Frequently Asked Questions
We, as mortgage professionals, want to help you with your purchase of a new home. Buying a new home is one of the largest financial transactions that most of us ever make and should be done with a complete knowledge of the process.
- What do you do after finding your new home?
- How do you apply for a loan?
- What paperwork do I need at the application?
- Which loan program is best for me?
- How does the credit scoring work?
- What does it mean to pay points?
- What do all the mortgage terms mean?
- What to do and not to do after applying for the loan!
- What do you need to know about your closing!
What do you do after finding your new home?
Contact the seller or the Realtor selling the home for the seller. Negotiations can then begin for the sale of the property. Once you and the seller have reached an agreed purchase price and the sales agreement is signed, it is time to apply for a loan. Do not forget that if the buyer wants the seller to pay for part of the closings costs that it must be written in the contract.
How do you apply for a loan?
Applying for a loan is very simple and straightforward. Call us and we can pre-qualify you in 5 minutes or less. You can also email us with your name, phone number, and a time to call or you can complete an on-line application that will reach us in minutes. This transmission is encrypted and secure. With a completed application you may be able to receive a conditional loan approval in less than 1 hour. After you are approved or pre-qualified you will need the items listed in the next paragraph.
What paperwork do I need at the application?
- Last two months Bank statements for any checking and/or savings accounts.
- Year to date check stubs to cover past 30 days.
- Last 2 years W-2 forms for all borrowers
- Information on other property owned: Address, mortgages, leases, tax, insurance, etc.
- Residence addresses for the past two years (name and of address of landlord if any).
- Social Security numbers for all borrowers.
- Names and addresses of each employer for the past two years.
- If any of the down payment is a gift, a gift letter must be completed.
If Salaried or Hourly
- W2s for the past two (2) years.
- Most recent two month’s pay stubs to cover 30 days.
- To use overtime or bonus, must show a history of earnings of two years.
- If commission earnings, we need two months pay stubs.
If Self Employed, Sole Proprietor, Corporation, or Partnership
- Two years individual tax returns with all schedules.
- Two years corporate/partnership tax returns or K – 1 (if applicable).
- Current profit and loss and balance statement for current year.
If You Receive or Pay Alimony/Child Support (only if you wish to use this income)
- A Copy of the recorded divorce decree and property settlement agreement
- If you receive, then we need proof by twelve months receipts by bank statements or court records
If You Receive Pension or Social Security income
- Copy of the award letter or direct deposit by twelve months bank statements or 1099 social security forms for the most current two-year period.
If You Receive Dividend or Interest income
- Must have a history of two years and two most recent personal tax returns with all schedules.
- Copies of recent statements reflecting stock/bond balances and dividend/interest income
Which loan program is best for me?
There are many types of loan programs which can suit your needs. In deciding the program to choose, it is important for you to consider your loan amount, the LTV (loan to value), the rate, and the monthly payment you need. Our loan officer will go over each program in detail to help you decide which is best for you.
Loans can be fixed or variable. Fixed rate loans are amortized over a period of 10, 15, 20, or 30 years. Due to shorter commitments for rates, ARM (Adjustable rate mortgage) rates are typically lower than longer term rates. Adjustable rate mortgage loans may have rates fixed for a period of time usually two to three years and then can be adjusted depending on the current interest rate. Currently we do not recommend adjustable rate mortgages and never have unless there is no other option.
A shorter amortized loan will build up your equity faster and therefore provide you with a debt free home. However, mortgage payments are higher for short term amortized loans.
The loan amount you receive will depend on the purchase price of the property, the appraised value, how much you can afford to pay monthly, and the down payment. Other factors are also considered. If you are purchasing a $200,000 home with $40,000 down payment available, it would be necessary to borrow an amount of $160,000 to purchase the property. This will be 80% of the home value, therefore the loan-to-value of your mortgage is 80%. LTV’s can, in some cases, be as high as 100%.
How does the credit scoring work?
In the mortgage banking world, credit scores drive most loans, although we do have programs that are not credit score driven. Your credit score determines the loan to value (LTV) and the rate of the loan. This is a mortgage scoring system developed by the credit reporting agencies that predict your ability to repay the mortgage you are applying for, based on your past payment patterns. Other factors that make up your “score” are the amount of credit inquiries in the past 6 months, the amount of outstanding debt as a percentage of the total credit line and the total amount of available credit. Other factors are also considered by these agencies. If your credit report contains errors, you should call the vendor placing the item on your report and the credit companies listed below, or click on the links below for their website(s). You can do this for free if you have been denied credit in the last 60 days. You are entitled to one free credit report a year, and we recommend that you check your credit at least once a each year.
TransUnion – 800-916-8800
Equifax – 800-685-1111
Experian – 800-682-7654
What does it mean to pay points?
A point is one percent of the loan amount. The lenders offer rates which may be lower but require paying points (also know as a discount. A rate of 6.25% with 1 point for a loan of $100,000 would require the borrower to pay a total of $1000 to the lender upon approval of the loan to get the lower rate. A rate of 6.75% with 0 points will require no payment to the lender but the interest rate is slightly higher. Points will lower rates and are of benefit if you have some cash to lower the rate and intend to keep the loan for its full term.
What do all the mortgage terms mean?
Please see Common home financing terms & definitions
What to do and not to do after applying for the loan!
Do not change anything of a financial nature until after the closing.
Do not apply for a credit card
Do not apply for a loan of any type.
Do not buy a car, boat, motorcycle, etc.
Do not spend any of the down payment on anything.
Do not change jobs
Do not have anybody run credit on you. Your credit score may be lowered when your report is acquired.
Do not pack to move until final loan approval.
DO keep all loan payments current even if it one you will be paying off at closing.
DO pay all taxes (state & federal) due on time.
DO keep all bank statements.
DO keep all pay stubs.
What you need to know about your closing!
Our loan processors will open escrow (if not already handled by your Realtor) order a preliminary title search to make sure that the title is clear of liens and in the name of the seller (a clear title). The processor will gather the insurance binders, the termite letter, if required, order an appraisal, and arrange for title insurance with the title company.
There are two kinds of title insurance and the only one you have to buy is the one that protects the lender. Please talk to your advisor to determine if you need or desire the buyers title insurance. Remember that all closings cost money and be sure that your loan officer and escrow officer has given you paperwork and explained the amount of money you must have in order to close. If there are any questions please email us or call.