Credit, Qualifying & Completing an Application

Where homeownership education takes flight!

First Time Home Buyer’s Complete Guide to

Credit, Qualifying and Completing the Loan Application

Thank you for attending

We will begin in a momentClass Scheduled to begin at 5:30pm

Presented by

Scott SchangSponsored by

Broadview Mortgage Corporation

1-866-667-6724


Credit, Qualifying and Application

The Purpose and Goals of this Class

• To Create and Empower Home Owners

• Educate you about your credit, the loan application and qualification process

• Empower you with the ability to make educated decisions in the home buying process

• Enable you to make sound financial decisions based on information, education and experience



Topics We Will Cover In This Class

• An Introduction to Your Credit Report

• The Loan Application Process

• The Loan Qualification Process

• Wrap Up and Take Aways



Ask Questions throughout presentation

• You may type questions in at any time during the presentation – Questions box on your screen

• Home buying specialists are standing by to answer your questions during the presentation

• This is an interactive learning environment – you will get the most value by having your specific questions answered

• The only dumb question is the one you don’t ask

Write number down now in case you get disconnected

1-866-667-6724



An Introduction to your Credit Report

• What you need to know about your Credit

• Installment Loans and Revolving Credit

• 3 Steps to Improving your credit scores

• Wrap up and Take Aways



What you need to know about your Credit

• Your Credit is a Current Snap Shot– Creditors report on different cycles

• Not knowing how to build good credit can result in bad credit

• How to get your truly FREE Credit Report– FTC Credit Report Site – www.ftc.gov/bcp/conline/edcams/freereports/index.html

– www.AnnualCreditReport.com

• Free credit reports from TV are not FREE• Consumer credit reports do not report the same as

mortgage inquiries



What you need to know about your Credit• Credit reports are not always right

– Creditors are much quicker to report negative items than they are to remove them

• How credit can affect your loan approval– Can trigger “risk based pricing” – increase cost– FHA does not penalize for credit scores

• 12 Month payment history– Most lenders are looking at past 12 months

• Credit Reports show past employers, past addresses, AKAs, social security number and birth date deviations



Installment Loans and Revolving Credit• What is an Installment Loan

– Fixed term– Fixed Payments– Auto, Education, Furniture, Cash Call

• What is a Revolving Credit Line– Credit Cards– High credit limit / Balance

• How they differ / How they are the same– On time payments the same– How Balances are treated are different– Number of months remaining



3 Steps to Improving your credit scores

• Step 1 – Know your Do’s– Do Order your free annual credit report

• Or have a lender run your credit– Do Educate yourself about your credit– Do maintain at least 3 revolving accounts– Do keep balances on revolving credit lines under

50%– Do Treat your revolving credit cards like an

AMEX– Do pay your “Reported” debts on-time– Do ONLY use “referred” credit repair services




• Step 2 – Know your Don’ts– Don’t be afraid to speak to your creditors– Don’t take out “quick fix” loans with extremely

high interest rates– Don’t max out your credit cards– Don’t apply for every credit card application you

receive– Don’t transfer credit card balances to one card– Don’t Make payments more than 30 days late– Don’t use credit repair services without a

personal referral from someone




• Step 3 – Take Action Now – Manage your existing credit lines

• Pay down balances on revolving lines• Increase high credit limits on revolving lines• Reduce installment to 10 months remaining

– Dispute derogatory items on Credit Report• Order free credit report to identify derogatory

reporting• Order online report for bureaus that are

showing derogatory accounts• Dispute all incorrect or inaccurate information



Wrap up and Take Aways

• There is no Mystery or Magic to credit reporting• It’s never too late to get on the right track and

improve your credit rating• Knowledge is Empowerment – Educate yourself

about good credit practices• 6 Month Plan – Starting from Scratch• Need it Now – Credit Repair Services

– Costs range from Hundreds to Thousands• Perfect credit not required for FHA loans



The Loan Application Process

• 2 years Housing History

• 2 years Employment History

• Assets and Liabilities – Credit History

• Legal Declarations and HMDA Reporting



The Loan Application Process2 years Housing History- Pg 1

– Rental history from Apartment / Mgmt Company• Verification of rents – verify timely payments

– Rental history from Private Party landlord• 12 months cancelled checks showing monthly

payments

– Living with Parents / Family• No documentation required – must be truthful• Cannot not have residence history on credit



The Loan Application Process2 years Employment History- Pg 1

– If less than 2 years employment, may ask for schooling in similar subjects as line of work

– Ok to change jobs if line of work is similar– Ok to change line of work if history is at least 2

years – Ok to go from Self Employed to employed (W2)

with less than 2 years “employed” if in same line of work

– Self employed must show minimum of 2 years• Tax returns, business license

– Income documentation is 2 years of tax returns or W2’s and most current 30 days pay stubs



The Loan Application ProcessIncome, Assets and Liabilities / Credit History- Pg 2• Gross monthly income• Present and Proposed housing expenses• Sourced and seasoned assets

– Must show in account for 60 days• Assets must cover closing costs and reserves

– Reserves not required for FHA– Reserves = compensating factor for approval– Must be able to use funds to be reserves

• Liabilities imported from Credit Report



The Loan Application ProcessLegal Declarations / HMDA Reporting- Pg 3• Declarations

– Discloses law suits– Bankruptcy history– Co-ownership / Co-maker on note– Intentions of occupancy– Past occupancy

• HMDA Reporting – Monitors discrimination– Ethnicity & Race– Sex– Acknowledgment and Authorization

Let’s complete an application



The Loan Qualifying Process

• Automated Underwriting Engines– Fannie Mae is standard– FHA DU

• Risk Assessment Underwriting Model– Income of household– Assets (reserves)– Credit profile– Equity (loan to value)– Loan to Value



The Loan Qualifying Process• Compensating Factors

– Debt to income– Months of reserves– Credit Scores– Loan to Value

• Manual Underwriting – FHA Only– Actual FHA approved underwriter reviews all

documents – much more restrictive

• Debt to Income Ratios are most restrictive– Maximum purchase price will be determined by

maximum payment / DTI




• Getting approved for your loan is the first step

• You cannot get approved without completing the loan application and getting an underwriting approval

• Begin gathering your documents and putting together all information for loan approval

• If credit challenges prevent approval now, at least you know and you can work on it




• We are a direct Lender that specializes in CalSTRS, CalPERS, CalHFA, USDA, FHA, VA and down payment assistance programs

• We can refer you a qualified Real Estate Agent that shares values and passion for education

• We are more than happy to be your “second opinion” if you are already working with someone

• We are committed to educating and empowering homeowners - Join us for future classes




• You will receive a “Thank you” email with links to the information we’ve talked about here today– Copy of power point presentation– Secure on-line loan application– Links to tools and resources we talk about in all of

our classes– Dream Home Finder request– A schedule of all upcoming classes

• Update on Tax Credit– $10,000 tax credit for CA / $8,000 Fed

• Mortgage protection program – – unemployment insurance



Upcoming Home Buyer Classes

• Five 100% Financing Loans You Should Know About

• A Complete Guide to Buying Foreclosures and Short Sales

• A Complete Guide to Closing Costs and the Good Faith Estimate

• A Complete Guide to the CalPERS Home Loan Program – No down option

• A First Time Home Buyer’s Complete Guide to Hiring a Real Estate Agent and Finding the Best Deals

• A Complete Guide to the CalSTRS 80/17

Check back often for upcoming classes


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For more information

1-866-667-6724Presented by

Scott SchangSponsored by

Broadview Mortgage Corporation

Credit, Qualifying & Completing an Application

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