|
When should I “physically” check out the property?
Always physically inspect the property before making an offer. Even if you have taken a virtual tour, it is in your best interest to drive to the location, view the neighborhood, the street, and the subject.
When should I apply for a loan?
You should get a pre-qualification certificate before you shop for a home as this will insure a smoother transaction and, could help in the negotiation.
Should I have the home professionally inspected?
A home is the biggest investment most people ever make. Inspection companies provide a valuable service. Before you purchase a home inspection, ask the seller if they have had the home inspected and if they could provide you with a copy of the report. If not, a home inspection will provide with a condition report of every important feature of the home (inside and out). If you would like to order a home inspection, contact us for a referral in your area (contact us)
How does the real estate agent get paid?
As the Buyer, you do not have to pay the agent directly. The listing agent and the sales agent split a predetermined commission paid by the seller. This is taken into consideration when establishing a listing price, however, you do not have to pay an “out of pocket” fee.
Back To Top
Refinance
When should I consider Refinancing?
If you have a low 30-year fixed interest rate it may be hard to create any benefit by refinancing. However, if any of the following apply to your situation, you should investigate your refinance options.
Increased Monthly Disposable Income
If we can lower your current interest rate, we can lower your monthly payments. A lower payment means more residual income for you. Save it, spend it, or use it to pay down your mortgage balance!
- Cash out of your equity.
If you have enough equity, we can give you cash out when refinancing. Use the cash out to consolidate debt, buy a new car, improve your home or take a vacation. However you use it, the cash is yours!
- Switch from an adjustable to a fixed rate.
Interest rates have been at historical lows. As rates begin to rise, so will the payments on your adjustable rate mortgage. This could be the best opportunity to fix your rate. By fixing your rate, you could save hundreds of dollars over the life of your loan. Ask your loan professional to calculate the benefit for you.
- Pay off your mortgage sooner.
If you shorten the term of your loan you can save thousands of dollars. We offer programs that allow terms of 30, 20,15 and 10 years. The slight increase in payment can result in huge interest savings! Ask your loan professional to compute the difference between 30, 20 and 15 year amortization.
Back To Top
Is refinancing worth it?
Refinancing costs money. Like buying a new home, there are points and fees to consider. Depending on the program, it could take up to three years to recoup the costs of refinancing your loan. If your interest rate is high, it may be smart to refinance to lower your interest rate even if it is for the short term. Check your current note to see if you have mortgage has a prepayment penalty. A pre-payment penalty is another cost you may incur.
Use the reasons above as a guideline and determine whether or not refinancing is the right thing to do.
Back To Top
What are the points and fees?
Here’s what you can expect to pay when you refinance:
Origination fee or “Points”
The more points you pay, the lower your interest rate. Most companies offer everything from a no points to “as many points as you are willing to pay”. A “point” is the same as one percent. When calculating points, you should multiply the loan amount by the points as a percentage. For example, 2 points (or two percent) of a $100,000.00 loan request equals $2,000.00 in points. If you are planning to sell your home in the next few years, you should try to avoid paying points altogether.
Discount Fees or Points
If you buy down your mortgage interest rate, you may be required to pay “discount” fees or points. Unlike the origination fee, this is a fee that is paid to secondary marketing for providing a lower than market rate delivery.
Who charges Fees
Fees include everything from loan fees to escrow and title. When providing a loan, we might deal with as many as 6 or 7 third party providers. Third party providers include appraisers, escrow officers, title companies, credit bureaus, flood service companies, city agencies, etc. Each of these entities offers services to a mortgage lender when you apply for a loan. In many cases, the fees are charged by the third party provider whether or not the loan closes. On the good faith estimate, and at the closing, your fees will be explained to you in detail. Some of the different loan fees you may encounter are:
Application Fee: This covers the initial costs of processing your loan application and is credited to you if the loan closes. (sage- link to application fee explanation)
Appraisal Fee: An Appraisal provides an estimate or opinion of your property’s value.
Title search and Title Insurance: A title search examines the public record to discover if any other party claims ownership of the property. Title Insurance covers you if any discrepancies arise in ownership.
Escrow Fee: a fee paid to the closing agent for reconciling the transaction and disbursing the funds to existing lenders, creditors, and third party providers.
Loan Fees: are charged regardless of points. All lenders charge fees, however, they are not all presented the same. Check the rate page to find the fees charged by our lender partners.
How to Save Money Refinancing:
Be prepared. Provide the lender with all documentation required. A complete package allows for a smoother transaction and (typically) a better deal.
Back To Top
What is a Fixed Rate Mortgage?
This most common loan in the U.S is a fixed rate. A fixed-rate mortgage is a loan where the principal and interest are amortized, or spread out evenly, over the life of the loan, giving you a fixed monthly Payment.
If rates are low, you can lock in for as long as 30 years and protect yourself against rising rates. However, if rates fall you can’t change your rate without refinancing the loan, and that could cost money.
The 30-year Fixed-Rate Mortgage, the most popular and easiest to qualify for, will give you the lowest payment. But you can also get a 20-, 15- and even a 10- year fixed-rate mortgage if you wish to save interest and pay you home off sooner.
Back To Top
What is an Adjustable Rate Mortgage?
With Adjustable-Rate Mortgages (ARMs) interest rates are tied
Directly to the economy so your monthly payment could rise or fall. Because you’re essentially sharing the market risks with the lender, you are compensated with an introductory rate that is lower than the going fixed rate.
How often does the interest rate change?
That depends on the loan. Changes can occur every six months, annually, once every three years or whenever the mortgage dictates.
How much can my rate change?
Your ARM will stipulate a percentage cap for each adjustment period, which means your interest may not increase beyond that percentage point. If the market holds steady, there may be no increase at all. You may even see your payment decrease if interest rates fall.
How are the changes determined?
Every ARM loan is tied to a financial market index, such as CD’s, T-Bills or LIBOR rates. Your rate is determined by adding an additional percentage (known as a margin) to that index’s rate. When the index rises or falls, your rate rises or falls with it.
Is there a limit to how much interest I’ll be charged?
Yes. It’s called a ceiling, or lifetime cap. This is a guarantee that your interest rate will never exceed a designated percentage. For instance, if your introductory rate was 5% and you have a lifetime rate cap of 6% (meaning that your interest rate can never increase more than 6% during the life of the loan) then your ceiling would be 11%.
What are the benefits of an ARM?
- With a lower initial rate (usually 2% to
3% lower than fixed-rate mortgages), qualifying
is easier and the payments are more manageable
at first.
- You may qualify for a larger loan than you would
with a fixed-rate mortgage.
- If you’re only planning to stay a short time the
interest rate is likely to stay lower than that of a
fixed-rate mortgage.
- If you expect regular pay increases that would cover
the increase in your interest, or if you believe
interest rates will fall, an ARM might be the wiser
choice.
A few words of caution:
Negative Amortization – This happens when a lender allows you
To make a payment that doesn’t cover the cost of principal and interest. Watch for this. It may be used as a lure to get you into a home with a promise of low initial payments. Or, a lender may give you a payment cap instead of a rate cap. In this mortgage arrangement, if interest rates increase, your monthly payments could stay the same – but the higher interest will still be charged to your loan, adding to it instead of reducing it. Either way, if you find yourself with a negative amortization ARM, you’ll be adding to your debt.
Discounted interest rates – Sometimes a lender will advertise an unusually low initial rate. This is a discounted rate, and it’s essentially a marketing tool. If your ARM offers a discounted interest rate you are certain to see an increase at your next adjustment period, even if interest rates don’t change.
Back To Top
When will I need Private Mortgage Insurance?
Refinancing costs money. Like buying a new home, there are points and fees to consider. Depending on the program, it could take up to three years to recoup the costs of refinancing your loan. If your interest rate is high, it may be smart to refinance to lower your interest rate even if it is for the short term. Check your current note to see if you have mortgage has a prepayment penalty. A pre-payment penalty is another cost you may incur.
Use the reasons above as a guideline and determine whether or not refinancing is the right thing to do.
Private Mortgage Insurance, or PMI, is insurance paid by the borrower to insure the lender for
Losses in case the borrower defaults on the loan. Generally, PMI is a required when less than a 20% down payment is made.
What does PMI cost?
The cost of PMI varies depending on the loan type (fixed or variable), loan term (15 or 30 years) and the exact amount of the down payment. The less down the greater the premiums.
Back To Top
What Documents Will I Need to provide with my Loan Application?
Items that you may need to provide will support the information stated on your application. The usual items are:
- Personal Tax Returns (federal 1040 only) for the past two years filed. If you have not filed the most recent year the past two years plus a copy of your extension will be necessary.
- Proof of funds required to close the loan transaction plus 2 months reserves. This can be a checking account, savings account, stock account, 401k, IRA, retirement account, or other account that could be converted to cash. The e-underwriter will ask for a minimum of 3 months bank statements to support your application.
- Last 2 paystubs It is necessary to document the most recent 30 day pay history, therefore, it is typical that you will be asked to provide us with your last 2 paystubs if paid every two weeks, or your last 4 if you are paid weekly.
- Proof of Self Employment may be necessary under certain circumstances. If asked, you will need to provide a license or tax certificate that dates back at least two years. Our e-underwriters prefer that you provide a business license if possible.
- W-2’s for past two years. If you have been employed for the past two years, you will be asked to provide all of your W-2s for the past two years. This helps the e-underwriter establish your employment history.
- Credit Explanations may be required if you have been any past or present problems. While we may overlook the state of your liabilities, our e-underwriters like to know what event occurred that caused a problem.
- Mortgage Ratings are necessary for almost every loan. Your credit risk grading is dramatically affected by the timeliness of your mortgage rating, however, we are only interested in the past 12 months. Therefore, you will be asked for the name address and account number of each outstanding mortgage.
- Cancelled Checks may be required to prove that you are or are not responsible for a credit liability, or to prove that your business pays a certain debt that may be listed on your personal credit report. If asked, please remember to photocopy both the front and back of your check before sending it to us.
- Bank Statements are required on most loans. Our e-underwriters believe that “cash is king” and like to see (a) a borrower has the ability to save, and (b) that the borrower has sufficient cash flow (deposits). We even have a loan program for borrowers who can only qualify using 12 months cash flow through there personal checking account.
- Bankruptcy Papers: If you have had a bankruptcy in the past seven years, you will need to provide us with a complete copy of the bankruptcy papers including a copy of the discharge document. The discharge document provides us with the date that the bankruptcy was finalized or discharged from the courts.
- Divorce Decree: If you have been divorced, it will be necessary to provide a copy of your divorce decree or MSA (Marital Settlement Agreement) as these documents provide details of the division of assets and liabilities, as well as any monthly income or debt that has been ordered by the court.
- Purchase Transactions require many special documents and will be specified under the misc. conditions on the bottom of your approval. If you have specific questions regarding these documents you should consult with your Real Estate Agent or contact our office so that we can explain why we require the document.
Back To Top
What information is analyzed during the approval process?
The Four “Cs” of Loan Approval
1. Capacity
2. Credit
3. Collateral
4. Character
Capacity
A lender will weigh your housing expenses and total debt against your monthly income to determine your ability to repay a loan.
Monthly Income - Your net monthly income. If you’re self-employed or received commissions or bonuses, the lender averages your monthly income over the last two years.
Housing Expenses – This is the monthly payment you’ll have with the new loan, along with the monthly cost of insurance, property taxes and any homeowner’s fees or other costs.
Total Debt – Add up any current mortgages, credit card balances, child support or alimony payments, tuition, car loans or other installment loans that will take longer than 10 months to pay off and this is your total debt. If your monthly mortgage payment is less than 28% of your net monthly income, a lender will typically consider you qualified to repay the loan. That figure can even go as high as 36% depending on the buyer. For instance, many lenders will allow a first-time buyer’s housing expenses to take up more of their income.
Credit
To find out what kind of credit risk you represent, your lender will investigate your:
- Previous mortgage payment history
- Rent payment history
- Credit card use
- Installment debt payment history
>
A few late payments on a credit card may not hurt you all that much. But collections, repossessions, foreclosures and bankruptcies can be serious problems. If your have a good explanation you may still be able to repair your credit rating and get approval.
Collateral
When you ask for a home loan, you’re putting the home itself up as collateral. Naturally, the lender will want to know that the home is worth at least as much as the loan amount, which is why an inspection is required.
But they’ll also want proof that you have the cash necessary for the downpayment and closing costs. They’ll seek verification of funds from sources including bank accounts, stocks, bonds, mutual funds, the sale of an existing property or any gifts from family members that will not have to be repaid.
Character
Lenders care a great deal about your fiscal character. If you take responsibility for your debts by paying your bills regularly and on-time, you will appear to have the integrity they’re looking for in a borrower.
Other Compensating Factors
Many factors can sway a lender in your favor. The bottom line is that the lender wants to feel secure in loaning you money. Even if there are a few dings in your credit, if you appear to be a safe credit risk overall you should be confident your loan will be approved.
Back To Top
Should I worry about security when I apply online?
Security is a serious issue when dealing with sensitive information like social security numbers and other income documentation. Our web designers have done everything possible to insure your data is in a safe secure file. Please read the
privacy and security disclosure.
Back To Top
Purchase
When is the best time to sell?
The best “selling seasons” are summer and fall (at the beginning or end of the school year).
What is a homeowners Warranty?
This provides the buyer with an insurance policy for appliances, and other items that may break in the first year. This is a good “perk” that the seller can offer during negotiations.
What is the listing agreement?
The listing agreement is one of the two most powerful documents you will sign during the process of selling your home. This sets the parameters by which the real estate agent will sell your home. It will include such items as price, expiration date, and commission
Back To Top
|
