PURCHASE QUESTIONS


CONVENTIONAL

1. How can I find out how much I can qualify for when looking to buy a house?

Your loan officer will evaluate your income, your current debts and estimated down payment. Based on this information, they can usually determine the maximum mortgage amount for which you could qualify within minutes. You may also access our payment calculator to make your own preliminary evaluation, of your ability to make monthly payments, based on various loan amounts. This process is frequently referred to as a “pre-qualification analysis.” In some cases, your loan officer may give you advice on ways in which you can improve your overall financial stability to better qualify to purchase a home. You may also choose to have your loan officer perform a pre-approval, which will require a more detailed analysis. (see below)

2. What is a pre-approval?

When you talk with your loan officer for a pre-approval, he/she will evaluate your income, your current debts, estimated down-payment and your credit report. Using this information, they will be able to perform a more in depth analysis of your financial picture and issue a pre-approval letter. The pre-approval letter is not a guarantee of loan approval, but rather an approval based on conditions that will need to be met once a formal loan application is performed. Many Realtors now require a prospective home buyer to be “pre-approved” before they will submit a contract on a home. Check with your Realtor for details or ask your loan officer.

3. How can I accumulate money for a down payment?

For many potential homebuyers, the money necessary for a down payment is often the biggest deterrent to home ownership. Here are several ways you can acquire enough money for a down payment.

  • Have your parents or a relative give you money as a gift. Although all gifts need to be documented, this is an easy way to come up with funds necessary for a down payment. Consult your loan officer for details on gifts and your particular loan program.

  • Ask the seller to pay all or part of your closing costs. Many loan programs allow seller contributions. Ask your Realtor or loan officer if this is an option for you.

  • Consider taking a “zero point loan” to help lower your closing costs. In many cases you can even take a slightly higher interest rate in exchange for a credit back from your lender at settlement. Ask your loan officer for details.

  • Borrow money from a retirement plan such as a 401K or Thrift Savings Plan (TSP). You may even consider borrowing money from the available cash value of a life insurance policy. Consult your tax or insurance advisor regarding these options.

  • You may consider selling an asset to raise cash for your down payment, such as a car or boat.

4. What can I do to maximize my buying power?

There are several factors that your loan officer and the underwriter will consider when qualifying you for a loan. The most significant factors are your income, debts and your down payment. In order to maximize the amount of money you can borrow, you need to consider the following things:

  • You should try to pay off or consolidate your long-term debt. A large amount of long-term debt can cause a lender concern about your future ability to pay your mortgage. Consult your loan officer about the best way to handle your current debt.

  • In addition to excessive debt, you may have other credit problems that are hurting your credit scores and therefore affecting your ability to borrow. Your loan officer can help you evaluate your credit report and offer suggestions that may help repair your credit and enable you to qualify. It is not always the best idea to pay off all your credit cards. Consult your loan officer.

  • If your income is too low to qualify, you should make sure you are reporting all of your income from other sources such as bonuses, overtime, rental income, alimony, etc. You can also ask your loan officer about other programs that may be available that require less down payment

5. Are there financial actions I should avoid taking while undergoing the loan approval process?

  • Do not make any major purchases. Any major purchases or increase in your current debt can have an adverse affect on your ability to close on your loan. Try to hold off on any new purchases until you have moved in to your new home.

  • Do not pay off debt or close accounts. Borrowers will often make the mistake of paying off or closing accounts assuming that will help their credit scores or their credit worthiness. It can actually hurt your ability to secure a loan if you close too many accounts. Your loan officer can help you evaluate your credit report and advise you on the best options for paying off debt or closing accounts.

  • Do not change jobs.
Most loan programs require the lender to verify your employment. If you change jobs prior to making loan application or during the loan process, this can cause delays or even hinder your ability to secure a loan. The biggest problem occurs when your new job is in a different line of work. This can create delays or even a loan denial due to lack of stability in your job.

  • Do not switch bank accounts or move money between accounts.
Most loan programs also require that the funds in your bank accounts be verified. If your account is brand new or has shown excessive activity including large deposits or withdrawals, this will cause delays while the activity is verified. It is best to leave your bank accounts stable until your loan is completed and closed.

FHA

1. Can I pay just monthly or just 1 time mortgage insurance with my FHA loan?

All FHA loans have 2 kinds of mortgage insurance – up front and monthly.  The cost of this insurance has changed frequently over the last 15 years.  As of January 26, 2015 the cost of up front MI is 1.75% of the base loan amount (defined as the purchase price less the down payment).  For 30 year loans, monthly mortgage insurance is based on a factor of 0.85% annually paid monthly for loans with less than or equal to 5% down and 0.80% for loans with greater than 5% down. The cost is lower for 15 year loans.  FHA monthly mortgage insurance cannot be cancelled unless you make at least a 10% down payment.

FIRST TIME HOMEBUYER

Home Ready & Home Possible

We offer Freddie Mac’s Home Possible® Mortgages and Fannie Mae’s HomeReady® Mortgages that allow low down payment and flexible credit terms. Now it is easier than ever to buy the home of your dreams.

  • Buy with as little as 3% down

  • First time or repeat buyer (cannot own other real estate at the time of closing)

  • Stable monthly payments with fixed-rate mortgages

  • Reduced mortgage insurance coverage levels

Virginia Housing Development Authority (VHDA)

In an effort to stimulate the home buying for first time buyers – VHDA has a limited Down Payment Assistance Grant Program

REFINANCING

1. Why should I refinance my current mortgage?



There are a number of reasons you may want to consider refinancing your current mortgage.

  • Lower your interest rate, thus lowering your monthly payment.

  • Maximize your cash flow with lower payments for a longer term.

  • Convert an adjustable rate mortgage to a fixed rate mortgage.

  • Pull cash out of the equity in your house to use for other things, such as paying off debt, home improvements, college education, etc.

  • Consult your loan officer to see if refinancing is right for you.

2. What factors should I evaluate when considering refinancing?

Consider the following factors when making your decision:

  • What is the difference between your current rate and the new rate?

  • How long do you plan to be in the home?

  • What are the costs associated with the refinance?

  • What is your break-even point for the refinance?

  • Do you feel comfortable with the new payment?

  • Do you need to pull out equity from your house?

These are just some of the questions you should ask yourself. Your loan officer can help you decide if refinancing is right for you.

3. Can I take cash out of my house when I refinance?

Yes. There are limitations on the amount of cash you can take out, but some programs allow cash out with loans totaling as high as high 100% of the total value of your home. Your loan officer can give you details on the various options available to you