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Frequently Asked Questions
As
a mortgage professional, I 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 to 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.
Often your Realtor may ask that you obtain a pre-qualification for a
specified amount. That is not an unreasonable request since
your will be taking up the time of many people. The Realtor
does not get paid unless they make a sale. Also, they do not
want to inconvenience the seller by taking tours of the prospective
home with clients that do not have the ability to purchase the
home. Do not forget that if the buyer wants the seller to pay for part of the closings costs,
or any item that is important, that it must be written into the
purchase contract. I will be happy to work with private-party
sellers but I strongly recommend the use of a professional
Realtor. I use a Realtor on my own property such as this home
we own in Silver Springs.
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How
to apply for a loan?
Applying for a loan is very simple and straightforward. Call me and
I 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
a minimum of the items listed in the next paragraph.
Top What paperwork
will I need with the application?
1. Last two months Bank statements for any checking and/or savings
accounts and retirement plan verification.
2. Year to date check stubs to cover past 30 days.
3. Last 2 years W-2 forms for all borrowers.
4. Information on other property owned: Address, mortgages, leases, tax, insurance, etc.
5. Residence addresses for the past two years (name and of address of landlord
if any).
6. Social Security numbers for all borrowers.
7. Names and addresses of each employer for the past two years.
8. If any of the down payment is a gift, a gift letter must be completed.
A.
If Salaried or Hourly
1. W2s for the past two (2) years.
2. Most recent two month's pay stubs to cover 30 days.
3. To use overtime or bonus, must show a history of earnings of two years.
4. If commission earnings, we need two months pay stubs.
B If Self Employed, Sole Proprietor, Corporation, or Partnership
1. Two years individual tax returns with all schedules.
2. Two years corporate/partnership tax returns or K - 1 (if applicable).
3. Current profit and loss and balance statement for current year.
C. If You Receive or Pay Alimony/Child Support (only if you wish to use this income)
1. A Copy of the recorded divorce decree and property settlement agreement
2. If you receive, then we need proof by twelve months receipts by bank statements or court records
D.
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.
E.
If You Receive Dividend or Interest income
1. Must have a history of two years and two most recent personal tax returns with all schedules.
2. Copies of recent statements reflecting stock/bond balances and dividend/interest income
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Which loan program is best for me? One
of the many good reasons I am associated with Nevada Property
Mortgage is the variety of loan programs they offer. We
have FHA, VA, Rural Housing in addition to conventional (Fannie Mae
& Freddie Mac) loans. Each have their own distinctive
features. Currently there are programs, if you qualify, that will
allow a purchase with little or NO DOWN PAYMENT. Since these
are risk-based mortgage loans they will likely have a higher
interest rate. Down payment assistance and tax credits are other
features that make this a great time to buy a home.
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. I will go over these program in
detail to help you decide which is best for you. Remember, this is
YOUR loan and the decision is yours. I will give you all the
information you need to make an informed decision.
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 or more years and then can
be adjusted depending on the current interest rate. Currently
I 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 in less time. 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%.
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How does the credit scoring work?
In the mortgage banking world, credit scores drive most
loans, although I 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
attempt to predict your ability to repay the mortgage,
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 that placed 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 I recommend that you check your credit at least once a each year.
IMPORTANT
NOTE! The federal government
has mandated that a free
credit report shall be provided to each US Citizen annually by
each of the 3 credit bureaus shown below. Under the FACT Act
amendments to the Fair Credit Reporting Act (FCRA),
you are entitled to one free credit report from each of the three
main credit reporting companies in a 12-month period. You will be
offered, for a fee, a copy of your credit score. You
do not need the credit score since it will have little value except
that you will have an idea of where stand in comparison to other
people. Your mortgage company or other lenders will most
likely share the score when you apply for credit. We always
share those numbers with our clients. There is never a fee for
that service. Carefully read all
of the information provided on this site and note the information
about the so-called "Credit Repair" companies that charge
a fee such as "Free Credit Report dot Com". Note what
the FTC has to say about these companies. Another
site that provides valuable information is myFICO
dot COM. Originally this was a site almost solely
dedicated to helping explain FICO scoring. However this site
has turned into sales site and pushes purchase of their products.
Call me before you spend your money on this unnecessary
product. FairIsaac, was
develeloped by Experian,
one of the 3 major credit bureaus. The others use a similar formula
but is named the Beacon Score by Equifax and is called Empirica by
TransUnion. Caution:
As often happens in large corporations, when they have some
government intervention, such as happened with the law requiring the
credit reporting agencies provide credit reports for free, they took
the lemons and made lemonade. Now unrelated companies, such as
banks and other financial institutions are making a big business out
of credit repair and selling credit reports and scores. The
biggest business is the credit bureaus themselves. Every site
you go to, including all noted here by NVHF will try to sell
credit monitoring and identity theft protection. They are not
likely to conspicuously let you know most of these services are
available for little or no cost, such as your 3 free annual credit
reports. Trust me, it is big business touted by many
celebrities including Suze
Orman. Almost daily we get calls from folks, many of them
seniors, that have spent some very hard-earned money for credit
repair. Credit monitoring, a series of credit reports with
scores and costly credit repayment schemes are just a few of the
scams that cost the unknowing and unwary their life savings..
Before you do this please call me for help. I can direct you
to the correct site or agency that can help for little or
nothing. At the very least, if something sounds too good to be
true, talk it over with more than one trusted advisor. You'll
be glad you did.
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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
5.5% with 1 point for a loan of $100,000
may 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
6.0% with 0 points
may require no payment to the lender but the interest rate is slightly higher. Points
may 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.
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What do all the mortgage terms mean?
Adjustment Interval
The period of time between changes in the interest rate for an adjustable-rate mortgage. Typical adjustment intervals are one year, three and five years.
Adjustable Rate Mortgage (ARM)
A mortgage with an interest rate that changes periodically, according to an index that is selected when the mortgage is issued. The initial interest rate is lower than that for fixed-rate mortgages, but monthly payments can go up or down when the rate is adjusted.
Amortization
Repayment of a mortgage debt with periodic payments of both principal and interest, calculated to retire the obligation at the end of a fixed period of time.
Amortization Schedule
A table showing the amounts of principal and interest due at regular intervals and the unpaid mortgage balance after each payment is made. questions
Annual Percentage Rate (APR)
A method for calculating an interest rate to the interest collected, discount points charged to either purchaser or seller or both, and certain costs related to closing, and mortgage insurance premiums. It is not the note rate for which your mortgage payment is calculated. A term defined in section 106 of the federal Truth in Lending Act (15 USC 1606), which expresses on an annualized basis the charges imposed on the borrower to obtain a loan (defined in the Act as "finance charges"), including interest, discount and other costs. Examples of fees that can be included in the APR are
Discount Points, Buy down Fee, Pre-Paid Interest, Private Mortgage Insurance (PMI), FHA Mortgage Insurance Premium (MIP), VA Funding Fee, Flood Certification, Fee Tax Service Fee, Processing Fee, and a Warehouse Fee.
Appraisal
An opinion or estimate of value. Also refers to the process by which a value estimate is obtained.
Appraiser
One qualified by education, training, experience and licensed to estimate the value of real and personal property.
Appreciation
An increase in value for any reason, except inflation.
Bankruptcy
An individual, firm, or corporation who, through a court proceeding, is relieved from the payment of all debts. Bankruptcy may be declared under one of several chapters of the federal bankruptcy code: Chapter 7, which covers liquidation of individual or business assets; Chapter 11, which covers reorganization of bankrupt businesses; Chapter 12, which covers certain farm bankruptcies; and Chapter 13, which covers workouts of debts by individuals. Chapter 13 - "Wage earner plan" where an individual debtor files a budget with the court and agrees to make partial payment to creditors over a three-to-five year period. Chapter 7 - Bankruptcy filing which gives a trustee the power to distribute a debtor's assets to creditors.
Borrower
One who receives funds in the form of a loan with the obligation of repaying the loan in full with interest.
Broker, Real
Estate
An individual employed on a fee or commission basis as agent to bring buyers and sellers together and assist in negotiating contracts between them.
Closing Costs
Fees paid to effect the closing of a mortgage, including but not
limited to, an origination fee, discount points, title insurance fees, survey fees,
escrow and attorney's fees.
Co-borrower
Second or additional person equally responsible for payments on a mortgage. A co-borrower does not have to take title to the property, but usually has to sign the mortgage note.
Co-signer
One who agrees to assume a debt obligation if the principal borrower defaults on mortgage payments. A co-signer assumes only personal liability and has no ownership interest in the property; his or her income and obligations are used in the underwriting process to reinforce the credit of the principal borrower.
Credit Report
A report to a prospective lender on the credit standing of a prospective borrower, used to aid in the determination of creditworthiness.
Credit Score
A number that is used to rate your credit. Many Lenders use this as a method of determining the rate that is charged. (see
"Important Notice" above.
Equal Credit Opportunity Act (ECOA)
A federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs. Also called "Reg B."
Flood Insurance
Insurance coverage which provides compensation to the insured in case of flood water damage.
Foreclosure
A legal procedure in which a mortgaged property is sold to pay the outstanding debt in case of default.
Good Faith Estimate (GFE)
A document which tells borrowers the approximate costs they will pay at or before closing, based on common practice in the locality. Under requirements of the Real Estate Settlement Procedures Act (RESPA), the mortgage banker or mortgage broker, if any, must deliver or mail the GFE to the applicant within three business days after the application is received.
Hazard Insurance
Insurance coverage which provides compensation to the insured in case of property loss or damage.
Home or Condominium Owners Association (HOA)
A nonprofit corporation or association that manages the common areas and services of a planned unit development or condominium project. In a condominium project, it has no ownership interest in the common areas; in a planned unit development, it holds title to common areas.
Land Sales Contract
An agreement to transfer title to a property once conditions of the contract has been fulfilled.
Lender
Person or entity that invests in or originates mortgage loans, such as a mortgage
broker, mortgage banker credit union, commercial bank, or savings and loan. In single-family property usage, the lender is generally whoever's name the loan is closed in. (In a table funding transaction, the wholesaler mortgage company is usually considered to be the "lender.") In commercial property usage, the lender is the life insurance company, bank or pension fund that provides the funds and in whose name the loan is closed.
Mortgage
Pledge of property, normally real property, as security for a debt. By extension, the document evidencing the pledge. In many states, this document is a deed of trust. The document may contain the terms of repayment of the debt. By further extension, "mortgage" is used to describe both the mortgage proper and the separate promissory note evidencing the debt and providing the terms of the debt's repayment.
Mortgage Insurance (MI)& (PMI)
Insurance which protects mortgage lenders against loss in the event of default by the borrower. This allows lenders to make loans with lower down payments. The federal government offers MI through HUD/FHA; private entities offer MI for conventional loans.
Mortgage Note
A written promise to pay a sum of money at a stated interest rate during a specified term. A mortgage note is secured by a mortgage.
Note
A general term for any kind of paper or document signed by a borrower that is an acknowledgment of the debt, and is, by inference, a promise to pay. When the note is secured by a mortgage, it is called a mortgage note and the mortgagor is named as the payee.
Loan Origination Fee
The fee charged by a lender to submit the documents to underwriting and other
costs incurred that are associated with your mortgage.
Planned Unit Development (PUD)
A comprehensive development plan for a large land area. A PUD usually includes residences, roads, schools, recreational facilities, commercial, office and industrial areas. Also, a subdivision having lots or areas owned in common and reserved for the use of some or all of the owners of the separately owned lots.
Pre-Paids
These are often thought to be closing costs but they are not. They are the cost of interim interest, the first year insurance premiums for hazard and mortgage insurance, and real estate taxes.
Real Estate Settlement Procedures Act (RESPA)
A federal statute and regulation promulgated by HUD governing real estate lending practices and disclosures. Its main features pertain to the provision of a good faith estimate of loan settlement costs and the provision of the HUD settlement booklet within three days of making a loan application.
Refinancing
The repayment of a debt from the proceeds of a new loan using the same property as security. Generally
used to obtain a lower interest rate or term.
Refinancing
(cash-out)
The repayment of a debt from the proceeds of a new loan using the same property as security. Generally
used to obtain a sum of cash to be used for debt reduction, home
improvement, to combine an existing 2nd mortgage in one mortgage,
lower interest rate or term.
Second Mortgage
A mortgage that has rights subordinate to a first mortgage. Often
used for cash out or as part of the down payment on a purchase
Settlement Costs (also known as Closing Costs)
Money paid by borrowers and sellers to effect the closing of a mortgage loan, including payments for title insurance, origination fees, discount points, processing, underwriting, appraisal, survey, title search, title insurance, recording, transfer charges, and attorney fees.
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What to do and
not do after applying for the loan! If
you are inclined to do something contrary to that suggested below
PLEASE CALL YOUR LOAN OFFICER 1st. You may jeopardize your
loan if you make a change without calling.
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
your credit . 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! All loans
include accounts that will be paid off with the proceeds
from your new loan.
DO pay all state & federal
taxes on time.
DO keep all bank statements.
DO keep all pay stubs.
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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
agent 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
call or email me .
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