A Mortgage Broker should be the first person you should contact when thinking about buying a home. Skagit Valley Mortgage has appointments available during evenings and weekends. Your loan application can even be taken over the phone at night. When you have a face-to-face interview with the loan officer, come completely armed with all the necessary information they will need to assess your situation. Bring the following with you:

• Social Security numbers & photocopies of your card.

• Residence address- include landlord and/or mortgage company names, addresses, account numbers and telephone numbers for the last two years.

• Names and addresses for each employer for the last two years.

• Gross monthly earnings and a year to date pay stub.

• Names, addresses, account numbers and all balances of all checking and savings accounts.

• Copies of the last two months of bank statements.

• Names and account numbers, balances and monthly payments on all open loans.

• Certificate of eligibility or DD214’s (VA only)

• If Self employed, bring business license, YTD Profit & Loss and the past two years tax returns for the business.

• Money for a credit report. (Usually around 20$.)

• W-2’s for the past two years, and past 2 years tax returns.

• Copies of divorce papers and parenting plan if applicable.

• Copies of discharge and full bankruptcy papers, if applicable.

• Copies of your driver’s license.

There are many types of loans and programs to choose from. Skagit Valley Mortgage is FHA, and VA approved, so unlike other mortgage brokers, they can help you with specific programs as well as all your conventional loan needs. They are experienced in less than perfect credit situations, and they have zero down purchase programs. If you don’t fit into one of the "special categories" of loans: VA, FHA, and First Time Homebuyer you are going to get a "conventional loan".

During your appointment, your loan officer will take into account all the facts and figures, and your credit rating, and generally recommend 2-3 types of programs that you might choose from. The purchase price that you will be able to afford will depend on 3 factors:

1. Your income and how much other debt you have. This will determine how large a PITI (principle, interest. tax and insurance) payment you can afford.

2. How much you have for down payment and closing costs, or how much you will be receiving in gift funds.

3. Your credit history.

There are certain terms which will be used during the interview that you will need to become familiar with. They are:

1. Loan-to-value (or LTV): This is the loan amount as a percentage of the purchase price or appraised value (whichever is less). If you are buying a $100,000 home with $10,000 down payment you have a 90% LTV. Loans over 80% LTV require either PMI (Private Mortgage Insurance) or a combination of a 1st and 2nd mortgage which avoids the PMI. For "expensive" homes two other rules apply. PMI stops (in general) at $400,000 loan amount and as loan amounts get progressively larger either a lower LTV is necessary or you are going to get restricted to certain loan programs. These are usually going to be adjustable rate loans or fixed rate loans at a higher than market rate.

2. Housing ratio:
   this is your total monthly housing expense (principle, interest, tax, insurance, and PMI and homeowners dues, if applicable) divided by your gross monthly income. Note, "gross" not net. If you have a "W2" job your income is easy. If you are self employed please note you gross income is what you bring from your Schedule C onto line 12 of your 1040. Also, a 2-year history of consistent self-employment income is necessary.

3. Debt ratio:
   this is your total monthly obligations (PITI above) plus your monthly payments of your installment and revolving debt. Some details here: this would include child support, alimony or separate maintenance. Any debt with fewer than 6 months to go does not count. A debt such as a "buy furniture now make no payments until more than a year from now" does not count as long as there are 12 months to go without payments. The same goes for student loans. We often see young couples not being able to afford a home because they have bought a couple of nice cars. Try not to have any or very minimum car payments. If you spend most of your monthly income on car payments, there is little room for a mortgage payment.

If you have excellent credit you can buy a home with 0% down and with housing and debt ratios as high an 38% for housing ratio and 45% for debt ratio. As your credit score declines your maximum LTV will decline and your ratios will have to be lower. If your credit is really less than perfect you should plan on having to put 20% down, or have your loan officer structure a plan to get you into a home. With the seller’s help and/or a “piggy back” second, many can still buy a home. You can either wait and clean up your credit, or you can pay a higher interest rate for the next 3-5 years. If you have good credit you may need a 10% down payment and ratios more like 35% housing and 40% debt ratio. Please understand that none of this is etched in stone. Compensating factors, such as a long time on the job or significant other liquid assets will enable higher ratios at a given LTV. You really need to talk with a mortgage broker to sort this out. The best advice we can give any potential homebuyer is to keep absolutely perfect credit. It is the key to opportunity. Payments made thirty days late on any card or loan is detrimental to your credit score. Also, if you make application for a lot of loans and credit cards, each credit “inquiry” reduces you credit score.

Your income and credit will determine the size loan you can qualify for. You now need the cash to make it happen. You need cash for 3 things:

1. The actual "down payment"

2. Closing costs:
   This is where a lot of people get misled. In addition to the usual costs, you need to cover your one time or "non-recurring" closing costs, your recurring closing costs: prepaid interest, insurance, impounds if there is PMI and potential pro-rated property tax. In some cases, the seller can pay all of your closing costs if the seller agrees.

3. Reserves:
   Your lender does not want to see a loan application the shows that when you close the deal you will have $5.99 left in the bank. They want to see at least 1 month’ s PITI in reserve. Don't try to minimize this. Make sure that you get together all of the cash necessary to close.