|Q) What is a
A) A mortgage is a legal document you sign pledging your
property as security for the loan the lender makes to you. A
mortgage is executed in conjunction with the note which is
your obligation to pay. A note and mortgage are often
considered together when signed by the borrower at closing.
Without a mortgage the lender would not have the ability to
foreclose against the property in the event of default. All
lenders require the borrower to sign both a note and mortgage.
Q) What are the lender's
criteria in making a loan?
A) Every lender uses its own criteria in making a
determination whether to approve the borrower's application
for a loan. However, most lenders follow guidelines set forth
by Fannie Mae (Federal National Mortgage Association) or
Freddie Mac (Federal Home Loan Mortgage Association). The
general wisdom is that lenders look to the "Three
C's" e.g. the borrower's credit history, capability to
pay, and collateral. The credit history is examined through a
credit report provided by a credit reporting agency. The cash
on hand is verified by your depository and the collateral or
property you finance is appraised by a state licensed lender
Q) How can I verify my
A) Your credit history is summarized by a credit bureau.
There are several national agencies and you can order directly
a copy of your credit report, or Valley Mortgage Company can
assist you with this process. If
your credit report reveals incorrect information you must
contact the bureau and request that the inaccurate information
be removed or corrected from your report. Late payments
indicated on a credit report do not necessarily disqualify you
from qualifying for a loan, but have a good clean credit
report is essential. Often
borrowers start the process by just reviewing their credit
Q) If I want to buy a house
but don't know what I can afford, what should I do?
A) The first step for any potential homeowner is
prequalification. For no charge Valley Mortgage Company, Inc.
will meet with you and review all the necessary information to
make a preliminary determination of the amount of loan your
income can support. The pre-qualification is not a guarantee
but it serves to give you a price range when looking for a
Q) Can I get a loan if I am
A) The law prohibits lenders from discriminating against a
loan applicant based on marital status. A couple may
have an advantage only to the extent that if both parties
work, both incomes can be used in the loan qualification
process. A single person should remember, however, that in
certain circumstances income from commissions, overtime and
part-time work can be used in the qualification process.
Q) Can I get a loan if I am
A) A self-employed applicant can qualify for a loan but
must support the application with supplemental information
including a two year history of averaged earnings. Valley
Mortgage Company, Inc. can advise you about the type of
verification required by each lender and recommend which
lender best suits your needs.
Q) Can I get a loan if I
live on a fixed income?
A) For loan qualification purposes, income is income.
Social Security payments, private pension income and
disability entitlements all can qualify you for a loan.
Federal law prohibits discrimination against a loan
application based on age.
Q) How much of a down
payment do I need?
A) Historically, lenders required a 20% down payment for
conventional financing. However, several programs today enable
the borrower to provide as little as a 3% down payment or even
no down payment under certain strict guidelines. In some cases
you may receive a gift for the down payment from a family
member or grant from a designated government agency.
Q) What are closing costs?
A) Closing costs are costs paid by the borrower at or
prior to closing charged by the lender and other parties to
make the loan. These costs include points, origination fees,
title insurance fees, recording fees and bank attorney fees.
In addition, the lender typically will establish an escrow
account at closing, and you will need to fund the account with
cash. The escrow monies are used to pay your taxes and
homeowners insurance as they become due. Generally, borrowers
should estimate that their closing costs total between 5% and
7% of the loan amount.
Q) What is refinancing and
when should I do it?
A) A refinance is the process of paying off your loan and
taking a new loan with the same or different lender at a
better rate or for the purpose of extracting equity. Very
often lenders advertise that you should refinance when the
prevailing rate drops two points below the rate of your
current loan rate. A better way to evaluate the situation is
to consider your current payments, the term left on the loan
and the payments under a refinanced loan. Valley Mortgage
Company, Inc. can review these criteria with your and advise
you accordingly. Often if you intend to remain owning the
property, you would benefit from refinancing even where the
rate differential is less than two percentage points.
Q) Can I reduce my monthly
payment or shorten my loan term if I refinance?
A) Rate and term
reductions are two common motives to refinance. We try
to look at the total picture carefully to make sure a
refinance is justified. Simply reducing rate at the
expense of lengthening term may not save you money. On
the other hand some borrowers refinance onto a longer term to
reduce the monthly payment. It is common for families to
consider a refinance to extract more equity from the property
to increase cash on hand to pay other debts, make home
improvements or afford college tuition. In short, the
purpose of the refinance is as important as the rate or
Q) How long does the loan
A) Typically the mortgage process from application to
commitment takes about 30 days. This is not to say that
a preliminary approval cannot come to us within days.
However, the full process that considers all the supporting
documentation including the appraisal report and results in a
firm commitment from a lender without lots of conditions takes
longer. We always operate at Valley Mortgage with a
sense of urgency in moving the process forward on your behalf
to resolve the mortgage contingency as quickly as possible.
Often we are finished with the application process well before
the closing date anticipated by the parties.
Q) How do I find out what my
interest rate will be?
A) There is no great mystery or secret about interest rates.
Lenders deliver interest rates every day, sometimes several
times a day, depending on the market. We will keep you
apprised of the rates from the start, and it will always be your
call when to lock the rate. Generally, rate lock periods
run for sixty days, so it will be important that you anticipated
closing fall within that time frame. Longer rate locks may
apply for construction financing or other niche programs.
Q) Does filling out an
application obligate me to complete a loan with you?
A) From the start it is
your decision to work with Valley Mortgage. You are free
at any point to change course and pursue your financing
elsewhere. We believe that our clients work with us
because we have earned your relationship by our smarts, our
ethics and our service.
Q) What are the advantages of
a fixed-rate loan versus an adjustable-rate loan?
A) The type of financing
your chose will depend on your needs. Suffice it to say
there are dozens of types of loan programs available on the
market, and part of our effort is to listen and learn from you
so that we can offer advice about these options. For the
borrower planning a shorter term on the property a variable rate
might make sense. Again, you will have lots of information
from us to help make a choice.
Q) Will I need an appraisal on
my new home?
A) Every mortgage loan
requires an appraisal. If you are just starting the
process then the appraisal is part of the loan processing we
perform on your behalf. If you are in possession of a
valid appraisal it may apply to your loan application.
Q) Do I have to pay Private
Mortgage Insurance (PMI)?
A) Private mortgage insurance applies when you borrow over the
80% mark. That is, if you purchase a property for $100,000
and seen a $90,000 loan you payment likely will include a
monthly mortgage insurance premium. Sometimes lenders
offer a “No MI” option whereby the monthly mortgage
insurance does not apply in return for a slightly higher
interest rate. Again, we can explore all options to
customize the loan to meet your needs.
Q) How much of my home equity
can I use?
A) Home equity lines of credit and loans can vary in rate and
amount according to the type of property and the credit profile
of the borrower. While the terrain of mortgage financing
constantly changes, there are some programs now that allow as
much as a 100% equity extraction from the property. Many
factors contribute to this determination, and a borrower needs
to understand fully the pluses and minuses of the typical
variable rate line of credit.
Q) What are the tax benefits
to owning a home?
A) We are not accountants
at Valley Mortgage, so you are best advised to consult with the
proper professional. However, it is commonly understood
that real estate taxes and mortgage loan interest paid by the
borrower/home owner is tax deductible against ordinary income.
A financial planner can explain to you how a mortgage payment
compares against rent in terms of real dollars.
Q) What's the best loan
program for me?
A) This a big question
that does not lend itself to a single answer. We consider
ourselves mortgage consultants, and as such our job at the start
is to listen and listen more. Learning about your
purchase, your qualifications, your intent and your financing
approach helps us advise you about appropriate options.
Our strength as a general mortgage broker fluent with a broad
selection of mortgage products allows us the flexibility to fit
the mortgage plan around you, rather than fit you into a single
available product. In the end it is about listening.