When should you send Your Verification Documents to us?
This is the list of basic document that we will or have provided, i.e., W2’s, pay statements, asset statements, id, etc. I would like to collect these ASAP, so we can verify work history, usable income, and assets. You don’t want any surprises. For a list, go to "Documents Needed"
Acceptable Documentation Format?
- Copies must be complete and legible.
- Any available technology may be used to produce copies of the documents in the loan file, such as a photocopier, fax machine, document scanner, or camera.
- May be photos or scanned versions of the original documents and can be delivered in hard copy or electronic means.
- Must be provided directly from the borrower and must not have been handled by, or transmitted through equipment of unknown parties, or interested parties, such as the real estate agent or builder, are not acceptable.
- All documents received electronically must be authenticated by examining the source identifiers (i.e., the fax banner or the sender’s email address) or contacting the source of the document by telephone to verify the document’s validity.
What is the difference between Pre-Qualified vs Pre-Approved?
Pre-Qualified is when you have provided us with the basic information to determine which loan program you qualify for. Pre-Approved is when we have collected, verified, and presented the information needed for underwriting and approval.
Does pulling Credit affect scores?
Credit is based on 30-day cycles. You can have your credit pulled multiple times within a cycle and it will not affect your scores more than the 1st pull. Per the experts, FICO® scores are affected zero to five points when pulled in the mortgage industry. The actual amount is determined by the strength of your credit profile. We recommend you not have your credit pulled more than necessary.
Should my spouse or significant other be on the mortgage with me?
If both incomes are needed to qualify, yes. If only one income is needed, then the second person is optional. Let’s discuss because there are pros & cons both ways.
- We have to use the lesser of all person's applying for the mortgage in qualification. That means if you have 800 scores, and your partner has 650 scores, we have to use the 650 for qualification.
- Another factor is liabilities and income. We operate on debt ratios so it may not be beneficial to add the second person. It's case by case.
- A benefit of being on the mortgage is having the mortgage trade line on your credit.
- Being on the mortgage means that you are responsible for the mortgage payment.
- If the second person is not on the mortgage, you have the option of putting them on title giving them ownership. Another strategy is to handle this within your "Will".
Can I purchase with a friend?
Yes, anyone can purchase together that has eligible credit if all parties are living in the home. Typically, 4-persons is the maximum number of buyers. There are limitations on non-occupant co-borrowers.
I am not a U.S. Citizen, can I still purchase?
Yes, if you are in the U.S. legally and expected to remain for the immediate future. Click here for complete information on residency and guidelines.
Are there Tax Benefits to Owning a Home?
Absolutely, however, home ownership is not for everyone. There are expense with owning a home, such as all repairs are now your responsibility. You are also committing to an area. When renting it is easy to transition from one are to another. As an owner, there is much more involved since you will need to sell the existing home or become a landlord. We suggest all clients consider their budget and reserves before purchasing. For an overview of tax benefit, click here.
What is the best Loan Type?
This depends upon your needs/goals, and what you qualify for. Some of the factors considered include: your income; program income limits; credit history; do you need a non-occupant co-borrower; debt ratio; how long you plan to keep the home; desired payment; and repayment goals.
What are Debt Ratio?
Most loans look to debt ratios to help determine credit risk. There are two ratios, a front or housing ratio, and back or expense ratio.
- The housing ratio is calculated by taking the mortgage payment and divide by the total income.
- The expense ratio is determined by taking all of your minimum payments for installment/credit loans/etc, along with your new mortgage payment and divided by your total income.
What is LTV and Why does it matter?
LTV stands for loan-to-value. It is the percentage of your down payment to the purchase price. Most loan options require you to put a down payment down, but there are those that do not have a down payment such as VA and USDA.
Eligible funds for purchasing?
We have to verify that funds used to purchase, come from an eligible source. Below are the most common sources.
- Buyers personal funds in checking and savings.
- Gift funds from a family member. Click here for detail
- Retirement accounts, 401k.
- Sale of current home.
- Down Payment Assistance program.
What are Closing Costs & Pre-Pays?
Closing costs are the cost of the actual loan, which include items such as the appraisal fee, title insurance fees, attorney fees, and lender fees. Pre-pays are fees for cost in the future. We collect 1-year of home owner's insurance, days of interest for month you are closing, and designated escrows. For an estimate of these fees click here.
What do You Pay For During the Purchase Transaction?
- Earnest money. This is good faith determined in negotiations with your offer.
- Appraisal fee which is collected by my staff for the appraisal management company. See "Appraisals" for price estimates.
- Home inspection (if you elect to have one), estimate cost $300 to $450.
- At closing there are four things paid:
- Down payment – minimum amount is determined by the loan type chosen.
- Closing costs – the actual cost of closing your loan, includes: title, attorney, lender, state, and county fees. You will receive a loan estimate which is a conservative estimate of all closing fees.
- Pre-pays - fees that you pay in advance, i.e.: days of interest of month you close, and one-year home owner’s insurance policy.
- Escrows - An account that holds funds for the purpose of paying homeowner's insurance and property taxes when the bills come due.
- You will receive credits at closing:
- Your earnest money.
- Seller concession agreed in your contract.
- Lender credits if applicable.
- Turn utilities on before closing.
- Moving expenses.
What is included in the monthly payment?
If you have a fully amortizing mortgage, portions of your monthly mortgage payment go toward loan principal and interest. Interest-only mortgage payments include only the interest that is due on the outstanding principal balance. If your mortgage carries mortgage insurance, a portion of your monthly mortgage payment will pay this also, unless the lender has paid your mortgage insurance or you have paid your mortgage insurance upfront. If you have set up an escrow account for your mortgage, then portions also go toward your property taxes and homeowners insurance.
- PITI = Principle + Interest + Taxes + Home Owners Insurance
- PITI = Your Monthly Payment
What is PMI?
With Conventional loans, Private Mortgage Insurance is provided by a private mortgage insurance company to protect lenders against loss if a borrower defaults. Private Mortgage Insurance is generally required for a loan with an initial loan to value (LTV) percentage in excess of 80%. In most cases, this will mean that you will have to pay Private Mortgage Insurance if your down payment is less than 20% of the value of the home you are purchasing or refinancing. The cost of the mortgage insurance is typically added to the monthly mortgage payment. MIP is similar but for FHA.
Rates change daily, therefore, we do not guarantee a rate until it is locked. This can be done anytime within 6-months of closing at your request. The shorter the rate lock period, (with all factors being the same), the lower your rate will typically be. Most clients lock their interest rate within 45-days of closing.
- We Shop Rates for You...with 12+ investors, such as Wells Fargo, SunTrust, Franklin America, Citi, PRMI, Chase, US Bank, and others. By doing so, we assure that the rate offered is competitive.
- When should You Lock? We recommend locking as soon as you are comfortable with the rate/payment, keeping in mind current market conditions. For example, if the experts are recommending to wait and watch rates for a possible improvement, rates may still go up. That said, by locking you may miss out on rate reductions which would lower your monthly payment.
- Protection for You! Once your rate is locked, if rates increase, you are not affected. What if rates drop? If the market improves 3/8th or more your rate automatically floats down to the lower rate. If the market improves less than 3/8th, your rate remains as locked.
- What if the Rate Expire? If we lock your rate but there is a delay in closing...and your rate expires, there is a daily fee for extending the rate. This is rare since most closings happen on time, however, there could be a delay for various reasons such as: waiting on title, repair completion, builder/seller issues, etc.
- Did You Know you can get money by accepting a higher interest rate! This is a strategy many clients use if they need money to close for expenses. It may be a good strategy anyway if you are not staying in the home long. This is called Rate Premium. If you need money for closing costs, one option is to use rate premium. For example: Let’s say the going rate is 5%. If I lock your rate above 5%, lets say 5.375%, you would receive money for taking a higher rate than was required. This strategy is sometimes the difference between a client being able to purchase or not.
- Another option is to Buy the Rate Down. With record low interest rates, this is typically not done, however, if you are planning on staying in the home long term, it may be worth considering, if you have available funds. We will discuss all options.
- What will my Rate be? Rates are based on a variety of factors such as the loan purpose; loan type; reserves; your credit history (credit scores); your ability to repay; appraised value; and the loan amount. For rate estimates, go to "Home" then "Rates".
- Can I lock my Interest Rate anytime? Absolutely. We provides a variety of options to lock in your interest rate. Locking your rate means that the lender is agreeing to provide you with your mortgage at that particular rate, and that it won’t go up (or down) between the time you lock it and the time that you close on your home. If your mortgage is fixed-rate, your interest rate will remain the same throughout the life of the loan. Mortgage interest rates fluctuate constantly, and you don’t want to start shopping for a house operating under a certain interest rate assumption, only to be unpleasantly surprised that interest rates have risen during your house hunt.
- For Market Rates click here
- Note: Everyone is scored individually, determined by their debt ratios, credit scores, loan option, reserves, etc. Two people purchasing the same property can have vast different interest rates.
What is the difference between Interest Rate & APR?
Your interest rate is the monthly cost you pay on the unpaid balance of your home loan. An Annual Percentage Rate (APR) includes both your interest rate and any additional cost or prepaid finance charges such as the origination fee, points, private mortgage insurance, underwriting and processing fees (your actual fees may not include all of these items). While your interest rate is the rate at which you will make your monthly mortgage payments, the APR is a universal measurement that can assist you in comparing the cost of mortgage loans offered by different mortgage lenders.
What is the difference between Fixed and Adjustable Loans?
- With a fixed-rate loan, your payment never changes for the life of the loan. The longer you pay, the more of your payment goes toward principal. The property taxes and homeowners insurance will go up over time, but for the most part, payment amounts on these types of loans don't increase much. Your first few years of payments on a fixed-rate loan go mostly toward interest. This proportion gradually reverses itself as the loan ages. Borrowers can choose a fixed-rate loan to lock in a low interest rate. People choose these types of loans when interest rates are low and they want to lock in this lower rate.
- If you have an Adjustable Rate Mortgage (ARM), refinancing into a fixed-rate loan can offer more monthly payment stability. If you currently have an Adjustable Rate Mortgage (ARM), we can help you lock in a fixed-rate at the best rate currently available. Call for more details. Adjustable Rate Mortgages — ARMs, as we called them above — come in a great number of varieties. ARMs usually adjust twice a year, based on various indexes. Most programs have a cap that protects you from sudden monthly payment increases. Some ARMs can't adjust more than 2% per year, regardless of the underlying interest rate. Sometimes an ARM has a "payment cap" which guarantees that your payment will not go above a certain amount over the course of a given year. Additionally, the great majority of ARMs feature a "lifetime cap" — this means that the rate can never go over the capped amount. ARMs usually start out at a very low rate that usually increases as the loan ages. You've likely heard of 5/1 or 3/1 ARMs. In these loans, the introductory rate is set for three or five years. It then adjusts every year. These types of loans are fixed for a number of years (3 or 5), then adjust. Loans like this are usually best for people who expect to move within three or five years. These types of adjustable rate loans benefit people who plan to move before the initial lock expires. Most borrowers who choose ARMs do so when they want to get lower introductory rates and don't plan on remaining in the house for any longer than this initial low-rate period. ARMs are risky if property values decrease and borrowers cannot sell their home or refinance their loan.
What are Seller Concessions?
Your realtor will negotiate the terms of the contract but I will recommend a loan structure to meet your needs. Part of the negotiations is seller concession. These funds are used to pay a portion of your closing expenses, therefore, lowering funds for the buyer at closing. Keep in mind that the seller is not giving you any funds, seller concession is negotiated into the offer price. This is simply a legal way that I as your lender can finance your closing cost minimizing funds out of your pocket at time of closing.
- Purpose? The purpose of an appraisal is to confirm the home is valued for at least what the contract price specifies.
- What is an Appraisal? A type of valuation developed by an independent, unbiased, qualified, and licensed/certified professional. Appraisals and valuations are opinions of the market value for the property used as collateral for the requested loan. Market value is the likely selling price of a home with a willing buyer and a willing seller on the open market. A comparable sale is a property that has recently sold and is similar to the subject property in most respects, including size, location and amenities. The selection of comparable sales is an important determining factor in providing an opinion of market value. It is the appraiser's responsibility to adequately research the local real-estate market and to determine which comparable sales best represent the value characteristics of the subject property. Once ordered, the average time to receive a report is 10 to 14-days without a rush. You will get a copy of the appraisal once approved.
- Managed by? They are ordered through a third party Appraisal Management Company, unless it is a VA loan, which are managed by VA.
- What if the Appraised Value is less than purchase price?
- The value can be challenged if determined there are errors.
- Once the report is accepted as being correct, an amendment is required to address any shortcomings, such as...home is contracted for $200,000 and appraised value is $195,000. An amendment would specify how the $5,000 is to be addressed. Often the seller will drop the price to the appraised value...seller concession may be affected. It is a negotiation that both the seller and buyer has to agree upon.
- What if Repairs are noted by the appraiser? They will be defined in the appraisal report and will have to be corrected before closing, or a repair escrow must be approved.
- Appraisal last for how long?
- 120-days for FHA, Conventional, and USDA.
- 180-days for VA.
- Cost, are determined by Appraiser & Management Company, below are estimates:
- Conventional: $525.
- FHA/USDA: $525.
- Manufactured Homes: $575.
- VA: $440.
- Jumbo Loans & Unique Properties: $700
- Investment (Rent Comp/Operating Income).....$250 additional (we do not always need if we are counting the entire proposed payment in buyers ratios).
What if one of the Buyer's Cannot Attend Closing?
Typically that is not a problem. We need to know this as soon as possible to see if a mail-out package is needed, or if a Power Of Attorney can be used. Click here for more info.
How do You Transfer Funds to the Closing Agent? (Attorney/Title Agent)
Unless otherwise confirmed by us with the attorney, all funds must be wired to the closing attorney, before the scheduled closing date. We will provide wiring instruction from the attorney, which you should take to your bank for the transfer. The funds are to be wired to the attorney and will be placed in an escrow account for you. If you do not close, the funds would be returned to your account. Your bank will provide confirmation of the wire, please forward this to us.
- Please contact your bank, to confirm their wiring process and time needed for delivery. It is important your funds are received by the closing attorney before your closing.
- Proceeds from Sale of Home - Most often your sale and purchase will occur on the same day. The attorney on your sale side should wire your funds to the attorney on your purchase side. Any other means of providing funds could delay your purchase.
- Gift Funds - We will provide detail instructions on how these funds are to be verified/sourced. Funds can be given to you or preferred option is to have gifting person(s), wire their funds directly to the closing attorney. They will need to contact their bank, to confirm their wiring process and time needed for delivery.
What are Points?
Points, also known as discount points or mortgage points, are a one-time fee that you can choose to pay to get a lower interest rate. One point equals one percent of your loan amount and will usually result in a rate that is one-eighth to one-quarter of a percent lower.
What is an Escrow Account?
An account that holds funds for the purpose of paying homeowner's insurance and property taxes when the bills come due. Each month with your monthly house payment, 1/12th of the estimate annual cost for each is collected. When the bills come, your service provider pay them. The goal is to have enough funds in the account to pay the total bill, but sometimes there is a shortage. If this happens, your service provider will notify you and provide options. Spreading these expenses over 12 months makes it easier to budget. Most clients find escrowing to be an advantage. With Conventional loans there is an option of opting out and managing yourself. Will the monthly amount you collect for my Escrow Account Change? Yes, if the cost for your taxes or home owner's insurance increases.
Is there a Pre-Payment Penalty?
No. You can always make additional payments toward principal without a penalty. That will help you pay off your loan more quickly.
What is Pre-Paid Interest?
When you make your mortgage payment on the first of the month, you are actually paying for interest charges that accumulated during the previous month (also called "paying in arrears"). For example, a mortgage payment due on August 1 would cover the interest charged from July 1 to July 31. As the name indicates, "pre-paid" interest is paid in advance. It is the per diem interest charges that begin accumulating on the day your loan is closed until the end of the month in which the closing occurred. So, for example, if your loan closed on June 15, the pre-paid interest would be calculated based on the number of days left in the month of June, or 15 days (June 16 through June 30). Using this same scenario, your first monthly mortgage payment would be due on August 1. The August 1 payment would cover interest charges that occurred between July 1 and July 31 (covering the days after the pre-paid interest period ended).
When is my Payment Due?
Your mortgage payment due date will be listed on your monthly billing statement or coupon. A late charge is assessed if the payment has not been received and processed by the date noted. It is very important that you establish and maintain good credit by making sure your payment reaches the service provider by the due date each month. Late payments can affect your credit record.