FAQ

Frequently Asked Mortgage Questions

A. Through my online prequalification process, I’ll work with you to provide an approximate amount of money you can borrow BEFORE you look for a new home. Once you provide more information and allow me to run your credit report and verify your income and assets, I can provide you with a written pre-approval before you make an offer on a home.

Q. What are income and debt ratios?

A. Your income ratio is your total monthly housing expense divided by your pre-tax monthly income. Your debt ratio is your total monthly housing expense plus any recurring debts, such as monthly minimum credit card payment, car payments or other loan payments, divided by your monthly income. Standard underwriting guidelines suggest a maximum of 28% for your income ratio and 38% for your debt ratio. However, these ratios may vary based on your loan program, your financial situation and the amount of your down payment

Q. What are cash reserves?

A. Your cash reserves are the funds available to you after your loan closes. They demonstrate your ability to make payments on your loan, and different loan programs have varying cash reserve requirements. Some programs may require you to have assets equal to two to six months of your mortgage payment. Larger cash reserves can be a strong compensating factor, as they are indicative of your ability to consistently keep up with your mortgage payments. Depending on your loan program, cash reserves can be in the form of cash, stocks, bonds or investments.

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 would otherwise not consider. Depending on credit scores, loan structure and loan program, mortgage insurance may be required when the down payment is less than 20%.

Q. What are VA loans? Can I qualify for a VA loan?

A. VA loans are for veterans who meet certain criteria, but active military personnel may also be eligible. They are guaranteed by the Veteran’s Administration, and they do not require a down payment. In some cases, the seller may be willing to pay for all or part of the closing costs, allowing qualified veterans to purchase a home with little or no money down.

Often, eligibility can be determined quickly through an automated system offered through VA. If eligibility can not be determined automatically, you will need to complete and submit the 1880 Form and your discharge papers or DD214. You can submit these forms to the local VA office to determine your eligibility or, I can initiate the process for you at the beginning of the prequalification process.

Q. What if I have had credit problems in the past or have filed bankruptcy?

A. A good credit history can be important because it allows to the Lender to see how you have paid your expenses in the past, which can be a strong indicator on your intention or ability to repay your loan. However, a perfect credit history is not necessary. If your credit score is low, there are steps you can take toward improving your score. There are also many loan programs available with lower credit score requirements.

Q. What if I recently obtained a new job?

A. While loan program guidelines look for a two-year job history within the same field, a change to a better position is considered favorable. Other changes, such as relocating, can be explained and are allowed. If you are a recent college graduate, you may be able to obtain a loan without a two-year work history. Typically, lenders will need a copy of your school transcripts and, if you are not currently working in the field in which you studied, they may need some additional documentation.

Q. What does “loan-to-value” mean?

A. Loan-to-value (LTV) is the amount of the loan divided by the lesser of the sale price or appraised value. If you pay 10% of the total cost of the home as a down payment, you would only need to borrow 90% of the total sales price. Therefore, your LTV would be 90%

Q. How do I “lock in” my interest rate?

A. Contact me. I can lock in the interest rate you were recently quoted. Pricing on interest rates can change quickly. So, at the time you decide you would like to lock you will be provided with 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 for which the rate is locked. This period may vary between 15 and 90 days, depending on your projected closing date.

Q. What do I need to bring to closing?

A. Closing typically takes place at the title company. You must bring a valid driver’s license and any funds due at that time must be in the form of either a cashier’s check made out to the title company or a wire transfer. Non-occupying spouses will be required to sign of the documents. So, they should plan on attending the closing. They will also need to bring a valid driver’s license.

Q. For how much do I need to insure my home?

A. It is your responsibility to secure homeowner’s insurance on the home you are purchasing prior to closing. Please contact your insurance company to purchase coverage that suits your needs.

Q. What is the Annual Percentage Rate?

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.

Q. Are there any actions I need to avoid before and during the financing process?

A. Here are some general actions to avoid prior to and during the home-financing process until you receive professional mortgage guidance.

• Don’t shop for a new home until you are prequalified.
• Do not pack and ship important documents you will need during the loan process, such as your W-2 forms, tax returns, bank statements and pay stubs.There are also a number of actions you can take during the process that will require additional documentation, and to prevent confusion, should be avoided.
• Do not suddenly pay off your debts.
• Do not apply for new credit cards.
• Do not make unusual large deposits and/or cash deposits