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What documents will I need to give the lender before closing a loan? |
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You will need these four documents to give to the lender before closing a loan.
1.
Fully ratified/executed sales contract on purchase loans.
2.
A termite report for the house.
3. Homeowners insurance policy properly listing the lender in the Mortgagee Clause.
4.
Any outstanding items requested by the lender.
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What's included in closing costs? |
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Closing costs are divided into three categories:
1. Lender fees (points, appraisal, credit report, underwriting, settlement and tax service fee)
2. Prepaid items(interim interest, real estate taxes and escrow, insurance premiums and escrow)
3. Settlement costs (title insurance, settlement/attorney fees, city / county / state taxes, recordation and messenger fees)
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How do adjustable rate mortgages work? |
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There are many types of adjustable rate mortgages, but all have some common features.
One common feature of adjustable rate mortgages is an interest rate change that occurs after a stipulated number of payments have been made. The interest rate can increase or decrease depending on how the new interest rate is calculated. Typically, the interest rate change is based upon a predetermined index value and a margin. If a mortgagor currently has an interest rate that is pending adjustment, the new rate would be calculated by adding the current index rate and a margin. For example, if the mortgagor's current rate was 6.000% with a 2.000% margin, the new rate would be determined by adding the current index rate (5.000% as an example) to the margin. In this example the new interest rate would be 7.000%.
The maximum amount the interest rate can change during any adjustment period is usually fixed. This maximum adjustment is called the "cap." Adjustable rate mortgages also have a lifetime cap, preventing the interest rate from exceeding a predetermined rate. |
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What are the closing costs for a refinance or purchase? |
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Closing costs vary depending on the purchase price of your new home or your loan amount, but generally run 3-5% of your total loan. |
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What is the Annual Percentage Rate (APR)? |
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The Annual Percentage Rate (APR) is the cost of your credit expressed as an Annual Rate.
It is commonly used to compare loan programs from different lenders. |
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Why is the APR different from the interest rate for which I applied? |
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The APR is computed from the Amount financed and based on what your proposed payments will be on the actual loan amount credited to you at settlement. For a $50,000 fully amortizing loan with $2,000 Prepaid Finance Charges, a 30 year term and a fixed interest rate of 12%, the payments would be $514.31 (principal & interest). Because the APR is based on the amount financed ($48,000), while the payment is based on the actual loan amount given ($50,000), the APR (12.553%) is higher than the interest rate. |
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Can I use Gift Funds for the Down Payment? |
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One of the most popular aspects of FHA financing is the ability to receive your down payment as a gift. It just needs to be from a relative. The down payment can be 100% gift funds. This is one of the key benefits to the FHA program. Most conventional mortgages do not allow 100% gift funds. Generally the borrower must have 5% of the funds.
Verification of the source of gift money is required. It is necessary that the gift funds be deposited in the borrower's account, or in an escrow amount, prior to underwriting approval. Proof of transfer of deposit is required.
Gift donors are restricted primarily to a relative of the borrower. They can also be certain organizations, such as a labor union or charitable organization. Contact your Loan Consultant for complete information. |
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What are the Rules Regarding Bankruptcy? |
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FHA may have the most lenient policies towards bankruptcy, but you still must have a valid reason and re-established credit. Generally, a bankruptcy will not necessarily disqualify a potential borrower. Guidelines are as follows:
Chapter 7: Two years must have passed since the bankruptcy was discharged. (Note: Discharge, not Filing Date). The borrower must have re-established good credit without delinquencies for two years (or has chosen not to incur new credit obligations), and has demonstrated an ability to manage financial affairs. If the borrower does not incur new credit, such things as Car Insurance, Telephone, Cable, Utilities, Medical Payments, etc. will be used to demonstrate re-established credit.
Chapter 13: A Chapter 13 Bankruptcy, often referred to as a wage-earner plan, allows arrangements to be made for some or all debts to be paid off over a number of years without the person liquidating assets. It can be viewed more favorably than a Chapter 7 or Chapter 11 Bankruptcy, where you walk away from debts remaining after liquidation of certain assets. Again, it hinges strongly on the lender and its practices. A few mortgage programs will allow an opportunity for you to get new financing while you are still in the Chapter 13, others will not and will require a certain period of time to have elapsed after its discharge. Some require that you must have completed the Chapter 13 and re-established credit with institutional lenders, while others do not and appreciate that you have incurred no new debt.
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