they use for predicting and measuring your risk as a borrower. For example, some lenders might put more weight on a high debt-to-income ratio (seeing you as a riskier borrower) while another might focus on your high credit score or see that you have a 20% down payment and view you as less risky.

Loan Products Can Affect Borrower Rates

In addition to risk algorithms, the specific types of loans available from a lender also have an impact on your rates. For example, one lender may have a 5-year ARM (adjustable rate mortgage) with a very low initial rate that seems much better than a 30-year fixed, but your rate could go up significantly after year 5 unless you refinance or pay off the loan in a lump sum. In another example, if you only have a 5% down payment the lenders may have specific loans available to get you into a home without 20% down.

Because risk models and loans vary by lender, it can benefit you to “shop around” for mortgage rates. Integrity First Lending is focused on helping borrowers get the best loan rates possible to purchase home, so make sure when you’re shopping around that you get a quote from us. Contact us today to learn more.

4 Questions People are Asking About COVID-19 and Mortgages

As more and more of our lives are disrupted by local, state, and federal policies around mortgages, there are several questions that many people have about how these policies and the COVID-19 virus are affecting mortgages. Here are four questions that many people have around mortgage loan rates, new mortgage loans, refinancing, and home values.

The COVID-19 virus has caused significant disruption for homebuying and refinancing.

1: Are mortgage rates going to continue to go down?

The Federal Reserve (Fed) recently made a significant cut to interest rates in an effort to slow down the economic freefall on Wall Street in early March that saw stocks tumble to their lowest levels in more than a decade. That has left many potential homebuyers, and homeowners who are considering refinancing a mortgage, wondering whether you should move ahead with today’s rates or hope for rates to go down more in the near future. The interest rates set by the Fed are different from mortgage rates; mortgage rates can follow the direction of Fed rates, but they could also go up. If you’re thinking about locking in a mortgage rate or refinancing, rates are at or near all-time lows right now so talk to your lender about whether a rate lock is a good move.

2: Can I still get a new mortgage loan right now?

If you are in the process of buying a new home, stay-at-home or shelter-in-place orders and non-essential business closings could be affecting the homebuying process. Orders that limit the number of people who can gather could make it hard to do a traditional loan closing, and other concerns could makehomebuying a challenge, for example, if the appraisal gets delayed or county offices are closed or short-staffed. However, most businesses are working to find solutions, so talk to your real estate agent and Integrity First Lending today.

3: Should I refinance my mortgage right now?

Maybe. Right now rates are very low, so if you’re in a high-interest loan or your home has appreciated in value enough to eliminate private mortgage insurance with 20% equity or more, now could be a great time to refinance. Talk to Integrity First Lending to discuss your specific situation and learn more about refinancing options.

4: Are home values going to go down in the near future?

It’s impossible to predict exactly where home prices will go, especially since the reason for the current economic decline is unprecedented. While some economic indicators are being compared to those around the 2008 recession when home values declined, othersindicate that the effects could be very short-term. Most of the time home values remain pretty steady, even in difficult economic times.

For other questions about things like mortgage forbearance or other short-term relief if you lost your job, or questions about the CARES Act and how it could impact your mortgage, contact Integrity First Lending today for assistance.

Important First Steps Before Applying for a Mortgage

There is a lot of information out there about the mortgage loan process itself—what documents you need, how long each step takes, and more—but not as much information about the important steps you should be taking several months, and even years, before you go to apply for that mortgage. Here are some important things that should be on your radar long before the mortgage process.

Getting qualified for a mortgage loan means taking important financial steps well in advance.

Check Your Credit Score

You have probably heard this one before, but it’s such an important part of the mortgage loan process. While there is no exact credit score number that automatically qualifies you for a loan, there are some general guidelines depending on the type of loan you will apply for:

  • FHA loans with 10% down: 500
  • FHA loans with 3.5% down: 580
  • VA loans for veterans: 580-620
  • USDA loans in designated rural areas: 620
  • Conventional loans: 620-640

None of these numbers are set in stone, so for example, a lender may be willing to give you a VA loan if your credit score is below 620 but they may require a bigger down payment.

By checking your score you can identify whether you are in the right range for a home loan, how much you might need to save for a down payment, and whether you need to take steps to improve that score, which can take time.

Pay Off Debts

One important factor in your ability to purchase a home is how much debt you currently have compared to your income, called a debt-to-income ratio. Lenders want to know you will be able to make a mortgage payment, so they have guidelines on how much of your income should be paid toward debt. If you have lots of other debts, like student loans, car payments, credit card debt, or medical bills, those all go toward your total debt calculation and can reduce what a lender is willing to give you for a home mortgage. Paying down debt (even if you can’t pay it off entirely) gives you more financial flexibility to get a bigger loan for that home you really want. Eliminating debt can also improve your credit score.

Watch Your Spending

Putting things on your credit card right now if you don’t have the ability to pay it all off right away can harm your credit score. Likewise, taking out new loans right before you plan to buy a home can lower your credit score. Don’t sign up for that store credit line, buy a new car, or make any big purchases on a card until you’re done with the mortgage process.

If you take these financial steps well in advance of your mortgage loan application with Integrity First Lending, you can help the process go smoothly and get the best loan at the best interest rate for your new home.

Can You Still Get a Home Loan During Coronavirus Shutdowns?

There is a lot of uncertainty right now in our healthcare system and society as we try to stay on top of a global pandemic that has changed everything. At the same time that our government leaders are urging (or requiring) people to stay home to prevent the spread of disease, near-record-low mortgage rates have made many people look more closely at refinancing or purchasing a new home. Here are some common questions and answers about loans in the early days of COVID-19.

Home loans and refinancing are significantly impacted by coronavirus-related shutdowns.

Home Availability Will Change

Normally the months of March and April are times when real estate brokers see a flood of new properties going on the market. Getting properties listed in the spring gives buyers time to look at inventory, put an offer in, close on their loan, and move during the summer months. The volume of homes going on the market is much lower than normal, and that can impact your ability to find a home you want to buy. Plus open houses and other activities that normally are part of a home-buying process are not allowed for the foreseeable future, which can impact the market.

Even the inventory that might normally come from things like foreclosures is gone, with government agencies like the Department of Housing and Urban Development announcing that lenders cannot foreclose or evict anyone with a Federal Housing Authority (FHA) mortgage for 60 days beginning March 18, 2020.

Settlements May Not Move Forward

Many state and local authorities are limiting the number of people that are allowed to congregate in any given place, so gathering all the people who need to be involved in a settlement or closing process may not be possible. In some states you may be able to sign documents electronically, but that still poses challenges in collecting all the necessary documentation to get a closing done and verifying that it is accurate. Your lender may have some specific requirements or things you need to send in advance to make the process go smoothly. If you do meet in person, you may want to take extra precautions like bringing your own pens for signing, not shaking hands, and bringing hand sanitizer and surface wipes for the conference table.

Timeframes May Be Extended

Some of the personnel shortages could also impact your ability to get all the steps completed in the same timeframe that you initially planned, so be patient with the process and talk to your lender throughout each step. County records offices that normally handle things like title searches or deed filings may be shut down or have only bare-bones staffing. Notaries are allowed to perform their duties virtually in about half of the states in the U.S., and Utah is one of them, which can help move the process along.

Your lender may not have a lot of concrete information about how long certain things will take, since this is new territory for many people, lenders included.

If you are in the process of a mortgage loan or you have questions, contact Integrity First Lending to talk to our experienced team about how the coronavirus might impact that. We’re always here to help.

Things That Could Hurt Your Ability to Get a Home Loan

Whether you are a new homebuyer or someone who has an existing home and is looking to upgrade, it’s important to understand how underwriters look at potential loan applicants, and what kinds of things might raise a red flag and hurt your ability to get a loan or a good interest rate. Here are a few of the most common.

1: Too Much Debt

Most lenders want your new house payments to fall into what is called the 28/36 rule. That means that your mortgage payment should be no more than 28% of your gross monthly income (income before taxes are taken out), and your total debts should not be over 36% of gross income. If you have several other loans or debts, your debt may go over that 36% and could hamper your ability to get a loan for the home you want.

Try to pay down debts before applying for a loan, especially:

  • Credit card debt
  • Student loans
  • Car loans

It’s also important not to take on any new debt or big loans right before a mortgage, so don’t go shopping for that new car until after you buy a house.

2: Unsteady Employment History

You’re not always able to control your employment history, and sometimes whether you have a stable job or not depends on the industry you work in, employers, market conditions, and more. But lenders want to know that you can make your payments, so it’s best if you can show a steady employment history. Changing jobs isn’t necessarily bad, but you will need to prove your income, and if the lender is worried about your job history, they may ask for more proof or a longer job or income history.

3: Negative Credit Reports

Credit reports are a metric that every lender uses to gauge the risk in providing you a loan. Lower scores mean more risk, while higher scores are generally considered safer for a lender. Your credit report shows all your past credit history, outstanding debts, whether you pay your monthly bills on time, and any negative things that have occurred like being sent to collections for failing to pay a debt. The more negative things on your credit report, the less likely you will be able to get a loan. Check your credit score and review the report in detail to make sure it’s all accurate. If something is wrong, you can dispute it and potentially get it removed to improve your score.

The biggest thing to remember is that lenders are looking at your risk, so the more you can show that you are a responsible borrower who will pay back the loan, the more likely you can get a mortgage for a new home. Talk to Integrity First Lending today to find out more about the home loan process and get all your questions answered.

Important Information to Have Before Applying for a Mortgage

The mortgage application process can seem difficult, but it doesn’t have to be. If you take time before your application to get some basic information together, and take a few important steps in advance, the process can be very easy. Here are the documents and information you should have before you apply.

Getting a mortgage loan takes time but being prepared with these items can speed it up.

Your Credit Score

Perhaps one of the most important things to know when you’re going into the mortgage loan application process is your credit score. Credit scores range from 300 to 850, but most lenders won’t be able to secure a loan if your score is below 580, although some lenders have programs available to people with credit scores as low as 500. These programs usually require a larger down payment, though.

What You Can Afford

While the lender will give you the official amount that you can get qualified for on a home loan, it’s a good idea to do a little research on your own to find out approximately what that will be. The easiest way to do this is to calculate it using your current income and apply the 28/36 rule. This is a general guideline that says your mortgage payment should not be more than 28% of your gross income (before taxes) and your total debt should not be more than 36% of your gross income.

To calculate these numbers:

  • Multiply your monthly income before taxes by 0.28 – this is 28% of your gross income
  • Multiply the same monthly income by 0.36 – this is 36% of your gross income

You can use an online calculator to determine what that house payment translates to for a total home price, but keep in mind these are just estimates. What you actually qualify for may be less than what you calculated. If you have a lot of other debt from car loans, student loans, or credit cards, you may not qualify for as big of a home loan.

Your Income and Employment

To qualify for a loan you need to show the lender that you have a steady income and will be able to make the payments and (hopefully) avoid defaulting on the loan. Be prepared to show at least your two prior paycheck stubs, although if you have a new job your lender may ask for some additional history from your previous employer as well.

Your Bank Account Information

Most lenders will ask for two to three months of bank statements for all the accounts you have, including checking, savings, and other online bank accounts like a high-yield savings account. If you have any large withdrawals or large deposits that aren’t related to your employment, be prepared to explain those.

Tax Returns

Lenders also need to see at least two years of IRS tax filings for your mortgage loan. If you are self-employed or have income that is not from a traditional source (a paycheck from an employer), the lender may ask for more than two years of tax returns.

Contact Integrity First Lending to get started on your mortgage journey and find out more about the process to buy your dream home.

Understanding the Home Buying Timeline

So you’re ready to buy a home. That’s exciting, but before you get ahead of yourself and start packing boxes, it’s a good idea to know what the average timeline is for someone to get into a new home. Part of the process includes time to get qualified for and close on the mortgage. Here’s an overview of that timeline so you can plan your next move.

Buying a home can be a lengthy process, so know what to expect before you start.

Prequalification & Home Shopping

The first step is to talk to a lender to get prequalified so you can start shopping for your home. This isn’t an in-depth review of your financial history, it’s just an overview where the lender will determine your viability to get a mortgage loan, and give you an estimate of what you can borrow. It’s not a guarantee that you can get that amount, so when you’re home shopping know that the actual amount you can get approved for may be different.

Timeline: Prequalification is a quick process that usually only takes a day or two. How long you shop for the perfect home is up to you.

Preapproval & Home Offer

Once you find a home, the next step is to go through a more in-depth review of your finances and creditworthiness for preapproval. You will find out the specific amount you can qualify for so you can put an offer down on the house. Many sellers won’t accept an offer unless you are already preapproved so they know it’s a serious and legitimate offer.

Timeline: Preapproval may take several days. Gather important documents like bank statements, paycheck stubs, IRS tax filings, and bank statements to speed it up.

Purchase Agreement

Once you finalize the price of the home through negotiations, you and the seller will sign a purchase agreement, which is a binding contract.

Timeline: Negotiations on home prices could take a few weeks of going back and forth.

Home Inspection & Appraisal

A final step is to schedule a home inspection (most lenders require this). If you’re not sure what to look for, there are checklists available to help you go through the home and identify red flags that could indicate a problem. Your lender will also schedule an appraisal to estimate the value of the home. You won’t be able to get a loan for more than the home’s appraised value.

Timeline: Home inspections and appraisals could take up to 5 or 6 weeks, depending on yours and the seller’s schedule, as well as the availability of appraisers.

Final Loan Approval & Closing

The final step is to take your signed purchase agreement to the lender and they will approve you for the loan. The lender will schedule a date to “close”, which is when you and the sellers get together and sign all the official documents to transfer the home ownership.

Timeline: This can take about 2 to 4 weeks after the appraisal and inspection are done. Most lenders plan about 30-45 days from the time the offer is finalized until closing.

If you’re ready to get started on this process, talk to Integrity First Lending about getting your prequalification to start shopping for your future home.