Frequently Asked Questions

1. Question: Just what does APR mean?
   Answer: APR or Annual Percentage Rate. The APR reflects the cost of your mortgage loan as a yearly rate. This rate may be higher than the rate stated in your mortgage or note because the APR includes, in addition to interest, loan discount or points, and other credit costs.
2. Question: How difficult is it to obtain a mortgage when my credit rating is very low?
   Answer: If you have the income to support the payments and are willing to pay the price you can often get financing through a lender that specializes in your situation. The rate will be significantly higher and you might have to deal with a prepayment penalty, but if you can tough it out for two years, make all the payments on time, then you can refinance and get a lower rate.
3. Question: How soon after filing bankruptcy can I obtain a mortgage without a huge down payment?
   Answer: New FHLMC guidelines require 10 years since release of bankruptcy. However, FNMA guidelines are usually two years with re-established credit and the rest of your credit package needs to be in good order. There are many lenders in the market that are not concerned with the bankruptcy and allow higher loan to value ratios. You will, however, be subject to higher interest rates and prepayment penalties. Often you can purchase a home, get your credit record cleared up, then after two years, if you have made timely payments and all the rest of your credit situation has improved, you can refinance to a lower rate.
4. Question: Why do I need a closing attorney?
   Answer: Closing attorney's and escrow agents act as a disinterested third party to a lending transaction. They are responsible for coordinating the payoff of any current lien holders on property, obtaining title and property insurance and filing the necessary documents and taxes with applicable county governments.
5. Question: How do I go about repairing my credit to get a home loan?
   Answer: Credit can be cleaned up, however it will take time. First you will need a copy of your credit report. If you have ever applied for a loan and been turned down, due to the condition of your credit report, you are entitled to a copy of your credit report. Next you need to contact the creditor who is reporting the delinquency and confirm the reported information. If you dispute their information, you must correspond with them in writing, and they are obligated to do so in return in a timely manner. Also, utilize good credit, establish new credit and keep it clean so the good payment history will out number the older, bad information. Lenders are really looking at the past 24 months, so keep it clean!
6. Question: How long should I have been on the job?
   Answer: Lenders require a 24 month work history. Meaning they need to be able to verify 24 month employment history in the same line of work. They want to see clean credit for the past 24 months. They also like to see a savings pattern. Meaning that your savings has been consistant for 12 - 24 months.
7. Question: How can I buy a home with no down payment?
   Answer: There are first time homebuyer programs with little or no down payment. Also there are programs that you can get a 80% first mortgage and 20% 2nd mortgage for a purchase. You must qualify and have great credit for these types of programs.
8. Question: What are the advantages and disadvantages of getting an FHA loan as opposed to a conventional loan?
   Answer: Typically FHA loans are great for first time home buyers because you can get in with very little down payment and FHA underwriting tends to be more lenient on the qualifying ratios. The down side is that FHA imposes loan limits (this could vary depending on the property location). Also depending on the market, the interest rates and points on FHA loans could be more costly than conventional. There are other differences.
9. Question: Can I have two or more FHA loans at one time?
   Answer: No. FHA was designed for first time homebuyers. It makes allowances for lower downpayments, higher ratios to qualify and offers other programs to help make housing more affordable.
10. Question: If I pay every month but I am sometimes late on a payment, is that a strike against me?
    Answer: If the payment is paid, but less than 30 days late, it will probably not show up on your credit report. If a payment is paid over 30 days from due date, it will probably show up on the credit report. When applying for a home loan, you will need to write a letter of explanation for all derogatory credit that appears on your credit report. Lenders really like to see 24 months of clean credit. So bottom line, make your payments on time. The lender wants to see good money management. Your credit is a reflection on how you handle your money and helps the lender determine the risk involved in making your  loan.
11. Question: What are pros and cons of a 15 year loan vs. a 30 year loan?
    Answer: A 15 year loan will have a lower rate and higher payments then a 30 year loan. If you can afford it, a 15 year loan is great since you will build up equity quicker and pay the loan off sooner and save thousands of dollars in interest. However, this is not an option for everyone.
12. Question: When does the final interest on my mortgage rate lock in?
    Answer: Lock periods run from 10 to 60 days. The 10-15 day locks are usually when the loan has been fully processed and approved and ready to draw or order the documents. The longer lock periods 45-60 days or longer are not so helpful since the lenders have to commit funds for a longer period of time and they usually charge more points to do so.
13. Question: When is a good time to refinance?
    Answer: When you are reducing your monthly payment.