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.

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.

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.

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 a loans.

Q.What is Private Mortgage Insurance?

A.Private Mortgage Insurance (PMI) is insurance for the Lender in case the borrower defaults on the mortgage and the property goes into foreclosure. PMI is placed on any conventional loan where the loan amount is greater than 80% of the sales price. PMI benefits the borrower by allowing him/her to put a smaller down payment on the home. Therefore the home can be purchased today rather than waiting until more money is saved up for a down payment of 20%.

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.

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.

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.

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.

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 you LTV would be 85%.

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. Cornerstone Mortgage Company 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 you projected closing date.