Can I qualify for a VA loan?
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.
How do I "lock-in" my interest rate?
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.
How much insurance do I need on my home?
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:
1. The total combined loan amount
2. 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 received.
How much money do I need for a down payment and closing costs?
There are few 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 averages
3.5% of the loan amount. 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 options.
How will I know the amount of loan for which I qualify?
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.
What are "Cash Reserves"?
Cash Reserves are the funds a borrower has remaining
after their loan funds. The normal requirement could be monies equal
to two months of the mortgage payment. The amount of Cash Reserves
varies by loan program, but larger reserves are a strong compensating
factor.
What are income and debt ratios?
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.
What do I need to bring to closing?
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.
What does "loan to value" mean?
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%.
What if I am new on my job?
A new job can work in your favor when you apply for your
loan. Loan program guidelines look for a two-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 two-year work history.
What if I don't have any established credit?
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; however,
there are both government and conventional programs that will accept
this type of payment history to establish credit qualifications.
What if I have had credit problems in the past or have filed bankruptcy?
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 their credit
history. If you have any outstanding credit obligations that are of
concern, 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.
What is an 80/10/10 and an 80/15/5?
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.
What is Mortgage Insurance?
Mortgage Insurance protects 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%.
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.