MORTGAGE INFORMATION

Getting pre-approved before you apply for a loan can help you understand how much you can borrow. When buying a home, you may be pre-qualified or pre-approved. Pre-qualification is not as useful as pre-approval. Pre-approval can be done over the phone or in person. It requires a more rigorous process, including verification of your credit, income, assets and liabilities. It is highly recommended that you be pre-approved before you start looking for a home. Being pre-approved will:
  1. Inform you of your maximum affordable home value, and save you from previewing properties outside your price range.
  2. Put you in a stronger negotiating position with the seller, because the seller will know your loan is pre-approved.
  3. Help you close quickly, since your loan is pre-approved.

Compare Loan Programs

What loan program is best for your situation? Lenders offer many different loan options:
  1. Think about how long you plan to keep the loan. If you plan to sell your home in a few years, you may want to consider an adjustable rate or balloon loan. If you plan to keep your home for a longer time, you may want to consider a fixed rate loan.
  2. Compare different loan programs. With so many programs to choose from, it's hard to figure out which program is best for you. Consult an experienced loan officer who can help you find a loan program that best fits your short- and long-term plans.
To improve your chances of getting a loan approval:
  • Respond promptly to any requests for additional documents. This is especially critical if your rate is locked or if you plan to close by a certain date.
  • Do not make any major purchases. Do not buy a car, furniture or another house till your loan is closed.
  • Anything that causes your debts to increase might have an adverse affect on your current application.
  • Do not move money into your bank accounts unless it can be traced. If you are receiving money from friends, family or other relatives, please contact us.
  • Do not go out of town around the closing date. If you do plan to be out of town when your loan is expected to close, you may sign a power of attorney, to authorize another individual to sign on your behalf.
  • Notify your loan officer before applying for any other credit, including credit cards, personal loans or even with another mortgage company. Some loan programs have strict guidelines regarding your credit score. Credit inquiries may lower your credit score and may have an adverse affect on your loan approval.

Required Documentation

A properly documented loan application makes your loan process go smoothly. This checklist will help you gather your paperwork.
  1. Complete and sign the residential loan application, Form 1003, and the attached loan info sheet, credit authorization and fair lending notice.
  2. If you are salaried: provide W-2's for the previous two years and one month of paystubs. If you are self-employed, provide tax returns for the previous two years, including all schedules, and a YTD profit and loss statement. (Note: provide copies of all requested documents. Do not provide original documents.)
  3. If you own rental property, provide recent rental agreements and tax returns for the previous two years, including all schedules.
  4. To speed up the approval process, provide bank statements for the most recent three months, and recent statements for stock, mutual funds and IRA/401K accounts.
  5. If applicable, provide a copy of your divorce decree and settlement agreement.
  6. If you are NOT a US citizen, provide a copy of your green card (front & back). If you are NOT a permanent resident provide a copy of your H-1 or L-1 visa.
  7. If any borrower has filed bankruptcy, provide the Discharge Notice, Filing and Schedule of Creditors.
  8. If you are applying for a home equity line of credit or loan (second loan), also include your first mortgage note. (This should be with your closing loan documents.)

Close the Loan

After your loan is approved, you will be required to sign the final loan documents. This will normally take place in the presence of a notary public. Be prepared to:
  • Bring a cashiers check for your down payment and closing costs if required. Personal checks are normally NOT accepted.
  • Review the final loan documents. Make sure that the interest rate and loan terms are what you were promised. Also, verify the accuracy of the name and address on the loan documents.
  • Sign the loan documents. The notary will require that you have your picture ID with you. Some lenders also require to see your Social Security card.
Your loan will normally close shortly after you have signed the loan documents. On refinance and home equity loan transactions, federal law requires that you have three days to review the documents before your loan transaction can close. Purchase transactions do not have a three day rescission period.

Loan Programs – Which loan is right for me?

Years you plan to stay in the home

Recommended program
1-3 years 3/1 ARM, 1 year ARM or 6 month ARM
3-5 years 5/1 ARM
5-7 years 7/1 ARM
7-10 years 10/1 ARM, 30 year fixed or 15 year fixed
10+ years 30 year fixed or 15 year fixed

Loan Program


Fixed Rate Mortgages
  • 30 year fixed
  • 15 year fixed
Advantages
  • Monthly payments are fixed over the life of the loan
  • Interest rate does not change
  • Protected if rates go up
  • Can refinance if rates go down
Disadvantages
  • Higher interest rate
  • Higher mortgage payments
  • Rate does not drop if interest rates improve
Adjustable Rate Mortgages (ARM)10/1 ARM, 7/1 ARM, 5/1 ARM, etc.

Advantages

  • Lower initial monthly payment
  • Rates and payments may go down if rates improve
  • May qualify for higher loan amounts
  • 30 year term, no balloon payment
Disadvantages
  • More risk
  • Payments may change over time
  • Potential for higher payments if rates increase
First Time Buyer Programs

Advantages
  • Lower down payment
  • Easier to qualify
  • Lower rates may be available
Disadvantages
  • May be subject to income and property value limitations
  • Some government subsidized programs may generate a recapture tax if you sell the house too soon
  • Education courses may be required to qualify for these loans
Stated Income Programs

Advantages
  • Don't need to verify income
  • Faster approval
  • Good for borrowers who may not qualify with a full income documentation program
Disadvantages
  • Higher rates
  • Higher down payment
Interest Only Programs

Advantages
  • Don't need to verify income
  • Faster approval
  • Good for borrowers who may not qualify with a full income documentation program
Disadvantages
  • Higher rates
  • Principal loan balance will not decrease during the interest only payment period
  • Payment will be higher for the remaining term
Home Equity Line of Credit

Advantages
  • You only borrow what you need
  • Pay interest only on what you borrow
  • Flexible access to funds
  • Interest may be tax deductible
  • May be free of closing costs
  • A good source for an emergency fund, if set up in advance
  • Can be used for debt consolidation and lower payments
  • Rates are usually lower than consumer loan or credit card rates
Disadvantages
  • Rates can change. The maximum interest rate can be relatively high
  • Payments can change
  • Harder to refinance your first mortgage
Home Equity Fixed Loan

Advantages
  • Fixed payments
  • Interest may be tax deductible
  • Get cash out for any purpose
Disadvantages
  • Higher interest rates compared to first mortgage
  • Harder to refinance your first mortgage
  • Interest is paid on the entire loan amount, compared to an equity line of credit
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