Mortgage FAQ's

How Much Home Do I Qualify For?
Once you provide additional information and let the company run your credit report and verify your income and assets, your loan application will be submitted to the underwriting department for a full credit approval. If you have a copy of your report you can let them know. As a precursor you can estimate your credit score on this site.

What is PITI ?
PITI is a popular term in the mortgage industry that means principal, interest, taxes, and insurance. These are the factors that make up your monthly mortgage payment to the lender. PITI is part of the financial analysis to calculate your income and other expenses along with your ability to repay the mortgage.

What are Discount Points ? Discount points are used lower the interest rate in the form of front fees paid to the lender. A discount point is equal to 1% of the loan amount

What are Debt to Income Ratios?
Your debt ratio is your total monthly housing expense along with any recurring debts, such as monthly minimum auto loan payments, credit card payments and other loan payments, divided by your income. Your income ratio is your total monthly housing expense divided by your gross monthly income. As a rule of thumb, conventional underwriting recommends a maximum of 28% for your income ratio and 36% for your debt ratio. However, these ratios could be different dependent on your down payment amount.

What are "Cash Reserves?"
The funds you have available after your loan closes are called cash reserves. They demonstrate your ability to repay your loan. There are different cash reserve requirements for all the different types of loan programs out there. Larger cash reserves can be an advantageous compensating factor, as they are a sign of your ability to maintain your mortgage payments.. Cash reserves can come in the form of cash, stocks, bonds or investments based on your loan program.

What is mortgage insurance?
Mortgage insurance insures lenders in the event of a foreclosure by the borrower. It permits lenders to offer loans which they would not consider. Mortgage insurance is usually required if the down payment is under 20-percent.

What does "loan-to-value" mean?
Loan-to-value (LTV) is the amount of the loan divided by the lesser of the sale price or appraised value. If you pay 15% of the total cost of the home as a down payment, you would only need to borrow 85% of the total sales price. Therefore, your LTV would be 85%.

How do I "lock in" my interest rate?
Your Loan Consultant may be able to lock in the interest rate quoted to you over the telephone during the approval process. You will be provided with a written Interest Rate and Price Agreement, which contains the interest rate and terms of the loan, as well as the period of time for which the rate is locked. This period can span from 10 up to 60 days, depending on your estimated closing date.

How much money do I need for a down payment ?
Your Loan Consultant will work closely with you, taking into account your financial goals and objectives, to structure the most advantageous home loan for your needs. Helping you determine how much you need for your down payment to fulfill the requirements for your individual situation is one of the multiple items your Loan Consultant will set out to do. The down payment rests mainly on your credit score, income and what you qualify for.

What if I recently changed jobs?
While loan program guidelines look for a two-year job history within the same field, a change to a better position is considered favorable. If you are a recent college graduate, you may be able to secure a loan even without a two-year work history.

Can I qualify for a mortgage even if I had past credit problems?
Of course, a person can still qualify, since past credit problems means that you fixed the payment problem and that shows responsibility. Past credit problems don't necessarily equate to being a bad credit risk currently. With that being said, credit problems, including bankruptcy, foreclosure or a short sale will be reviewed in depth to determine if they can give you a mortgage today and the interest rate and terms offered on any purchase loan. Keep in mind that a less than stellar credit score, even at 580, may still get you into a home with an FHA loan.

What are VA loans and Can I Qualify for a VA loan?
VA loans are for veterans and active duty military members who meet specific guidelines, They do not require a down payment and are guaranteed by the Veteran's Administration. In certain situations, all or part of the closing costs are paid by the seller at their discretion which permits the eligible veteran to buy a home with little or zero money down.

To see if you qualify for a VA loan, obtain a form 1880 from your Loan Consultant. Once you have completed the form, take the form 1880 along with your DD form 214 to your local VA office to confirm if you are eligible or not for VA financing.

Will my spouse's poor credit history hurt me ?
Yes it could. If you can do so and your income is sufficient, you may want to get a mortgage using just your name. However, your spouse will still have to sign closing documents so be sure they are comfortable with that arrangement.

What are 80/10/10 and 80/15/5 loans?
An 80/10/10 is a loan method that permits for an 80% first loan, a 10% second loan and a 10% down payment. Usually, when a borrower pays less than 20% for a down payment, they are required to pay for mortgage insurance. The 80/10/10 gives the borrower 90% financing and separates the loan amount into two loans which avoids the need for mortgage insurance. In a similar scenario, an 80/15/5 is an 80% first loan, a 15% second loan and 5% down payment.

What do I need to bring to closing?
The closing usually happens at the escrow offic, your home, attorney's office if on east coast, or at the title company, and you and any other borrower in the mortgage agreement need to bring a current driver's license. In addition, any funds still outstanding have to be in the form of either a wire transfer or a cashier's check paybale to the title company.

What is the Annual Percentage Rate on my Truth in Lending Document?
The Annual Percentage Rate (APR) is the cost of your credit expressed as an annual interest rate. Points and other prepaid finance charges are factored into the APR to show the true yield on the loan, which is why the APR is often higher than your note rate. The APR can be compared to the APR on other loan programs to give you a consistent means of comparing rates and programs.

I am self-employed. What documentation do I need to get a mortgage?
You will need to present quite a bit of documentation. It will consist of 2 years of personal income tax returns, (if you are incorporated 2 years business income tax returns), a current profit and loss statement, a current assets & liabilities sheet, and a personal credit report. Some lenders may ask for a even more documents. Keep in mind that it is considerably more cumbersome to gain insight into your credit history when the mortgage lender is not able to easily look at your pay stubs like they do with an employee.

Is there anything I should avoid before and during the loan process?
It is best to talk to your Loan Consultant about your individual situation, but here are some things to avoid prior to and during the home financing process until you can get professional mortgage guidance.
1. It is best to get preapproved then look for a new home.
2. Have the following documents available during the loan process, your bank statements, pay stubs, W-2 forms, and 1040 tax returns,
To prevent confusion or hurt your ability to get a loan during the process avoid the following:
1. Do not suddenly pay off your debts.
2. Do not apply for new credit cards.