FAQ

Your credit standing impacts many of the financial and life decisions that are made about you, including the ability to secure loans, obtain the best interest rates, and in some cases, even gain employment. Your credit score is used to predict how likely it is that you will repay a new loan.

The credit scoring system was developed based on experience with millions of consumers. In general, the computer model assigns points to information in a credit report. For example, making payments on time every month is positive for the score. Charging the maximum amount available on a credit card is negative. The computer adds the positive and negative points, and the resulting number is your credit score.

Sometimes people think they have good credit. Then, they apply for a loan and are surprised to learn that there are some problems with their credit. That’s why it’s critical that you get a copy of your credit report and credit score a few months before making such a major purchase. You can easily obtain your credit report through www.annualcreditreport.com. In addition to providing you with your credit report, they also offer a variety of credit management tools and educational resources.

Once you have obtained your credit report, check it thoroughly to make sure the information is accurate. It’s possible for incorrect, incomplete or outdated information to appear on your credit report. Keep in mind that you are the only one who’ll notice if anything is out of the ordinary and it is up to you to find any inaccuracies. Mistakes on your credit report can drastically lower your chances of qualifying for the mortgage and interest rate you deserve.

If you find an error, take the following steps to fix it as soon as possible. If you see evidence of fraud, contact the credit reporting agencies immediately. Explain the situation and ask that a fraud alert be placed in your file. Identity theft is the fastest growing white-collar crime in America and, in addition to being the leading fraud complaint last year, on average the rate of incidents has more than doubled each year since 2000.

It’s more important than ever to stay on top of your credit history and know what’s in your credit report.

For more information about how to understand and improve your credit score, visit the Federal Reserve’s Consumer’s Guide to Credit Reports and Credit Scores.

For your initial pre-qualification we’ll ask questions about your income, assets, credit history and employment. In addition, you will be required to pay a minimal fee to cover the cost of your credit report so that we can verify your credit history.

Once you start the application process we’ll need to verify the information you gave us with specific documentation, such as your last two years of income tax returns, bank statements, pay stubs and documents pertaining to other personally owned real estate. You’ll receive notification in writing of required documentation needed to obtain a final approval. In some cases, our Underwriting Department may request additional information.

According to the situation and We Lend Money Mortgage policies and guidelines, we generally require that two to seven years have passed before you can qualify for a mortgage. In the case of a foreclosure the waiting period is 7 years. With a short sale, the seven year wait may be reduced to a minimum of 2 years with a downpayment of at least 20%. In the case of a bankruptcy, we require that 4 years have passed. In addition, in all cases you must have re-established an acceptable credit history with new loans or credit cards, and your minimum credit score must be 640.

The first step in buying a house is determining your budget. There’s an often-quoted rule of thumb that says that you can afford a house that costs up to two and one-half times your annual gross income. In reality, everyone’s individual situation differs and your maximum mortgage eligibility is determined by weighing your income, existing debts, the purchase price of the house, your down payment, the interest rate on the loan, and the cost of property taxes and insurance.

This calculator steps you through the process of finding out how much you can borrow. Simply enter in your information into the required fields to determine the maximum purchase price of the home for which you qualify.

There are “4 C’s” of a loan approval.

Capacity – Can you repay the debt? We will ask for employment information including your previous occupations, how long you have worked and how much you earn. Essentially we’re verifying that your current job situation and income levels are stable.

Credit History – Will you repay the debt? We’ll look at your past credit history to see how much you owe, how often you borrow, whether you pay bills on time and whether you have a history of living within your means.

Capital – Do you have enough cash to meet the down payment requirements associated with your pending mortgage, closing costs, taxes, and insurance? Do you need a gift from a relative? Will you have a cushion left after your home purchase or will you use your last penny on purchasing your home?

Collateral – Will we be fully protected if you fail to repay the loan? We must be sure the property you are buying is sufficient to back up the loan.

In addition to your down payment, you will need funds to cover the associated costs of getting a mortgage. Total costs include the charges for your appraisal, tax service, survey (if necessary), deposit, closing fee, flood certificate, title commitment, and recording fees. Additional costs can also be involved in a purchase depending on the particular situation, including; points, inspection fees, pre-paid interest, taxes, insurance, and private mortgage insurance (PMI).

A home loan often involves many fees, such as the appraisal fee, title charges, closing fees, and state or local taxes. To assist you in evaluating our fees, we’ve grouped them as follows:

Third Party Fees

Fees that we consider third party fees include the appraisal fee, the credit report fee, the settlement or closing fee, the survey fee, tax service fees, title insurance fees, flood certification fees, and courier/mailing fees.

Third party fees are fees that we’ll collect and pass on to the person who actually performed the service. For example, an appraiser is paid the appraisal fee, a credit bureau is paid the credit report fee, and a title company or an attorney is paid the title insurance fees.

Taxes and other unavoidables

Fees that we consider to be taxes and other unavoidables include: State/Local Taxes and recording fees. These fees will most likely have to be paid regardless of the lender you choose. If some lenders don’t quote you fees that include taxes and other unavoidable fees, don’t assume that you won’t have to pay it. It probably means that the lender who doesn’t tell you about the fee hasn’t done the research necessary to provide accurate closing costs.

Lender Fees

Fees such as points, administration and escrow waiver fee (if an escrow waiver is requested and approved) are retained by the lender and are used to provide you with the lowest rates possible. This is the category of fees that you should compare very closely from lender to lender before making a decision.

Required Advances / Pre-Paids

You may be asked to prepay some items at closing that will actually be due in the future. These fees are sometimes referred to as prepaid items.

One of the more common required advances is called “per diem interest” or “interest due at closing.” All of our mortgages have payment due dates of the 1st of the month. If your loan is closed on any day other than the first of the month, you’ll pay interest, from the date of closing through the end of the month, at closing. For example, if the loan is closed on June 15, we’ll collect interest from June 15 to July 1 at closing. This also means that you won’t make your first mortgage payment until August 1. This type of charge should not vary from lender to lender, and does not need to be considered when comparing lenders. All lenders will charge you interest beginning on the day the loan funds are disbursed. It is simply a matter of when it will be collected.

If an escrow or impound account will be established, you will make an initial deposit into the escrow account at closing so that sufficient funds are available to pay the bills when they become due. This type of charge should not vary from lender to lender.

Whether or not you must purchase mortgage insurance depends on the size of the down payment you make.

If your loan is a purchase, you’ll also need to pay for your first year’s homeowner’s insurance premium prior to closing. We consider this to be a required advance.

There are many advantages to homeownership:

 A sound investment – When you carefully choose a home you can afford, the payoff can be great. As a homeowner, instead of paying rent to a landlord, each month when you make your mortgage payment, you are building equity in a place of your own. The more mortgage payments you make, the more equity you’ll have. And unlike most things you buy, a home can actually appreciate in value as time passes, building more equity.

• Tax advantages – The mortgage interest and real estate taxes you pay are tax deductible which can reduce your tax bill.
• Real estate is marketable.
• You can make your own decisions about design and décor.
• You can invest in upgrades that will not only bring you pleasure but can also add to the value of the property over time.
• You have control over the piece of property. You are not answering to a landlord.

As a first time homebuyer you may be wondering if you need a real estate agent to help you find and purchase a home or if you can do it on your own. There is no law that prevents you, as an individual, from buying property without professional Real Estate assistance. You can search for homes, arrange showings, and even negotiate on your own (although, in some localities, the actual contract for purchase will need to be drawn up by an Attorney). The real question may be “do you want to do it on your own?”

There is a misconception among many first time homebuyers that by using a Real Estate Agent they will be subject to paying a commission. In virtually all situations this is not the case. The commission for the sale of a home is paid for by the seller, not the buyer.

Sellers, too, sometimes decide not to use an Agent in the sale of their house. Maybe they think they can get more return by not paying a commission, or maybe they cannot find an Agent to list their home for the price they demanded. In fact, many real estate analysts have found that the selling prices of For Sale By Owner (FSBO) homes are equal to —or higher than— those listed by Agents. In that case a problem arises when, as a “do-it-yourself” homebuyer and without the benefit of a Comparative Market Analysis, you need to determine whether or not the house is worth the asking price. How do you decide? There is too much money potentially involved to make a “seat of the pants” decision. If you’re determined to go it alone, Mortgage Center can help you obtain an appraisal through one of our approved appraisers who we’ve trusted for years to give accurate determinations of property values. Our title company, Mortgage Center Title, also offers the For Sale By Owner Fact Sheet, which offers a wealth of information for both buyers and sellers in involved in an FSBO transaction.

When dealing with a FSBO home, you may find your choices are limited. If you are tempted to jump into the “listed” market by checking advertisements, calling Listing Agents directly or visiting Open Houses, keep in mind that there is not a dime to be saved by doing this. The seller is still going to pay a commission and you run the risk of ending up with no representation, since the Listing Agent is duty bound to represent the seller. If there aren’t enough choices for you in the FSBO market, it is in your best interest to secure a real estate agent as soon as possible to assist you in your search.

The graph below lists the advantages to finding a home on your own vs. with a real estate agent.

If you decide to use an agent, you should know the difference between a real estate agent or broker and a Realtor®. A real estate agent or broker is a person licensed to negotiate the purchase and sale of real estate on behalf of buyers and sellers. A Realtor is a real estate broker or associate who is an active member of a local real estate board that is affiliated with the National Association of Realtors. In both cases, the Agent, unless specifically disclosed otherwise, represents the seller in any transaction for the sale of a home. It is that Agent’s fiduciary duty to protect the seller’s position at all times.

No!  Getting started before you find a home may be the best thing you could do!

If you get started before you have a property to purchase, we can issue a pre-qualification subject to you finding the perfect home, which you can use to assure real estate brokers and sellers that you are a qualified buyer. Getting pre-qualified for a mortgage will even give more weight to any purchase offer you make.

When you find the perfect home, you’ll need to call your Loan Originator and provide your signed purchase agreement to complete your application. You’ll then have an opportunity to lock in our great rates and fees and we’ll complete the processing of your loan.