Tips for Success: Your Mortgage Application

For months, maybe even years, you’ve dreamed of owning your own home. As you move forward towards that direction your first step should be to determine how much of a home you can comfortably afford.  Even if you’ve taken steps to ensure you have a respectable credit score and saved for your initial investment, it’s completely normal to feel anxious about your mortgage application being approved. Use the following as a guide to ensure a smooth loan approval.

Calculate Your Mortgage Budget

Before you start shopping and fall in love with a house you can’t afford, you need to do some math. You know your financial situation and your spending habits better than anyone.  What monthly mortgage can you reasonably afford given your current income and debt obligations? After you’ve done your homework, consult with a reputable loan officer and get their opinion on what a lender is likely to loan you.  It will generally take about 15-20 minutes over the phone to find out.  Having a good understanding of your finances will ensure your success as you shop for your home and apply for your mortgage.  As a general rule, your total monthly house payment (PITI and HOA dues if any) should be between 30% – 33% of your gross monthly income.  Your house payment plus all of your other debts should not exceed 36% – 42% of your gross monthly income.

Ascertain Your Available Funds for Down Payment and Closing Costs

As you consider homes to purchase, determine if the potential house payment will be within your budget and check to make sure you have cash on-hand that is necessary for the down payment and closing costs. The larger your down payment, the lower your monthly house payment will be.  Most loan programs will require a minimum down payment of 5 percent of the sales price of the home.  In addition, you’ll have to plan to pay closing costs and “pre-paid expenses” which usually run between 3% – 4% of the sales price.  (There are loan programs available that have a minimum down payment of 3% if you can qualify.)

Avoid These Actions

Lenders examine every aspect of your financial history. From your credit to your income, no stone is left unturned. As you prepare to submit your mortgage application, talk to your loan officer before you do any of the following:

  • Buy or lease a new car
  • Change Jobs
  • Get Married
  • Transfer large quantities of money between bank accounts
  • Close credit accounts
  • Open new credit cards (Don’t let anyone pull your credit – it can make the difference between qualifying and not.)
  • Make any unusual deposits in your bank accounts

Basically, any unusual financial activity could hinder your chances for mortgage approval.

Get Your Documentation Together

There are some documents your lender will need to collect from you to submit your mortgage application.

  • Complete copies of bank statements for the most recent 2 months from checking, savings, investment, and retirement accounts.
  • Complete Personal Tax Returns including all schedules and W-2s for the most recent 2 year period.
  • Paystubs for each borrower for each employer the most recent 30 day pay period.
  • Driver’s licenses for each borrower.
  • Complete tax returns, W-2s, and 1099s for most recent 2 years

Depending on your particular circumstances the necessary documentation you must provide will vary. Your loan officer will give you a customized list of everything required.

Get Expert Advice

After you’ve done your homework, consult with a reputable loan officer and let her help you put all the pieces together. It will generally take about 20-30 minutes over the phone to give you a good idea of what you can expect to be approved for.  (Face-to-face meetings are always a good idea when possible.) She will probably want to check your credit to make sure there aren’t any unforeseen surprises.  She’ll review different loan programs which might be a good fit for you and explain the pros and cons of each.  She will give you estimates for different loan scenarios so you can see what your monthly payment will be and how much of an initial investment each scenario will require. When you feel comfortable with the loan officer it helps to provide her with the supporting documentation listed above and ask to be formally “pre-qualified”.  She will review everything for any potential issues and advise you how to correct them. She will be able to give you a rock solid Pre-Qualification letter so that a seller will consider your offer when you find a home.  (If you’re in need of a good Realtor, she’ll be able to refer you to a tried and true professional.)

For over three decades, Dorothy Erminger has been helping Texans buy homes. When you’re ready to get in the game give her a call.  She will give you professional, reliable guidance so you can set yourself up for a smooth loan approval. Contact Dorothy today.

9 Tips for Improving your Credit Score

Congratulations on beginning the home buying process. You’ve started in the right place by researching how to best prepare yourself for submitting a mortgage application. A major part of that application is the home buyer’s credit score which examines many years of your financial history.

About Credit Scores

Known as FICO scores, credit scores were developed in the late 1990s to serve as an objective method for assessing an individual’s credit management habits. As a portion of the mortgage application process, your credit score allows lenders to determine which type of loan you are eligible for and the pricing tier you qualify for when searching for a new home. Credit scores range from 300 to a high of 850, with most lenders looking for a median score of at least 640.

There are 40 factor codes divided into five main categories that are used to calculate a credit score:

  1. Past Payment Performance (35%) – This indicator shows how often you pay your bills on time. If you let bills and debts slide, thus incurring late fees, this will negatively affect your credit score.
  2. Credit Utilization (30%) – This factor examines how you use credit. In regards to applying for a mortgage, lenders like to see 3-5 credit cards in use for a period of no less than two years to know that you understand credit and utilize it properly.
  3. Credit History (15%) – A look at of the financial accounts in your name and the length of time they have been open.
  4. Type of Credit in Use (10%) – Accounts such as mortgages, auto loans, revolving or installment accounts show the type of credit you’ve used.
  5. Inquiries (10%) – This refers to any formal inquiries made about your credit. Any time a company makes an inquiry about credit score, it impacts said score. Too many inquiries can be the difference between getting a mortgage and not. If you’re planning to buy a home you need to be very judicious about who you give your Social Security Number to.

Improve Credit Score Before Applying for a Mortgage

It might seem like your credit score is chiseled in stone but that’s not true.  A credit report (and a credit score) is a snapshot in time. If you are planning on buying a home soon and are concerned with your credit scores, there are steps you can take to ensure they will be better before submitting a mortgage application.

  1. Speak with a financial professional. Before, you close any accounts or make any changes to your credit profile, speak with a knowledgeable loan officer about the best course of action to take so you can be strategic about your overall mortgage plan. A professional, experienced loan officer will be your guide throughout the home buying process and is there to help you successfully submit your mortgage application.
  2. Pay all of your bills on time. Always. Past Payment Performance accounts for 35 percent of your credit score, so it’s imperative that all bills are paid in a timely manner. A great method for making sure your bills are paid on time is to set up reminders on your cell phone’s calendar. Also, many companies allow users to set up recurring payments to automatically pay bills to eliminate the monthly hassle.
  3. Under-use existing credit cards. While it is important to have credit cards in use, you want to under use them. Try to keep a balance that is no more than 35 percent of your credit limit. Maxed out credit cards reflect poorly on your score.
  4. Don’t pay off your credit cards unless you normally pay them off at the end of every month.  A zero balance has a negative impact on your credit score – leave a small balance.
  5. Review your credit report for any errors. You should not be penalized for errors made by creditors and you are entitled to have these mistakes removed from your credit report. Unfortunately, any mistakes might negatively impact your overall score and thus change the outcome of your mortgage application. Your loan officer will tell you exactly what you need to do to clean up any incorrect information from your report.  It’s not a good idea to formally dispute any charges until you’ve spoken with your loan officer.
  6. Do not apply for unnecessary credit. You want to limit any applications you might make for additional credit, whether you are considering buying a new car or you want to acquire another credit card. Your top priority is your mortgage application. Extra credit lines can absolutely be considered once everything has been settled with your mortgage.
  7. Increase credit limits. Speak with the banks and companies that hold your credit cards, and see if they will extend your credit limits. The increased credit limits reflect well on you but the unnecessary spending of that credit works against you. A word to the wise: be careful not to increase your spending habits if you get additional credit.
  8. Begin the process sooner rather than later. If you think you’ll be buying a home within the next year or so, the time is now to take steps to improve your credit score. Work with a loan officer, organize your bills, and follow the other tips mentioned here so when the time comes to apply for a mortgage, there are no unwanted surprises awaiting you. Believe it or not, you’re probably in much better shape than you realize.
  9. You may get a free credit report once a year from  This will not be reflected as an inquiry on your report.  You will be asked if you would like to pay for an upgrade but that’s not necessary.  You will need to follow the prompts to request your report from each credit reporting repository – Equifax, TransUnion, and Experian.  You should request your free report from all three bureaus – they don’t always report the same information.

Buying a home is an exciting yet nuanced process, with many moving parts. To make sure you move into the home of your dreams, you want to work with a trusted and tested expert who will walk you through the process and answer each and every one of your questions. With 24 years of experience as a loan officer and 10 years of experience as a realtor, Dorothy Erminger has the expertise every homebuyer needs to successfully submit a mortgage application. Contact Dorothy today to start taking steps to improve your credit score.

How Donald Trump’s Presidency Will Affect Interest Rates

Throughout his campaign and following his win in the November election, President-elect Donald Trump has had a massive impact on our nation and around the world. Once he is sworn is as Commander-in-chief, President-elect Trump will continue to influence many aspects of everyday life, including buying and selling real estate. As we look ahead to what the next four years of a Trump presidency holds, our nation is pondering what to expect from his administration.

A few weeks after the November election, the Los Angeles Times reported that, “Long-term U.S. mortgage rates continued to surge this week in the aftermath of the election of Donald Trump as president.” Rates increased by approximately .25% after the election.

Put in proper perspective, it’s important to understand that the Fed has kept rates artificially low for many years in an effort to keep our fragile economy from imploding. As we finally move forward into a more healthy economy it’s only fair to expect these controls to give way to a normal market and a more sound fiscal policy. (You can’t kick the can down the road forever!) Even though mortgage rates have increased, they are still very close to historical lows and they are not expected to increase much more in the near future.

Admittedly, the prospect of higher interest rates isn’t what one wants to hear if they are considering buying a new home. Higher interest rates have a negative impact on the amount a home a person can qualify for but at the same time, an increase in interest rates could potentially drive down the overall price of homes. Higher interest rates can make refinancing less feasible for homeowners who are looking to refinance their homes because the savings won’t be as great and as home values decline, so does their equity.

The silver lining is that the prospects of a Trump presidency is having a significant >positive effect on our economy. More jobs and higher paying jobs that are expected from a Trump presidency will almost certainly bode well for would-be homebuyers and home sellers.

Positive and Negative Outlooks are Both Impacting Interest Rates

In anticipation of Trump’s ascension to the most powerful job in the world, investors have been putting as much capital as possible into the US stock market in hopes that Trump’s presidency will yield the economic boom that analysts are predicting. In order to put their put their funds into stocks, a lot of investors have withdrawn money from the US bond market.

As the strength of Treasury bonds decreases, the interest rates that accompany mortgages rise in comparison. As the stock market rises, the mortgage bond market dips which causes mortgage rates to rise. This is normal. There have always been and will always be ups and downs in both markets.

Either way, the result is the same. Whether investors are excited or downtrodden about a Trump victory, it’s a given that the housing market – as well as other segments of our economy – will feel some repercussions while we adjust to the policies of the new Administration.

What Does This Mean For You?

The ability for an average person to buy a home is slightly more difficult than it was a few months ago. However, a new home is not out of reach for most prospective home buyers. It might take a little more time and patience but in most cases your efforts will be rewarded. Home buyers might need to expand the scope of their search parameters. Keep in mind that your first home is not likely to be your forever home. It may not be exactly where you want it to be and it may not the home of your dreams – it’s a stepping stone.

The key is to get into the home as soon as you can. Chances are that you’ll be able to earn some equity and sell for a profit in a few years. The money you earn from appreciation on your first home is what you will use to buy your second home and you will get closer to meeting your ultimate housing goals then.

In today’s environment, it’s more important than ever to work with a knowledgeable, dedicated loan officer to help you navigate through the home buying process. If you live anywhere in Texas, Dorothy Erminger is a great resource for potential homebuyers. Dorothy will guide you through the loan process and you can rest assured that your home buying experience will be straightforward, pleasant and easy-to-follow.

Dorothy and her colleagues work tirelessly to ensure their clients lock down the best loan program for their unique needs at very competitive interest rates while minimizing unnecessary costs. She is known by her clients as well as industry professionals as a stickler for detail – which translates to smooth closings – on time, every time! Owning a home is part of the American Dream, and it’s Dorothy’s goal to help you turn your dream into a reality.

Credit Inquiries and Credit Score

Accounts: All 4 Types of Inquiries

Inquiry—is the common term that is used to describe someone who is checking into and/or viewing your credit. Basically they’re inquiring about someone’s track record and payment history to creditors.
Many experts in the industry rate the inquiries down to a two part description. The two part description is usually labeled “hard pull” or “soft pull” inquiries. Most people who refer to these two terms lack the over all understanding that there are actually 4 types of inquiries. The four different types of inquiries are used for different purposes and can either affect your score or not affect your score.

The four different types of credit inquiries are labeled as: account review inquiries, promotional inquiries, standard inquiries, and self pull inquiries. It’s easier to just use the first part of the term rather than having to verbally state all the words attached to inquiry with every description.

An “Account review inquiry” is when a potential creditor requests from the bureaus, permission, to review your account for only negative information within a certain time frame. This potential creditor does not receive good information about your credit and does not receive your credit scores (only information on recent delinquencies). An example would be if your ALLSTATE INSURANCE desires to request an account review on your negative payment history over the last 12 months. This information could be very valuable in determining your financial strength, financial reliability and responsibility, and in determining if there may be a common sense reason that you are now a higher insurance risk and are more prone to be in an accident and cost ALLSTATE INSURANCE more money.

This type of inquiry would be labeled a “soft pull”, because it is not factored into the credit risk scoring formula to remove points off your credit score. One of the major flaws with the account review inquiry is that it does not take into detail or exception if an individual has earned a lot more money, opened a lot of new accounts, mistaken or misapplied payments or, had lates that another creditor should’ve paid off to another creditor in the transfer and pay off of prior loans. This unfortunate example could lead to increased insurance rates to a prospering and responsible individual which is completely unfair.

“Promotional inquiries” are requested with the sole purpose of just receiving a credit score only. A promotional inquiry will not include information on recent lates, collections, public records, information on types of accounts, and who your creditors may be. Once again the only information that is provided to your requested potential creditor is simply a credit score. Promotional inquiries are usually distributed for the sole purpose of deciphering statistically who would be the best candidates to send credit promotions. The most common type of credit promotion is mailing offers with applications for credit cards. The credit card companies save time and money by narrowing their targeted audience to people who they feel would qualify for their credit offer. This saves them time, money, and makes the credit card companies way more money. Promotional Inquiries do not hurt your credit score and just like Account Review Inquiries, they are not even seen by your future potential creditors when they view your credit history.

“Standard Inquiries” are requested by your creditors when you are applying for a loan, money, line of credit, or extension of credit. You may be shopping for a car, boat, applying for a mortgage, applying to rent an apartment, leasing a tractor or construction equipment, buying/leasing furniture, or
computer equipment etc. These loans are very important to you because you want the best deal
knowing you can save thousands of dollars on interest by purchasing from a lender that gives you the best interest rate. The problem is the more you shop around the more potential risk you have of continually lowering your credit score. The scoring model has attempted to make changes so they don’t continually brutalize the savvy and thrifty shopper that is trying to get the best deal.

Copyright © 2016 Credit CRB, All rights reserved.

This is not a commitment to lend or extend credit. Restrictions may apply. Information and/or data is subject to change without notice. All loans are subject to credit approval.

Home Buyer Education Certificate May Help You Qualify for a Loan Program that Offers Lower Rates, Lower Mortgage Insurance

If you are a first time homebuyer and are looking for a homebuyer education course to help you achieve your homeownership goals and possibly help you qualify for a special first time homebuyer program that offers a lower interest rate and/or lower mortgage insurance rate- try this free, interactive course at

For more information about qualification, please call Todd Kurio, Residential Mortgage Loan Originator, at 512 459 2405. NMLS #214411/216616, Capstar Lending, Equal Housing Lender.

This is not a commitment to lend or extend credit. Restrictions may apply. Information and/or data is subject to change without notice. All loans are subject to credit approval.

Tips For Protesting Property Taxes

It is that time of year again and I’ve been fielding questions about property taxes. There has definitely been an increase in values in Texas cities, but that doesn’t mean the value the county appraisal district has for your home is correct. Below is the information I posted last year, which outlines the steps to protest the value. The most important thing to take is data and documentation. Good luck, Adam

Are you one of everybody in Travis County who received a notice this week that your home’s appraised value is higher than last year? I usually protest appraised value on at least one of my properties every year, and I’m generally successful. The steps included in how to protest property taxes are:

    1. As quickly as you can, send in the form on the back of the notice to protest the property taxes. There is a deadline, you don’t want to miss your opportunity. If you request a protest, you don’t have to follow through with it if for some reason you change your mind.
    2. If you purchased your home in 2014 and it appraised higher than the price you paid, make a note of this. With a copy of the settlement statement, they’ll usually simply lower it to the price you paid. You are not obligated to provide them with any information, so if the appraised value is lower than the sales price it is a good time to stay quiet.
    3. When sending in the protest form, make sure to request the data the county appraisal district used to assess your home. They are required to provide it if you ask for it.
    4. After a long time, the county will reply with a notice of a date for an informal protest and a formal protest. They will also include a packet with their details about your home as well as a spreadsheet of the comparison homes they used to arrive at their data.
    5. Make sure the data they have for your home is accurate. I’ve had properties where the square footage in the county records was larger than the actual square footage. Simply showing the square footage calculations from the appraisal lowered the appraised value not only for that year, but going forward. Other inaccuracies might include the condition of the property or structures that are no longer there. This also can go the other way, which you may not want to bring the assessor’s attention with a protest.
    6. Make sure the properties they are using for comparison are actually similar to your property. The comps should be of the same type and within the same neighborhood. I’ve had single family houses incorrectly compared to commercial property, much larger properties, duplexes and properties in other non-comparable neighborhoods.
    7. Find properties that are more comparable and support a lower value. The best data is closed MLS listings from your immediate neighborhood. Most real estate agents are more than happy to help with locating these. Of course, these listings must support a lower value. It is very possible that the values in your neighborhood have gone up and the tax assessor is correct.
    8. Make notes of all items with your property that may negatively affect your home’s value compared to any higher valued properties, especially items that won’t show up on their spreadsheet. For example, do the comparable properties have similar-sized lots but your lot has a portion that is not buildable due to a flood plain, terrain or irregular shape? Is your lot on a busy road, adjacent to commercial buildings? Does it lack the view that other nearby properties might have? Have the comparable properties been updated and remodeled or expanded while your house has not?
    9. By state law, the value the appraisal district is considering is as of January 1 of this year, so what is important is the condition of the property at that time. Comparable properties from the previous year can be used.
    10. Attend the informal hearing with data, and reschedule it if the time they assigned you doesn’t work. This hearing is a meeting with a county appraiser in his or her cubicle. Usually there will be an unhappy property owner with no data ranting at the appraiser in the adjacent cubicle. That approach will not be successful, and the appraiser will be happy to have someone in front of them not doing that. Show the appraiser everything to support your claims. He or she will want copies of anything that they use to update your file. Photographs are helpful, as are documentation of closed sales and maps. I have found the county appraisers very reasonable when they have data to review. However, they will never take your word for it that you think your house isn’t worth that much and they should just lower that value right now.
    11. If you are not successful and still feel you have a good case and good data, you can move on to the formal protest. This is a hearing with a county appraiser on one side and you on the other. Three paid, citizen appointees listen to documentation from both sides and vote on an outcome. I’ve had three formal hearings. Two were successful, with the appointees asking relevant questions of both sides and considering the documentation. The third was unsuccessful and featured one of the appointees who couldn’t do simple math and one who fell asleep during the hearing.
      It doesn’t cost anything other than time to protest, and a successful protest may lower your taxes this year and in future years if there is incorrect information in the county records. If you do not want to spend the time to protest, there are services that will protest your taxes and their fee is a portion of the savings.

My opinion is generally that you know your neighborhood and property better than anyone else, and generally you will make your own best advocate. Good luck, Adam Stephens NMLS 216606

OWELTY LIEN: A Great Way to Refinance and Split up Equity in a Divorce

No one wants to get a divorce. However, if it is inevitable, there are ways for partners to make a clean break and get their fair share of the property in question by getting an Owelty lien.

Since Texas is a community property state, if you are married, and you own a primary residence with a homestead exemption, both spouses have equal rights to the equity in their home.
If Your Name is On the Mortgage, You Are Still Responsible For Payments After A Divorce. Most spouses think the divorce decree releases them from obligation to the lender. That is not the case. Even if the decree awards the property and the debt to one spouse, if the other spouse is on the mortgage, they are still responsible for the debt. Any late payments or other derogatory reporting will be reflected on both spouse’s credit report and would negatively affect each spouse’s credit score.

An Equitable Work Around

An Owelty Lien is a way to give each spouse what is owed to them as detailed in the divorce decree without having to sell the house. You don’t have to have the required 20% equity which would be required on a Texas Cash Out Refinance.

For more information on Owelty Liens, please call Todd Kurio, Residential Mortgage Loan Originator. 512 459 2405, NMLS #214411/216616, Capstar Lending, Equal Housing Lender.

Capstar Lending Announces NEW Mortgage Assistance Program!

Capstar Lending is pleased to offer the Travis County HFC Hill Country Home Down Payment Mortgage Assistance Program. This program is for properties located anywhere in Travis County including anywhere within the City of Austin. This is a grant for up to 5% of the loan amount. This assistance can be used for down payment, closing costs and prepaids.

This program is for new or existing homes, 1-4 units detached or attached, condos or townhomes that meet the lender’s requirements. Borrowers must occupy the home as their primary residence.

There is no first time homebuyer requirement for this program and there are no purchase price limits. The loan amount maximum is set by the type of loan program you are applying for. For example, the FHA loan limit for a single family home in Travis County is $305,900.

The maximum income limit for this program is $105,560. This is based on the qualifying income used on the loan application. There is no recapture tax on this program.

Borrowers must have a minimum, middle credit score of 640.

For more information or to apply,please call Todd Kurio, Residential Mortgage Loan Originator. 512 459 2405, NMLS #214411/216616, Capstar Lending, Equal Housing Lender.

This is not a commitment to lend or extend credit. Restrictions may apply. Information and/or data is subject to change without notice. All loans are subject to credit approval.

IRA Withdrawal for Home Purchase

IRA’s consist of two types- Traditional and Roth. Funds contributed to traditional IRAs are “before-tax” contributions because they are made and, thus, lower taxable income and tax liability.
However, when traditional IRA funds are withdrawn (and not rolled over to another pension- type account), the funds are fully taxable regardless of the age or other circumstances of the taxpayer.

If the IRA is Roth, IRA withdrawal for home purchase of up to $10,000 for a “first home” are completely free of tax and penalty (as long as the funds have been in the IRA for five years or more).

The 1997 Taxpayer Relief Act changed some IRA rules to allow certain types of IRA withdrawals early, without penalty, in some circumstances.

The rules for taking a distribution from a Roth IRA to finance a first time home purchase are slightly different than those for a traditional IRA.  The law defines a ‘first time home buyer” as someone who has not owned for 2 years. So the law helps even newer home buyers.

If you are a first time homebuyer and you meet the Roth IRA rules as a qualified distribution (after the account has been open for 5 yrs)you can withdraw $10,000 or less to purchase a home (if the funds are used directly toward the home acquisition-which includes down payment, closing costs, etc).

If the withdrawal counts as a qualified distribution you will avoid paying income taxes and early withdrawal fees. If you are married, and you and your spouse are first time homebuyers, you can each pull from retirement accounts, giving you $20,000 to use for a home purchase.

If you have not set money aside for your home purchase or don’t have a Roth IRA to tap- then you might want to consider other down payment options.  Capstar Lending offers Mortgage Assistance Programs and other grant programs that will provide the funds for your down payment and closing costs.

Please consult your financial/tax advisor for more detailed information.

This is not a commitment to lend or extend credit.  Restrictions may apply.  Information and/or data is subject to change without notice.  All loans are subject to credit approval.

Please call Todd Kurio, Residential Mortgage Loan Originator for more details. 512 459 2405, NMLS #214411/216616,   Capstar Lending, Equal Housing Lender.