Q. What does it mean to get pre-approved?
A. The pre-approval process gives you the opportunity to have your credit, income and assets evaluated prior to shopping for your new home. Based on this information you and your Mortgage Planner can come up with a clear price range for your new home search. Armed with a pre-approval letter, home buyers can enter in to a purchase contract with confidence. And most importantly a pre-approval letter demonstrates to the real estate agent and seller that you are a serious and well prepared candidate.
Q. What documents will I need to apply for a mortgage?
A. You will need to gather the following documents to prepare for the application process.*
- The 2 most recent years federal tax returns
- Most recent W-2 (for salaried borrowers) or year-to-date p&l (for self employed borrowers)
- One month of pay stubs
- Two month’s of statements for each of your asset accounts: checking/savings/investments/retirement
* please remember to provide the most recent copies of all documentation and to include all pages, even if the pages are blank or partially blank
Q. What will a lender look at when I apply for a mortgage?
A. Lenders consider many factors in evaluating your loan application, but they primarily focus on four areas:
Income and debt: how much money you make and what other bills you have to pay helps the lender determine what mortgage payment you can afford.
Assets: the lender needs to make sure you have enough money to cover the down payment, closing costs and reserves.
Credit: your history of meeting financial obligations helps the lender predict your ability to repay your mortgage.
Property: the home needs to meet the lenders guidelines and be worth enough to act as collateral for the mortgage.
Q. What if I’ve had credit problems?
A. Your credit history is only one factor in qualifying for a loan, and having made some late payments may not disqualify you from buying a home. Someone who has consistently made payments on time in the past may have more financing options than someone who has not, but that doesn’t mean a mortgage is off-limits if you’ve had credit problems.
Q. What is the minimum down payment I can make on a home?
A. Many first-time buyers believe they must be able to put down as much as 20% of a home’s purchase price in cash. That may have been true in the past, but many of the mortgage options available to today’s home-buyers require little or no down payment. Conventional loans allow for as little as 5% down payment while FHA programs require only 3.5% down payment. And with FHA loans the 3.5% can be a gift from a family member! For those eligible for VA loans, no down payment is required. For more information on these great programs please click here to contact one of our Mortgage Planners.
Q. Will I have to pay for Mortgage Insurance?
A. Mortgage Insurance provides your lender with a way to recoup its investment if you are unable to repay your loan. Mortgage Insurance is usually required when the mortgage amount is higher than 80% of the home’s value. That means that if you buy a home with a down payment of less than 20%, you will have to pay for mortgage insurance.
Q. What closing costs will I have to pay?
A. Closing costs typically fall into the following categories-
Lender fees: Origination Fee, Underwriting Fee and Processing Fee
3rd Party Fees: Title and Escrow, Appraisal and Credit Report
Prepaid Fees: Prepaid interest, Property Taxes and Hazard Insurance.
Q. Should I pay discount points?
A. Discount points are prepaid interest which you pay at closing in exchange for a lower interest rate on your mortgage. Paying discount points, each of which is equal to 1% of the loan amount, is often called €œbuying down€ your rate.
So does paying points make sense for you? The answer depends primarily on how long you plan to stay in your home. Your Mortgage Planner can work with you to weigh the cost of the discount point against the savings of the lower interest rate to help you make the best decision for your situation.
Q. Should I choose a fixed-rate or adjustable-rate loan?
A. Most mortgage loans have either a fixed interest rate or an adjustable interest rate. With a fixed-rate mortgage, the interest rate never changes and your payments remain stable throughout the life of your loan. With an adjustable-rate mortgage (ARM), the interest rate changes at regular intervals, based on a formula that uses a market index. For most ARM options, rate adjustments begin after an initial period, usually between one and ten years, during which the rate is fixed.
A fixed rate is usually recommended if you plan to stay in your home for the long term and are buying at a time when rates are relatively low. An ARM is usually recommended if you plan to move before the rate adjustments begin, or if you are buying when rates are relatively high.
As always please consult your Mortgage Planner to determine which option is best for you.
Q. Should I lock my rate?
A. Locking your interest rate means your lender guarantees the rate on your loan even if market rates change before closing. Most lenders will allow you to lock your rate for 30 to 60 days, with the option to extend the rate-lock period for a fee. So how do you know whether to lock your interest rate? It depends on whether you expect rates to rise or fall before you close on your home. No one knows for sure which direction rates will go at a given time, so it’s difficult to make a reliable prediction. It helps to keep track of announcements from the Federal Reserve Board, whose monetary policies have an effect on mortgage rates, and to talk to your Mortgage Planner about what may happen in the near term.
Q.Should I refinance my existing loan?
A. People refinance their existing loans for a number of reasons including obtaining a lower interest rate, to save on monthly payments and to change the term of the loan. People also choose to refinance if they want to switch from an adjustable rate to a fixed rate or to consolidate debt by refinancing for a higher loan amount and using the difference to pay off other debt. To see if it makes sense to refinance your loan Click Here.
Q.How can I consolidate debt when refinancing my mortgage?
A. Cash-out refinancing can help homeowners who want to consolidate high-interest, nondeductible debt. Because your mortgage interest rate is likely to be lower than rates on credit cards or other types of bank loans, consolidating debt may reduce your overall monthly debt payments. In addition, your mortgage interest may be tax-deductible, while your credit card interest is not.
Q. How does American Pacific Mortgage use my credit report?
A. Your credit report is used to evaluate your mortgage request by showing American Pacific Mortgage how you have handled your credit obligations in the past. APM will only pull your credit report once you have authorized us in writing, we will also ask you to complete a credit card authorization to charge you for your credit report(s). The cost for this is $16 for an individual applicant and $24 for joint applicants.
Q. Is it possible to contact the credit bureaus directly with questions about my credit?
A. The following three companies are the primary repositories for credit information. To contact them directly with questions about your credit report or obtain a free copy of your credit report please see the contact information below.
Q. Which mortgage and homeowners costs are tax-deductible?
A. Three types of mortgage and homeowners costs may be tax-deductible: discount points, interest paid on a home loan or home equity loan and property taxes. After the year of sale, your mortgage interest and annual property taxes are the only deductible costs. For a refinanced loan, points must be deducted over time. Also, in some cases your mortgage insurance premiums can be tax-deductible click here for more information regarding this. Please consult your tax advisor for advice about your situation.