Learning Center – Mortgage Overview
Use this checklist to make sure you have everything you need before you begin your loan application. Having all necessary documentation up front saves time so your loan can close smoothly and quickly.
• 2 years of tax returns
• 2 years of W-2s
• If self-employed, 1099s and copy of business license.
• Most recent bank statements (all accounts and all pages).
• Explanation (signed and dated) of any deposits over $1,000 other than normal pay into accounts.
• Most recent pay stubs (minimum of 30 days).
• Copy of driver’s license.
• Explanation (signed and dated) of any inquiries on credit report.
• Mortgage Statement, Insurance Declaration Page, and most recent tax statement for all other properties owned.
• Divorce Decree and Separation Agreement (if applicable).
• Copy of Earnest Money Check & Purchase Contract.
10 Do’s and Don’ts
- Don’t apply for new credit of any kind.
- Do keep all existing credit card accounts open.
- Don’t MAX OUT or overcharge existing credit cards.
- Do maintain your employment at your current job.
- Don’t consolidate debt to one or two cards.
- Do pay off collections, judgements, or tax liens reported within one year.
- Don’t make any large purchases.
- Do stay current on your existing accounts.
- Don’t make any large deposits into any of your accounts.
- Do call us. We are here to help you through this process.
First Time Homebuyer
Get Pre-Approved. The only way to truly know how much home you can afford is to ask a lender. Getting pre-approved lets you know how much you can afford before shopping for your home.
What to Know:
• Income: Stable income assures a lender you can make your monthly mortgage payment.
• Debt: Add up auto payments, credit card payments, student loans, alimony, child support, and other debt.
• Cash: Total assets, amount in checking and savings accounts, and other investments.
Determine Monthly Mortgage Payment Including Escrow. Escrow is a third-party account used to retain funds including the property owner’s real estate taxes and hazard insurance premiums. Escrow is only applicable in certain loan programs.
Understand Bills Associated with Homeownership.
Estimate that it will cost about one percent of the purchase price per year to maintain your home. For a $200,000 home, you should budget approximately $2,000 per year or approximately $170 per month for maintenance. Condominiums and co-ops will have regular maintenance fees. You will also have utilities, gas, electric, water, sewage, cable, telephone, insurance, property tax, etc.
Establish Future Priorities and Plan for the Unexpected.
• What are your needs for the new home – furniture, lawn equipment, barbecue grill?
• Do you plan on a new car in your near future?
• Do you plan to have children?
• How long can you survive if you lost your job?
Rent vs. Own
Buy and begin building your own equity. Rates are at an all-time low, and we are confident there is a program that is perfect for you. The benefits are endless!
• You can’t build equity in an apartment or rental property, but by owning your home you can!
• Your rent payment is not tax deductible. By being a homeowner, the interest portion of your mortgage payment could be tax deductible. *Please consult your tax advisor.
• Your rent almost always increases when your lease is renewed, but with a fixed-rate mortgage, the principle & interest payments never go up.
• In addition to deducting mortgage interest, you may also be eligible to deduct costs paid at closing. As part of owning a home versus renting, you may be eligible for tax credits for improvements and other tax incentives.
What is a Fixed-Rate Loan?
A fixed-rate home loan is a loan with an interest rate that never changes. A popular term (length) for fixed-rate loans is 30 years, but many lenders offer other term options. Fixed-rate loans with shorter terms tend to require higher monthly payments, but less total interest paid over the life of the loan.
You lock in the security of a consistent rate, which is ideal if you plan to stay in the same home for a long time. And if rates suddenly go up, you’ll keep the rate you had the day you closed on your loan.
Fixed-rate loan types may have a higher rate and payment than the initial period of a loan with an adjustable rate.
What is an Adjustable-Rate Loan?
With an adjustable-rate mortgage (ARM), your rate may change based on national rate indexes (within certain limits). Adjustable-rate home loans have an initial fixed rate period after which the rate will adjust at stated periods. For example, a “5/1 ARM” is a loan with a fixed rate for 5 years, then one yearly adjustment for the rest of the loan term. Each adjustment has annual and lifetime limits.
If you’re planning on staying in your home for a shorter period of time, the initial low fixed rate of a 3/1, 5/1 or 10/1 ARM can keep your monthly payments low.
If rates rise and you’re past your fixed period, your monthly payment could rise too. You could end up paying more each month than you did when you first obtained your loan.
What is a Conventional Loan?
A conventional loan isn’t insured by the federal government. They typically require a minimum of 5% down and have both fixed or adjustable rate options. Popular conventional loan terms are 15 and 30-year.
Conventional loans tend to involve less paperwork than government-backed loans in many cases. If you can make a down payment of 20% or more on a conventional loan, you won’t have to carry mortgage insurance. Also, you may not be required to establish an escrow account.
If you can’t make a down payment of 20%, it’s likely you’ll have to carry mortgage insurance, and contribute every month to an escrow account your lender will use to pay your property taxes and homeowner’s insurance.
What is an FHA Loan?
If you’re looking for a loan with flexible credit requirements and a more manageable down payment, an FHA Loan—backed by the Federal Housing Administration—may be just the ticket.
Government-backed FHA Loans offer competitive rates, flexible credit requirements, and down payments as low as 3.5%. An FHA Loan is a great option for people who may not qualify for a conventional loan.
Both up-front mortgage insurance and monthly mortgage insurance are required for FHA Loans, while they can be optional in other situations. You’ll also be required to have an escrow account to stay on top of your property taxes and insurance payments.
What is a VA Loan?
If you are a veteran, active duty service member, or surviving spouse of a veteran, you may be eligible for a well-deserved benefit: A VA Loan.
Compared to many other loan types, VA Loans offer low rates and manageable down payments (that can actually be as low as $0 for qualifying borrowers!) They also don’t require monthly mortgage insurance payments.
New VA Loans are only for primary residences. The amount you can borrow may be limited by your VA entitlement amount. VA Loans also require an up-front funding fee, unless you have a military service-related disability.
What is a Jumbo Loan?
You’d never guess, but a jumbo is a really big loan. Okay, maybe you would guess. A jumbo is a loan that exceeds conventional loan amount limits.
Jumbos help you buy or refinance higher-valued properties, while still offering fixed and adjustable options.
Because the sort of property bought with a jumbo loan is expensive, it can be harder to sell. A bigger down payment is sometimes needed, and rates tend to be higher.