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FAQ
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How do I apply for a loan?
Please contact your mortgage
consultant at a location near you.
What's the best way to approach buying a home?
Buying a home is not a difficult process. It is basically
a ladder of events. Follow this guided tour to buying your
own home.
What counts in the loan application
process?
Your
Income
The amount of income you earn will determine the amount of
money you can borrow to purchase your home. For example,
if a person makes $5000 a month and spends $1600 on a
mortgage loan, including property taxes, mortgage
insurance and Home Owners Insurance, the housing expense
ratio is 32% (1600 divided by 5000).
Your debts
The lender will look at the monthly debt such as loan
payments, charge cards, child support, made monthly by
the applicant. The percentage of debts to income is
known as the debt-to-income ratio.
Lenders
look at the last 2 plus years of employment to verify a
steady source of income
It is important for the lenders to see a steady employment
in any occupation held by the applicant. Mortgage lenders
are more likely to lend money to people who have worked
several years at the same job or the same type of job. A
Verification of Employment Document will be requested by
the lender to verify your work history.
Your credit history
Each borrower has a credit history report that is filed
with the Credit Bureau. Lenders receive a copy of your credit
history in the loan application process in order to determine
your willingness to pay as a borrower. This assessment depends
on your credit record, ie. if you have been late on your
various payment obligations.
What is the property worth?
The lender will want to know the value of the prospective
home. The loan amount approved will depend on the value
of the property to be determined by an appraiser. |
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How do I know which loan program will benefit me the most?
There are various types of loan programs design to suit the
financial needs of individual borrowers. In deciding the type
of loan program for which you would like to qualify, it is
important to consider your loan amount ......
Loan
type
First, the two types of loans are a conforming loan and
a non-conforming/jumbo loan. Conforming loans are for amounts
between $50,000 to $333,600. Jumbo loans cover loan amounts
between $333,600 to $650,000. Higher loan values have special
quotes. Loans can be fixed or variable (ARMS). Fixed rate
loans are amortized over a period of 30, 15, or 10 years.
Due to shorter commitments for rates, ARM (Adjustable Rate
Mortgage) rates are typically lower than longer term rates.
These are best suited for transient borrowers.
Loan Amortization
A loan can be amortized over a period of 30 years, 15 years,
or 10 years. Adjustable rate mortgage loans will have rates
fixed for a shorter period of time. A shorter amortized
loan will build up your equity faster and will therefore
provide you with a debt-free home; however, mortgage payments
are higher for shorter amortized loans.
Loan-to-Value
The loan amount you receive will depend on the appraised
value of the property and how much down payment you can
afford. If you are purchasing a $100,000 home with
$20,000 down payment available, it will be necessary to
borrow an amount of $80,000 from a lender to purchase
the property. This will be 80% of the home value;
therefore, the loan-to-value of your mortgage is 80%.
LTV's can be as high as 100+%
What does it mean to have 0 points or 1 point or 2
points?
A point is one percentage of the loan amount. Lenders offer
rates which may be lower but require paying points. A rate
of 7.875% with 1 point for a loan of $100,000 would require
the borrower to pay a total of $1000 to the lender upon settlement
of the loan. A rate of 8.000% with 0 points will require no
payment to the lender, but the interest rate is slightly higher.
Points will lower rates and are of benefit if you have some
cash for the down payment and can therefore lower the rate.
You should intend to keep the loan for its full term.
How do I get pre-approved for a loan?
Pre-approval is a new trend in the mortgage industry that
allows a borrower to be pre-approved for a loan before shopping
for a home. Sellers and real estate agents will know you are
a serious and qualified buyer. Pre-approval can be obtained
within seven days of filling out the online loan application.
Final approval of the loan will be subject to an appraisal
of the property.
What documents are needed
to process my loan?
The loan requires certain documents for approval. These may
include credit reports, the loan application, an appraisal
of the property, income verification, asset verification,
and various other documents depending on the complexity of
your personal financing situation.
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Who's who in the housing business?
Real
Estate Agent/Broker
When you first start looking for a new home, contact a real
estate company in the area that you are planning a purchase.
The real estate professionals will show you many available
houses in your price range that will meet your personal
needs. When you decide on a home to purchase, make an offer
on the home. The real estate broker will present your offer
to the seller. But please remember that the broker is under
contract to the seller to represent the seller's interest.
When an agreed price has been reached, it is necessary to
draw up a sale of contract document signed by both the buyer
and seller.
Mortgage Brokers
The mortgage brokerage firm has Mortgage Consultant who will find
the best loan program to suit your financial needs and concerns.
The mortgage broker represents numerous wholesale lenders
and typically searches for the best program and rates to
suite your particular needs. Hometown Equity Mortgage would
like to be your mortgage broker.
Mortgage Consultant
The Mortgage Consultant will be the buyer's liason to the lender
for obtaining a loan.
Lender
Banks, savings and loans, and mortgage companies lend money
to home buyers. Your lender will ask you to fill out a loan
application form that includes information about your income,
employment, and debts.
State or Local Housing Finance Agency
Some government agencies provide valuable housing assistance
to low- and moderate-income home buyers and renters. To
find out more about these programs, ask your real estate
agent or your mortgage broker.
Property/Mechanical Inspector
For a fee, a qualified inspector will examine the home you've
chosen from basement to attic. The inspection includes an
evaluation of the home's plumbing, electrical work, appliances,
the furnace and/or air conditioner, roof, and structural
stability. These inspections can save you thousands of dollars
in the future, and the knowledge of flaws can help you negotiate
a better price on the house.
Appraiser
The appraiser will be hired by the mortgage broker or lender
to determine the market value of your prospective home based
on its condition and the selling prices of comparable homes
recently sold in the area. This estimate helps the lender
decide a reasonable loan amount for the mortgage.
Mortgage Insurer
Mortgage insurance makes it possible for lenders to offer
mortgage loan options to buyers with small down payments.
If for some reason you can no longer make your payments,
mortgage insurance helps cover the lender's losses.
Underwriter
The underwriter works for the lenders in reviewing all the
documentation involved with your loan. Once you've applied
for the loan and found the loan program appropriate to your
needs, the mortgage broker will begin the paperwork to provide
all the supporting documents required for the approval of
the loan. These shall include employment history, credit
reports, the appraisal of the home, verification of employment,
the uniform loan application, and other documents.
Attorney/Closing Agent
The attorney or closing agent is responsible for ensuring
that all documents have been completed properly including
those related to the title search and title insurance. The
closing agent will explain all closing documents to you
and the seller, obtain your signatures, and record the documents
with the appropriate local governments. He or she also will
collect the transaction fees and give them to the appropriate
parties.
What do the words amortization, escrow, principal,
foreclosure, PITI, and closing mean?
These words may ring a bell or seem completely foreign. But
they are very important concepts to understand when applying
for a loan.
Amortization
Gradual debt reduction. Normally, the reduction is made
according to a pre-determined schedule for installment payments.
Escrow
An account set up by the lender into which the borrower
makes periodic payments, usually monthly, for taxes, Home Owners Insurance, assessments, and mortgage insurance premiums.
Principal
The original balance of money loaned, excluding interest;
also, the remaining balance of a loan, excluding interest.
Foreclosure
If the borrower fails to pay back the loan through mortgage
payments, the lender has the right to put the home on the
market for sale to recover the money owed to the lender.
This is known as foreclosure.
PITI
Principal, Interest, Taxes, and Insurance are the components
of a mortgage payment.
Closing
The conclusion of a transaction. In real estate, closing
includes the delivery of a deed, financial adjustments,
the signing of notes, and the disbursement of funds necessary
to the sale or loan transaction.
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How long before I can get my loan?
The settlement closing of a loan requires about 30 days from
the date of the locked-in rate. While at settlement, you will
read and sign numerous documents related to the purchase or
refinance of your property. Your settlement agent will be
able to answer any questions you may have regarding these
documents. Settlements usually run smoothly and are completed
within 60 minutes.
What are closing costs?
Once a loan has been approved by the lender, the buyer is
asked to go to settlement to sign papers, and the loan process
is complete! There are certain costs involved in closing a
loan which usually amount to about 2%-6% of your mortgage
loan. For example, if your mortgage loan is $85,000, your
closing costs might range from $1700 to $5100. These closing
costs will be in addition to your down payment on the house.
Origination Fees
Your lender will charge a fee to cover the administrative
cost of processing your loan. This fee is usually a small
percentage of the loan amount.
Items Paid in Advance (Prepaid Escrows)
Most lenders require you to pay for some items that will
be due after closing. These pre-paid items usually include
first year insurance premiums (for hazard and mortgage insurance)
and real estate taxes.
Title Charges
A title is the document that shows who owns a property.
It is necessary for an attorney to examine a title to make
sure there are no problems that would prevent you from having
"clear" (legal) title. It is also necessary to
get title insurance in case someone else should try to claim
title to your property. Fees for title examination and title
insurance will be included in the closing costs.
Recording and Transfer Charges
A record of your home purchase will be on file with your
local government , and there is a small fee to cover the
cost of paperwork.
Attorney's Fee
This fee is to pay the attorney or closing officer for preparing
and reviewing all of the documents needed to close your
loan.
What's in a mortgage payment?
Mortgage payments consist of costs for principal, interest,
property tax, Home Owners Insurance, and mortgage insurance.
Principal
The principal is the amount of money you borrowed. Each
month when you make your mortgage payment, you are paying
back a small portion of the principal. The longer the payments
are amortized (over 30 years for example), the more the
payments go to reduce the principal you owe; over time,
interest will become a smaller part of your monthly payment.
In the beginning, most of the mortgage payments made to
the lender will be interest payments.
Interest
Interest is the cost of borrowing money, usually expressed
as an annual percentage of the loan amount - for example
8.125%, 9.000%, etc. Lenders will offer different rates
depending on the type of loan program offered.
Property Taxes
These are taxes paid to local governments, usually charged
as a percentage of the property value. Your lender collects
the taxes through your monthly payments. The amount of tax
will vary depending on the location of the home.
Home Owners Insurance
This is a contract that protects you from any financial
losses on your property that might result from fire, flood,
or any other "hazards."
Mortgage Insurance
This is an insurance policy that pays mortgage lenders for
part of their financial losses if a borrower fails to fully
repay a loan. Mortgage insurance makes it possible to buy
a home with a low down payment. |
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What types of insurance do I need
to know about?
Private
Mortgage Insurance (PMI)
A lender will require you to purchase mortgage insurance
if you make a down payment of less than 20% of the market
value of the home. There are different types of insurance
available which often affect the type of mortgage loans
you obtain.
Conventional Mortgages
FHA Mortgages
VA Mortgages
Title Insurance
Title insurance will be included in the closing costs to
insure that no other party can claim title to your property.
Home Owners Insurance
This insurance is a contract that protects you from any
financial losses on your property that might result because
of fire, flood, or any other "hazards."
What is refinancing, and when should I apply for it?
Refinancing involves obtaining a new mortgage loan on a property
already owned - often to replace existing loans on the property.
When the mortgage rates are low, it may be a good time to
refinance. Refinancing can save you money on your monthly
mortgage payments.
What is a rate lock-in?
A lock-in, or rate lock option, ensures the borrower a commitment
to a specified mortgage rate, including not only the interest
rate but also its discount/origination points. The borrower
must agree with an authorized representative of Hometown Equity
Mortgage Company for a specific interest rate in order to
choose this option. It is also possible to choose not to lock-in
a specific rate, but instead to "float" for a certain
number of days. Floating means simply a borrower electing
to have interest rates move up and down according to market
conditions until a specific rate is elected to be locked-in.
All borrowers electing this option must lock-in a rate and
its discount points at least five (5) business days prior
to a scheduled settlement, or else your settlement will be
delayed.
At Hometown Equity Mortgage, loan applicants can lock rates
over the phone using a credit card. In order to lock-in rates
and points, Hometown Equity Mortgage accepts a non-refundable
fee of $357.00. This amount will be credited toward appraisal
and credit report fees once the loan settles. Lock-in rates
are usually valid for 30 to 45 days, depending upon a borrower's
specific needs.
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