Mortgage FAQ's

 Some loans will allow you to secure just a 5% down payment plus closing  costs.  Another similar loan option is called a piggy-back loan where  you get approved for the first and second mortgage at the same time to  avoid PMI. You could also apply for a FHA Loan  which only requires you to put down 3.5% down. Your interest rate will probably be higher, and you will be required to buy private mortgage insurance (PMI). 

Yes, it may be possible to speed up the process. Consider these tips below:

• Become pre-qualified or pre-approved for a loan to help the process  move faster. A pre-qualification is a better indication that you are a  solid buyer, but only a loan commitment from the lender is a guarantee  that you will be approved.
• Obtain a loan commitment, which is guaranteed under pre-set conditions.
• Prepare your paperwork ahead of time. 
  • Check your credit history and resolve any issues. Be able to explain any other questions about your credit that arise.
  • Make sure you have all the documents you need before applying,  including personal identification, income verification and tax returns,  employment history, and insurance commitments.
• Respond promptly to any requests from the loan officer to eliminate unnecessary delays.

 If the bank or mortgage company determines that your loan is a risk,  they may require private mortgage insurance. This insurance serves to  insulate the lender in the event that you default on your loan. It is  possible that the fair market value of your house will not cover the  full amount of money owed to the bank or mortgage company if you  default. In such cases, private mortgage insurance reimburses the lender  for the difference. Private mortgage insurance is usually required for  borrowers that make a down payment of less than 20% or with poor credit  scores. 

 Each lender requires slightly different financial records—this will  depend on the type and amount of the loan you are applying for. However,  there are some basic records all lenders will request. These include  income records (i.e. pay stubs for the previous 30 days, the last two  years of tax returns, 2 to 3 months of bank records for each of your  bank accounts, and any other additional documents that prove your  income). You will also need to furnish information about your current  debts such as account numbers and monthly payment information. 

The U.S. Department of Housing and Urban Development, also known as  HUD, has a number of programs for qualified buyers. HUD oversees the FHA  and has options that include 203(K) loans for fixer-uppers, financing  for homes that are FHA insured and obtained via foreclosure, and more.  Their goal is to increase ownership for minorities and low-income  Americans.

FHA loans are the most popular option. The FHA requires only 3% for a  down payment and guarantees the loan, which results in credit policies  that are less strict for potential borrowers.

Veteran’s Administration, or VA, loans are intended for qualified  veterans or their unmarried surviving spouses that are looking to buy or  refinance a home.

The two primary federal government financing programs for mortgages are  VA loans and FHA loans. VA loans are not actually loans, but a guarantee  from the federal government that should you default, the U.S.  Department of Veterans Affairs will pay the lender a certain amount of  the defaulted loan. These loans are available to current members of the  military and veterans with honorable discharges. FHA loans are available  through the U.S. Department of Housing and Urban Development (HUD).  These loans, like VA loans, guarantee that the Federal Housing Authority  will pay the lender 100% of the insured amount of your mortgage should  you default. You must meet certain criteria to qualify for an FHA loan. 

 The interest rate for a fixed-rate mortgage is set in place over the  life of the loan. On the other hand, an adjustable-rate mortgage can  have its interest rate rise or fall during specified adjustment periods. 

 Fixed-rate mortgages make sense for buyers when the current mortgage  rate is low. This allows you to lock in the current rate and be  protected from increases that are likely to take place over the next 30  years. If the current rate is high, an adjustable-rate mortgage may be  better because rates can drop. It is good to remember that you will have  the option to refinance in the future to take advantage of rate changes  as well.

The closing costs you pay when securing a mortgage will be about 3% to 6% of the total loan and include:

Generally paid with your application:

• A non-refundable application fee to process your information
• An appraisal fee for the property, which is required by the lender
• A fee for the lender to check your credit report (i.e. credit score and history) to help determine qualifications as well as loan limits

Generally paid at closing:

• A survey fee may be required in order to verify property boundaries
• A flood certification fee may be required to ensure the property is not in a flood zone
• The title search fee is used to check the property’s history to ensure there are no legal claims on it
• Title insurance from the lender is used to make sure the loan is repaid
• Attorney costs associated with closing the loan
• Recording and transfer costs—a small fee applied to recording the purchase of your home
• Loan preparation fees, which are a percentage of the overall loan amount
• Discount points (an optional percentage-of-the-loan amount) paid to get a lower interest rate
• Escrow accounts, including private mortgage insurance (PMI), homeowner’s insurance, property taxes, and possibly, interest

Many consider owning a home better for you in the long run. However, it is important to keep in mind the following:

• It can take years before your home begins to build equity and many buyers move before that happens.
• Your costs associated with owning a home often increase due to  interest rate adjustments, larger payments, property tax increases,  maintenance, and insurance.
• Tax benefits for being a homeowner can only be claimed once deductible expenses surpass the standard deduction level.

There are benefits to renting to consider, including:

• Maintenance costs are assumed by the landlord.
• Relocating for a job is easier without having to sell your home.
• Convenient access to public transportation, employment, entertainment, retail, and more.

Conforming loans meet specific national standards,  most often referred to as Fannie Mae/Freddie Mac requirements. These  loans follow uniform standards set for document specs, maximum loan  amounts, interest rates, and debt-to-income ratios.

Non-conforming loans do not meet these standards due  to either the borrower’s financial status or the property not falling  within set guidelines. These are funded by private lenders and often  come with higher interest rates.