Buying a home
I am thinking of buying in the next 6 months, when should I start the process?
Congratulations on planning ahead. The earlier you start your financing process the easier it is. We want to uncover any potential obstacles and rectify them as soon as possible. Every situation is different and requires attention.
Types of Real Estate
What types of real estate can be financed?
If it's considered Real Estate for the most part it can be financed by Fannie Mae, Freddie Mac, FHA, USDA or Veteran's Administration. There are a few exceptions so be sure to ask.
Types of Loans
Do I have to pay mortgage insurance?
Most all loans require 20% down to avoid mortgage insurance(MI). Mortgage Insurance premiums vary by amount of down payment, credit score and loan type being applied for. Veteran's loans have no monthly Mortgage Insurance.
What is a Point? What is a Discount Point?
A point is one percent of the borrower's loan amount.
A discount point is paid upfront to the lender and is supposed to lower the borrower's interest rate over the life of the loan. It is often called a buy down.
Do I have to pay Points?
Depends on what your needs are and if the math warrants paying points. This can be answered with a full application. Variables such as loan size, term, credit scores and loan-to-value will have an impact on a loan's price and determining if paying "points" is a benefit to you.
What if I lock and rates go lower?
Virtually every loan program has a "float down feature" that allows the borrower to take advantage of a lower rate in the event there is a material change in mortgage pricing.
What is a Jumbo Loan?
Jumbo loans are any amount greater than $417,000.
What is Proof of Employment and Income?
You will have to provide proof of income and employment to qualify for a mortgage. There is no way around that one. It shows your creditworthiness.
What is Hazard Insurance?
Many lenders require hazard insurance on the property for which you are taking out a mortgage. It is important to figure in this cost so you know how it reflects in your loan payment.
A conforming loan is a mortgage that adheres to a set of loan guidelines or standards. These meet Fannie Mae or Freddie Mac guidelines. These two entities purchase mortgages from lenders and package them into securities for resale to investors.
What is the definition of Immediate Family Member?
"'Immediate Family Member' means a spouse, child, sibling, parent, grandparent, or grandchild. This includes stepparents, stepchildren, step-siblings, and adoptive relationships." MN Statutes 2015, Definitions 58A.02 Subd. 4
What is a Closing?
A closing is the process where the real estate transaction between a buyer and a seller is consummated. Documents are signed creating a security interest in real property that becomes effective between the borrower and the lender. MN Statutes 2015 58.02 Definitions
Taxes in this case refers to property taxes. Paying them through your mortgage can break up the fee around tax time (May and October) in manageable, monthly payments.
What is Interest?
Interest is the amount you will pay back in addition to the principal loan.
What is Principal?
Principal is the dollar amount that's being approved for the loan. This does not take into account any other fees during the process.
What is the role of a Mortgage Loan Originator?
A Mortgage Loan Originator's role is to help you find a loan with a lender, product and rate that best fits a home buyers financial situation.
Buying a Home
I am pre-approved. Now what?
- You start house hunting.
- Do NOT use your credit cards past 30% of available balance.
- Do NOT change jobs.
- Stop buying stuff and especially big stuff like a car. Increased liabilities can lead to decreased pre-approvals.
What documents do I need to provide to get a home loan?
The best way to learn this is to contact your Mortgage Loan Originator. There are documents you need to have on hand and depending upon your history, you may need to provide additional items.
Generally to start you need to have:
- Last two recent pay stubs
- Previous 2 years' W2 forms
- Previous 2 years' Tax Returns
- Purchase Contract (if you are buying)
- Last 2-3 months Bank Statements (all pages)
- and a few more items...
Is there an application fee?
The only fee we collect up front is for an appraisal. Appraisals range from $400 on up depending on the complexity of the property.
What is a Bridge Loan
In summary a Bridge Loan is two loans held consecutively. Basically what you are doing is using the current equity as a down payment on a new house so you can be considered non-contingent in the transaction. It is can be a timing issue getting all parties to close on schedule. It does cost a little bit to do these types of loans.