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Frequently asked questions
When should I refinance?
It's generally a good time to refinance when mortgage rates are lower than the current rate on your loan. Any reduction in your interest rate can lower your monthly mortgage payments.
What are points?
A point is a percentage of the loan amount. For example 1-point = 1% of the loan, so one point on a $100,000 loan is $1,000.
Should I pay points to lower my interest rate?
Discount points are not cheap, but paying discount points to lower the loan's interest rate is a good way to lower your required monthly loan payment, and possibly increase the loan amount that you can afford to borrow. Eventually the amount you paid for the lower interest rate will be offset by the reduced monthly payment, although this may only happen after a few years in the loan.
What is an APR?
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Points - both discount points and origination points -
Pre-paid interest. The interest paid from the date the loan closes to the end of the month. -
Loan-processing fee -
Underwriting fee -
Document-preparation fee -
Private mortgage-insurance -
Escrow fee
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Title or abstract fee -
Borrower Attorney fee -
Home-inspection fees -
Recording fee -
Transfer taxes -
Credit report -
Appraisal fee
What does it mean to lock the interest rate?
How is my credit judged by lenders?
Experian (formerly TRW): (888) EXPERIAN (397-3742)
Trans Union: (800) 916-8800
These agencies may charge you up to $9.00 for your credit report.
What can I do to improve my credit score?
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Have you paid your bills on time? Payment history is typically a significant factor. It is likely that your score will be affected negatively if you have paid bills late, had an account referred to collections, or declared bankruptcy, if that history is reflected on your credit report.
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What is your outstanding debt? Many scoring models evaluate the amount of debt you have compared to your credit limits. If the amount you owe is close to your credit limit, that is likely to have a negative effect on your score.
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How long is your credit history? Generally, models consider the length of your credit track record. An insufficient credit history may have an effect on your score, but that can be offset by other factors, such as timely payments and low balances.
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Have you applied for new credit recently? Many scoring models consider whether you have applied for credit recently by looking at "inquiries" on your credit report when you apply for credit. If you have applied for too many new accounts recently, that may negatively affect your score. However, not all inquiries are counted. Inquiries by creditors who are monitoring your account or looking at credit reports to make "prescreened" credit offers are not counted.
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How many and what types of credit accounts do you have? Although it is generally good to have established credit accounts, too many credit card accounts may have a negative effect on your score. In addition, many models consider the type of credit accounts you have. For example, under some scoring models, loans from finance companies may negatively affect your credit score.
What is an appraisal?
An Appraisal is an estimate of a property's fair market value. It's a document generally required by a lender before loan approval to ensure that the mortgage loan amount is not more than the value of the property.
What is PMI (Private Mortgage Insurance)?
On a conventional mortgage, when your down payment is less than 20% of the purchase price of the home mortgage lenders usually require you get Private Mortgage Insurance (PMI) to protect them in case you default on your mortgage. The best way to avoid this extra expense is to make a 20% down payment, or ask about other loan program options.
What happens at closing?
At closing, the ownership of the property is officially transferred from the seller to you. This may involve you, the seller, real estate agents, your attorney, the lender’s attorney, title or escrow firm representatives, clerks, secretaries, and other staff. You can have an attorney represent you if you can't attend the closing meeting, i.e., if you’re out-of-state. Closing can take anywhere from 1-hour to several depending on contingency clauses in the purchase offer, or any escrow accounts needing to be set up.
What is a pre-qualification?
A pre-qualification is a written approval (usually in the form of a letter) in which a loan officer certifies that you can purchase a home at or below a certain value. After reviewing your financial situation (income, credit, monthly expenses etc.), your loan officer will make an early decision as to whether or not he/she believes that you can comfortably purchase a home at the price you are wanting, or make a recommendation of a comfortable price range for you to shop within.
Why is it a good idea to pre-qualify?
Sellers and their realtors want to know that if they sign a sales contract for a property, the transaction has a high likelihood of closing, especially if they have other offers on the table. By being able to show that you had an expert review your financial situation and say with confidence that you can afford to buy the home, you are showing the sellers that you are serious and have taken the first steps towards purchasing a home before even meeting them. You are also potentially putting yourself at an advantage over other potential buyers who have not pre-qualified.
What information and documents do I need to apply for a mortgage?
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Copy of signed sales contract including all addendums -
Verification of the deposit you put down on the home -
Copy of your Earnest Money Check -
A bank statement showing the money exiting your account
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Names, addresses and telephone numbers of all realtors, builders, insurance agents and attorneys involved -
Copy of Listing Sheet and legal description if available -
If the property is a condominium please provide a name and contact number for the HOA
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Copies of your pay-stubs for the most recent 30-day period -
Copies of all W-2 forms you received over the past two years -
Names and addresses of all employers for the last two years -
Letter explaining any gaps in employment in the past 2 years -
Work visa or green card (copy front & back)
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Provide full tax returns for the last two years PLUS year-to-date Profit and Loss statement (please provide complete tax return including attached schedules and statements. If you have filed an extension, please supply a copy of the extension.) -
K-1's for all partnerships and S-Corporations for the last two years (please double-check your return. Most K-1's are not attached to the 1040.) -
Completed and signed Federal Partnership (1065) and/or Corporate Income Tax Returns (1120) including all schedules, statements and addenda for the last two years. (Required only if your ownership position is 25% or greater.)
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Divorce decree/court order stating amount -
Proof of receipt of on time payments for at least the last 6 months
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Provide award letter from each agency or orginazation from which you receive this type of income
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Sale of your existing home - provide a copy of the signed sales contract on your current residence and statement or listing agreement if unsold -
If you are using the funds from your home sale to purchase a new home, you must receive those funds prior to closing and provide a Settlement/Closing Statement)
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Savings, checking or money market funds - provide copies of bank statements for the last 2 months -
Stocks and bonds - provide copies of your statement from your broker or copies of certificates -
Gifts - If part of your cash to close, provide Gift Letter and proof of receipt of funds -
Based on information appearing on your application and/or your credit report, you may be required to submit additional documentation
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If you recently opened a new account that does not yet show on your credit report, you will need to provide a copy of the contract for the new account and/or an account statement -
If you are paying alimony or child support, include marital settlement/court order stating the terms of the obligation