Why Income Stability Matters in Mortgage Approval

Mortgage lenders look for steady, reliable income because it shows your ability to make consistent payments. If your income changes, it can cause the lender—or the underwriter reviewing your file—to re-examine your financial profile. This may delay closing or put your approval at risk.

Examples of Income Changes That Can Affect Your Loan

Some changes are obvious, while others may not seem like a big deal but can still impact your approval. Here are a few situations to watch out for:

• Quitting your job or changing employers mid-process
• Reduced work hours or switching from full-time to part-time
• Short-term disability leave
• Maternity or paternity leave
• Loss of overtime income or cutting back on bonuses/commission

Even if the change is temporary, lenders may not be able to count your full income, which can increase your debt-to-income ratio and reduce your buying power.

What to Do If You Anticipate an Income Shift

If you know your income may change during the mortgage process, the best thing you can do is be upfront with your loan officer. A professional mortgage team can help you:

• Assess how the change will affect your pre-approval
• Explore options to keep your loan moving forward
• Decide whether it’s better to pause the process until your income stabilizes
  

The Bottom Line

Any shift in income—big or small—can impact your mortgage loan approval. Before making job changes, reducing your hours, or planning extended leave, talk with your mortgage professional. A quick conversation can help prevent surprises and protect your ability to buy the home you want.

If you’re considering a job change or expect your income to shift while applying for a home loan, contact Liberty Star Mortgage in Fulshear, Texas today. We’ll help you navigate your options and keep your path to homeownership on track.

The post What Happens If Your Income Changes During the Mortgage Loan Process? appeared first on Liberty Star Mortgage.

What Is a Mortgage Recast?

A mortgage recast is when your lender recalculates your monthly mortgage payment based on a new, lower loan balance after you make a significant lump-sum payment—usually $10,000 or more. Unlike refinancing, your interest rate and loan term stay exactly the same. The only thing that changes is your monthly payment, which decreases because your principal balance is lower.

Benefits of a Mortgage Recast

• Lower Monthly Payment: Your payment is recalculated based on your reduced principal, resulting in a smaller bill each month.
• No Credit Check or Appraisal: Unlike a refinance, most recasts don’t require you to re-qualify for the loan.
• Keep Your Low Interest Rate: If you locked in a great rate when you first purchased, a recast allows you to keep it.
• Lower Costs: Recasts typically involve a small administrative fee, not thousands in closing costs like a refinance.
• Flexible Timing: If you recently came into extra cash—like a bonus, inheritance, or sale of another property—this is a great way to put it to work.

When Is a Recast a Good Idea?

A recast makes sense if:

• You’ve got extra funds to apply toward your loan balance.
• You want to lower your monthly payment without starting the loan process over.
• You plan to stay in your home and are happy with your current rate and term.

Recast vs. Refinance: Which Is Right for You?

While refinancing may be a better option if you’re aiming for a lower interest rate or switching loan types, a recast is ideal when you simply want to reduce your payment without the paperwork and fees of a refinance.

Not all loan types qualify for a recast, so it’s important to talk with a mortgage professional to see what’s possible.

If you’re considering lowering your mortgage payment and wondering whether a recast or refinance is right for you, get in touch with Collette Horton at Liberty Star Mortgage. We’ll help you weigh the pros and cons and find the best solution for your financial goals.

The post How to Lower Your Mortgage Payment Without Refinancing: What Is a Mortgage Recast? appeared first on Liberty Star Mortgage.

How to Include Closing Costs in Your Home Purchase

If you’re buying a home, you typically can’t add closing costs directly to your mortgage. However, there is a strategy that allows you to cover these costs: seller concessions.

Here’s how it works:

1. Negotiating with the Seller: Instead of asking for a price reduction, request seller-paid closing costs.
2. Adjusting Your Offer: If a home is listed for $250,000 and you were planning to offer $240,000, you could instead offer $250,000 while requesting the seller pay $10,000 toward your closing costs and prepaid expenses.
3. Final Impact: The seller still nets $240,000, while you get $10,000 covered, reducing your out-of-pocket expenses at closing.

What About Refinancing?

When refinancing a mortgage, rolling in closing costs is typically an option, but it depends on your loan-to-value (LTV) ratio.

• If you have enough equity, the lender may allow you to add the closing costs to the new loan balance.
• If your equity is limited, you may need to pay some or all of the costs upfront.

Each situation is unique, so discussing your options with a mortgage professional is key.

Bottom Line

While closing costs usually can’t be directly added to a mortgage in a home purchase, strategic negotiation with the seller can help you cover these expenses. In a refinance, rolling in closing costs depends on your home’s equity. If you have questions about how to structure your loan to minimize upfront costs, get in touch with Collette Horton to explore what works best for you.

The post Can You Roll Closing Costs Into Your Mortgage? appeared first on Liberty Star Mortgage.

What Costs Should You Expect Before Closing?

Many first-time buyers assume the only expense to prepare for is the down payment, due at closing. However, there are several costs to budget for before that day arrives:

1. Earnest Money Deposit
   Earnest money is a deposit that shows you’re serious about purchasing the home. While negotiable, this is typically 1%–2% of the home’s sales price and is paid when you write the contract.
2. Option Fee
   The option fee gives you the right to walk away from the contract within a negotiated timeframe for any reason. Like earnest money, this fee is also paid at the time of the contract.
3. Home Inspection
   After your offer is accepted, you’ll need to schedule a home inspection. This ensures the property is in good condition and helps identify potential repairs. Home inspections generally cost $400–$1,000, depending on the size of the home and the type of inspections required.
4. Appraisal Fee
   Once inspections and repair negotiations are complete, your loan officer will order an appraisal to determine the home’s value. You’ll pay this fee directly to the appraisal company, typically weeks before closing.

What Costs Are Due at Closing?

When closing day arrives, you’ll need to bring funds to cover these major expenses:

1. Down Payment
   Your down payment is due at the closing table. You’ll either wire the funds or bring a cashier’s check to cover this cost.
2. Closing Costs and Prepaid Items
   In addition to the down payment, closing costs include lender fees, title services, and prepaid items like property taxes and homeowners insurance. Your chosen insurance company will send an invoice, which is paid at closing as part of your total costs.

Budgeting Pro Tips

• Be Prepared Early: Having a budget for upfront costs like earnest money, option fees, and inspections will prevent surprises during the process.
• Ask Questions: Work closely with your loan officer and real estate agent to understand all potential costs.
• Keep Extra Funds Ready: It’s always a good idea to have a financial cushion for unexpected expenses.

Understanding the costs at each step will make the process smoother and less stressful. With a solid plan, you’ll be one step closer to achieving your dream of homeownership!

Liberty Star Mortgage – Guiding You Home

Buying a home doesn’t have to feel overwhelming. With the right guidance and preparation, you’ll feel confident every step of the way.

The post Common Budget Questions for Buying a Home appeared first on Liberty Star Mortgage.

What is a Contingency?

A contingency is a common strategy that helps you buy a new home while selling your current one. If most of your funds are tied up in your current home, a contingency ensures your offer on the next house is subject to the sale of the home you’re living in.

Here’s how it works:

• You put your current home on the market and get a contract to sell it.
• At the same time, you make an offer on your next home with a contingency clause.
• Both homes can close on the same day. For example, you could close on the home you’re selling in the morning and the new one in the afternoon. The title companies will handle transferring the funds from one to the other seamlessly.

The Leaseback Option

There’s another option that may provide more flexibility: a leaseback. Here’s how it works: You close on the sale of your current home, but you lease it back from the new owners for a short period. This can give you extra time to prepare for your move. For example, you might close on your sale on a Friday, lease your home over the weekend, and move into your new home on Monday after completing the purchase.

A leaseback provides:

• More time to pack and clean
• A smoother transition without the rush of same-day closings
• Peace of mind knowing your funds are ready for your new purchase

Ready to Make Your Move?

If you’re planning to sell and buy at the same time, a contingency or leaseback could make the process easier and more efficient. Have questions about how these options work or want to explore the best strategy for your move? Contact Collette Horton at Liberty Star Mortgage, she is here to guide you through it!

The post Understanding Contingencies in Real Estate: A Guide for Sellers and Buyers appeared first on Liberty Star Mortgage.

Welcome to the definitive guide for all prospective homeowners! I’m Collette Horton from Liberty Star Mortgage, and today, we’re delving into the essential principles that every buyer should follow when venturing into the realm of real estate and mortgages. These rules aren’t just suggestions—they are the cornerstone of a smooth and successful home buying experience. So, let’s explore the “10 Commandments of Mortgage” that will guide your journey from pre-qualification to closing day.

1. Thou Shalt Not Venture into the Marketplace of Homes without Pre-Qualification

Embarking on your home buying journey without pre-qualification is like sailing into uncharted waters without a map. Pre-qualification gives you a clear understanding of your budget and shows sellers that you are a serious and prepared buyer. It sets the stage for a smoother, more efficient house-hunting experience.

2. Thou Shalt Not Purchase Shiny Baubles Before Closing

It’s tempting to start buying furniture or appliances for your new home, but big purchases on your credit card or taking out new loans can jeopardize your mortgage approval. Lenders monitor your finances up until closing day, so keep your spending in check and avoid large transactions to ensure nothing disrupts your final loan approval.

3. Thou Shalt Not Conceal Thy Debts

Honesty is the best policy, especially when applying for a mortgage. Disclosing all your debts upfront allows your lender to accurately assess your financial situation and provide the best loan options for you. Concealing debts can lead to complications and even denial of your mortgage application.

4. Thou Shalt Not Play Shell Games with Thine Finances

When you’re in the process of securing a mortgage, stability is key. Moving money between accounts, or making unusual deposits and withdrawals, can raise red flags with lenders. Keep your finances consistent and transparent to avoid unnecessary scrutiny and questions.

5. Thou Shalt Not Deceive Thy Loan Officer with Tall Tales

Accuracy in your loan application is crucial. Falsifying employment history, income, or assets can lead to severe legal consequences and potential mortgage denial. Always provide truthful and accurate information to your loan officer.

6. Thou Shalt Not Submit False Documents, Forgeries, or Falsehoods

Integrity in your documentation is just as important as honesty in your application. Submitting any falsified documents can be considered fraud, which not only jeopardizes your loan but can also have legal repercussions.

7. Thou Shalt Not Neglect Thy Credit Report and Procrastinate Thine Payments

Your credit score plays a significant role in your mortgage terms. Regularly review your credit report for accuracy and continue making all payments on time. Maintaining good credit habits will help secure favorable loan conditions.

8. Thou Shalt Not Ignore Thine Budget and Spend Money Thou Hast Set Aside For Closing

Stick to your budget and remember the additional costs associated with closing. It’s easy to underestimate expenses like closing fees, moving costs, and home repairs. Ensure you have sufficient funds to cover all closing costs without dipping into reserves you might need for unexpected expenses.

9. Thou Shalt Not Enter into Co-signer Agreements Before Closing

Becoming a co-signer on another person’s loan or asking someone to co-sign for you before your mortgage closes can alter your debt-to-income ratio, potentially affecting your loan approval. Wait until after closing to make any commitments that could impact your financial profile.

10. Thou Shalt Not Hastily Pay Off Collection Accounts

While paying off debts is generally positive, doing so right before applying for a mortgage might not always be beneficial. Consult with your loan advisor to determine the best strategy for dealing with collection accounts and other debts in relation to your mortgage application.

By adhering to these 10 commandments, you ensure that your journey to homeownership is as smooth and successful as possible. Remember, the path to your new home is paved with preparation, honesty, and wise financial choices. Happy house hunting!

The post The 10 Commandments of Mortgage: Navigating Your Path to Homeownership appeared first on Liberty Star Mortgage.