FAQ
What types of documentation do I need for the application?
In general, you will need the following:
- Your two most recent W2’s.
- Current paycheck stubs for past 1 month
- Recent bank statements for past 3 months
- Asset and liability information (stocks, bonds, other real estate, etc.)
- Copy of your homeowners insurance policy
- Copy of your most recent mortgage statement
How do I know which type of mortgage is best for me?
The right type of mortgage for you depends on many different factors:
- Your current financial situation
- How long you intend to stay in your house
We can help you decide which loan program is best for you. Since we offer only fixed rate mortgages, your only decision will be if you would like a 15 or 30 year term. Give us a call and we’ll review your situation with you and show you what our programs will mean for you in terms of monthly payment.
How much of a down payment will I need?
If you are purchasing your home, you will need at least 3 percent of the purchase price. Our FHA mortgage program allows for a 6 percent seller's concession to help you cover your closing costs. Your down payment can be borrowed from a family member under certain circumstances.
What is escrow?
In addition to your principal and interest portion of your monthly mortgage payments, your taxes and insurance will also be collected with your mortgage payment. These additional funds are referred to as the escrow portion of your payment. They are collected throughout the year and paid on your behalf.
What is amortization?
This is the process of decreasing the balance of your mortgage over a period of time. For example, many mortgages have an amortization of thirty years, meaning that your mortgage will be paid off completely after thirty years.
Will my monthly payment always stay the same.
No, your monthly payment can change for the following reasons:
· Escrow Analysis - At least once a year, your we will analyze your escrow account, and adjust the portion of your monthly payment collected for your real estate taxes, insurance, and PMI (if necessary). Your monthly payment amount shown on the analysis will typically become effective on the anniversary of your first payment due date.
· ARM Adjustments - If you have an adjustable rate loan, the interest rate and principal and interest (P & I) portion of your mortgage payment will change on a scheduled basis based on the terms of your note. Since we only offer fixed rate mortgages, you will not have to worry about ARM adjustments when you finance your FHA mortgage with us. If you have an escrow account, the escrow portion of your payment may change as well.
How does the lender decide the maximum loan amount that I can afford?
We consider your debt-to-income ratio, which is a comparison of your gross (pre-tax) income to housing and non-housing debts. Non-housing expenses include credit card minimums, car or student loan payments, alimony, or child support. For our government insured loans, your mortgage payments (PITI) should be no more than 31% of gross income, while the mortgage payment, combined with non-housing expenses, should be no more than 43% of your income. We also consider your cash available for a down payment and closing costs if a purchase transaction, your asset reserves, FHA county loan limits, your credit history, and your employment history when determining your maximum loan amount.
Do I really need homeowners insurance?
Yes. Proof of a paid homeowner’s insurance policy is requirement to close your loan with us, so you will need to make arrangements before your closing.
What is loan to value (LTV) and how does it determine the size of the loan?
Your loan to value ratio is the amount of money you borrow compared with the appraised value of your home. Our FHA loans have specific LTV limits. For example: On a purchase transaction, we will lend up to 97.75% of the lower of the appraised value of the home or the purchase price. On a Rate and Term Refinance (no cash out), we will lend up to 97.75% of your home's appraised value. Finally, on a Cash Out Refinance you can borrow up to 95% of the appraised value of your home. To be more specific, with a 95% LTV Cash Out Refinance on a home priced at $200,000, you could borrow up to $190,000. To protect lenders against potential loss in case of default, higher LTV loans (over 80%) require a mortgage insurance policy (PMI).
What is the difference between the mortgage rate and the APR?
The APR (Annual Percentage Rate) of a loan is an overall interest rate with all the applicable closing costs factored in.
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