FAQ

It’s best to think of this question in terms of underwriting (UW); in other words, what would you want to know if I where to ask you to lend me $200,000.00 for a house?

 Ok, now that I have your attention here’s how banks UW Mortgage loans:

1. Credit History, The UW will look at your history of repaying debt, the document used is a tri-merge credit report (this will be handled by your loan officer);
2. Collateral, the house being financed is the collateral. Documents:
   1. Appraisal (this will be handled by your loan officer) will be used to determine value.
   2. Title to the house (this will be handled by your loan officer) the UW wants insurance that they will hold first lien position. This is an important function for you as well.
3. Capacity, Is the ability to repay the loan. Documents used are whatever official third-party proof of income and assets (a.k.a. reserves) you were provided. Some common documents:
   1. Paystubs
   2. W-2
   3. Personal/Business tax returns
   4. 1099’s
   5. Bank Statements
   6. 401k Statement

Income comes in various form; it’s been my experience that if the income is real it’s provable.

It’s also worth noting that UW DO NOT like cash… income and assets will need third party verification.

A point is a percentage of the loan amount, (ex. one-point equals one percent of the loan amount). The term “Points” is generally used in reference to fees, such as loan origination fees or buying down interest rates, etc.

Closing costs vary based on the type of loan. In most instances closing costs will include:

1. Appraisal, cost range $350-550, can vary based on many factors;
2. Title for the house, cost range $800-1,200, can vary based many factors;
3. Credit report, typically, under $50.00.

An easy way to determine if fees are fair vs. junk fee (fees that are profit only); if the fee is required by the UW to make a decision, its fair. For example, an appraisal is necessary for the UW to determine a value for the house. As opposed to an “Admin Fee”, this fee provides nothing to assist the UW in making a decision, it’s just additional profit (a.k.a. Junk Fee).

Not necessarily. Its possible that if you pay extra on your mortgage it could be paid off in the same 15 years and have a lower effective interest rate than the current market 15-year rates. See blog or call for personal analyses.

Down payment requirements depend on the loan type:

• VA Loan, Zero Down Payment;
• USDA Loan, Zero Down Payment;
• FHA Loan, 3.5% of the Purchase price;
• Conventional Loan, 3% of the Purchase price (possibly 5%).