Why did my realtor refer me to you?

A high quality realtor knows that the key to a successful transaction means TEAMWORK with a professional mortgage banker. Any experienced realtor could tell you horror stories about times when a client made a poor choice of mortgage company, and ended up with big surprises at the closing table, or worse, no closing taking place at all! A good realtor will form relationships with trusted individuals who have proven themselves time and time again, so that they know you will be given the excellent service that you deserve. It is important to know that your realtor is NOT given any compensation or "kickbacks" for referring you to a mortgage banker. As mortgage professionals, we desire more referrals, both from you and your realtor, so consider the extra motivation this provides for us to take great care with your satisfaction!

Why should I use a realtor?

First and foremost, because you need an experienced professional working on your behalf. The realtor's commission is not paid by the buyer, but by the seller of the home being purchased, and it is in each party's best interest to have professional representation. As a seller, profits are generally maximized by having an experienced realtor market and sell your home, rather than deal with the headaches of trying to do it all on your own. See our page on "selecting a realtor" for more information.

Why and how do interest rates change?

Many people are surprised to learn that rates change on a daily and sometimes hourly basis. Interest rates fluctuate in response to changes in the financial markets. The bond market is generally a good indicator of the general trend of interest rates.

Can I get pre-qualified or pre-approved for a home purchase loan before I’ve found my property?

Absolutely.  However, you should not confuse a pre-approval with a pre-qualification.  During the pre-qualification process, we will ask you a few preliminary questions regarding you debt and income.  Based on this information, we will be able to give you an estimated loan amount that you can qualify for.  The pre-approval process is much more complete.

During a pre-approval we do all the work of a full-approval, except for appraisal and title search.  When you are pre-approved, you have more negotiating leverage with the seller.  In some cases (especially in multiple-offer situations), having a pre-approval can make the difference between buying a home and not buying a home.  In other instances, home buyers have been able to save thousands of dollars as a result of being in a better negotiating situation. 

Most good Realtors will not show you homes before being pre-approved because they do not want to waste your time, the seller’s time, and their time.  We will pre-approve you at minimal or no cost.  We will typically need to check your credit and verify your income and assets. 

What is an origination fee?

Typically, it is 1% of your loan amount, and works exactly like a discount point. You can avoid all or part of this fee by paying a higher interest rate.

What is title insurance?

It is a policy provided by the title company guaranteeing the accuracy of the title work done on your home at the time of purchase. As a buyer, you are required to purchase a lenders policy of title insurance as part of your standard closing costs, which only protects the mortgage company. You may also choose to purchase an owners policy, which would protect you against any loss in the event of any legal issues relating to the title of your home.

What is mortgage insurance?

This is generally required in one form or another when the down payment is less than 20%, and protects the lender in the event of loan default. The lower the down payment, the higher the risk for the lender, and thus the higher the monthly premium. Depending on your particulars, there are ways in which mortgage insurance can sometimes be avoided at purchase, or dropped altogether at some point in the future.

 How do I increase and protect my credit rating?

Here are a few general tips to assist you in raising and maintaining your credit score:

• Maintain two to three revolving charge accounts (such as Visa or MasterCard) in good standing.
• Have a couple of other credit card accounts, such as department stores or gas cards, in good standing.
• Avoid “finance” company credit card offers.
• Avoid credit inquiries-they lower your credit score.
• Don’t max out your credit cards-the ratio of available credit to your total credit balances is very important.
• Don’t apply for multiple credit lines; this triggers an inquiry of your credit, which lowers your credit score.

How will my credit score affect my loan application?

Credit scoring plays a significant role when you apply for a loan. Higher credit scores help you to be eligible for more loan options. If you've had credit difficulties in the past, there are still mortgage programs available, but they will usually cost more and will vary depending on the severity of your credit problems. 

Should I refinance?

The significant and most common reason for refinancing is to save you money.  You can save a lot of money every month by lowering the interest rate on your current loan.  How much you can save depends on a lot of factors.  You have to consider how much it will cost in fees in order to realize the savings in your payment.   Saving money through refinancing can be achieved by obtaining a lower interest rate, which causes your monthly mortgage payment to be reduced or by reducing the term of the loan, which saves money over the life of the loan.  Even if the fees get added on to the loan balance, they're still there.  You may also consider refinancing in order to convert your adjustable loan to a fixed loan.  The main reason for this is to obtain stability and security offered by a fixed loan rate over the term of the loan.  Adjustable rates are popular when rates are higher whereas when rates are low most people tend to lock in for a fixed loan rate.

If your intentions are to consolidate debts and replace high interest loans with one low rate mortgage than you may want to consider refinancing.  The loans being consolidated may include second mortgages, credit lines, student loans, credit cards, consumer charge cards, or other debt you may have.  In many cases, debt consolidation saves you money by saving on taxes and avoiding paying high interest rates.  Mortgage loan interest is tax deductible whereas interest on consumer loans is not tax deductible.

What does it mean to “lock a rate”?

“Rate locks” are a way of protecting from a possible rise in interest rates during the processing of your loan.  With some lenders, you can lock a rate up to 90 days.  Generally speaking, if you choose to lock for an extended period of time, the cost of the loan goes up. Furthermore, if rates improve during the processing of your loan, you will still get the rate you locked. Some lenders may require a home purchase contract before they will allow you to lock an interest rate.

What is a Conventional Loan?

A mortgage or deed of trust that is not insured or guaranteed under a government insured program. 

What is a Balloon Loan?

A note calling for periodic payments which are insufficient to fully amortize the face amount of the note prior to maturity, so that a principal sum known as a “balloon” is due at maturity.

What is a FHA Loan?

The Federal Housing Administration provides mortgage insurance for residential mortgages and sets underwriting standards.  The loan is partially guaranteed by the Department of Housing and Urban Development and a private lender. 

What is a FICO score?

A FICO score is a credit score developed by Fair Isaac & Company.  It is a credit scoring method to determine the likelihood of credit users paying their bills.  Since the 1950s, Fair Issac & Co were pioneers in setting credit scoring standards and even today their method has become the most widely accepted and reliable scoring method used by lenders in credit evaluation. 

A credit score attempts to condense your credit history into a single number.  Credit scores analyze your credit history by considering numerous factors such as:

• Late payments
• The amount of time credit has been established
• The amount of credit used versus the amount of credit available
• Length of time at present residence
• Employment history
• Negative credit information such as bankruptcies, charge-offs, collections, liens, etc.

Credit scores are calculated by using scoring models and mathematical tables that assign points for different pieces of information which best predict future credit performance. 

What is a Good Faith Estimate?

When you file your application for a loan, the lender must, under the terms of RESPA, provide you with a Good Faith Estimate of settlement services that will likely incur.  The estimate may be stated as either a dollar amount or a range for each charge.

What is an Adjustable Rate Mortgage (ARM) and how does an ARM work?

An Adjustable Rate Mortgage (ARM) is a mortgage or deed of trust, which allows the lender to adjust the interest rate periodically as agreed to at the inception of the loan.  The interest rate on an ARM is tied to a market index and is fixed for a specific period of time. Once that period of time is over, the interest rate is adjusted periodically (every 6 to 12 months) following the changes in the interest rate of index that is associated with the loan. Examples of market indexes include, but are not limited to, LIBOR, Constant Maturity Treasury, and 11th District Cost of Funds. If you are interested in an adjustable-rate mortgage, it is important to discuss all of the features and options of an ARM with our Mortgage Consultant so they can help you make an assessment of the best ARM to meet your specific needs. 

What is Hazard Insurance?

Hazard insurance is an insurance policy to protect homeowners against property damage.  This premium prepayment is for insurance protection for you and the lender against loss due to fire, windstorm and natural hazards.  If a catastrophe does happen, hazard insurance should cover the costs to rebuild your home.  Most Lenders often require you to get a policy before you buy or refinance a home and usually require you to pay the first year’s premium at settlement. 

What is an Origination Fee?

A fee or charge for work involved in evaluating, preparing and submitting a proposed mortgage loan.  For FHA and VA loans this fee is limited to 1% of the loan amount.

What is P.I.T.I?

Principal, Interest, Taxes, and Insurance.  The four components of a monthly mortgage payment.  Principal refers to the part of the monthly payment that reduces the remaining balance of the mortgage.  Interest is the fee charged for borrowing money.  Taxes and insurance refer to the amounts that are paid into an escrow account each month for property taxes and mortgage and hazard insurance. 

What is Private Mortgage Insurance (PMI)?

Insurance written by a private company that protects the lender against loss if you default on the mortgage. 

What is a Truth In Lending Disclosure?

The disclosure is designed to give you information about the cost of your loan. 

What is a VA Loan?

An independent agency of the federal government that offers benefit programs to veterans.  These programs encourage mortgage lenders to offer long-term, no down payment financing to eligible veterans by guaranteeing the lender against any loss. 

What kind of documentation will I need to provide the lender for verification?

As each loan has different variables, there is no single list of documents needed for all applicants.  You should be prepared to provide copies of the following documents:

     Employment & Income Data

• W-2 tax forms, past two years
• 1099's
• Pay stub showing current year-to-date earnings (two most recent stubs)
• Your job history and any explanation of a job change within the past two years
• If self employed (defined as owning 25% of a business or more), you need business and personal federal tax returns (two years, including schedules), a current year-to-date profit or loss statement and a K-1 on all partnerships

     Assets

• Bank account statements, past two months
• Investment account statements
• Retirement account statements
• Signed gift letter and transfer of funds verification
  
  

     Liabilities

• Credit Cards - include account numbers and balances
• Auto loans and leases - account numbers and value of car
• Explanation and paperwork of any derogatory credit in the past seven years
• Explanation letter of any derogatory credit (bankruptcy, collection, foreclosure or default)
• Student and personal loans - include account numbers, monthly payments and balances
• Landlord address(s) for past two years and rental amounts

      Property & Realtor Information

• Name and contact information of your Realtor (business card)
• Homeowners insurance information
• Rental or lease agreements
• Residence & address for past two years

When should I choose a fixed-rate loan?

A fixed-rate loan offers a borrower the comfort of knowing exactly what their payments will be, month after month, for the life of the loan. Loan terms can range from 15, 20, 25, and up to 30 years. In a low-rate environment, borrowers tend to prefer a fixed-rate product that can protect them from possible interest-rate increases. 

When should I choose an Adjustable Rate Mortgage or ARM?

Generally speaking, an ARM enables borrowers to secure a loan at an initially lower interest rate than a fixed-rate loan. This means a borrower has lower monthly payments for a specific period of time when compared to other loan options. Lower monthly payments may allow you to qualify for a higher loan amount.