Mortgage Frequently Asked Questions
How much money do I need in hand to buy a house?
Usually, the purchase of a house requires a minimum down payment of 3% to 5%, plus the funds to cover closing costs, prepaids, escrow, and two payments in reserve. In the case of a FHA Loan, the down payment must be the borrower's own money. Closing costs, prepaids, and reserves can be a gift or loan from a relative.
What are "closing costs" and "prepaids"?
Closing costs are the charges and fees that are paid at closing. Some of these are paid to third parties for survey fees, courier costs, etc. Prepaid expenses include prepaid interest, homeowners insurance, real estate taxes and private mortgage insurance (if the loan to value exceeds 80%). Generally, two months taxes and insurance are also collected and placed in escrow.
How long will it take to process my loan?
Once you have given us all necessary information, you can expect to have your loan processed in 2-3 weeks. FHA Loans, however, can take 30 to 45 days.
What happens when I lock in an interest rate?
You have the option to lock in an interest rate any time during loan processing. If the loan does not close and fund within the lock in period and the rates go up, you will close at the higher rate. If the rates go down, you will close at the locked in rate.
What is "APR" and why is it different from my interest rate?
Your interest rate, commonly called the note or base rate, is the rate used calculate your monthly payments. The Annual Percentage Rate (APR), is the total yearly cost of a mortgage. It is stated as a percentage of the loan amount which includes the base interest rate, mortgage insurance, loan origination fees, points and certain other expenses (if any).
Common homebuying mistakes
Buying a new home can be easy as pie, but it can also seem difficult if you don't follow all the rules. Here's a few common mistakes to avoid:
Not bringing the proper documents to closing.
Cashiers checks are required for funds needed to close. You make the cashiers check payable to the title company or the closing agent. Some lenders require the check to be payable to yourself, to be endorsed at the closing table. Personal checks or credit cards are NOT acceptable. You must also have proof of home owners insurance.
Failure to document gift funds properly.
Gift funds are an acceptable source of funds, in some cases. But you MUST properly document them. Get the gift funds from the donor and copy the certified check along with proof of deposit into your account.
Not understanding the terms of the sales contract.
One of the benefits of working with a real estate professional is that they can explain the details of the contract to you. If you are not working with a real estate professional, an attorney can explain the contract provisions that are not clearly understood.
Attempting to close the sale too soon.
Don't try to close on your loan before construction is complete when building, or prior to repairs being finished when purchasing an existing property. Generally, work must be completed whether it's for construction or repairs. This is determined by final inspection.
Failing to provide loan officer with the information they have requested in a timely manner.
Loan officers and processors often have to make multiple requests for required information from the borrower to complete their file. If you don't provide the documents, it will only extend the processing time of the loan and possibly delay the closing.
Failing to completely disclose information on the initial application.
Without a complete picture of your financial position, a lender may not able to make a lending decision that would be in your best interest. So, fill out the application completely. And don't be afraid to ask you loan officer for assistance.
Lacking liquid funds to close.
All funds used in a mortgage transaction must be documented and verified. No borrowed funds are allowed, except when secured by collateral.
Making large installment/Credit purchases.
Be careful not to buy a lot of big ticket items for things such as furniture, automobiles, or appliances, prior to closing. These purchases could change your financial picture, and may effect your ability to qualify for the home you want. Check with your loan officer.
Not making an appointment to visit with a mortgage loan officer.
It is vital to make an appointment to visit a loan officer to insure that you are given the best possible service. Be prepared for the interview by reviewing the questions you have in advance. You may even want to make a list of question you want to ask.
Prequalify before meeting with a real estate agent.
This is an important step. It assists the real estate professional in guiding you to homes in your price range.
Buying more home then is comfortably affordable.
Be realistic about your budget and the kind of lifestyle a higher housing payment could require.
Don't shop lenders by rate only.
Request a good faith estimate so you can compare other fees between lending institutions. And remember to ask what investor the loan going to and who will be servicing it.