Happy Holidays everyone ! Last month we talked about understanding what options your loan professional has presented to you. Ensuring that you choose the right option for your situation is the key to getting what meets your needs. Sometimes we’re not presented with as many options that we would like because our current financial situation does not meet the requirements of a particular category.
The “A Paper” category is what many advertising and marketing are based on. You see those signs advertising interest rates all over the place. Have you ever read the small print? If you haven’t, it tells you that you have to meet “A paper” requirements to get that great rate or payment. This category is really for those of us that have excellent credit and also have the income and assets to qualify you as a preferred client, according to the mortgage banking system. The “A Paper” client has the most choices in loan types.
The “B Paper” or “Alt A” category is a client who has excellent credit, but lacks somewhere is their income, assets, employment history or credit history to qualify for preferred loan terms.
The “C Paper” category is a client who has good credit and may have some blemishes on their credit history or no credit history at all. Clients in this category can usually get a loan, but the terms aren’t really negotiable, since the loan choices are limited.
The final category is called “D Paper”. This category is pretty much the most undesirable by mortgage banks, but there are banks that will give a loan to a client if the client is willing to agree with the very limited loan options. These days it’s virtually impossible to get a loan if you fit in this category unless you’re willing to accept unreasonable terms by the lender. This is the reason there are so many foreclosures today. Think twice about these loans and seek the advice from a reputable professional.
Understanding where you stand based on your credit score will help you to better understand why you were presented with your number of loans options and loan types. Now that you have some of the information to make an educated decision, you should also know about “Pre Payment Penalties”. These penalties are directly tied to your credit classification. An “A Paper” client would probably have the option of not having a penalty. A “B Paper” to “D Paper” client would not have this option. This client would almost always have a “Pre Payment Penalty”. This penalty is in place to keep you in a loan for a minimum amount of time (2+ years) so that the mortgage banks can make interest on your loan before you decide to re-finance their loan for a new one. Let’s face it…banks are in the business of making money and this is one of the ways that they do.
The next step in the loan process is approving one of those loan choices and giving the OK to your mortgage professional to move forward. Once you have done so, the real works begin. We’re just getting started and we’ll cover the process that your mortgage professional takes to get your loan to the close stage.
These days we have a lot of choices and the best way to learn about these choices is to ask your loan professional. My team of professionals and Real Estate partners can assist you or answer any questions that you have regarding home purchase, refinance or foreclosure. We are well versed in all aspects of these topics and best of all…we’re local.
We’re not finished yet. We’ll continue with the loan process next month. Remember…This is the time to buy!
Selwyn Jamurath is Branch President with GC Financial Services, 200 Broadway Suite 84 King City, CA 93930, (831) 385-7848 x119, www.selwynassociates.com or firstname.lastname@example.org