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 down payment.
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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:
