Frequently Asked Questions

Refinancing is typically a good idea when mortgage rates are 2% lower than the rate on your current loan. Even if the interest rate difference is just 1% or less, it can still be a sensible choice. Any decrease can lower your home payments each month. Example: On a $100,000 loan, your payment, minus taxes and insurance, would be around $770; if the interest rate were cut to 7.5%, it would be $700, saving you $70 a month. Your savings are influenced by your income, spending plan, loan balance, and changes in interest rates. You can calculate your options with the aid of your reliable lender.

A point is a percentage of the loan balance, therefore one point on a $100,000 loan is equal to $1,000. Points are fees that must be paid to a lender in order to obtain mortgage financing under defined guidelines. Discount points are fees used to pay a portion of the interest on a mortgage loan up advance, so lowering the interest rate. Basic points, or one point, or one percent of the loan amount, are how lenders may describe fees. 1 point is equal to 100 basis points.

Yes, provided you anticipate residing in the home for at least a few years. A good approach to reduce your necessary monthly loan payment and maybe raise the loan amount you can afford to borrow is to pay discount points to lower the loan’s interest rate. However, if you only intend to reside in the home for a year or two, your monthly savings might not be sufficient to cover the upfront cost of the discount points.

An interest rate that represents the cost of a mortgage as a yearly rate is called the annual percentage rate (APR). Because it accounts for points and other credit fees, this rate is probably greater than the marketed or stated note rate on the mortgage. Homebuyers can compare various mortgage products using the APR based on the annual cost of each loan. The purpose of the APR is to calculate the “real cost of a loan.” It gives lenders an equal playing field. It stops lenders from promoting a low rate while concealing fees.
Your monthly payments are not affected by the APR. Your monthly payments are solely determined by the interest rate and loan term.
A loan with a lower APR is not always a better rate because the numerous costs levied by lenders have an impact on how the APR is calculated. Asking lenders for a good-faith estimate of their costs on the same type of program (such as a 30-year fixed) at the same interest rate is the best approach to evaluate loans. Then you can eliminate any fees that are not related to the loan, like those for homes insurance, title insurance, escrow fees, legal services, etc. Add up each loan fee now. A loan from a lender with lower loan fees will cost less than one from a lender with higher loan fees.
The following fees are generally included in the APR:

  • Points – both discount points and origination points
  • Pre-paid interest. The interest paid from the date the loan closes to the end of the month.
  • Loan-processing fee
  • Underwriting fee
  • Document-preparation fee
  • Private mortgage-insurance
  • Escrow fee

The following fees are normally not included in the APR:

  • Title or abstract fee
  • Borrower Attorney fee
  • Home-inspection fees
  • Recording fee
  • Transfer taxes
  • Credit report
  • Appraisal fee

From the day you apply for a loan until the day the deal is closed, mortgage rates can fluctuate. A sudden increase in the borrower’s mortgage payment may result from a significant spike in interest rates during the application process. As a result, a lender may permit a borrower to “lock-in” the loan’s interest rate, which guarantees that rate for a set period of time, typically 30 to 60 days, occasionally in exchange for a fee.

A list of the paperwork needed to apply for a mortgage is provided below. However, because every circumstance is different, you might also need to submit further supporting evidence. Therefore, be cooperative and give the information required as soon as you can if more information is necessary. It will facilitate an expedited application procedure.

Your Property

  • Copy of signed sales contract including all riders
  • Verification of the deposit you placed on the home
  • Names, addresses and telephone numbers of all realtors, builders, insurance agents and attorneys involved
  • Copy of Listing Sheet and legal description if available (if the property is a condominium please provide condominium declaration, by-laws and most recent budget)

Your Income

  • Copies of your pay-stubs for the most recent 30-day period and year-to-date
  • Copies of your W-2 forms for the past two years
  • Names and addresses of all employers for the last two years
  • Letter explaining any gaps in employment in the past 2 years
  • Work visa or green card (copy front & back)

If self-employed or receive commission or bonus, interest/dividends, or rental income:

  • Provide full tax returns for the last two years PLUS year-to-date Profit and Loss statement (please provide complete tax return including attached schedules and statements. If you have filed an extension, please supply a copy of the extension.)
  • K-1’s for all partnerships and S-Corporations for the last two years (please double-check your return. Most K-1’s are not attached to the 1040.)
  • Completed and signed Federal Partnership (1065) and/or Corporate Income Tax Returns (1120) including all schedules, statements and addenda for the last two years. (Required only if your ownership position is 25% or greater.)

If you will use Alimony or Child Support to qualify:

  • Provide divorce decree/court order stating amount, as well as, proof of receipt of funds for last year

If you receive Social Security income, Disability or VA benefits:

  • Provide award letter from agency or organization

Source of Funds and Down Payment

  • Sale of your existing home – provide a copy of the signed sales contract on your current residence and statement or listing agreement if unsold (at closing, you must also provide a settlement/Closing Statement)
  • Savings, checking or money market funds – provide copies of bank statements for the last 3 months
  • Stocks and bonds – provide copies of your statement from your broker or copies of certificates
  • Gifts – If part of your cash to close, provide Gift Affidavit and proof of receipt of funds
  • Based on information appearing on your application and/or your credit report, you may be required to submit additional documentation

Debt or Obligations

  • Prepare a list of all names, addresses, account numbers, balances, and monthly payments for all current debts with copies of the last three monthly statements
  • Include all names, addresses, account numbers, balances, and monthly payments for mortgage holders and/or landlords for the last two years
  • If you are paying alimony or child support, include marital settlement/court order stating the terms of the obligation
  • Check to cover Application Fee(s)

Creditors use a technique called credit scoring to help them decide whether or not to grant you credit. Your credit application and credit report are used to gather data about you and your credit experiences, including your payment history, the number and kind of accounts you have, late payments, collection actions, outstanding debt, and the age of your accounts. Creditors use statistical software to compare this data to the credit performance of customers with comparable profiles. Each element that aids in determining who is most likely to repay a debt is given points by a credit scoring system. A credit score is a tally of points that assists in determining your creditworthiness, or how likely you are to repay a loan and make payments on time.

The FICO scores, created by Fair Isaac Company, Inc., are the ones that are used the most frequently. Your rating will range from 350 (high risk) to 850. (low risk).

Before you file a credit application, it is crucial to confirm that your credit report is correct because it plays a significant role in many credit rating systems. Contact the following three main credit reporting companies to obtain copies of your report:

  1. Equifax: (800) 685-1111
  2. Experian (formerly TRW): (888) EXPERIAN (397-3742)
  3. Trans Union: (800) 916-8800

These agencies may charge you up to $9.00 for your credit report.

Every 12 months, you are entitled to one free credit report from each of the three major national consumer credit reporting agencies: Equifax, Experian, and TransUnion. Your credit score may not be included in this free credit report, which can be obtained by visiting the website listed below:

Credit rating algorithms are intricate and frequently change between creditors and for various credit products. Your score may change if one element changes, but progress typically depends on how that factor interacts with other variables taken into account by the model. The only person who can tell you how to raise your score according to the specific model used to assess your credit application is the creditor.

However, scoring algorithms often assess the following categories of data in your credit report:

  • Have you made on-time bill payments? Usually, payment history is a big issue. If your credit report shows that you have a history of making late payments, having accounts sent to collections, or filing for bankruptcy, it is likely that this past will have a negative impact on your credit score.
  • What is the balance of your debt? Numerous scoring systems assess how much debt you have in relation to your credit limits. Your credit score is likely to suffer if the amount you owe is near to your credit limit.
  • How long is your Credit history? In general, credit models take your credit history into account. Your credit score may be impacted by a lack of credit history, but this can be mitigated by other elements like on-time payments and low balances.
  • Have you lately applied for fresh credit? When you apply for credit, several scoring models look at “inquiries” on your credit report to determine whether you recently asked for credit. Your score could suffer if you’ve lately applied for too many new accounts. But not all enquiries are taken into account. Creditors who make “prescreened” credit offers after checking your account or credit reports are not included in this calculation.
  • How many credit accounts do you have, and what kinds? Although having established credit accounts is typically a good thing, having too many credit card accounts could hurt your score. Many models also take your credit account types into account. For instance, borrowing from finance companies may lower your credit score under various scoring schemes.

More than just the details in your credit report may be used to create scoring models. For instance, the model might also take into account details from your credit application, such as your job or occupation, work history, and house ownership.

Focus on timely bill payment, reducing sums due, and refraining from taking on additional debt if you want to raise your credit score according to the majority of models. To noticeably raise your score, it could take some time.

The fair market value of a piece of property is estimated by an appraisal. A lender would typically request this document before approving a loan (depending on the loan programme) to make sure that the mortgage loan amount does not exceed the value of the property. An “Appraiser” conducts the appraisal; normally, this is a state-licensed expert who has been taught to provide professional views regarding property values, location, amenities, and physical characteristics.

 In the case of a conventional mortgage, lenders typically require you to obtain Private Mortgage Insurance (PMI) when your down payment is less than 20% of the home’s purchase price in order to protect them in the event that you default on your loan. At closing, you may occasionally be required to pay up to one year’s worth of PMI premiums, which can be rather expensive. Making a 20% down payment or looking into other loan program options are the best ways to avoid this additional cost.

Even though it may seem surprising, some people with high earnings find it quite difficult to save enough money to put a 20% cash down payment on their ideal residences. These buyers must obtain Private Mortgage Insurance (PMI) when using conventional financing, which raises the cost of home ownership and, unfortunately, makes it even harder to qualify for the mortgage. But if you’re a member of the cash-strapped class who pays dues, don’t give up hope. If your income is high enough, it should be feasible to avoid being forced to pay PMI. It was created for this reason: 80-10-10 finance. It is known as 80-10-10 because a standard first mortgage of 80% is provided by a savings and loan association, bank, or other institutional lender, and you also receive a 10% second mortgage and pay a cash down payment of 10% of the home’s purchase price. You are no longer need to obtain PMI on your property if you choose this strategy.

The same logic holds true if your budget only allows for a 5% down payment; 80-15-5 financing is likewise an option. However, do not be shocked if you are requested to pay more loan costs and a higher mortgage interest rate for 80-15-5 than you do for 80-10-10 because a smaller cash down payment increases the lender’s risk of default.

At “Closing” or “Funding,” the property is formally transferred from the seller to you.

At closing, the seller formally transfers ownership of the property to you. You, the seller, real estate agents, your attorney, the lender’s attorney, representatives of the title or escrow agency, clerks, secretaries, and other personnel may be involved in this. If you are out-of-state or unable to attend the closing meeting, you may have an attorney represent you. Depending on the purchase offer’s contingency provisions and any escrow accounts that need to be opened, closings might take anywhere from a few hours to several.

The majority of the documentation involved in closing or settlement is completed by lawyers and real estate experts. Depending on who you are working with, you might or might not be part in some of the closing activities.

You should conduct a final inspection, or “walk-through,” before closing to ensure that any agreed-upon repairs have been made and that any furnishings, lighting fixtures, or other objects that were supposed to stay with the house are still there.

In the majority of states, a title or escrow company handles the settlement, and you must send them all relevant documents, paperwork, and cashier’s checks so they can make the required payments. The seller will receive the check from your representative, who will then hand you the keys.