Below are Frequently Asked Questions that often are encountered through the course
of the home buying process. You also can use our Mortgage
Dictionary to address additional terms or questions that arise.
Q: Do I need to be prequalified before I
begin searching for my home?
Q: Do I need to be prequalified before I begin searching for my home?
A: Definitely! If you know that you will be approved prior to your house
hunt, the process goes much smoother. The process is simple. To arrange to be prequalified
for your purchase, take the following steps:
- Gather your personal financial information, such as bank statements, W-2 forms,
and paycheck stubs and meet with your New Century Realty & Lending Loan Officer.
- Your New Century Realty & Lending mortgage professional will pull your credit report
and evaluate your financial documents. With this information, you and your New Century
Realty & Lending Loan Officer are able to discuss the best home financing options
that will help you achieve your financial goals.
- To inform both your Realtor and the seller of the property that you a preferred
and serious potential buyer, New Century Realty & Lending will write a prequalification
letter for you. This will give any offer you extend on a property more weight. This
backing will allow you to relax and enjoy the process of looking for your new home!
Q: When I apply for a mortgage, what documents
will I need?
Q: When I apply for a mortgage, what documents will I need?
A: Usually, you’ll need to provide documents that verify your employment,
income and assets. There are some loan programs that have limited requirements in
terms of documentation for certain homebuyers.
Typical loan programs require the following documents:
- A copy of your Social Security card
- Pay stubs for the last two months
- W-2 forms for the past two years
- Bank statements for the past two or three months
- One to two years of federal tax returns
- A signed contract of sale (if you've already chosen your new home)
- Information on current debt, including car loans, student loans and credit cards
Q: If I am a non-citizen, can I qualify?
Q: If I am a non-citizen, can I qualify?
A: Different guidelines are established for non-citizens. Each loan type
varies.
As a requirement, the home being purchased in this country must be the primary residence
for FHA loans. Non-citizens also must have a Social Security card and all other
documentation regularly required for FHA buyers.
Freddie Mac underwrites loans for permanent and nonpermanent residents alike, with
no special requirements for the latter.
Through Fannie Mae, non-citizens are required to hold a green card (have permanent
resident alien status). Non permanent resident aliens are required to supply an
additional down payment and proof of permission to work in the United States for
extended periods through a work visa. Additionally, they must occupy the purchased
property.
Be sure to meet with your New Century Realty & Lending Loan Officer before choosing
a home. This will help you be aware of your specific financing opportunities.
Q: Is it still possible to qualify for a
loan even if I have past credit problems?
Q: Is it still possible to qualify for a loan even if I have past credit problems?
A: In challenging economic times such as these, a good number of people have
found themselves with financial difficulties. These times create opportunities to
incorporate valuable lessons in to a person’s financial planning. When the desire
to move forward into home ownership sets in, it is often questioned what chances
exist for those that have encountered financial problems.
The first distinction that is important to make is the difference between a person
with a bad credit experience in the past and a person who is a bad credit risk.
There is an important difference.
Lenders' main questions will be along the lines of the following:
- What was the situation of the financial difficulty? What circumstances caused the
specific trouble?
- What steps did you take to resolve the issue?
- What measures were taken to prevent the situation from occurring again? Have you
reestablished yourself financially? Were the changes that were made the right ones?
If you have encountered more challenging credit problems like bankruptcy and foreclosure,
your explanation needs to be more thorough and have much more importance; additionally,
the greater the credit problem, the more recovery time is necessary.
Everyone finds themselves in tough financial situations at one point or another,
but everyone deserves another chance. Do not allow previous problems intimidate
you and prevent you from trying to get a fresh start!
Q: How will I know the loan program that
is best for me?
Q: How will I know the loan program that is best for me?
A: Deciding on the best loan program for you will depend greatly on your
personal financial situation. You can focus on the most beneficial options by asking
yourself a few questions:
- In the next few years, do you anticipate your finances to change?
- Do you plan to live in this home for a substantial amount of time?
- Would an adjusting mortgage payment make you comfortable or uncomfortable?
- When you enter the next phases of life (children’s college, your retirement, etc…),
would you aim to be out of mortgage debt?
When you cover these questions with your New Century Realty & Lending Loan Officer,
together you can determine answers that will help you choose the loan program best
fits your needs and helps you attain your goals.
Q: What is the difference between a FHA and
a VA loan?
Q: What is the difference between a FHA and a VA loan?
A: A FHA loan is a loan guaranteed by the Federal Housing Administration.
FHA issues specific guidelines for mortgages. A VA loan is a loan guaranteed by
the Veterans Administration. To obtain a VA loan, the borrower must have served
in the Armed Forces for a specific time period.
Q: How do I know what my interest rate will
be?
Q: How do I know what my interest rate will be?
A: You discuss this with your New Century Realty & Lending Loan Officer who
advises you of the rates available for your loan product. You then “lock” the rate
and discount points with your loan officer.
Q: How does the Annual Percentage Rate differ
from the interest rate?
Q: How does the Annual Percentage Rate differ from the interest rate?
A: The Annual Percentage Rate is the financing rate calculated with the finance
charges over the life of the loan. The interest rate calculates the principal and
interest payment for the loan.
Q: Should I get a fixed or adjustable interest
rate?
Q: Should I get a fixed or adjustable interest rate?
A: When deciding on the type of rate you want, it's all a matter of time.
You'll want to think about a fixed rate mortgage if you plan to be in your home
for more than seven years. Fixed rates provide you with set payments and protection
against increasing mortgage interest rates. An adjustable rate mortgage would be
more suitable for you if you foresee living in your home for less than seven years.
With an adjustable rate mortgage, you open yourself up to the possibility of having
your monthly payments increase each time your interest rate changes.
Q: What does my mortgage lender mean by
points or origination fee?
Q: What does my mortgage lender mean by points or origination fee?
A: One point is equal to one percent of the loan amount. Points and origination
fees are used to buy down the interest rate. Origination fees help pay the cost
for the lender to do the loan.
Q: When mortgage lenders refer to "PITI"
what are they referring to?
Q: When mortgage lenders refer to "PITI" what are they referring to?
A: PITI is principal, interest, taxes, and insurance: the components of a
monthly mortgage.
Q: What amount is required for a down payment?
Q: What amount is required for a down payment?
A: There is not an established amount of a down payment for every loan. Depending
on your situation and eligibility, you may find very low down payment requirements
available. Your New Century Realty & Lending Loan Officer will be able to help you
find a loan program that best fits your financial goals and needs. Remember that
private mortgage insurance may be required for down payments less than 20%.
Q: How does mortgage insurance work?
Q: How does mortgage insurance work?
A: Mortgage insurance operates very similar to the insurance you have for
your vehicle. It protects against loss, requires payment of a premium, and is used
in the case of an emergency. The lender is able to foreclose on the home if the
borrower is not able to repay the amount of an insured mortgage loan; the lender
can file a claim with the mortgage insurer for a portion or the full amount of losses.
Q: How do I know if I need mortgage insurance?
If I do need it, how do I get it?
Q: How do I know if I need mortgage insurance? If I do need it, how do I get it?
A: If you make a down payment less than 20% of the purchase price, you will
be required to have mortgage insurance. Your New Century Realty & Lending Loan Officer
can provide details on how to acquire this.
Q: Do I need to have a certain amount of
money left after I buy my home?
Q: Do I need to have a certain amount of money left after I buy my home?
A: Reserve requirements are program specific. Your New Century Realty & Lending
Loan Officer will this information with you.
Q: When my loan officer asks me if I want
to waive escrows, what exactly does this mean?
Q: When my loan officer asks me if I want to waive escrows, what exactly does this
mean?
A: When you waive escrows, you take the responsibility of paying your taxes
and insurance rather than having them included in your monthly payment. Waiving
escrows may add a small fee to your closing costs. You can only waive escrows if
your loan program allows for this such as conventional loans that have a loan value
of 80% or less on your first lien.
Q: Why did I receive a Truth-In-Lending?
Q: Why did I receive a Truth-In-Lending?
A: Truth-In-Lendings are sent to all borrowers after a loan application has
been made. The Truth-In-Lending Act is a federal law requiring lenders to reveal
all of the terms of a mortgage. The APR that appears on your Truth-In-Lending will
be higher than the interest rate on your Real Estate Lien Note, as it is calculated
based on term and finance charges.
Q: Will I get a copy of my credit report
and appraisal?
Q: Will I get a copy of my credit report and appraisal?
A: You may obtain a copy of your credit report through the credit bureaus.
You will receive a copy of your appraisal at your closing.
Q: What inspections are required by the
lender?
Q: What inspections are required by the lender?
A: The lender requires an appraisal on most transactions. A clear termite
report is required on government transactions. If the appraiser recommends repairs
or if repairs are mentioned in the contract, the lender will require that those
repairs be done before closing. The appraiser then will perform a final inspection
to assure that the repairs were completed. If the termite report recommends treatment,
treatment is required. We will need a receipt showing the name and amount of chemicals
used and a clear termite inspection.
Q: When will I find out what my final figure
is for the total costs to close?
Q: When will I find out what my final figure is for the total costs to close?
A: The Settlement Statement (HUD-1) is prepared by the title company according
to closing instructions prepared by the lender. This is available 24 hours prior
to closing by contacting the title company.
Q: Where do I go for closing?
Q: Where do I go for closing?
A: Your closing will take place at the title company. The title company name
and address appears in your sales contract. Call the title company to schedule a
time for your closing.
Q: Will I have two separate payments if
I have a second lien?
Q: Will I have two separate payments if I have a second lien?
A: The second lien is often from a different lender than the first lien.
Therefore, borrowers with a second lien will make two separate payments each month
- one on the first lien and one on the second lien.
Q: Where do I send my first mortgage payment?
Q: Where do I send my first mortgage payment?
A: Refer to your "First Payment Letter" in your closing documents to determine
where to send your first mortgage payment. If you receive a statement from your
new lender prior to the due date of your first payment, send your payment to the
new lender.
Otherwise, send your payment to New Century Realty & Lending, A PlainsCapital Company
as detailed in your "First Payment Letter." Remember to include your loan number
on your check.
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