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Q.How
will I know how much I can qualify for?
A.Becky or Dixie can work with you to get you qualified BEFORE
you look for a home. Based upon information you present
to Becky or Dixie 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 Becky or Dixie 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 downpayment.
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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. Becky or Dixie 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, Becky or Dixie
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.Becky or Dixie 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:
a) The total combined loan amount
or
b) The replacement cost on the appraisal
Because you may begin shopping for homeowner's insurance
before the appraisal is in, it may be necessary to begin
gathering quotes with a minimum dwelling coverage of the
combined loan amount. You will be notified of the
replacement cost once your appraisal is in.
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Q.What
is the Annual Percentage Rate on my Truth in Lending Document?
A.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.
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