Mortgage Q&A with Birmingham’s Best Dressed Mortgage Dude
Please welcome Joshua Cornutt of SouthFirst Mortgage, here to answer some of our most frequently asked mortgage questions for you!
First off, what should we know about you? How long have you been in the biz, etc.?
First thing to know about me is I have a beautiful wife, Katie, and 2 absolutely perfect children (with exception to their attention spans and food choices), Lennon (5) and Caroline (2). We live in Birmingham, Homewood specifically. I was born here, and grew up here, so I feel like I should be pretty familiar with Birmingham. I have been in the business for 8 years this June. That is definitely long enough to see a tremendous amount of changes, and waves in the market.
When it comes to qualifying for a loan, what kind of paperwork do I need to get started?
The amount of paperwork that you will need will vary from case to case. However, there are a few staples you could have readily available when you are ready to get started with your buying process. The most recent 30 days’ worth of paystub is a guarantee. Most people throw these away each time they get paid, so if you think you are getting close to looking around, make sure to hold on to a few of these. Also, your 2 previous W-2’s for those who aren’t self-employed, and for those of you who are, then you will need slightly more (tax returns, 1099’s for independent contractors, etc.). And the last thing that is of obvious importance would be bank statements. Most of the time, you can plan on needing your most recent 2 months, every once in a while you can get away with just 1 month (just be prepared for 2 months to be safe).
What kind of loans are out there, and what are their pros and cons?
Well this is a question that you could easily burn up a whole page on the blog with. You have innumerable options available that you can choose from, Conventional, FHA, VA, USDA, Construction, Construction-Perm, and the list goes on, and on, and on. To keep people from falling face first onto the keyboard while reading this, I will stop the list there. The pros and cons portion of the question is the area that will almost certainly spark debate amongst us mortgage nerds. I will refrain from throwing out my opinion on the matter, but financially your best option is the Conventional loan with 20% down (unless you are a veteran who is eligible for a VA loan. If that is the case, go with VA). It puts you in a better position due to the fact that the cash injection of 20% down will preclude you from paying any mortgage insurance on that loan for as long as you keep it. That saves real dollars each month, and that is what matters the most to people, especially right now. The other loans are all great in their own light and circumstance, but again, for the sake of not lulling everyone to a midday nap while reading this, I will leave it at that.
How do I know what I can afford?
Another loaded question here, but I will attempt to give this one a go. I get asked the “how much can I qualify for?” question really often. That question scares me for the people asking it in most cases. Because what you can “qualify” for and what you can “afford” may be two different things entirely. Logically, when I speak with someone for the first time, I have no idea what they can “afford”, that is totally subjective and will vary from person to person. My suggestion is look at your current housing payment (current mortgage, rent, etc.) and decide if that works for you, or if you can increase that number. For mortgage approval purposes, we use a max ceiling percentage of your income each month to make sure you can “afford” the payment that is reflected by the price/property that you find. That percentage changes with each different type of loan, so it will be hard to pinpoint which one to use for yourself when trying to formulate a budget at home. That was basically a long-winded way to say, just call me, I will help you figure it out, the last thing I want to do is to put someone in a position where they cannot live comfortably.
When do I lock in my rate?
You really have 2 different options when it comes to locking in a rate. You can lock in a rate when you are starting to look at houses, or you can wait until you are under contract on a property. There are reasons why I would like to lock before I find something, and there are reasons why I like to wait. It is a matter of preference, and really dependent on how long you think it will take you to find a house, and get under contract. You lock rates for a specific amount of time before closing, so you want to make sure your timing is right. My personal stance on the matter if I were searching for a house, would be to not lock until I am under contract. But again, there really isn’t a right or wrong course of action with this one.
What kind of down payment and closing costs should I typically expect?
At the risk of sounding like a broken record, it will depend on which loan type you are going with. You can put down nothing, and I have also had people put down 80% before. There is no right or wrong answer to this one. It will all depend on your situation, and what you might qualify for.
What happens once I’m under contract?
Once you are under contract, the fun begins*. To make a long story short, we will gather all the documents we have requested from you, along with the contract, and we will get everything to the Underwriter for review. The Underwriter will review everything that we submit to them and let us know what else, if anything, they need to satisfy the approval. After that, we will send the closing package to the attorney to prepare the closing documents, and you will show up and sign a mountain of paper, and bam, you own a home. *denotes the condensed version to avoid the aforementioned sleep inducing keyboard face plant as 100% of people said they don’t like that at all.