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Frequently Asked Questions

Do I need a 20% downpayment?

No! Not anymore. We offer one product that only requires a 1% downpayment - and that can be a gift! The lender then gifts you another 2% toward the downpayment, so that you'll have a total of 3% down. This program isn't available for all loans; however, for conventional financing, you may only need 3% down. And of course, FHA and VA offer minimal and no down payments as well. Call us and we'll help you work through the different options.  

How do I know which mortgage is right for me?

There is no simple formula to determine which mortgage is right for you. This depends on a number of factors, including your current and future financial circumstances and the plan for the home you are purchasing or refinancing. We can help you evaluate the choices so that you can make the decision that's best for you and your family.  

When should I refinance?

It's generally a good time to refinance when mortgage rates are lower than the current rate on your loan, or when your ARM loan adjusting to a higher rate than is otherwise available on a fixed rate loan. It's also a good time to refinance if your credit has improved or if you're just looking for certainty in fixed payments from an ARM. For example, only using principal and interest, assume your existing loan is a $100,000 Adjustable Rate loan at 4.5% interest. Your payment would be $1,248. If rates drop to 4%, your payment would be $1,119 and you'd save $128/month! Alternatively, if Fixed Loan rates are also 4.5%, it still may be a good time to refinance so that you reduce your risk of higher payments when interest rates rise. Call us today to know what your options are. 

What are points?

A point is a percentage of the loan amount (1-point = 1% of the loan), so one point on a $100,000 loan is $1,000. Points are costs that need to be paid to a lender to get mortgage financing under specified terms. Points can be paid in cash or often times rolled into your loan amount. The points are generally paid when borrowers want a lower interest rate. 

Should I pay points to lower my interest rate?

Yes, if you plan to stay in the property for a least a few years. Paying discount points to lower the loan's interest rate is a good way to lower your required monthly loan payment, and possibly increase the loan amount that you can afford to borrow. However, if you plan to stay in the property for only a year or two, your monthly savings may not be enough to recoup the cost of the discount points that you paid up-front. We can help you determine the costs/benefits of paying points.

What is an APR?

The annual percentage rate (APR) is an interest rate reflecting the cost of a mortgage as a yearly rate. This rate is likely to be higher than the stated note rate or advertised rate on the mortgage, because it takes into account points and other credit costs. The APR allows homebuyers to compare different types of mortgages based on the annual cost for each loan. The APR is designed to measure the "true cost of a loan." It creates a level playing field for lenders. It prevents lenders from advertising a low rate and hiding fees.

The APR does not affect your monthly payments. Your monthly payments are strictly a function of the interest rate and the length of the loan.

Because APR calculations are impacted by the various different fees charged by lenders, a loan with a lower APR is not necessarily a better rate. The best way to compare loans is to review all of the individual costs associated with the Loan Estimate provided by the lender(s). 

The following fees are generally included in the APR:

  • 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

What does it mean to lock the interest rate?

Mortgage rates usually change often from the day you apply for a loan to the day you close the transaction. They even change sometimes mid-day. If interest rates rise during the application process it can increase the borrower’s mortgage payment unexpectedly.  Locking the interest rate means that the lender will hold that interest rate for you for a specified period of time (typically 30-45-60 days). Your loan must close by the end of the lock-in period in order for the lender to guaranty the rate. 

What documents do I need to prepare for my loan application?

Technology has really advanced in the last few years. We work with a variety of lenders that require differing levels of documentation. One of our lenders offers an option for borrowers to log into their accounts through the lender's website and give your approval for the lender to verify directly with the institutions. This drastically reduces the amount of paperwork that you need to chase down. But because it doesn't work in all situations, below is a very generic list of documentation that you'll want to be able to provide shortly after the application process:

Your Property

  • Copy of signed purchase/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 Letter/Statement from the person giving the gift 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

  • 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)

How is my credit judged by lenders?

Credit scoring is a system creditors use to help determine whether to give you credit. Information about you and your credit experiences, such as your bill-paying history, the number and type of accounts you have, late payments, collection actions, outstanding debt, and the age of your accounts, is collected from your credit application and your credit report. Using a statistical program, creditors compare this information to the credit performance of consumers with similar profiles. A credit scoring system awards points for each factor that helps predict who is most likely to repay a debt. A total number of points -- a credit score -- helps predict how creditworthy you are, that is, how likely it is that you will repay a loan and make the payments when due.

The most widely use credit scores are FICO scores, which were developed by Fair Isaac Company, Inc. Your score will fall between 350 (high risk) and 850 (low risk).

Because your credit report is an important part of many credit scoring systems, it is very important to make sure it's accurate before you submit a credit application. To get copies of your report, contact the three major credit reporting agencies:

Equifax: (800) 685-1111
Experian (formerly TRW): (888) EXPERIAN (397-3742)
Trans Union: (800) 916-8800
These agencies may charge you up to $9.00 for your credit report.

You are entitled to receive one free credit report every 12 months from each of the nationwide consumer credit reporting companies – Equifax, Experian and TransUnion. This free credit report may not contain your credit score and can be requested through the following website: https://www.annualcreditreport.com

What can I do to improve my credit score?

Credit scoring models are complex and often vary among creditors and for different types of credit. If one factor changes, your score may change -- but improvement generally depends on how that factor relates to other factors considered by the model. Only the creditor can explain what might improve your score under the particular model used to evaluate your credit application.

Nevertheless, scoring models generally evaluate the following types of information in your credit report:

  • Have you paid your bills on time? Payment history typically is a significant factor. It is likely that your score will be affected negatively if you have paid bills late, had an account referred to collections, or declared bankruptcy, if that history is reflected on your credit report.
  • What is your outstanding debt? Many scoring models evaluate the amount of debt you have compared to your credit limits. If the amount you owe is close to your credit limit, that is likely to have a negative effect on your score.
  • How long is your credit history? Generally, models consider the length of your credit track record. An insufficient credit history may have an effect on your score, but that can be offset by other factors, such as timely payments and low balances.
  • Have you applied for new credit recently? Many scoring models consider whether you have applied for credit recently by looking at "inquiries" on your credit report when you apply for credit. If you have applied for too many new accounts recently, that may negatively affect your score. However, not all inquiries are counted. Inquiries by creditors who are monitoring your account or looking at credit reports to make "prescreened" credit offers are not counted.
  • How many and what types of credit accounts do you have? Although it is generally good to have established credit accounts, too many credit card accounts may have a negative effect on your score. In addition, many models consider the type of credit accounts you have. For example, under some scoring models, loans from finance companies may negatively affect your credit score.

Scoring models may be based on more than just information in your credit report. For example, the model may consider information from your credit application as well: your job or occupation, length of employment, or whether you own a home.

To improve your credit score under most models, concentrate on paying your bills on time, paying down outstanding balances, and not taking on new debt. It's likely to take some time to improve your score significantly.

What is an appraisal?

An Appraisal is an estimate of a property's fair market value. It's a document generally required (depending on the loan program) by a lender before loan approval to ensure that the mortgage loan amount is not more than the value of the property. The Appraisal is performed by a state licensed professinal who is trained to render expert opinions concerning property values, its location, amenities, and physical conditions.

What is Property Inspecition Waiver?

Fannie Mae and Freddie Mac have collected much data in their years of existence. So much so, that often, they have confidence in a range of values for certain properties. When this happens, they allow you and the lender to decide if you want to exercise the Property Inspection Waiver, which simply means that you don't have to obtain an appraisal in order to close the loan because they have confidence in the loan amount and value estimate that was submitted on the loan application. Exercising this option saves time and money - there is no cost of obtaining an appraisal.

What is PMI (Private Mortgage Insurance)?

On a conventional mortgage, when your down payment is less than 20% of the purchase price of the home mortgage lenders usually require you get Private Mortgage Insurance (PMI) to protect them in case you default on your mortgage. Much has changed in this area as well over the last years. Borrowers can choose to roll the cost of the PMI into the loan and have the lender pay for the policy up front. Or, you can split the upfront and monthly option and do a combination of both.