Daryle Evans Mortgage Lender Vice President Mortgage Loan Originator, NMLS # 264599

FAQS

Mortgage FAQ #1: How can I find

out how much I qualify for?

To calculate how much house you can afford a good rule of thumb is using the 28%/36% rule, which means that you shouldn't spend more than 28% of your gross monthly income on home related costs and 36% on total debts, including your mortgage, credit cards and other loans like auto and student loans.

Mortgage FAQ #2: Is there

anything I should do before I get

prequalified?

Prequalifying for your home loan before you begin shopping for a house can save you hours of wasted time. When you know how much house you can afford ahead of time, you can meet with your realtor, with a price target ready to make an educated buy. From the sellers perspective, a prequalified homebuyer is perceived as a better buyer prospect. Having your paystubs, bank statements, and tax returns ready can make prequalification even faster. It also helps to have a paper trail of any large deposits you make, as well as notifying your loan officer directly if you plan to use a down payment gift from your family.

Mortgage FAQ #3: Is there

anything I shouldn’t do while I’m

getting prequalified?

Don’t pay off all your debts suddenly. After you get preapproved and the loan process starts your lender is required to pull a refreshed credit report before closing to check for any new debt. So avoid any major changes in your finances which could delay your loan closing or even result in a denial despite an earlier approval. How can you keep your credit clear while your loan is in the works? Don’t do this: • Apply for a new credit card, auto loan, or other types of credit. • Co-sign a loan with someone. • Change jobs, become self-employed, or quit your job. • Skip any payments on existing credit accounts, utility bills, or loans. • Decrease your borrowing ability buy buying on credit large ticket items before your loan closes.

Mortgage FAQ #4: What are

income and debt ratios?

Income ratio: Your total monthly housing expense divided by your pre-tax monthly income. Debt ratio: Your total monthly housing expense plus any recurring debts, like car payments, monthly minimum credit card payments, and other loan payments, divided by your monthly income. To manage your debt and maintain healthy credit, keep credit card balances to less than 30 percent of your credit limit. Also, don’t close long-term credit lines, these accounts often positively contribute to your credit score and the rate you qualify for.

Mortgage FAQ #5: What are cash

reserves?

These are funds available to you after your loan closes. These amounts reflect your ability to make monthly mortgage payments. Different loan programs may have different cash reserve requirements.

Mortgage FAQ #6: What is

mortgage insurance?

This insurance helps protect a lender if a borrower forecloses on their property. Borrowers pay for the mortgage insurance which allows lenders to make loans they might not have considered otherwise. Mortgage insurance is typically required on loans when a down payment is less than 20 percent.

Mortgage FAQ #7: What are

mortgage points?

These are also called discount points, mortgage points are a one-time fee you can opt to pay if you’d like to get a lower interest rate. One mortgage point is equal to one percent of your total loan amount and may drop your interest rate one-eighth to one-quarter percent lower. Most lenders charge their own fees, which can vary greatly. One lender may choose to waive a fee but add on another. Another lender might quote an interest rate before adding or subtracting discount loan points that can change the total cost of a mortgage. Costs you need to look at to determine if you are getting a good deal from your lender. • Application • Appraisal • Courier • Credit report • Discount points • Document prep • Inspection • Loan origination • Notary • Recording • Processing • Tax service • Title search • Underwriting These loan fees may not seem as important as what interest rate you are getting but they’re a great indicator of whether you’re getting a good mortgage loan from a fair lender. Lenders are also required to provide a free written fee estimate for any of the costs listed above.

Mortgage FAQ #8: What’s an

APR?

This stands for annual percentage rate which is the cost of your total loan credit calculated into an annual interest rate, also called APR. The APR includes loan points and other prepaid finance charges to reflect the true yield on the loan, which is why the APR is normally higher than a loan interest rate. To check that you’re getting the most competitive loan you need to compare “apples to apples,” or APR to APR, on different loan programs.

Mortgage FAQ #9: Can I get a

mortgage if I have bad credit or

have filed for bankruptcy?

Having good credit helps to get a good mortgage interest rate, but perfect credit isn’t required. If you have a low credit score or have filed bankruptcy in the past, we can make recommendations to help improve your credit. Checking your free credit report regularly from one of the three nationwide credit reporting agencies, can help you to keep tabs on your financial status. Regular credit checks can also help you catch any problems that pop up like mistakes on your credit report or instances of fraud. Here’s how to understand your FICO score, the range is from 300 on the low end to 850 on the high end. There are five factors that make up your credit rating: • Taking out a variety of credit lines, like credit cards, a car loan, and other credit accounts, could increase your score. FICO score impact: 10 percent. • On the other hand, having a lot of credit inquiries can lower your credit score. FICO score impact: 10 percent. • It’s not necessarily bad to have a short credit history, if you’ve handled your money well. Having one or two good credit accounts is better than having no credit at all. FICO score impact: 15 percent. • Delinquent and/or overdue bills can lower your credit score. FICO score impact: 35 percent. • You should keep the amount you owe to creditors to under 30 percent of your credit limits. FICO score impact: 30 percent. A great credit score could qualify you for the lowest available interest rates, compared to a poor score that might make it harder to get a loan.

Mortgage FAQ #10: I just got a

new job. How does this impact

getting a mortgage?

Typically lenders look for a two-year job history in the same field, but changing jobs to move to a better position could be seen as favorable. For recent college grads, you may still be able to get a home loan without a two-year work history. If you’ve recently changed from employed by a company to self-employed, you may need five more documents to complete your mortgage approval: • 1099 for the last two years. • Form 1120S or K1. • Both personal and business full tax returns for the last two years. • Proof of self-employment. • Current balance sheet and profit/loss statement. If you receive retirement or disability income, you may need five additional documents for home loan approval: • Pension award letter. • Social Security award letter. • Supplemental Security Income (SSI) benefits. • Permanent disability award letter. • Recent retirement account statement.

Mortgage FAQ #11: Can I “lock

in” my interest rate?

Yes! Get in touch with us and we can lock in the interest rate you were quoted. You’ll be provided with a written Rate and Price Determination Agreement, detailing interest rate, loan terms, and time period for the rate lock. You can also use something called a rate shield to lock your rate for up to 270 days, with the option to float down to a lower rate if rates drop within 45 days of closing.

Mortgage FAQ #12: What’s

prepaid interest?

Prepaid interest on a mortgage is interest paid in advance. For mortgages paid on the first of the month, you’re paying for interest accrued the previous month. Depending on when you close, you may pay prepaid interest that has accrued for the days left in the month which might be the interest accumulated from May 15 to May 31 for example.

Mortgage FAQ #13: What are

closing costs?

The extra costs paid at closing may include attorney fees, prepaid interest, insurance fees, documentation fees, and more. Closing costs paid by the buyer: • Half of title and escrow fees: such as title insurance, transfer taxes, notary fees, and more. • Lender fees to cover the act of obtaining a mortgage, including the appraisal. • Homeowner’s insurance, normally the first year of hazard or homeowner’s insurance is paid up front on closing day. • Additional costs paid by the buyer may include the owner’s title insurance, inspection fees, earnest money, RE Brokerage admin fees (if applicable), and credit report fees. Closing costs paid by the seller: • Half of title and escrow fees: such as title insurance, transfer taxes, notary fees, and more. • Commissions which are estimated at around 5 to 6 percent for the average real estate commission. • Loan payoff to cover any outstanding mortgage balances. • Additional costs paid by the seller may include optional home warranty, prorated property taxes, RE Brokerage admin fees, pest or septic inspection, and prorated HOA fees, if required.

Mortgage FAQ #14: What should

I bring to closing?

At closing you and any other borrower listed on your mortgage agreement will need to bring in a valid driver’s license. Any funds required at closing must be brought as a wire transfer or cashier’s check made out to the title company.

Mortgage FAQ #15: When will I

get my money?

You’ll have access to your funds on the day you close on your loan.

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THE DEPARTMENT MAINTAINS A RECOVERY FUND TO MAKE PAYMENTS OF CERTAIN ACTUAL OUT OF POCKET DAMAGES SUSTAINED BY BORROWERS CAUSED BY ACTS OF LICENSED RESIDENTIAL MORTGAGE LOAN ORIGINATORS. A WRITTEN APPLICATION FOR REIMBURSEMENT FROM THE RECOVERY FUND MUST BE FILED WITH AND INVESTIGATED BY THE DEPARTMENT PRIOR TO THE PAYMENT OF A CLAIM. FOR MORE INFORMATION ABOUT THE RECOVERY FUND, PLEASE CONSULT THE DEPARTMENT’S WEBSITE AT WWW.SML.TEXAS.GOV