Jennywms

1. What if I have a history of credit problems?

Negative or lack of previous credit can affect an applicant's ability to obtain a loan; however, recent credit information is more critical than older information. The applicant's previous payment history on a mortgage loan is the most important, followed by major installment accounts such as auto loans, then by major credit cards and finally by minor revolving charge accounts. If you have a reasonable explanation for late payments, explanation letters written to the lender will improve your chances of qualifying for a loan.

2. What is the minimum down payment needed to buy a home?

Most Conventional fixed rate loan programs require 0 to 5 percent down payment for qualified buyers. Texas Residential/Bankers Alliance has several programs that require 0 percent down for qualified buyers. FHA programs require 3 percent down payment, and the entire down payment can come from a gift. VA loans require no down payment.

3. When does it make sense to refinance my home?

Refinancing a home makes sense when the cost of refinancing (whether cash or equity) can be recovered prior to selling the home, or if the rates are sufficiently low - so that the cost of refinancing can be paid by the lender with an interest rate that is lower than your current rate.

4. Can I use gift funds as a down payment?

Loan applicants can accept cash gifts from family members such as parents, grandparents, siblings, aunts and uncles in order to save for a down payment. Gifts from non-family members such as friends or coworkers are not acceptable. Lenders will supply a "gift letter," which states the relationship between the parties, the address of the purchased property, the amount of the gift, and the source of the funds used to make the gift. You and the donor must sign this letter, which states that the funds are a gift and not required to be repaid.

Make a copy of the check used to make the gift and keep a copy of the deposit receipt when you deposit the gift funds into your bank account or escrow.

On FHA loans, the entire down payment can be a gift. For conventional loans, 5 percent of the down payment must come from the purchaser. Any additional funds can be a gift. If, however, the gift is for at least 20 percent of the purchase price, the entire down payment can be a gift.

5. When should I lock in? Should I lock in?

Interest rates may rise between the time you apply for a mortgage and when you close on your loan. This is especially true when you have a long escrow period and interest rates are volatile.

One way to avoid this is to "lock-in" the interest rate at the time you apply. (You must have a contract on a home when you lock in a rate.) Most lenders are willing to do this, but they usually restrict the amount of time that the lock-in applies. For example, lenders may be willing to lock-in the interest rate at no charge to you for 30 days. However, if you want to lock-in a rate for a longer period of time, you can secure the rate for up to 180 days. Usually there is a cost involved for this service. Talk to your loan officer to see what is best for you.

6. What is PMI, and how can I avoid paying it?

PMI is insurance for the benefit of the lender. If a property is abandoned or goes into foreclosure, this policy protects some of the value of the home. This policy is usually required if the loan-to-value (LTV) is greater than 80 percent. LTV means the percentage relationship between the amount of the loan and the appraised value or sales price - whichever is lower. There are many exceptions. FHA and other first-time homebuyer programs require mortgage insurance, regardless of LTV.

If you provide less than 20 percent down payment, or obtain an FHA loan, mortgage insurance will typically be required. The lender takes care of obtaining the mortgage insurance, but it will be part of your normal monthly payment.

7. How long will it take to get my loan approved?

If you provide all the necessary documents, your loan will be approved in approximately two weeks. Pre-approval, which is usually a good indicator of whether or not the actual loan will be approved, can be completed within days or hours.

8. How much will I pay in closing costs?

This depends on the price of the house and the loan program that you select. To get a ballpark figure, estimate 1.5 percent of your loan amount for a no point loan program. This would cover costs such as attorney fees, title insurance, prepaid interest, and recording fees. In addition to the closing costs, you will need funds for tax escrows and other similar items. This would bring the total amount you need for closing to around 3 percent of your loan amount. You will be required to have an additional amount in reserve savings of two months mortgage payments. (This is not a requirement for VA and FHA loan progams.)

9. Can I qualify for a mortgage if I’m self-employed?

Instead of your W-2's, lenders require two years of personal and corporate tax returns, and a year-to-date profit and loss (P&L) statement on the business. There are also loan programs available which limit the documentation from self-employed borrowers. This usually means no income documentation, such as tax returns or check stubs, is required.

10. What documents will I need when applying for a home loan?

* W-2 forms for the last (most recent) two years.
* The most recent pay-stubs from your employer covering a full month of employment.
* Bank statements for the past three months.
* The names, account numbers, and balances of your other monthly obligations.
* The purchase & sales agreement on the home you are buying.
* The last two years' personal and business tax returns for self employed borrowers.

Note: I pay referral fees based on the financed price of the home. Ask me about my program, Fees paid four days after the home funds Be sure to let me know when you are referring someone.

Jenny Williams
m_jennyw@sbcglobal.net