1. What is the difference between pre-approved and pre-qualified?
A pre-qualification means that a loan originator has taken a loan application from a borrower, reviewed the borrower’s credit and run the information through the automated approval engine. If the automated engine approves the loan, the loan originator issues a Pre-Qualification Letter.
For a pre-approval, the loan originator must also collect the supporting documentation from the borrower including pay stubs, tax returns (if required), bank statements and loan disclosures. Once an underwriter has validated the information provided and issues a conditional approval, then the loan originator can issue a Pre-Approval Letter. Sellers prefer a borrower get pre-approved and not just pre-qualified. Some banks that are selling properties via short sale or foreclosure will not accept pre-qualification letters and insist that buyers get pre-approved before they will accept the offer.
2. What is the 1003 Form?
The 1003 is the Fannie Mae form number for the Uniform Residential Loan Application. Freddie Mac refers to the Loan Application as Form 65. You will be asked to fill out the 1003 whenever you apply for a home loan.
3. Is there a loan application fee?
We do not ever charge an upfront application fee to our borrowers. The only upfront charge we have is the appraisal fee when it’s required. You may pay for the appraisal with a credit card. You are not charged for the appraisal until it is delivered to us by the appraiser and you have accepted the terms of the loan we have offered to you.
4. How do I qualify for an FHA loan?
FHA loans do not have income limits and the property can be located anywhere. Borrowers can even have multiple FHA loans, with FHA approval, in certain situations such as a job transfer. However there are loan limits depending on the county where the property is located. To find the loan limit in your county, click here.
5. How do I qualify for a USDA loan?
USDA loans allow a borrower to finance up to the appraised value. However, USDA loans are both income and location specific. Income is limited by family size and area. To verify income limits and whether a property qualifies for a USDA mortgage, visit the USDA Income and Property Eligibility Site.
6. What financial documentation will I need to provide before I get a loan?
You will be asked to provide documentation such as bank statements, pay stubs, tax returns, identification, mortgage statements, survey and homeowner’s insurance information. Each loan application is unique, however, and your loan originator will provide a specific list of the documentation we will require to process your loan.
7. What are the closing costs involved in a mortgage?
Closing costs on a home loan consist of administration/lender fees, title company fees including owner’s and lender’s title insurance, survey, flood certification, credit report, appraisal and HOA transfer or statement of account fees. Other closing costs can apply with special loan programs like Texas Veteran Loans and TDHCA Bond loans for first time homebuyers.
8. What are the prepaid items on a mortgage?
Prepaid items consist of any per diem interest that is collected the month of closing and escrowed property taxes and mortgage insurance. For any loan that exceeds 80 percent of the value of the home, an escrow account is required except in certain HARP loan scenarios. The amount that is deposited into the escrow account at closing is dependent upon the due date of the taxes and insurance bills and the first payment date of the loan.
Lenders also keep a prescribed amount of cushion in the escrow account to take care of any increases in taxes and insurance costs. Each time a bill is paid from your escrow account, the lender will reanalyze the escrow account and adjust the amount they are collecting from you. You will receive an Escrow Account Analysis statement along with the notice that your payment is either increasing or decreasing.
9. What are the tax advantages to owning a home?
Owning a home allows you to deduct the mortgage interest and taxes paid on the property from your taxable income. Please consult your tax advisor for more details.
10. Do you recommend that I get pre-approved for a mortgage before I look for a home?
YES! Sellers are more willing to accept an offer from a pre-approved buyer. Additionally, you want to start out searching for a home in a price range you can afford. This saves you time, money and possible disappointment.
11. What do I do if I have credit problems?
You are entitled to a free copy of your credit report every 12 months. Visit www.annualcreditreport.com to get your free copy. Although there is no score with this credit report, you will be able to see if there is any incorrect information being reported and get it corrected before you want to apply for a mortgage. If you want to know your actual score, you can go to www.myfico.com and get your actual Equifax and TransUnion scores. If you pull your scores here, it will not show up as a credit inquiry.
If you find out that your score is lower than you would like, visit www.myfico.com/crediteducation and learn more about how your credit score is determined and ways you can improve it.
12. How can I check the status of my mortgage application?
Your Residential Mortgage Loan Originator will email or phone you (your preference) and keep you updated every step of the way. If you have any questions during the process, we encourage you to ask your loan originator.
13. How long does it usually take to close a loan or refinance?
Most loans are closed in 30 days. However, if your situation requires a very specialized loan program, the loan could take longer than 30 days to close. Your loan originator will let you know an estimated closing date upfront. If there are any delays during the process, he or she will notify you immediately and reset closing expectations.
14. What is PMI? Will I need to pay it?
PMI stands for Private Mortgage Insurance. PMI is required on most conventional loans where loan value is greater than 80 percent of the value of the property. There are different options available for PMI including monthly and upfront options.