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Here are some answers to common mortgage questions: getting approvals, types of loans, closing costs, etc..
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Do's and Dont's with Your Credit During the
Home-Buying Process
When buying your next home, changes to your credit (additional accounts, closing
accounts, fluctuating credit card balances) can result in the lowering of your credit score. If your credit score changes, that can affect your interest rate and even the loan approval itself. Therefore, it is imperative that there are no major changes to your credit and information provided, during this process.
In order for your loan to reach final approval and fund, you'll want to adhere to the following:
1. DO NOT charge any new items on your charge cards (higher balances will lower credit scores).
2. DO NOT apply for any new charge cards or loans (new credit trade lines and credit inquiries can lower credit scores).
3. DO NOT buy or lease any new major purchases – especially cars, furniture, appliances, etc… (even "no interest" loans, as they appear as new credit trade lines and will affect your debt to income ratio).
4. DO NOT co-sign for anyone's loans for any reason.
5. DO NOT allow anyone to check your credit unless in the shopping process and even then, know the consequences (each inquiry may lower your credit score).
6. DO NOT change employment may result in loan denial.
7. DO NOT start any new remodeling jobs.
BUT....8. DO continue to make all payments on time
A new credit report will be pulled before closing to make sure no new credit has been established and any inquiries will have to be verified to that effect. Following these simple rules, will ensure a stress-free loan process from the standpoint of your credit report.
Financial FAQs
Pre-Approval versus Pre-Qualification What could be more comforting than the peace of mind that goes with knowing your mortgage is fully approved? You will have a greatly improved negotiating position when you are pre-approved for a mortgage. Sellers are more apt to negotiate with someone who already has a mortgage approval in hand. The pre-approval letter lets the seller know they are working with a serious buyer. A pre-approved buyer can also close on a property more quickly - another major consideration for a motivated seller. Obtaining a pre-approved mortgage is essential in a "sellers' market", or where supply is limited. Pre-approval uses basic information as well as electronic credit reporting. It is a true mortgage commitment, which means a commitment to financing your future home and an indication of the total mortgage amount available to you. Mortgage lenders can help you through the pre-approval process. Pre-qualification, on the other hand, is not a full mortgage approval, but an estimate of what you can afford. When you pre-qualify for a mortgage, the lender collects basic information regarding your income, monthly debts, credit history and assets, and then uses this information to calculate an estimated mortgage amount. Of the more than 50 different mortgage types available, the two largest categories are fixed-rate and adjustable rate mortgages, each with advantages to consider.
What types of mortgage programs are offered?Currently, there are over 50 different mortgage products available, including: 15-, 20- and 30-year fixed-rate loans, adjustable-rate loans, new construction financing, VA and FHA loans, 5- and 7-year balloon loans and many more.
Fixed-Rate Mortgage A fixed-rate mortgage is the traditional method of financing a home. The interest rate stays the same for the entire term of the loan (usually 15 or 30 years). Your payments are stable and predictable, but initial interest rates tend to be higher on a fixed-rate mortgage than on adjustable-rate loans. A subsequent buyer cannot usually assume a fixed-rate mortgage. Adjustable-Rate Mortgage (ARM) Interest on an adjustable-rate mortgage is linked to a financial index, such as a Treasury security, so your monthly payments can vary over the life of the loan, usually 25 to 30 years. Most ARMs have a lifetime cap on the interest rate increase to protect the borrower. The lower initial
payments on ARMs make it easier for buyers to qualify. Some ARMs may be converted to fixed-rate mortgages at specified times, usually within the first five years.
How long does it take to process a mortgage application?Usually about 45 to 60 days, although it can take as few as seven days and as long as 90 days for some transactions. The actual time depends on how quickly the lender can get an appraisal of the property, a credit report and verification of employment and bank accounts. What documents will I have to provide?Be prepared to provide verification of income (including a pay stub and recent tax returns), bank account numbers and details on your long-term debt (credit cards, auto loans, child support, etc.). If you're self-employed, you may also be required to provide financial statements for your business. In recent years, lenders have been required to obtain more specific information from borrowers in order to package and sell loans to investors. If you were lending someone such a large amount of money, you'd want detailed financial information.
It will save time if you have the following items available: • W-2 forms for the last two years • Federal tax returns for the last two years • Last two months' bank statements • Long-term debt information (credit cards, child support, auto loans, installment debt, etc.)
Could anything delay approval of my loan?If you provide the lender with complete, accurate information, everything should go smoothly. You may face a delay if the lender discovers credit problems - a history of late payments or nonpayment of debts, or a tax lien. You may then be required to submit additional explanations or clarifications. You should also be sure to notify your lender if your personal or financial status changes between the time you submit an application and the time it's funded. If you change jobs, get an increase (or decrease) in salary, incur additional debt or change your marital status, let the lender know promptly. You may be delayed if the home you selected fails to appraise for the agreed-upon purchase price.
Repairing Past Credit Problems Have you had situations in the past that have put blemishes on your credit? There are many reasons why credit problems occur. Some explanations are: • You allowed someone else to use your credit cards • You were a co-signer on a loan that wasn't paid on time • You may have thought your spouse paid the bill • You are divorced, but your former spouse has credit problems
It is in your best interests to keep your credit report in good standing. Here are some helpful hints for your credit report: • Never go over 90 days past due on any accounts • Keep your credit card debt below 50% of your monthly obligations • If paying bills after the due date, always pay within the grace period
What's included in my house payment?Principal and interest on your loan. Depending on the terms of your loan, the payment also may include hazard (homeowners) insurance, mortgage insurance and property taxes. Can I pay those other things separately?Not if it's a FHA- or VA-insured loan. With most other loans, you can pay your own taxes and insurance if you’ve borrowed no more than 80% of the purchase price or appraised value of your home. Check with your lender to be sure. What do the closing costs include?Closing costs cover processing and administration of your loan. In addition to a loan fee, you'll usually be asked to prepay interest charges plus pro-rated property taxes, hazard insurance and mortgage insurance to cover the partial month in which you close. When do my mortgage payments start?Usually about 30 days after closing. The actual date of your first payment will be included in your closing documents. EX: If you settle October 31, your first mortgage payment would begin on December 1. Mortgages are paid in arrears, which means that December's mortgage payment covers the month of November.
Licensed by the Pennsylvania Department of Banking, an Equal Housing LenderNMLS ID 134407
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Christopher BlouchSr. Mortgage ConsultantNMLS ID [email protected]
Opening the doors to home ownership
Licensed by the Pennsylvania Department of Banking, an Equal Housing LenderNMLS ID 134407
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