How
will I know how much I can qualify for?
What are income and debt ratios?
What are "cash reserves"?
How much money do I need
for down payment?
How much money do I need
for closing costs?
What is Private Mortgage insurance? (PMI)
Can I qualify for a VA loan?
What if I don't have any established
credit?
What if I had credit
problems in the past?
What if I've filed bankruptcy?
What if I am new on my job?
What does "loan to value" (LTV) mean?
How do I "lock in" my interest
rate?
What is an 80/10/10 and an 80/15/5?
What do I need to bring to closing?
How much do I need to insure my home
for?
What is the Annual Percentage Rate on my Truth
in Lending Document?
Q.How
will I know how much I can qualify for?
A.A
Loan Officer can work with you to get you qualified BEFORE
you look for a home. Based upon information you present to
the Loan Officer at the loan application, they will determine
the approximate amount of money that you will be allowed to
borrow. You will be "pre-qualified" for that loan
amount. By allowing your Loan Officer to run your credit report
and verify your assets and income, your loan application can
be submitted to the underwriter for a full credit approval.
We can help you obtain a complete written credit approval
(subject to an appraisal) before you make an offer on a home,
if you desire.
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Q.What
are income and debt ratios?
A.The
Income Ratio is your total monthly housing expense divided
by your gross monthly income (before taxes). The Debt Ratio
is your total monthly housing expense PLUS any recurring debts
(i.e. monthly credit card minimum payment, car payments, or
other loan payments) divided by your income. Standard underwriting
suggest a maximum guideline of 28% on the Income Ratio and
36% on the Debt Ratio, but these ratios can vary based on
the loan program, the financial strength of the borrower and
the downpayment.
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Q.What
are "Cash Reserves"?
A.Cash
Reserves are the funds a borrower has remaining after their
loan funds. The normal requirement could be monies equal to
2 months of the mortgage payment. The amount of Cash Reserves
varies by loan program, but larger reserves are a strong compensating
factor.
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Q.How
much money do I need for a down payment and closing costs?
A.There
are loan programs available that do not require any down payment.
These loan programs have higher interest rates and they may
have a prepayment penalty. For most loans a minimum down payment
of 5% is required plus money for closing costs, which average
3.5%. Some programs allow the down payment and/or closing
costs to be a gift from a family member. A Loan Officer can
advise you about these different types of loans.
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Q.What
is Mortgage Insurance?
A.Mortgage
Insurance insures lenders in the event of a borrower's foreclosure.
It is paid for by the borrower, and allows lenders to grant
loans that they otherwise would not consider. Depending
on credit scores and loan structure, mortgage insurance may
be required when the down payment is less than 20%.
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Q.Can
I qualify for a VA loan?
A.VA
loans, guaranteed by the Veteran's Administration, are for
veterans who meet a certain criteria. VA loans do not require
any down payment and in some cases the seller may be willing
to pay all or part of the closing costs. This allows the veteran
to purchase a home with little or no money down. To find out
if you qualify for a VA loan, ask your loan officer for an
1880 form for you to complete. After you have completed this
form, take it and your discharge papers (or DD214) to your
local VA office to determine your eligibility. Active military
personnel may also be eligible for a VA loan.
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Q.What
if I don't have any established credit?
A.If
you do not have enough established credit, your Loan Officer
can work with you to document alternate credit information.
If you have been renting, we can obtain a rental rating from
your landlord as a way of verifying your payment history.
Or, we can contact your utility companies, phone service,
cable companies or car insurance carrier to obtain a rating
on your payment history. Not all loan programs will accept
alternative documentation on your credit. There are both government
and conventional programs that will accept this type of payment
history to establish credit qualifications.
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Q.What
if I have had credit problems in the past or have filed bankruptcy?
A.Your
credit payment history lets the Lender know your intentions
to repay the loan. Therefore a good credit history is important,
but a perfect credit history is not. Credit counseling agencies
specialize in meeting with clients and reviewing your credit
history. If you have any outstanding credit obligations that
need to be dealt with, the credit agency can work with you
and help you make arrangements to pay any outstanding debts
that you may have. First time home buyers can also attend
seminars that will go through the home purchasing process
and requirements with you.
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Q.What
if I am new on my job?
A.A
new job can work in your favor when you apply for your loan.
Loan program guidelines look for a 2 year job history in the
same field, but a job change for a better position is looked
on favorably. If you are a recent college graduate, you may
be able to obtain a loan even though you don't have a 2 year
work history.
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Q.What
does "loan to value" mean?
A.Loan
to value (LTV) is the loan amount divided by the lesser of
the sales price or appraised value. For example, if you are
paying 15% of the total cost of the home as a down payment,
you would only be borrowing 85% of the total sales price from
the lender. Therefore your LTV would be 85%.
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Q.How
do I "lock-in" my interest rate?
A.A
Loan Officer can "lock-in" the interest rate quoted,
over the telephone during their pre-qualification interview
with you. We will provide you a written Interest Rate and
Price Determination Agreement which details the interest rate
and terms of the loan you have requested, as well as the period
of time the rate is locked. This may vary between 10 days
and 60 days depending upon your projected closing date.
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Q.What
is an 80/10/10 and an 80/15/5?
A.An
80/10/10 is an 80% first lien, a 10% second lien and a 10%
down payment. The 80/10/10 structure allows for 90%
financing without mortgage insurance. When a borrower
chooses to put less than 20% down for a down payment, he may
either split the loan amount into two liens (80/10/10 for
example), or he may opt to have one 90% lien and pay mortgage
insurance (see below). In the same manner, an 80/15/5
is an 80% first lien, a 15% second lien and a 5% down payment.
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Q.What
do I need to bring to closing?
A.The
closing will take place at the title company. Each borrower
will need to bring a valid driver's license the day of closing.
The funds due at closing must be in the form of either a cashier's
check made out to the title company or a wire transfer.
You may write a personal check up to $1,500.
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Q.How
much do I need to insure my home for?
A.It
is your responsibility to secure homeowner's insurance on
the home you are purchasing prior to closing. The minimum
dwelling coverage required is the lesser of either:
a) The total combined loan amount
or
b) The replacement cost on the appraisal
Because you may begin shopping for homeowner's insurance before
the appraisal is in, it may be necessary to begin gathering
quotes with a minimum dwelling coverage of the combined loan
amount. You will be notified of the replacement cost
once your appraisal is in.
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Q.What
is the Annual Percentage Rate on my Truth in Lending Document?
A.The
Annual Percentage Rate (APR) is the cost of your credit expressed
as an annual interest rate. Points and other prepaid
finance charges are factored into the APR to show the true
yield on the loan, which is why the APR is often higher than
your note rate. The APR can be compared to the APR on
other loan programs to give you a consistent means of comparing
rates and programs.
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