 |
FREQUENTLY ASKED QUESTIONS
What is a mortgage?
What are the lender's criteria in making a loan?
How can I verify my credit history?
If I want to buy a house but don't know what I can afford, what should I do?
Can I get a loan if I am single?
Can I get a loan if I am self-employed?
Can I get a loan if I live on a fixed income?
How much of a down payment do I need?
What are closing costs?
What is refinancing and when should I do it?
Q) What is a mortgage?
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 approved appraiser.
Q) How can I verify my credit history?
A) Your credit history is verified by a credit bureau. There are several national agencies and you can order directly a copy of your credit report. Typically, however, ABC National Mortgage, Inc. will assist you with this. If your credit report reveals incorrect information you can 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. ABC National Mortgage, Inc. can counsel you on the various factors that need consideration to counter any negative information in your report.
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 pre-qualification. For no charge ABC National Mortgage, 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 home.
Q) Can I get a loan if I am single?
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 self-employed?
A) A self-employed applicant can qualify for a loan but must support the application with supplemental information and verification of earnings. ABC National Mortgage, 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 or loan proceeds. 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. ABC National Mortgage, Inc. can review these facts with you 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.
|
|
 |
