Home Loan Prep FAQs

We have the answers to the most common home loan preparation questions.

Have questions about preparing for a home loan?

We have answers. Please feel free to reach out directly to our loan officers if you have further questions. We look forward to hearing from you!
Discount points are prepaid fees that borrowers can purchase that will lower the amount of interest they will have to pay on future payments. Each point costs about 1% of the total loan amount, and can lower the loan's interest rate by one-eighth to one-quarter percent. Here's a tool that will help you determine whether paying paying additional discount points for a specific interest rate in exchange for a lower interest rate is of interest to you. The length of time you expect to stay in a home may factor into whether paying points is the right choice for you. 
An escrow account, which is also sometimes called an impound account, is setup by the mortgage lender to pay certain property-related expenses. An escrow account can be helpful in paying these expenses because money is set aside every month instead of having to pay a big bill a couple times a year. Your mortgage servicer will manage the escrow account and pay these bills on your behalf.  Escrow accounts may be required by the lender and are also, in some cases, required by law. Here's a blog that tells more about escrow accounts.
 
There are three main instances when your monthly payment amounts may change:
1. If you have an adjustable rate mortgage, and the rate changes.
2. If there is an escrow established on your loan and there are changes in your taxes or insurance.
3. If your loan was originated with monthly Primary Mortgage Insurance ('PMI') but has reached a loan to value where PMI has been dropped. 
Your interest rate will change  if you have a loan with an adjustable rate. The interest rate on a fixed-rate loan does not adjust. 
A home appraisal is an opinion of a home's value done by an unbiased professional. These are almost always used for home purchases and sales, as well as refinances. They are done to ensure the lender that the homeowner is not over-borrowing for a property, preventing a possible foreclosure in the future.
This is to protect the buyer to guarantee that the seller owns the property legally without outstanding legal or financial claims against it.
Private  mortgage insurance (PMI)  is typically required on a conventional loan when there is less than a  20% down payment.
In some states, a survey company must verify the property lines and shared fences on the property.
No. An appraisal determines a home's fair market value. An inspection is an examination of your home's physical structure and systems.
A standard inspection report examines the condition of your home's interior plumbing, electrical systems, roof, attic and insulation, walls, ceiling, floors, windows, doors, foundation, basement, structural components, heating and cooling systems.
A  gift may typically be acceptable from: a borrower relative, borrower's employer or labor union, a close friend, a charitable organization, a governmental agency or public entity that has a program providing home ownership assistance to low and moderate families or first-time homebuyers. Specific requirements regarding gifts can vary by loan type and program. Talk to your lender for details. 

You will need a down payment gift letter that may include, but is not limited to: 

  • Donor's name, address and phone number
  • Donor's relationship to client
  • The date the funds were transferred A statement from the donor that no repayment is expected.
  • The donor's signature.
  • The address of the property being purchased.
The maximum loan amount you can borrow depends on your credit score, your debt-to-income ratio (DIT) and profile in the underwriting process. The lender basically wants to have an understanding of how much you will be able to repay, taking into consideration all risk factors. Here's a tool to help you calculate how much you can borrow.
The amount of a down payment needed for a mortgage loan depends on the type of loan and additional credit underwriting criteria. A FHA loan requires a minimum down payment of 3.5%, conventional loans require a minimum down payment of 3%, and VA loans typically, with some exceptions, don't require a down payment. There are higher down payments required for specific programs and scenarios; talk with your lender to learn more. Here's a tool that can help you calculate how much you put down can affect your payments and rate.
An escrow account, which is also sometimes called an impound account, is setup by the mortgage lender to pay certain property-related expenses. An escrow account can be helpful in paying these expenses because money is set aside every month instead of having to pay a big bill a couple times a year. Your mortgage servicer will manage the escrow account and pay these bills on your behalf.  Escrow accounts may be required by the lender and are also, in some cases, required by law.The account needs to be "front-loaded" at closing. Dependent on the due dates of taxes and insurance at the time of closing, a certain number of months of estimated property taxes, mortgage insurance payments and home owners insurance payments are collected at closing to establish the initial escrow cushion.
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