•  The basics about getting a loan  •  The loan procedure: steps to a mortgage  •  Financing buyers with bad credit  •  Types of mortgages  •  Points explained  •  Loan application information  •  Loan application checklist  •  Loan calculator Some lenders we trust:  •  Advanced Funding

The Basics About Getting a Loan [Back to Top] Selecting the best financing package available is as important as finding a home that meets your needs. In fact, determining how much you can afford before you begin your home search will save you valuable time in choosing the right home in the right neighborhood. There are three factors to consider in figuring how much you can afford: down payment, ability to qualify for a mortgage and closing costs. Most loans require a down payment between 10 and 20 percent of the home price(first time home buyers can expect to pay between 3% to 5%). If you are able to make a down payment of 25 percent or more, you may qualify for special mortgage programs offered by a variety of lenders. Most lenders require that your monthly mortgage payment, including principal, interest, taxes and insurance, should not exceed 28% of your gross monthly income. They also look for your total installment debt (regular scheduled payments of 6-months or longer), including the proposed monthly mortgage payment on your new loan, to not exceed 36% of your gross monthly income. In addition to your gross monthly income, lenders review your employment history, stability and potential for increasing your income. They also evaluate any additional income, such as bonuses, commissions and child support. A credit report is also requested, to verify your debt repayment, outstanding debt and available credit. Assets are also calculated, including checking and savings account balances, CDs, stocks and bonds. Avoiding any late payments on credit accounts and limiting your credit purchases helps keep your credit report in good standing. If you have items on your credit report that could negatively influence your ability to secure a mortgage, be prepared to explain each situation in writing. You should also consider delaying major purchases until after you've moved into your new home. Closing costs typically range between 2 and 5 percent of your loan amount. These fees are due in cash at the time of closing, or sometimes can be included in the loan. Taking the time to pre-qualify for a mortgage before you begin your home search will put you in a better negotiating position, because the seller is assured that the transaction will not be delayed while you secure financing. If you would like assistance in determining how much house you can afford or learn about financing options, please contact John for more information.

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The Loan Procedure: Steps to a Mortgage [Back to Top] Prequalification "Prequalification" occurs before the loan process actually begins, and is usually the first step after initial contact is made. In a prequalification, the lender gathers information about the income and debts of the borrwer and makes a financial determination about how much house the borrower may be able to afford. Different loan programs may lead to different values, depending on whether you are qualified for them, so be sure to get a prequalification for each type of program you are suited for. Application The "application" is actually the beginning of the loan process and usually occurs between days one and five of the loan. The buyer, now referred to as a "borrower", completes a mortgage application with the loan officer and supplies all of the required documentation for processing. Various fees and down payments are discussed at this time and the borrower will receive a Good Faith Estimate (GFE) and a Truth-In-Lending statement (TIL) within three days which itemizes the rates and associated costs for obtaining the loan. Opening The File This occurs between days 3 and 10. At this time the lender orders a property appraisal, property survey and credit reports, mails out requests for verifications, if necessary, for employment (VOE) and bank deposits (VOD) and any other documents needed for processing of the loan. All information supplied by the borrower is reviewed at this time and a list of items not yet received is compiled. Processing Processing occurs between days 5 and 25 of the loan. The "processor" reviews the credit reports and verifies the borrower's debts and payment histories as the VODs and VOEs are returned. If there are unacceptable late payments, collections for judgement, etc., a written explanation is required from the borrower. The processor also reviews the appraisal and survey and checks for property issues that may require furtherm discernment. The processor's job is to put together an entire package that may be underwritten by the lender. Underwriting "Lender underwriting" occurs between days 15 and 25. The underwriter is responsible for determining whether the combined package passed over by the processor is deemed as an acceptable loan. If more information is needed, the loan is put into "suspense" and the borrower is contacted to supply more documentation. "Mortgage insurance underwriting" occurs when the borrower has less than 20% of the loan amount to put towards a down payment. At this time, the loan is submitted to a private mortgage guaranty insurer, who provides extra insurance to the lender in case of default. As above, if more information is needed the loan goes into suspense. Otherwise it is usually returned back to the mortgage company within 48 hours. Pre-Closing "Pre-Closing" occurs between days 20 and 30. During this time the title insurance is ordered, all approval contingencies, if any, are met, and a closing time is scheduled for the loan. Closing Closing usually occurs between days 30 and 45 of the loan. At the closing, the lender "funds" the loan with a cashier's check, draft or wire to the selling party in exchange for the title to the property. This is the point at which the borrower finishes the loan process and actually buys the house. Closings occur at different places in different states. For instance, some states require that the closing take place at a closing attorney's office while others use a title or escrow company.

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Financing Buyers With Credit Issues [Back to Top] Q. I have had credit problems in the past. Will this affect my ability to obtain a mortgage loan? Answer. In evaluating an application for a mortgage loan an applicant's credit history will be considered as one element in determining the applicant's qualification for the requested loan. Negative credit histories or a lack of previous credit experience can adversely affect an applicant's ability to obtain a requested loan. More recent credit information will be weighed more heavily than older information. Also, some types of credit histories may be given greater weight than others. Generally, the applicant's previous payment history on a mortgage loan is given the greatest weight, followed by major installment accounts such as auto loans, followed then by major credit card accounts such as MasterCard and VISA accounts, and finally followed by minor revolving charge accounts such as departments stores and finance companies. Q. My credit problems occured more than three years ago. Will this affect my ability to obtain a mortgage loan? Answer. In evaluating a loan application we will look most closely at information occurring in the past two years. Generally, a few late payments occurring on installment loans or credit-card accounts more than two years ago will not affect an applicant's ability to obtain maximum financing (with minimum equity or downpayment) as long as the late payments were isolated and an adequate statement has been provided explaining why the credit problems occurred. Q. I recently filed bankruptcy. Will this affect my ability to obtain a mortgage loan? Answer. An applicant may be able to qualify for maximum financing with a previous bankruptcy provided that the discharge date is more than two years ago, the applicant has re-established and maintained a positive credit history on at least three accounts since the date of the bankruptcy discharge, and the applicant provides an acceptable explanation for the reason the bankruptcy was filed. Chapter 13 bankruptcy plans (which provide for a restructuring of debt and repayment of all or a portion of the debt over a 3 to 5 year period) must have been fully completed for a two year period to obtain maximum financing at the best available interest rates. However, we offer special loan programs at higher interest rates which allow more recent bankruptcies. These special programs typically require higher downpayments or equity positions than our conventional loans (between 10% to 35%) depending on how recent the bankruptcy. Q. I have very recent late payments on a prior mortgage. Will this affect my ability to obtain a mortgage loan? Answer. As previously stated, mortgage payment histories are given greater weight than other types of credit information. Thus late payments occurring on a mortgage within the past two years will typically preclude an applicant from obtaining maximum financing at the best interest rates. However, we offer special loan programs at higher interest rates which allow recent late payments on mortgages. These special programs typically require higher downpayments or equity positions than our conventional loans (between 10% to 35%) depending on how recent the late payments occurred. We even have loan programs for applicants which are currently in default on a mortgage loan or which have experienced foreclosures, however, these programs typically require higher equity positions of between 20% and 35% and have interest rates which are much higher than those offered on other loan programs. Q. How is the amount of the downpayment I will be required to pay determined on these special loan programs allowing derogatory credit? Answer. The amount of the downpayment required for an applicant with recent derogatory credit is determined on a case-by-case basis. Generally, the more negative and more recent the derogatory information, the higher the downpayment or equity position that will be required. For example, We offers a program which allows a 5% downpayment which permits late payments on a mortgage occurring more than 12 months prior to the application date, and up to three 30-day late payments on other types of accounts during the preceding 24 months. With 10% down, several late payments on a mortgage occurring within the preceding 12 months and a few 30-day and 60-day late payments on other types of accounts will be permitted on these special programs with higher interest rates. Most of these programs also allow higher debt ratios than those programs at more favorable interest rates.

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Types Of Mortgages [Back to Top] FIXED RATE FINANCING Once thought to be a dying breed, these loans offer fixed payments that only change when taxes or insurance change. A consumer can obtain a break on the rate of about 2% by going with a shorter maturity, 15-year loan, but this is at the expense of higher payments. As a result, a consumer qualifies for a lower loan amount. Under the current rates, these loans perform best over the long run since rates can vary greatly on Adjustable Rate Mortgages. ADJUSTABLE RATE MORTGAGES (ARMs) Having evolved for 15 years, these loans offer an attractive alternative to fixed rate financing. The initial rates start as much as 4% lower as compared to their fixed rate counterparts. A typical one-year ARM has a 2% annual cap and a 6% life cap over the initial rate and is adjusted annually according to a national index that reflects current interest rates. At adjustment, this program utilizes the current index rate and adds a margin that generally varies around 2.5 - 2.7%. Consumers should view ARMs under their worst case scenario as this, at some point, could be a reality. The loans are ideal for properties that will be sold in 4 to 5 years since a sizable amount of cash flow can be saved up front during the first two years. Under some circumstances, these loans can assist an individual in qualifying for a greater loan amount due to the lower initial rates. The FHA has an attractive ARM program that offers more protection to a homeowner. The program offers a 1% annual cap and a 5% life cap. Although based on the same index as conventional ARMS, the margin is much lower at 2.0 - 2.25%. BALLOON LOANS These loans were evolved during the last year and serve as an attractive alternative to ARMs and fixed rate programs. The loans are fixed for 5 to 7 years at a lower rate compared to fixed rate loans, although their payments are amortized over 30 years. A 7-year program saves .375% annually, and a 5-year program saves .75% annuals compared to a 30-year fixed rate. At the end of 5 to 7 years, these loans are due in full although a consumer may (with restrictions) roll the loan over to the fixed rates (plus 2%) at the maturity date. These are great loans for individuals who will hold properties for 3 - 7 years but prefer fixed rate financing at lower rates. None of the above programs have pre-payment penalties under FNMA guidelines and are based on simple interest calculations. The adjustable rate loans may be assumed with restrictions under their original terms, but the fixed rate and balloon programs are not assumable. (Actual rate differentials may vary from above example)

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Points Explained [Back to Top] WHAT IS A POINT? One point is equal to 1% of the NEW Loan Amount. WHY DO LENDERS CHARGE POINTS? Whenever government regulation, state usury laws and/or competitive practices prohibit the lender from charging a rate of interest which would make the real estate loan competitive with other fields of investments, the lender must seek some method of increasing the yield for the investors. By charging points, the lender can bring the real estate loan up to those other investments. ARE POINTS CALLED BY DIFFERENT NAMES? Yes, Loan Origination Fee, Commitment Fee, Discount Fee, Funding Fee, etc. WHO MUST PAY POINTS? FHA: The Buyer is usually chargedwith the Loan Origination Fee; the Discount Fee can be paid by Buyer or Seller. VA: The Buyer is usually charged with the Loan Origination Fee and the Funding Fee. Discount Fee must be paid by the Seller. Conventional: Points can be paid by the Buyer, the Seller, or split between the two. State on Contract of Sale! City/County/State Government Sponsored Loans: As published by them. DO THE NUMBER OF POINTS CHARGED FLUCTUATE? Yes. If rates on mortgage loans are lower than other investments (such as stocks, bonds, etc.) then funds will be drawn away from the mortgage market. Also, when there is a heavy demand upon the money market because of business needs, military requirements or other government borrowing, the result is that money for home mortgages becomes scarce and more expensive. When this occurs, more points can be charged. Points balance the market. Points are not set by government regulation but by each lender individually. ON VA LOANS, IS THERE ANY WAY TO LOCK IN THE NUMBER OF POINTS? Not without jeopardizing the sale. Even when a lender stipulates in writing the number of points to be charged, that guarantee states "if the interest rate is not changed by the government." Points charged on an FHA or conventional loan are usually not changed from commitment time to settlement. IS FHA OR VA FINANCING UNFAIR TO SELLERS? No. Homes can sell faster because more buyers can qualify with the lower down payment requirement, lower interest rate, long term loans with lowest monthly payments. Sellers receive all cash for their equity to reinvest in a new home or other investment. The purpose of these loans is to provide buyers the opportunity to buy homes with minimal cash investment thus providing a bigger market for sellers. ARE POINTS DEDUCTIBLE FOR INCOME TAX PURPOSES? Points on a home mortgage (for the purchase or improvement of, and secured by, the taxpayer's residence) are deductible currently if points are generally charged in the geographical area where the loan is made and to the extent of the number of points generally charged in that area for a home loan. If you are in doubt about points being deductible you should contact your tax return preparer.

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Loan Application Information [Back to Top] So you will have the facts and figures with you when you make your application for a mortgage loan, we have prepared this list of some of the questions the loan officer will ask you. Your being able to provide all the information at the first interview will save you time, and save several days in the time it takes to process your application. The lender will require this information as it applies to you and your spouse (or CO-borrower). Be prepared to pay approximately $50.00 for a credit report, and approximately $350.00 for an appraisal. EMPLOYMENT  •  Name and address (including zip code) of Employer.  •  Rate of pay and current pay stubs.  •  How long you have worked there (if less than two years, you will also be asked to give the same information about your previous employer(s).  •  W-2's for the past 2 years. CREDIT REFERENCES  •  Names of banks or other places you have paid off an account in full within the last few years.  •  Names of all creditors and credit cards along with account numbers, addresses and zip codes, required payments, and outstanding balances for each.  •  Delinquent payments with any creditor will require written explanation. CURRENT DEBTS (The lender will be ordering a credit report on you, so please include on the list all items which will show up on a credit report - it will save time in having to give an explanation of unlisted items later.)  •  Names of banks, stores, credit card companies, etc., to whom you owe money, including revolving charge accounts.  •  Monthly payment and balance owed.  •  Account number (or credit card number).  •  Child support and/or alimony. INCOME  •  Your monthly income before deductions.  •  Average overtime per month and/or second job monthly income.  •  Other regular income - investments, royalties, child support.  •  Alimony, commissions, (with proof of sales - e.g. tax returns, 1099 forms for 2 years, divorce decree, etc.) Should you be self-employed, the following documents are required Sole Proprietorship:  •  Complete, signed, personal tax returns for the past two years.  •  A current, signed Profit and Loss, and signed Balance Sheet. Partnership: In addition to the above, the following is required:  •  A Schedule K-1's complete, signed, Partnership tax returns for the past two years, and current signed Profit and Loss Statement and Balance Sheet. Corporation:  •  Complete, signed, personal tax returns for the past two years plus current signed Profit and Loss Statement and Balance Sheet.  •  If on a Commission Basis: complete, signed, personal tax returns for the past two years, year-to-date signed statement of employee business expenses. LIFE INSURANCE  •  Face and cash value of life insurance policies. ASSETS: Household:  •  Estimated replacement value of household items..  •  Jewelry.  •  Tools, hobby collections, etc.  •  Other things you own which have specific monetary value. Automobiles:  •  Make, model and market value of automobiles.  •  Indebtedness of all vehicles. Banks:  •  All banks names, addresses and zip codes, account numbers, current balances for all checking and savings accounts, including credit union accounts, money market accounts, etc.  •  Copy of the last two months bank statements on all deposit accounts. Investments:  •  Name of stocks, bonds, mutual funds, etc.  •  Market value and number of shares.  •  Location and estimated value of any real estate owned. Be sure to include name and address of lender and loan number, monthly mortgage payments, loan balances and rental income, if applicable.  •  Copies of leases on all rental property. PERSONAL  •  Copy of Drivers License and Social Security Card for each applicant.

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Loan Application Checklist [Back to Top] Photo Identification/Copy of Driver's License Social Security Card 7 Years Residence History 2 Years of Landlord or Mortgage Addresses 2 Years Employment History Last 2 Years W-2's and Most Recent Pay Stubs self-employed; Signed and Completed 2 Years Tax Returns, Corporate Tax Returns, Current Profit and Loss Balance Sheet Commissioned: Complete 2 Years Tax Returns and Current Pay Stub Reflecting Year-to-date Earnings. Name, Address with Zip, Account Number and Balance of: a. Installment and Charge Accounts b. Home Mortgage, all Real Estate Loans c. Checking, Savings, Credit Union, etc. to verify funds required to close your loan. Copy of Last Two Months Bank Statements on All Accounts Child Support Debt or Income: Complete Divorce Decree and/or Property Statement. Sales Contract on New Home. Sales Contract/Listing Agreement on Present Home. Rentals: Lease Agreement (12 Months) VA Loans: DD214 and Certificate of Eligibility Check to Pay for Credit Report and Appraisal in the Amount of $

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