Frequently Asked Questions

Should I refinance?

Find out if you can save money by refinancing your existing loan.

A lower interest rate will mean lower monthly, but a refinance will also mean paying closing costs and, in some cases, points. If your monthly savings exceeds these closing costs, refinancing is a good decision. Determine how many months it will take to break even with closing costs, by entering your loan details into the Refinance Calculator.

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Should I rent or buy?

Consult one of our knowledgable loan agents to review your finanical options and help you decide whether you should rent or buy a home.

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What is a FICO score?

A FICO score is your credit score developed by Fair Isaac & Company. This score is what helps companies determine the likelihood of users paying their bills. The FICO score is accepted by lenders as a reliable means to evaluate credit users habits and financial history, including:

  • Late payments
  • The amount of time credit has been established
  • The amount of debt versus the amount of credit available
  • Length of time at present residence
  • Negative credit information such as bankruptcies, charge-offs, collections, etc.

To obtain a copy of your credit report, contact any of these credit-reporting agencies:

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How can I increase my credit score?

Even though it is difficult to increase your score immediately, there are some ways to increase your score over a period of time:

  • Pay your bills on time. Late payments and collections can have a serious impact on your score.
  • Do not apply for credit frequently. Having a large number of inquiries on your credit report can worsen your score.
  • Reduce your credit-card balances or ask for the credit limit to be raised. If you are "maxed" out on your credit cards, this will affect your credit score negatively, so having a low debt to credit ratio helps increase your credit score.
  • Not having sufficient credit can negatively affect your score.

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What if there is an error on my credit report?

To correct any errors on your credit report, you must write to the credit card company and explain the error.

If the creditor concurs that an error has occurred, the credit card company must report and correct the error to the credit-reporting agency.

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Why do interest rates change?

Interest rate fluctuations are based on supply and demand. If the demand for credit (loans) increases, so do interest rates. Because there are more buyers, sellers can charge higher rates. Likewise, as the demand for credit reduces, then so do interest rates. In this case, there are more sellers than buyers, so buyers can require lower rates. When the economy expands there is a higher demand for credit, causing rates to rise and vice versa.

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What is the difference between being pre-qualified and pre-approved?

Pre-qualification is typically determined by a loan officer. After interviewing you, the loan officer is able to determine the potential loan amount for which you may be approved. The loan officer cannot issue loan approval; therefore, pre-qualification is not a commitment to lend. After the loan officer determines that you pre-qualify, a pre-qualification letter is issued to make an offer on a property. This letter informs the seller that your financial situation has been reviewed by a professional, and you will likely be approved for a loan to purchase the property. Pre-approval involves verifying your credit, down payment, employment history, assets, etc. Your loan application is then submitted to a lender's underwriter. If and when your loan is pre-approved, you receive a pre-approval certificate. Getting your loan pre-approved allows you to close more swiftly when you do find a home. Pre-approval can also help you negotiate a better price with the seller.

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Can my loan be sold?

Your loan can be sold at any time. There is a secondary mortgage market in which lenders buy and sell pools of mortgages. This secondary mortgage market results in lower rates for consumers. A lender buying your loan assumes all terms and conditions of the original loan. As a result, the only thing that changes when a loan is sold is to whom you mail your payment. In the event your loan is sold you will be notified. You'll be informed about your new lender, and where you should send your payments.

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What is a rate lock?

A rate lock is a lender's promise to reserve or "lock" a specific interest rate with a specific number of points for you for a particular period of time while your loan application is processed. During that time, interest rates may change, but if your interest rate and points are locked in, you should be protected against increases. On the other hand, a locked-in rate could also keep you from taking advantage of price decreases, should rates decrease during the loan process.

There are four components to a rate lock:
1. Loan program
2. Interest rate
3. Points
4. Length of the lock period

The longer the length of the lock period, the higher the points or the interest rate will be. This is because the longer the lock, the greater the risk for the lender offering that lock.

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What's the difference between a conventional loan and an FHA loan?

Loans where the borrowers' down payment is less than 20% often require mortgage insurance, which can be provided privately or publicly. Conventional loans requiring this are insured by private mortgage insurance. FHA loans are those whose Mortgage Insurance is provided by the Federal Housing Administration, a public, government program backed by taxpayers. Both mortgage insurance options have premiums, often paid by the borrower. Each program has advantages and disadvantages depending on your individual situation.

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What documents will I need to have to secure a loan?

This checklist outlines the principal documents and information that are generally required to complete the application. Additional documentation may be required, depending on the circumstances of your loan. By having the information available, you will save time and avoid delays.

  • Copy of Purchase Sales contract or Offer to Purchase and all addenda (signed by buyer and seller)
  • Past 2 years' tax returns and W-2s
  • Past 2 years' employment history
  • Last 3 consecutive paycheck stubs (5 if paid weekly)
  • Name, address, and phone for past 2 years' residence(s) and landlord(s) (if renting, evidence of 12 months' rent payments)
  • Last 3 months' statements for savings, checking, CD, money market accounts, etc.
  • Recent statement on retirement accounts (IRA, 401k, 403-B, Annuity, etc.)
  • Monthly payments and balances on all open accounts
  • Proof of all additional income
  • Divorce Decree (if applicable)
  • Bankruptcy schedules/Discharge papers (if applicable)
    Additional information that may be required:
  • Estimated market value of assets, such as autos, furniture, personal belongings, etc. Be prepared to discuss where the money for closing will come from, including down payment and closing costs.

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How will my monthly payments be calculated?

Monthly payments on a property depend upon the term of your loan (i.e. how long you plan on paying the loan back.) Most mortgages are either 30-year or 15-year terms. While longer term loans require less to be paid back each month, shorter terms require larger monthly payments, but pay off the debt more quickly.

Most monthly payments are based on four factors: Principal, Interest, Taxes and Insurance. These factors are commonly referred to as PITI.

  • Principal: This is the originally borrowed amount to buy a home. A portion of each monthly payment goes to paying this amount back. In the beginning, only a small fraction of the monthly payment will be applied to the principal balance. The amount applied to principal will then increase until the final years, when most of the payment is applied toward repaying the principal.
  • Interest: To take on the risk of lending money, a lender will charge interest. This is known as the interest rate, and it has a very direct impact on monthly payments. The higher the interest rate is, the higher the monthly payment.
  • Taxes: While real estate taxes are due once a year, many mortgage payments include a small portion of the expected tax bill and collect that amount along with the principal and interest payment. This amount is placed in escrow until the time the tax bill is due. Borrowers may be able to opt out of escrowing this amount, which would reduce the monthly payment, but also leave them responsible for paying taxes on their own.
  • Insurance: Insurance refers to property insurance, which covers damage to the home or property, and, if applicable, mortgage insurance. Mortgage insurance protects the lender in the event of default and is often required in cases where borrowers have less than 20% equity in the home.
  • Like real estate taxes, insurance payments are often collected with each mortgage payment and placed in escrow until the time the premium is due. Again, borrowers may be able to opt not to escrow the insurance amount, instead paying the total amount due in one lump sum on their own.

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Should I pay points?

The best way to decide whether you should pay points or not is to perform a break-even analysis:
1. Calculate the cost of the points. Example: 2 points on a $200,000 loan is $4,000.
2. Calculate the monthly savings on the loan as a result of obtaining a lower interest rate. (Example: $100 per month)
3. Divide the cost of the points by the monthly savings to come up with the number of months to break even. In the above example, this number is 40 months. If you plan to keep the home for longer than the break-even number of months, then it would make sense to pay points, otherwise it does not.

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What is an Annual Percentage Rate (APR)?

The Annual Percentage Rate is the actual cost of the mortgage, based on the mortgage interest rate while factoring in other costs (i.e, points, underwriting, processing, and admin fees). The Federal Truth-in-Lending law calls for mortgage companies to disclose the APR when they advertise a rate. Typically the APR is found next to the rate.

The APR does NOT affect your monthly payments. Your monthly payments are a function of the interest rate and the length of the loan.

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