MORTGAGE FAQs
Here are some of the most frequently asked questions.
New to the mortgage process and have questions? While a loan advisor is always available to answer your questions, here are some frequently asked questions from borrowers that might help.
A prequalification is a getting a general idea of how much loan you can afford. It often relies self-reported information from the prospective borrower pertaining to credit, income, and assets. A pre qualification is less reliable than a preapproval. To obtain a preapproval, your credit, income, and asset information will be verified by requesting and reviewing documentation, and the information is validated by an automated underwriting system.
While completing a prequalification is a good first step in the process, a preapproval shows real estate agents and home sellers that you are both serious and qualified to make a purchase.
PMI, or private mortgage insurance, is a type of mortgage insurance that may be required if you have a conventional loan. PMI protects the lender—not you—in the event you stop making payments on your loan. In general, for loans without 20% down payment or 20% equity, PMI is required.
The annual percentage rate (APR) is a measure of the cost of borrowing money. The APR is often higher than the the quoted interest rate, as it expresses the interest rate, any points, mortgage broker fees, and other various charges that you pay to get the loan. The interest rate is simply the cost you will pay each year to borrow the money, expressed as a percentage.
While each loan is different and may require more or less documentation, the standard items we will need to process your loan include:
- A copy of each applicant’s photo ID and, if not a U.S. citizen, a copy of the green card or work visa
- Income documentation for wage earner applicants to include most recent 30-days paystubs & most recent year’s W-2(s).
- Income documentation for self-employed to include most recent two-years tax returns. Business tax returns may be required, as applicable.
- Assets documentation to include most recent two-months bank statements for all accounts needed for down payment funds and reserves.
- If you own any rental property, current signed rental agreement for each property
- Mortgage statement(s) for all real estate property owned.
- Copy of property tax bill and homeowner’s insurance declarations page for any real estate owned (if not escrowed).
- Copy of most recent homeowner’s association (HOA) bill or coupon for all real estate owned, if applicable. A letter to the contrary will be required if there is no mandatory HOA on any property.
- Contact information for homeowner’s insurance agent/company on subject property.
During the processing of your loan, we rely on information from you, the applicant, as well as outside sources (employer, credit bureau, etc.). It is important that we receive all necessary information at the time of application and that there are no major changes during the processing of the application. Any changes or newly acquired information after application could change the terms or outcome of your mortgage offer and potentially even lead to denial of your application. If you are unsure how something may impact your loan approval, contact your loan officer or processor to discuss.
- DO disclose any debts you may owe that may not be on your credit report (IRS payments, child support, alimony, etc.).
- DO NOT apply for or open new credit (this includes voluntary credit checks)
- DO NOT make any major purchases prior to closing (e.g., furnishing your new home)
- DO NOT co-sign a loan or credit card for anyone.
- DO NOT open or close any existing credit or bank accounts.
- DO NOT stop paying your bills or get behind on your bills, even your mortgage if you are refinancing.
- DO NOT quit or change your job.
- DO save your money until after closing. You will need to have enough money documented for down payment, closing costs, and possibly payment reserves.
- DO NOT borrower money or deposit money in amounts larger half of your monthly income. If you must, be sure to keep a paper trail to document the source and deposit.
- DO NOT deposit large sums of cash into your bank account. Any deposit larger than half of your monthly income or excessive deposits may be subject to further review.
Closings generally take place at an attorney’s office or title company. Each borrower on the loan must take a valid photo ID to closing. Any money required for closing will need to be a wire transfer (contact your loan advisor or closing agent for details) or certified funds payable to the law firm or title company. It’s always helpful to take a checkbook in case of any incidental changes. Your loan advisor will notify you in advance if any other items are required.
While having good credit may help you get a better interest rate, imperfect credit, bankruptcy or foreclosure does not necessarily prevent you from getting a mortgage. Talk to a loan advisor to discuss the details of your situation.
Simply stated, reserves are the amount of money you have left in your bank account(s) after your loan closing. Some loan programs require verification of reserves in addition to funds needed for closing, as it impacts your perceived ability to make payments. Your loan advisor will discuss the requirements with you during the application process, if applicable to your loan.
