​​What Happens in Underwriting?

Underwriting is a crucial step in your home-buying process. It can be the deciding factor of whether or not you get your loan near the end of the mortgage process – so it’s important to know what goes on behind the scenes, and how to help underwriting go as smoothly as possible. Let’s dive into the specifics of underwriting so you know what it is, how it’s done, and how to be prepared for a fast, stress-free approval on your way to your dream home.

First things first: What is underwriting?

Underwriting is the process that mortgage lenders go through to assess the risk of lending you money for a loan. When you take out a mortgage, there are several factors that go into approval. The process is meant to ensure that the loan in question – if approved – will be paid back over time. When a loan is denied, it is usually because a detailed look into an applicant’s credit history, income, and financial assets appeared too risky to afford the loan payback.

How does underwriting determine risk?

There are three C’s that are evaluated in the underwriting process, to determine the risk of mortgage loan.

• Credit – Credit history paints a picture of how previous debts have been repaid. Underwriting looks at how much debt has been accumulated, how long it takes to pay back, and the consistency of past payments.
• Capacity – DTI (debt to income) ratio refers to how much money is spent compared to how much is brought in. It’s a strong indicator of your ability to manage monthly mortgage payments, based on spending and income.
• Collateral – This is where appraisals are done to find out how much the home you want to buy is worth in case you default on the loan.

How to prepare for the underwriting process

The more prepared you are for the underwriting stage of home buying, the quicker you can pass into the homeowner’s stage. You will need the following documents ready to go, so it’s smart to have them organized before applying for a loan.

• Government issued I.D.
• Recent pay stubs
• Bank account information (checking, savings, CDs, retirement accounts)
• W-2s from about two years
• Tax returns
• Any additional income information like bonuses, child support, pensions, etc.

Having all necessary documents ready ahead of time will speed up the underwriting process and help avoid delaying your loan approval. It’s also a good idea to check your own credit information ahead of time to see any potential red flags. Try and get your DTI ratio (36% or lower is ideal) down by paying down any remaining debt. Finally, remember that a higher down payment means less risk for your lender – which makes you an even more appealing candidate for the loan.

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At VRM Lending, we strive to make the loan process as smooth and simple as possible. We’re here to help guide you through each step of the way, to help you finance your dream home. Contact us today to start your home-buying journey.

The Real Home-Buying Process

Embarking on the process of buying a home is a super exciting one (so, congratulations!). However, it’s also a long process, and it usually involves a lot of red tape, hoop jumping, and paperwork. After all, you’re purchasing — and most likely financing — a pretty massive investment, and it’s a really big decision. The key to doing it the right way, however, is to make sure you understand what exactly it is you’re doing. 

While you’ll want the right team at your side to help you along the way, making sure you yourself are aware of all of the steps is super helpful. Here’s what you need to know about the *real* home buying process, steps and all.

Step 1: The process before the process.

The home buying process really starts long before the actual home buying process — and understanding this is key to making sure that you can make the right decision with the right purchasing power. First up, get your finances into order — check your credit score (optimize it if you need), work to save up for an estimated down payment, ensure that you don’t have any big purchases coming up soon, and start gathering details about what you want in a home, from the location it’s in to the amount you want to pay for it.

Step 2: Get prequalified for a loan and define a budget.

We recommend getting prequalified for your loan before you even start looking for a home — and we most definitely recommend defining a serious budget for your home buying journey. By getting prequalified and setting parameters, you can make a great financial decision that actually fits your life. Plus, getting prequalified for a loan can help to save you steps later on. It’s also a great time to shop around, since different lenders may offer you different interest rates.

Step 3: Enlist a realtor and get looking.

Now comes the fun part — yay! Once you’ve gotten all your ducks in a row, you can find a realtor (or do it on your own) and find your dream home! Our best advice is here is simple — be patient. Finding a home can be really frustrating at times, and most homebuyers know the feeling of finding a dream home and then realizing someone else has already put an offer in. It’ll happen!

Step 4: Make an offer (plus, dot your I’s and cross your T’s).

If you’ve found the home you could see yourself living in, making an offer is the next step. Your job? Make a smart offer based on your budget and the parameters you’ve already set in place, and contact your realtor about the need for any contingencies in the offer. If your offer is accepted, congratulations! But, the work’s not over. Dot your I’s and cross your T’s by ensuring that you get a home inspection, an appraisal, and a detailed walkthrough pre-closing.

Step 5: Close!

You’re in the final countdown! Closing is the last thing you’ll have to do before you can get the keys in hand for your new home, and it’s definitely a process. This will typically involve several people and a lot of paperwork (you have some disclosures to read), as well as closing costs to be paid. But, hey! You did it! You’re in, and that’s a huge deal.

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At VRM Lending, we’re proud to work alongside people like you to find your dream properties. With our dedicated team and tailored list of loan products, we have you covered. Find out more here.

To Buy or to Rent? What You Need to Know

When you’re looking into moving homes, the age-old question is sure to come to light: should I buy or should I rent? The buy vs. rent question is one that we get a ton from both existing and prospective clients, and for good reason. After all, buying a home is a big decision… and, often, so is renting. There are pros and cons to both buying a home and renting one, and it’s all about choosing the right choice for you, your family, and your financial situation.

Wondering if you should buy or rent?

Here’s what you need to know to make the best decision for your next home.

First up: what makes the most sense with your finances?

The first factor to consider when deciding whether to buy or rent all comes down to your financial situation. While renting may be more expensive month to month, it doesn’t require things like down payments or ongoing maintenance costs. And, while owning may be less expensive month to month (and in the long run), it does require a down payment as well as a myriad of other, ongoing expenses.

When you’re buying a home, a down payment is essential in lowering your mortgage payments and getting a great interest rate — and we’d always recommend getting as close as possible to 15-20% down payment. There are also financial health checklists you’ll need to go through in order to get a loan, which includes having a manageable debt-to-income ratio and a good credit score, among other things. When you take your down payment and current finances and weigh it against other necessary expenses of being a homeowner (think: homeowners insurance, maintenance costs, etc.) you can make a decision that really does make sense. It’s important to consider every piece of the puzzle when choosing whether to rent or buy — since, while a mortgage payment in itself may be cheaper than rent, ongoing home ownership costs will often drive that number up. 

Second, how long do you want to stay in the home?

Another important factor to consider when choosing whether to rent or buy a home is how long you want to stay in the home. If you purchase a home, it’s yours. You can stay in it as long as you want (and you’re also locked into your mortgage). However, when you rent a home, you’re at the mercy of the property owner — and you’re only guaranteed to stay for the length of your lease. If you’re wanting to plant down roots in a home that can be yours for a long time, buying a home is always going to be your best choice. 

Third, do you want equity (and the responsibility that comes with it)?

The main difference between renting and buying is a lack of equity vs. having equity. When you buy a home, you’ll eventually pay that home off and have equity in it. You’ll be able to sell the home if you’d like, you’ll be able to rent it out, or you’ll be able to live in it as long as you’d like. However, everything connected to the home (from yard upkeep all the way to plumbing and foundation) is your responsibility. With renting, you’re giving a property owner money each month, but with no equity in the home. However, when renting, you’re not the one who has to pay for property upkeep and maintenance. It’s a tradeoff — and it’s worth putting in some real thought as to which trade you want to make.

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The choice to buy or rent a home is only one that you can make, and making the right choice is essential in being happy with your housing situation. In the meantime, our team of lenders and professionals at VRM Lending are here to answer your mortgage questions — and we’d love to help you on your home buying journey. 

Our Favorite Resources for Keeping a Pulse on Realtor Trends

If one thing is for sure in the real estate industry – it’s that the market and trends are constantly changing.

It can be difficult to stay up to date on the fluctuating home values, mortgage rates, buyer demand, seller behaviors, and the economy. The best real estate agents are the ones who prioritize learning and invest time and energy into researching the trends of the industry.

We know how important your time and energy are, so we put together these few resources to help you efficiently stay in the know of what’s happening in the real estate market. The more you know, the better so you can serve your clients through an ever-changing climate and grow your real estate business.

1. Find real estate groups

Building relationships with other real estate professionals in your area is a great way to stay on top of trends and have a bit of fun while you’re at it. You can find in-person groups of all types, but there are great options online, as well. Joining and engaging in Facebook groups for realtors is a simple (and free) way to connect with and learn from your peers and professional contacts.

Search for lunch and learn events for realtors in your area for a fun and informative gathering. You can network and learn from other realtors about the ins and outs of the market.

If you’re looking for a larger platform, check out The National Association of Realtors (NAR). You can find monthly updates of market research by economists of national housing and commercial stats and trends.

2. Listen to real estate podcasts

Podcasts are amazing resources for agents with busy schedules. Listen while you drive, get ready in the morning, exercise, or whenever. We love a tool for learning on the go for maximum efficiency. Here’s a few great real estate podcasts to get you started:

•  The Best Ever Real Estate Show with Joe Fairless
•  Real Estate News for Investors – Hosted by Kathy Fettke
•  Real Estate Coaching Radio – Hosted by Tim and Julie Harris

3. Subscribe to real estate email newsletters

There are plenty of great real estate market newsletters to get your hands on. Having resources delivered right to your email inbox is a great way to learn about changing trends in your area. If you haven’t already, sign up here to receive market tips and insights from VRM Real Estate Alliance.

We’re here to help you grow your real estate business with tools and tips of the industry, and to help you better serve your community and clients.

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VRM Lending is an equal housing lender. NMLS: #1941734