FAQs from Home Buyers

Pre-qualification determines the loan amount you are likely to receive. But it is not a guarantee of approval, and it’s important to understand this implies no obligation on the part of the lender. Pre-qualification is obtained through an interview by a licensed loan officer who makes the determination. You’ll be given a letter with this information which you can present if you make an offer on a property.

The pre-approval process is far more thorough. You must submit a formal application, and your credit history and finances will be analyzed. A pre-approval certificate puts you in an even stronger position to close on a home quickly and negotiate with sellers. We highly recommend obtaining pre-approval before you shop for a home.

Yes! You can’t change the location of a home, you can change nearly anything else about one. Commute times, school districts, availability of amenities like parks -- you can only change these by buying a new house! Location should be considered just as important as the condition of a given property when you are evaluating one for purchase.

A few factors will be considered when you apply for a loan, including:

• Proof of income -- be sure to have copies of your pay stubs
• Tax information -- make sure you have your tax returns for the past two years
• Credit details -- Your credit history will be checked when you apply
• Debt documentation -- You will need to provide documentation of all your current financial commitments

Points are interest that you can pay up front. Doing so enables you to get a lower interest rate on both fixed-rate and adjustable-rate mortgages. The points charged to reduce the rate may depend on the type of loan. 1 point = 1% of the loan amount.

This is dependent on your situation. Consider:

• How much can you afford to pay up front?
• How long do you expect to be making payments on your mortgage?
• What’s the length of the loan, and how long do you plan to be in the home?

Many people who are looking for long-term mortgages pay points to reduce their monthly payments. Others, who are looking for shorter-length mortgages or who intend to resell their property within 5-7 years may consider not paying points.

Many people concentrate mainly on interest rates when shopping for a loan, but it’s really very important to work with a reputable mortgage broker. You need to consider the offered interest rate, closing costs, and most importantly the execution (mortgage broker’s ability to bring you to the closing table). A mortgage broker should be able to provide you with all the details for your loan in writing, including pre-approval. Family, friends and trusted professionals should be able to recommend a lender to you. If they’ve been happy with a lender, it’s reasonable to assume you will be as well. It’s also wise to check online reviews.

Additionally, make sure you understand the full cost of a loan, and all the terms. Be aware of pre-payment penalties, large down payment requirements, etc. These may outweigh the benefit of a low interest rate.

• Form 1003, the residential loan application
• Tax returns for the past two years, all pages
• W2s and/or 1099s for the past two years
• Two most recent pay stubs (if you are getting a direct deposit, please contact your HR department to get actual copies of your pay stubs)
• A copy of your Government ID
• If you own rental units, rental agreements and tax returns for the past two years
• Your last two bank statements, all pages, and the most recent statements for mutual funds, retirement accounts or stock accounts.
• Settlement agreements or divorce agreements if applicable
• Letter explaining how you will use refinance proceeds if you’re looking for a cash-out refinance.
• Non-citizens must present their Green Card, H-1 or L-1 Visa
• If you’ve ever filed for bankruptcy, provide a schedule of creditors, discharge notices.
• If this is your second loan, include the first mortgage note
• If you apply for refinancing and you pay a maintenance or common charges, provide a copy of it

For approval, we will analyze your credit, employment history, assets, the value of the property, your occupancy intent, and anything else relevant specifically to your situation.

Your FICO score tells creditors how likely you are to pay your debts. FICO and the credit reporting bureaus have their own methods of evaluation. But most credit scores are calculated by taking into account factors such as

• Payment history
• Employment history
• How long you’ve had credit
• Credit utilization vs available credit
• Derogatory credit items (collections, charge-offs, etc)

• Identifying information
• List of debts and accounts
• Bills sent to collection agencies, bankruptcies, suits, etc.
• Inquiries made on your credit in the past two years

It’s not always easy or quick to raise your credit score, but some things you can do include:

• Paying your bills on time -- avoid late payments
• Reduce your credit balances to improve the ratio of available credit to debt
• Avoid applying for credit frequently
• Establish credit history if you don’t have any

Yes. If you find an error in your credit report you should report it to the credit reporting agency and to the creditor that has erroneously reported something. You may want to consider working with a credit repair specialist to ensure that these errors are corrected.

You may want to move money around in the hopes of making yourself look like a better candidate for a loan, but it’s best not to do anything that could raise a red flag. Adding money from untraceable sources (i.e., cash) into your accounts is one such action that may cause problems.

Mortgage rates are tied to the basic rules of supply and demand. Factors such as inflation, economic growth, the Fed’s monetary policy, and the state of the bond and housing markets all come into play. Of course, a borrower's financial health will also affect the interest rate they receive, so do your best to keep yours as healthy as possible.

These are loans where you pay no points or fees up front, in exchange for a higher interest rate. The lender agrees to pay upfront costs. These are popular loans for first-time buyers who don’t have a lot of cash and cannot afford upfront fees. It’s also popular for refinancing. There’s no penalty for refinancing when interest rates drop (even if done multiple times in a year). They are also useful for people who don’t anticipate living in a home long-term. If the house will be resold within about five years, there is little downside to taking this type of loan. But for someone who will be living in a house long-term, the higher interest rate over time will cost them more money in the long run.

A rate lock is a lender’s promise to adhere to a specific interest rate/points for an agreed upon period of time until you close on your home. This protects you from unexpected interest rate increases. However, this works the other way, and if interest rates decrease you may not be able to benefit. Rate locks can vary based on loan program, interest rates, and the desired time period.

Yes. Lenders and investors sell pools of mortgages. If a new company buys your mortgage, it assumes all terms and conditions. The new lender can’t change your rate, payments or any other aspect of your agreement. All that changes is who you send your payments to.

You’re still obligated to make payments, and typically a lender going out of business sells all their mortgages to other lenders. The terms and conditions of your loan won’t change.

PMI is Private Mortgage Insurance, which protects a lender from the costs of foreclosure. If you can’t make a down payment of at least 20% you may be obligated by your lender to purchase PMI. By doing so, you can still have access to a mortgage, and the lender is protected in the event that you default on the loan. The larger a down payment you can afford, the lower your PMI cost will be.

Talk to your loan officer before doing so. Moving around a lot of money or suddenly increasing your debt to income ratio could have an adverse effect on your loan approval.

Talk to your loan officer if you think you’re going to have a change in employment. It’s best to have 2 years of steady employment and verifiable income when you apply for a loan.

It’s important to understand what condition a home is in before you buy it. It can also provide leverage in negotiation with sellers, in terms of lowering the purchase price or stipulating services in your contract.