FAQ
Q. We are considering purchasing a home. Who should we seek first, a realtor or a mortgage broker?
A. A mortgage broker would be your best choice. Imagine contacting a realtor knowing that you have guaranteed financing. Your price range is firmly established, and you can begin looking at homes that you know you can buy. The realtor will be more willing to tour homes with you knowing that you are
a qualified borrower. It's a huge time saver for everyone.
Q. I'm concerned that my credit score may be too low. Can I still get qualified?
A. Your credit score is an important part of the home buying puzzle, but it's not the only piece. Your mortgage broker will review your credit report with you to make sure it is accurate. If there are errors, you will be shown how to correct them. The mortgage industry has loan products that allow home buyers with lower scores generous mortgage loans. The important thing is to get the facts and know where your credit stands today.
Q. How long do I have to be self employed before I can get a home mortgage?
A. The normal time is 2 years. You need either a letter from your tax preparer stating that they have prepared your previous 2 years tax returns as a self employed person, or a professional license that has been issued for 2 or more years. If your credit scores are high enough you can get purchase financing up to 90% without stating employment.
Q. Can the seller pay my closing costs?
A. Yes. Depending on the loan program, the seller may pay up to 6% of the purchase price toward your closing costs. This must be stated on the purchase agreement. This is another good reason to visit with a mortgage broker prior to seeking a realtor.
Q. What do closing costs consist of?
A. When you purchase or re-finance a home there are costs involved with obtaining financing. The Real Estate Settlement Act of 1974 (RESPA) requires that these costs be disclosed as a Good Faith Estimate. They include broker origination fee, processing, underwriting, appraisal, title examination, abstract update, attorney fees, title transfer fees, and in some states, mortgage taxes. These fees are typically 3rd party fees that are documented by invoice and the charges cannot be higher than the invoiced amount. Fees that appear vague such as administration fees, application fees, broker fees, etc, are typically 'junk' fees and as a consumer you should question these fees.
There is a distinction between closing costs and total settlement cost, which includes pre-paid fees such as pre-paid interest and escrow account set up of insurance and taxes.
Q. What does the APR on the Truth in Lending document mean and why is it higher than the rate I was quoted?
A. The Truth in Lending document discloses the real cost of the financing. Here's a hypothetical scenario; let's say you are borrowing $125,000.00 and the rate is 6%. Your monthly payment would be $749.44. Your closing costs are $2,500.00. The $2,500.00 is subtracted from the $125,000.00 loan and the payment of $749.44 is applied to a loan amount of $122,500.00 or the loan amount minus closing costs. The APR or annual percentage rate is what it would take to make $749.44 equal the payment for a loan of $122,500.00. It would be somewhere around 6.5%. The spirit behind the Truth in Lending disclosure is to allow a borrower to see at a glance what the financing is costing the first year. If the APR is more than 1% above the note rate you need to ask why. There may be a legitimate reason, because there are so many different programs and borrower needs. The bottom line is...Ask questions.
At Leading Edge Mortgage, the most important questions are the ones you ask. When trust really matters, 'WE MAKE THE DIFFERENCE!' Send your questions to timrice@leadingedgemtg.com or call me at 701-373-2052.