Frequently Asked Questions

A point is a percentage of the loan amount.  1 point = 1% of the loan.  1 point on a $100,000 loan is $1,000. Points are either origination points or discount points.  Origination point fees are paid directly to the originating company, broker or lender, as a fee the company charges to complete your transaction.  Discount point fees are used to lower the interest rate on a mortgage loan or to buy the rate down.

It depends on how long you plan to stay in the home or keep the new loan.  We'll show you break-even analysis to determine when it makes sense to pay discount points to buy the rate down.  Paying discount points to lower the loan's interest rate lowers your monthly loan payment, and possibly increases the loan amount you can afford to borrow. However, if you plan to stay in the property for only a year or two, your monthly savings may not be enough to recoup the cost of the discount points that you paid up-front.

The annual percentage rate (APR) is an interest rate reflecting the cost of credit. This rate is likely to be higher than the stated note rate because it takes into account points and other credit costs. The APR prevents lenders from advertising a low rate and hiding fees.

The APR does not affect your monthly payment. Your monthly payments are strictly a function of the interest rate and the term of the loan.

Because APR calculations are affected by the various different fees charged by lenders, a loan with a lower APR is not necessarily a deal. The best way to compare loans is to ask the loan officer for a LOAN ESTIMATE or LE.  The LE is an estimate of loan costs on the same type of program (e.g. 30-year fixed) at the same interest rate. Pay attention to the loan fees. The lender that has lower loan fees has a cheaper loan than the lender with higher loan fees.

The following fees are generally included in the APR:

• Points - both origination and discount points
• Pre-paid interest. The interest paid from the date the loan closes to the end of the month.
• Processing fee
• Underwriting fee
• Document preparation fee
• Private mortgage-insurance
• Escrow or closing fee

The following fees are normally not included in the APR:

• Title or abstract fee
• Borrower Attorney fee
• Home-inspection fees
• Recording fee
• Transfer taxes
• Credit report
• Appraisal fee

Mortgage rates change day to day and sometimes change multiple times a day depending on market volatility.  Lenders allow the borrower to "lock-in" the interest rate guaranteeing that rate for a specified time period.  Rate locks are generally available for 30, 60, 90 days.  Longer locks are available and require a deposit from borrower up-front.

Below is a list of documents that are required when you apply for a mortgage. However, every situation is unique and you may be required to provide additional documentation. So, if you are asked for more information, be cooperative and provide the information requested as soon as possible. It will help speed up the process.

Your Property

• Copy of signed sales contract including all riders
• Verification of the deposit you placed on the home
• Names, addresses and telephone numbers of all realtors, builders, insurance agents you use
• Copy of Listing Sheet and legal description if available (if the property is a condominium please provide condominium declaration, by-laws and most recent budget)

Your Income

• Copies of your pay-stubs for the most recent 30-day period and year-to-date
• Copies of your W-2 forms for the past two years
• Names and addresses of all employers for the last two years
• Letter explaining any gaps in employment in the past 2 years
• Work visa or green card (copy front & back)

If self-employed or receive commission or bonus, interest/dividends, or rental income:

• Provide full federal tax returns for the last two years - please provide complete tax return including attached schedules and statements. If you filed an extension, supply a copy of the extension.
• Provide 1099s and K-1's for all partnerships and S-Corporations for the last two years (please double-check your return. Most K-1's are not attached to the 1040.)
• Completed and signed Federal Partnership (1065) and/or Corporate Income Tax Returns (1120) including all schedules, statements and addenda for the last two years. You're considered self-employed if your ownership interest is 25% or greater.

If you will use Alimony or Child Support to qualify:

• Provide divorce decree/court order stating amount and proof of receipt of funds for last 6 months

If you receive Social Security income, Disability or VA benefits:

• Provide award letter from agency or organization

Source of Funds and Down Payment

• Sale of your existing home - provide a copy of the signed sales contract on your current residence and statement or listing agreement if unsold (at closing, you must also provide a settlement/Closing Statement)
• Savings, checking or money market funds - provide copies of bank statements for the last 2 months
• Stocks and bonds - provide copies of your statement from your broker or copies of certificates
• Gifts - If you'll receive a gift, PLEASE LET US KNOW RIGHT AWAY!  Gift funds need to be documented properly.  We'll walk you through that process.
• Based on information appearing on your application and/or your credit report, you may be required to submit additional documentation

Debt or Obligations

• Include all names, addresses, account numbers, balances, and monthly payments for mortgage holders and/or landlords for the last two years
• If you are paying alimony or child support, include marital settlement/court order stating the terms of the obligation

Credit scoring is a system creditors use to help determine whether to give you credit. Information about you and your credit experiences, such as your bill-paying history, the number and type of accounts you have, late payments, collection actions, outstanding debt, and the age of your accounts, is collected from your credit application and your credit report. Using a statistical program, creditors compare this information to the credit performance of consumers with similar profiles. A credit scoring system awards points for each factor that helps predict who is most likely to repay a debt. A total number of points -- a credit score -- helps predict how creditworthy you are, that is, how likely it is that you will repay a loan and make the payments when due.

The most widely use credit scores are FICO scores, which were developed by Fair Isaac Company, Inc. Your score will fall between 350 (high risk) and 850 (low risk).

Your credit report is an important part of many credit scoring systems, it is very important to make sure it's accurate before you submit a credit application. To get copies of your report, contact the three major credit reporting agencies:  Equifax, Experian, Trans Union.  OR you are entitled to receive one free credit report every 12 months from each of the credit reporting agencies.  This free credit report may not contain your credit score and can be requested from https://www.annualcreditreport.com

Credit scoring models are complex and often vary among creditors and for different types of credit. If one factor changes, your score may change -- but improvement generally depends on how that factor relates to other factors considered by the model. Only the creditor can explain what might improve your score under the particular model used to evaluate your credit application.

Nevertheless, scoring models generally evaluate the following types of information in your credit report:

• Have you paid your bills on time? Payment history typically is a significant factor. It is likely that your score will be affected negatively if you have paid bills late, had an account referred to collections, or declared bankruptcy, if that history is reflected on your credit report.
• What is your "Utilization Ratio"? Many scoring models evaluate the amount of revolving debt you owe compared to your credit limit, called your "utilization ratio".  Having a high utilization ratio on revolving debts (e.g., credit cards, lines of credit, store cards, etc) can have a negative effect on your credit scores. 
• How long is your credit history? Generally, models consider the length of your credit track record. An insufficient credit history may have an effect on your score, but that can be offset by other factors, such as timely payments and low balances.
• Have you applied for new credit recently? Many scoring models consider whether you have applied for credit recently by looking at "inquiries" on your credit report when you apply for credit. If you have applied for too many new accounts recently, that may negatively affect your score. However, not all inquiries are counted. Inquiries by creditors who are monitoring your account or looking at credit reports to make "prescreened" credit offers are not counted.
• How many and what types of credit accounts do you have? Although it is generally good to have established credit accounts, too many credit card accounts may have a negative effect on your score. In addition, many models consider the type of credit accounts you have. For example, under some scoring models, loans from finance companies may negatively affect your credit score.

To improve your credit score, concentrate on paying your bills on time, pay down outstanding balances to improve utilization ratio, and don't apply for or add new debt.

An Appraisal is an opinion of a property's fair market value. It's a document generally required (depending on the loan program) by a lender before loan approval to ensure that the mortgage loan amount is not more than the value of the property. The appraisal is performed by an "Appraiser" - a state-licensed professional who is trained to render expert opinions concerning property values, its location, amenities, and physical conditions.

On a conventional mortgage, when your down payment is less than 20% of the purchase price of the home mortgage lenders usually require you get Private Mortgage Insurance (PMI) to protect them in case you default on your mortgage.

The property is officially transferred from the seller to you.

At closing, the ownership of the property is officially transferred from the seller to you. This may involve you, the seller, real estate agents, your attorney, the lender’s attorney, title or escrow firm representatives, clerks, secretaries, and other staff. Closing can take anywhere from 30 minutes to an hour, or more.  Typically, refinances take about 30 minutes and purchases take about 1 hour.

Prior to closing you should have a final inspection, or "walk-through" to ensure requested repairs were performed, and items agreed to remain with the house are there such as drapes, lighting fixtures, etc.

The settlement is completed by a title or escrow firm.  You provide required funds due at closing in the form of a cashier's check or wire so the firm can make the necessary disbursement. We'll make sure you know exactly what you need (cashier's check/wire and amount) before closing.