What documentation will I need to provide?

  • Photo ID (Driver License or Passport).
  • Income – W2 Employee
    • Most recent 30 days pay stubs.
    • Most recent two years’ W2s.
    • All pages of the most recent two years’ Federal Tax returns including all supporting Schedules.
  • Income – Self employed
    • Most recent two years 1099.
    • Most recent two years K-1s.
    • All pages of the most recent two years’ Business Federal tax returns including all supporting Schedules.
    • Contact information for your CPA.
  • Assets
    • All pages of most recent two months’ statements from all asset accounts. This would include: Checking, Savings, IRA, stocks, 401k etc. Transaction histories and screen shots are unfortunately not accepted by underwriters.
  • A complete list of your monthly and total debts such as credit cards, student loans, car loans, and child support payments.
  • Student loan statements.
  • Additional Properties Owned – If you own additional property be prepared to provide the following for each property:
    • Copies of your most recent mortgage statements for all properties owned.
    • Copies of all leases.
    • Condo owners must provide the contact name and phone number for the condo management company and insurance agent holding the policy for your unit specifically.
    • Proof of monthly HOA payment if applicable.
    • Single family owners must provide proof of insurance coverage including the annual premium.  
  • If you are purchasing – miscellaneous documents/information:
    • Sales contract signed by all parties. Typically your Real Estate Agent will provide this.
    • Copy of cancelled earnest money check(s).
    • Contact information for the agent providing your homeowners insurance policy.
    • Contact information of your attorney, if applicable.
    • Contact information of your current landlord.
  • If you are refinancing – miscellaneous documents/information:
    • Your current mortgage statement.
    • If you have a second mortgage you will need to provide a copy of the Note (ask your loan officer if you are unsure what this looks like).
    • Contact information for your insurance agent.

What is a conventional mortgage?

A loan that is not insured or guaranteed by the federal government. A conventional, or conforming, mortgage adheres to the guidelines set by Fannie Mae and Freddie Mac. Conventional loans can be either fixed or an adjustable rate. Fixed-rate mortgages have a set interest rate for the entire length of the mortgage term which can be between 10 and 30 years. An adjustable-rate mortgage (ARM) has a term of 30 years with a low introductory rate for a fixed period followed by periodic adjustments according to a specific benchmark, typically a specific LIBOR or a T-Bill index.

What is a VA mortgage?

A mortgage loan in the United States guaranteed by the U.S. department of Veterans Affairs (VA). The VA loan was designed to offer long-term financing to eligible American veterans or their surviving spouses. They allow up to 100% financing.

What is an FHA mortgage?

An FHA loan is a mortgage insured by the Federal Housing Administration. Borrowers with FHA loans pay for mortgage insurance, which protects the lender from a loss if the borrower defaults on the loan. Down payment requirements smaller and there some flexibility with credit history.

What is a Jumbo?

A home loan for an amount that exceeds conforming loan limits established by regulation. Ask your loan officer what the current jumbo limits are for the county in which you are purchasing.  

How much do I need for a down payment?

The higher your down payment, the lower your monthly mortgage payment will be. The amount required for a down payment depends on your loan type. Typically, you will need to save 3 to 20 percent of the sale price in cash in order to qualify for a conventional loan. Down payments for jumbo loans can be as low as 10 percent. If you put down less than 20 percent on a conventional loan, you will most likely have to pay mortgage insurance.

I have Student Loans, but the payments are currently deferred. How does this affect my ability to qualify?

Underwriters will require you to document the monthly payment on any outstanding student loan. You may need to contact the servicer of your student loan to obtain proof of the minimum required payment once the deferred period expires.

  • Some mortgage programs use a percentage of your total student loan balance (1-2%) rather than using your monthly payment amounts under an income-driven repayment plan.
  • If the loans are in a deferred payment or income-based repayment plan, some guidelines require the borrowers to qualify on the anticipated fully amortized payment.
  • Give your loan officer a call to better understand how student loan debt affects your specific loan scenario.

If I have a low Credit Score or too much debt what do I do?

  • Fix or improve your credit score (FICO Score)
    • Pay all bills on time.
    • Keep credit card balances at or below the 30% threshold of the max available credit.
    • Avoid opening any new accounts or cancelling any existing accounts.
    • Correct any errors on the report.
  • Decrease your debt-to-income (DTI) Ratio
    • Typically, the maximum threshold for acceptable DTI is roughly 40-45% of your gross monthly income. Special government programs and lenders might approve borrowers with slightly higher DTI ratios, depending on a variety of underwriting criteria.
    • Get Pre-Approved to gauge your home buying power
      • By getting pre-approved by a lender, you’ll learn what the costs and down payment requirements are. To determine what you can qualify for, a lender would look at your 2-year employment history, credit (FICO), income, and assets.

What is the difference between pre-qualification and pre-approval?

Pre-qualification is the initial step in the mortgage process. You supply your lender with your overall financial picture, including debt, income and assets. After evaluating this information, a lender can give you an idea of the mortgage amount for which you qualify. Pre-qualification can be done over the phone or online, and there is usually no cost involved. Loan pre-qualification should include an analysis of your credit history and an in-depth look at your ability to purchase a home.

Pre-approval is the next step. You’ll complete an official mortgage application, pay for a credit report, and supply the lender with the necessary documentation to perform an extensive check on your financial background and current credit rating. (Typically at this stage, you will not have found a house yet, so any reference to “property” on the application will be left blank). From this, the lender can tell you the specific mortgage amount for which you are approved and give you a better idea of what interest rates will be for your loan scenario.

How long will it take to get prequalified?

Getting Pre-qualified can be done relatively quickly on a phone call with your Loan Officer.

What is an appraisal?

An appraisal is a written estimate of a property’s market value completed by a licensed appraiser. The value is based upon a market analysis of recent sales prices for similar properties in the area, and the property’s physical condition.

Will I be provided a copy of the appraisal?

Yes, the lender will provide you a copy of your appraisal.

What does “market value” mean?

Market value can be determined by either licensed or unlicensed individuals. Yet only a certified or licensed individual can perform a property appraisal. If the estimated market value is calculated by a licensed real estate agent, the report may include the following: active property listings, pending property sales, sold properties in the last 12 months and expired listings. In contrast to a real estate agent, an appraiser does not represent any particular person. An appraiser simply performs the service of determining the property’s appraised value according to strict guides to maximize the objectivity. Appraisers do not represent an individual’s interests regarding a property.

What is a comparable sale?

Comparable sales are the sales prices of similar homes that have sold. Comparable sales are neither active listings nor pending sales. Comparable sales are used as an example to justify why a buyer doesn’t want to pay more than the last guy paid for a similar home. The best comparable properties are going to be very similar in age, size, location, and style to the subject home. Active listings and pending sales may be used in the appraiser’s analysis, but those values do not carry the same weight as a home that has already sold.

What is the difference between interest rate and APR?

The interest rate is the cost of borrowing the principal loan amount. It can be variable or fixed, but it’s always expressed as a percentage. The Annual Percentage Rate, or APR, is a broader measure of the cost of your mortgage. It reflects the interest rate, as well as other costs such as lender fees, discount points and some closing costs. The APR is also expressed as a percentage.

What are closing costs?

Closing costs are fees associated with the closing of a mortgages and real estate transaction. The Closing is when the title of the property is transferred from the seller to the buyer, or when a borrower signs for a refinance. Closing costs are incurred by either the buyer or the seller.

Often include:

  • A fee for pulling your credit report.
  • Admin or Underwriting fee, which covers the cost of the evaluating and approve the mortgage application.
  • Document Preparation
  • Processing Fee
  • Discount points, which are fees you may elect to pay in exchange for lower interest rate.
  • Appraisal fee.
  • Survey fee, which covers the cost of verifying property lines.
  • Title insurance, which protects the lender in case the title isn’t clean.
  • Escrow deposit, which will cover the required reserves for property taxes, homeowners insurance, and private mortgage insurance.
  • Recording fee, which is paid to a city or county to record the new land records.

What are mortgage points?

Mortgage points come in two varieties: origination points and discount points. In both cases, each point is equal to 1% of the total mortgage amount.

Origination points are used to compensate loan officers. Not all mortgage providers require the payment of origination points, and those that do are often willing to negotiate the fee. 

Discount points are prepaid interest. The purchase of each point generally lowers the interest rate on your mortgage by 0.25%.

What are “pre-paids”?

Daily interest that accrues on your loan between the date you close on your mortgage loan and the period covered by your first monthly mortgage payment.

On purchases, the hazard insurance is paid for 12 months in advance at the time of closing.

Pre-paid escrow accounts. The lender will collect several months of taxes and insurance at closing to fund your escrow account. The funds are used to pay for the annual property taxes and insurance premiums when they come due.

What is a FICO score?

FICO is a software company based in San Jose, California. It stands for Fair Isaac Corporation and was founded by Bill Fair and Earl Isaac in 1956. Its FICO score, a measure of consumer credit risk, has become a fixture of consumer lending in the United States.

The most widely used credit scores are FICO scores. FICO takes credit information and uses it to create scores that help lenders predict behavior, such as how likely someone is to pay their bills on time, or whether they are able to handle larger credit line. Scores developed by FICO can also be used to forecast which amounts are most likely to end up included in bankruptcy, or which ones are likely to be most profitable.

What is PITI?

PITI refers to the four main components which make up a monthly mortgage payment. They are Principal and Interest, Taxes and Insurance.

The Principal and Interest portion of a monthly payment are defined on the NOTE at the time of Closing.

The property taxes and homeowners insurance portion of the payment will change over time. Each year your mortgage company will analyze your escrow account and determine if adjustments need to be made to your monthly payment based on changes in your taxes and insurance.

PITIA adds in the monthly assessment from Homeowner’s Associations. The HOA payment will be made separately to the HOA management company, but the monthly amount is factored in with your PITI payment when qualifying.

Flood insurance is collected by the lender when it is required by FEMA. Technically, one could pay a monthly PITIAF!