Home Purchase FAQs

When evaluating real estate, location plays a critical role. It is essential to consider factors such as the crime rate, public school ratings, daily commute times to nearby cities, as well as the proximity to local amenities such as parks, libraries, swimming pools, sports arenas, churches, restaurants, and shopping centers. These factors influence the price valuation of real estate. Therefore, it's crucial to consider the location as much as the condition of the property when making a purchase decision.

• Proof of Income – Find and make copies of your pay stubs.
• Tax Information – Gather your W-2s, 1099s, and tax returns for the last 2 years. If you’re self-employed or an independent contractor, you’ll be required to provide your 1099-MISC information.
• Credit Details – We’ll perform a credit check when you apply.
• Debt Documentation – You’ll be required to provide documentation on your outstanding financial commitments. Gather materials on your current mortgage, car loans, student loans and any other debts.

It depends on your particular situation. Three major factors should be considered when deciding whether to pay points:

1. How much you can afford to pay upfront?
2. How long do you expect to make payments on your mortgage?
3. What is the length of your loan, and how long do you plan to live in the home?

Many people looking for a long-term mortgage opt to pay points to ease their monthly payments. People looking at a mortgage with a shorter term or looking to stay in the home for a shorter period of time often opt to make a larger down payment instead of paying points.

When selecting a mortgage, it’s not always the interest rate that should be your main focus. It’s also important to do business with a trustworthy and reputable lender who can provide you with all the details of your loan in writing, including pre-approval. You can ask for recommendations from friends and family members, as their feedback may be more thorough and reliable than online reviews.

It’s essential to ensure that you fully comprehend the entire loan cost and feel comfortable with the terms. For instance, pre-payment penalties, large down payment requirements, or larger monthly payments can make the loan less ideal, regardless of the interest rate.

• Form 1003 — The residential loan application — including the attached Fair Lending notice, loan info sheet, and credit authorization. Note: Do not use whiteout on this paperwork. Mistakes should be crossed out and initialed.
• Copies of W-2s or tax returns for the previous 2 years.
• If you own rental units, provide the most recent rental agreement and tax returns for previous 2 years.
• Your last 3 bank statements along with the most recent statements for any mutual funds, IRA/401(k), or stock accounts.
• Settlement agreement and divorce decree (if applicable).
• Letter explaining how you plan to utilize refinance proceeds if you’re seeking a cash-out refinance.
• Non-U.S. citizens must present their Green Card or H-1 or L-1 visa.
• If you’ve filed for bankruptcy, present a schedule of creditors, discharge notice, and filing.
• If you’re applying for a second loan, include the first mortgage note.

These documents may not be all-inclusive, but by having these on hand, you will expedite the application.

nce you have chosen a loan and submitted an application, the approval process commences. The approval process involves verifying your credit score, employment history, assets, property value, and any other information required based on your individual circumstances.

FICO stands for Fair Isaac Corporation. This company is a pioneer and leader in credit scoring. Your FICO score is a number that tells creditors how likely you are to pay off your debts.

FICO and the credit bureaus do not disclose their exact computation methods. However, most credit scores are calculated through models that assign points to different factors of your credit history to best predict future performance. There are many commonly analyzed factors in your credit history, including:

• Payment history
• Employment history
• How long you have had credit
• How much credit you have used compared to how much you have available
• How long you’ve lived at your current residence
• Negative credit/financial events such as collections, bankruptcies, charge-offs, etc.

• Identifying information — Social Security number, date of birth, employment information (these facts are not determining factors in credit scoring)
• A list of debts — how many credit lines have been opened and closed, types of credit lines, a history of how you’ve paid them, loan limits, and current balances
• Public record information — bills referred to collection agencies, bankruptcies, foreclosures, suits, liens, etc.
• Inquiries made about your creditworthiness during the last two years — voluntary and involuntary inquiries.

Raising a credit score is not always easy and not something that can be done overnight. There are several credit best practices that will raise your rating over time:

• Pay your bills on time. This is extremely important. Collections and late payments can lower your credit scores.
• Reduce your credit balances. Maxed out credit cards will lower your credit score.
• Don’t apply for credit often. This reflects poorly on you and your rating.
• Establish credit history.

Yes, errors and fraud should be reported to both the credit reporting agency that provided the report with the error or fraud, as well as the creditor that provided the erroneous or fraudulent information to the credit reporting agency. At this time, Experian and Equifax are only accepting disputes via their online forms. TransUnion handles disputes by phone, standard mail and an online form. We have provided you with information below to access these agencies per myFICO.com.

Equifax:
Visit Equifax: https://www.ai.equifax.com/CreditInvestigation/home.action

Experian:
Visit Experiam: http://www.experian.com/rs/fi4.html

TransUnion:
TransUnion Disputes
2 Baldwin Place, P.O. BOX 1000
Chester, PA 19022
1-800-916-8800
Visit Transunion: https://www.transunion.com/credit-disputes/dispute-your-credit

It may seem like a good idea to transfer funds between accounts to demonstrate financial stability, but this is not a recommended practice. Lenders take into account all aspects of your income when evaluating your loan application, so it's important to avoid any financial actions that could affect your eligibility, such as transferring money from unverifiable sources into your accounts. Moreover, it's advisable not to change jobs during the home loan process as stable employment is a factor in loan qualification. Finally, making significant purchases like buying a car, appliances, or furniture can adversely affect your loan outcome.

The fluctuation of interest rates is linked to the market's supply and demand dynamics. When there is a high demand for loans, interest rates tend to rise to capitalize on a thriving market. Conversely, when there is a low demand for mortgages, interest rates tend to decrease to lure in new clients.

Another factor that significantly affects mortgage rates is inflation, which is typically linked to a growing economy. As the economy expands, prices for goods and services rise, thereby impacting the real estate sector, causing an upswing in the price of mortgages.

Lastly, the Federal Reserve has the power to influence interest rates to manage inflation and employment levels. It can achieve this objective by adjusting the discount rate and indirectly steering the Federal funds rate.

A zero-point/zero-fee loan, as the name implies, is a type of loan where you do not pay any fees or points upfront. In exchange for no upfront costs, you agree to pay a higher interest rate. This loan option is quite popular among first-time homebuyers who may have limited cash and want to reduce upfront expenses. It is also a popular option for people who wish to refinance their homes. Since there are no fees, there are no penalties for refinancing, even if you refinance multiple times in a year, especially when interest rates drop.

Zero-point/zero-fee loans are particularly beneficial for people who do not plan on staying in their homes for an extended period. If you intend to move within five years, this loan option has few drawbacks. However, if you plan on staying in the home for a long time, you may end up losing money over time by paying a higher interest rate.

A mortgage rate lock is a promise to you from the lender to hold a specific combination of an interest rate and points for an agreed upon time (typically 10, 15, 30, 45 or 60 days) until you can close on your home. Locking in a rate protects you from unforeseen interest rate increases that can occur in the days or weeks leading up to closing, but conversely, if the rates fall, you may not be able to take advantage of the lower rates.

Rate locks are dependent on the type of loan program, current interest rates, points, and the length of the lock. To hold a rate for longer periods of time, you usually have to agree to pay higher points or interest rates.

Yes. There is an active secondary mortgage market where pools of mortgages are bought and sold by lenders and investors. If another company acquires your mortgage, it takes over all the existing terms and conditions of the agreement. It's important to note that the new lender cannot alter any aspect of the agreement, such as the interest rate or payment schedule. Your only responsibility would be to send payments to the new loan servicer.

In this instance, you’re still obligated to make payments. Usually, a lender that goes out of business is forced to sell their mortgages to other lenders. The terms and conditions will not change, but you will have to send payments to the new loan servicer.

Private mortgage insurance (PMI) protects the lender from the costs of foreclosure. You may be obligated to purchase PMI if you can’t make a sufficient down payment of at least 20%. By purchasing PMI, you will have access to a mortgage without having to make a large down payment, and the lender is insured in the event that you default on the loan.

The price of PMI is inversely proportional to the size of your down payment. The larger your down payment, the lower the cost of PMI will be.

Talk to your loan officer before making a large purchase. Moving money around in your accounts or increasing your debt to income ratio could affect your loan.

Talk to your loan officer if there is going to be a change in your employment. It’s best to have steady employment for at least 2 years and verifiable income when applying for a loan.

Inspections are important to understand the condition of the home. They can also be helpful when it comes time to negotiate with the sellers, in terms of lowering the price of the home, or adding service stipulations to the contract.