Do I need to find a home before I apply?
No! Getting started before you find a home may be the best thing you can do.
If you get started before you have a property to purchase, we can issue a pre-approval, which you can use to assure real estate brokers and sellers that you are a qualified buyer. Getting pre-approved for a mortgage will even give more weight to any purchase offer you make.
With us, you can even take the pre-approval process a step further with our Homebuyer Advantage Program. Learn more HERE.
When you find the perfect home, you’ll need to contact us and provide your signed purchase agreement to complete your application. You’ll then have an opportunity to lock in our great rates and fees and we’ll complete the processing of your loan.
What is a Pre-Approval and why is it important?
A mortgage pre-approval means that a loan officer has looked at your finances (your income, debt, assets, and credit history) and determined how much money you can borrow, how much you could pay per month, and what your interest rate will be. Essentially, is defines what price range you can afford.
Once a lender has pre-approved you for a mortgage, you’ll receive a letter you can take to sellers to show them that you’re a qualified buyer. This gives sellers peace of mind to know they won’t be wasting their time with someone who couldn’t afford their house in the first place and can be used to your advantage in future negotiations.
What is the difference between a Pre-Qualification and a Pre-Approval?
Prequalification tends to refer to less rigorous assessments, while a preapproval can require you share more personal and financial information with a creditor. As a result, an offer based on a prequalification may be less accurate or certain than an offer based on a preapproval.
What information do I need to apply for a mortgage?
Once you start the application process, we’ll need specific documentation, such as your last two years of W2s, bank statements, pay stubs and documents pertaining to other personally owned real estate. You’ll receive notification in writing of the required documentation needed to obtain final approval. In some cases, our Underwriting Department may request additional information.
What is an Annual Percentage Rate (APR)?
The Annual Percentage Rate, or APR, is the cost of your credit expressed in terms of an annual rate. Because some lenders may charge you points and origination fees for your mortgage and other closing costs, the APR can be compared to other loans for which you may have applied and give you a fair method of comparing price.
Do you offer Custom Loan Programs?
Yes, the different types of loan programs being offered are changing every day. We find the best loan scenario for all our clients. Unlike big banks that are restricted to using loan programs and rates being offered at that time by the bank, we have access to many lenders. What we do is find the loan program that best fits your needs. Contact us today and let us show you what we can do for you.
Do you have to have a 20% down payment to purchase a home?
There are many programs available today that require less than 5% down payment. Contact us to find the right program for you.
What is the difference between a fixed and an adjustable rate mortgage?
With a fixed rate mortgage, the interest rate and the amount you pay each month remain the same over the entire mortgage term, traditionally 15, 20 or 30 years. Several variations are available, including five- and seven-year fixed rate loans with balloon payments at the end. With an adjustable rate mortgage (ARM), the interest rate fluctuates per the indexes. Initial interest rates of ARMs are typically offered at a discounted (“teaser”) interest rate lower than fixed rate mortgage. Over time, when initial discounts are filtered out, ARM rates will fluctuate as general interest rates go up and down. Different ARMs are tied to different financial indexes, some of which fluctuate up or down more quickly than others. To avoid constant and drastic changes, ARMs typically regulate (cap) how much and how often the interest rate and/or payments can change in a year and over the life of the loan. Several variations are available for adjustable rate mortgages, including hybrids that change from a fixed to an adjustable rate after a period of years.
Is a fixed or adjustable mortgage rate better?
It depends. Because interest rates and mortgage options change often, your choice of a fixed or adjustable rate mortgage should depend on: the interest rates and mortgage options available when you’re buying a house, your view of the future (generally, high inflation will mean ARM rates will go up and lower inflation that they will fall), and how willing you are to take a risk. When mortgage rates are low, a fixed rate mortgage is the best bet for most buyers. Over the next five, ten, or thirty years, interest rates are more apt to go up than further down. Even if rates could go a little lower in the short run, an ARM’s teaser rate will adjust up soon and you won’t gain much. In the long run, ARMs are likely to go up, meaning most buyers will be best off to lock in a favorable fixed rate now and not take the risk of much higher rates later. Keep in mind that lenders not only lend money to purchase homes; they also lend money to refinance homes. If you take out a loan now, and several years from now interest rates have dropped, refinancing will probably make sense.
Do I need an Appraisal and Home Inspection?
Both a home inspection and an appraisal are designed to protect you against potential issues with your new home. While home inspections are not mandatory, they are recommended to make sure there aren’t major issues with the home you are purchasing. Sometimes, appraisals are not required if there is enough equity or down payment and if the property qualifies for an appraisal waiver through our automated underwriting system.
The appraiser will make note of obvious construction problems such as termite damage, dry rot or leaking roofs or basements. Other obvious interior or exterior damage that could affect the salability of the property will also be reported.
Keep in mind, appraisers are not construction experts and won’t find or report items that are not obvious. They won’t turn on every light switch, run every faucet or inspect the attic or mechanicals. That’s where the home inspector comes in. They generally perform a detailed inspection and can educate you about possible concerns or defects with the home.
Accompany the inspector during the home inspection. This is your opportunity to gain knowledge of major systems, appliances and fixtures, learn maintenance schedules and tips, and to ask questions about the condition of the home.
What does it mean to lock an interest rate and when do I lock?
It means that a commitment has been made between my company and the investor on your behalf regarding the interest rate in your mortgage loan. Your loan officer watches the market on a daily basis to make sure that when we lock your interest rate, it is in the best interest for you and your loan.
How do rates move?
Rates can move more than daily, but on a typical day rates do not move very much. This is why it is important to employ First American Mortgage to assist you in making the determination of when to lock your loan. Things that will affect the interest rate moving are strong swings in the equity or stock market and indications from our economic position in not only the U.S. market but the world market as well.
Do you sell my loans?
No. When we lock in the interest rate we will determine which investor we will use and that company will likely service your mortgage for the life of the loan.
Am I committed to you because I have signed or reviewed my loan application?
No. We would love for you to do business with First American Mortgage and if there are any problems, please consult with me personally. The only commitment you have is when you have completed the signatures on the closing documents and the loan funds.
What are my origination and discount points?
These are percentages of the loan amount that you and your loan officer discuss regarding your rate and total cost of originating your mortgage loan.
What is an Escrow Account and why do I need one?
We will set up an escrow account to collect funds for the payment of your real estate taxes, homeowner’s insurance, and private mortgage insurance, if necessary. Each month a portion of your payment will be held in your escrow account to make sure the funds are available when these payments are due. At that time, funds are drawn from the escrow account. If you have a 20% down payment on a home, an Escrow Account is an option but not mandatory.
What are Closing Costs?
Closing costs are those costs that include the loan origination fee, discount points, appraisal costs, and any other charges associated with the legal transfer of property.
What is Private Mortgage Insurance (PMI)?
Private mortgage insurance is required on conventional loans and may allow you to purchase a home for as little as 5% down. This coverage requires a monthly insurance fee to be paid. PMI is only required if your loan-to-value is 80% and above.