FREQUENTLY ASKED QUESTIONS
Q: What documentation will I need to provide?
Different loan programs vary in the exact amount of documentation required, but you will typically need to provide:
- Tax returns
- Pay stubs, W-2s or other proof of income
- Bank statements or other assets
Q: What can I expect from the loan process?
First we will preapprove you by evaluating your income, assets, and credit in order to determine the best loan program for your goals. Next, we work your real estate agent to help you submit the perfect offer for your dream home. Once your offer is accepted, escrow will coordinate the signing of loan documents and disbursement of funds. Finally, after all conditions have been met, your loan will fund!
Q: Do I have to have a 20% down payment?
While 20% down payment is considered the ideal down payment amount for most lenders, it is not ideal for many buyers and is definitely NOT a requirement to getting a home loan. Some conventional loans require as little as only 3% down, FHA loans require only 3.5% down, and VA loans require 0% down. The higher your credit score and down payment are, the less of a risk you are to lenders, and this will get you a lower interest rate. However, many buyers prefer to put less down upfront and keep their cash for future expenses. We help our clients determine what will be the best route for their situation.
Q:How can I improve my credit score?
It is possible to change one's credit score in the short time between when most people decide to take out a home loan and when their loan is submitted for approval. Our agents at Castle Funding Corp. are experts at detecting and correcting erroneous items which adversely affect a borrower's credit. On virtually every one of the credit score changes that we have accomplished, the borrower ultimately qualified for a better loan program than was previously available to them.
It is always advantageous to take the following steps prior to buying or refinancing:
- Reapportion your debt
- Do not close positive credit lines
- Resist the temptation to "juggle" between credit cards
- Never exceed your credit limits
- Pay your bills on time
Q: What is the difference between a pre-qual and a pre-approval?
During a pre-qualification, you are asked for a verbal statement of your income, assets, debts, and employment history. This is preliminary step to figure out your loan options. Pre-approval requires verification of these things, as well as a credit check, and is submitted to underwriting for conditional approval. It is hugely beneficial to get pre-approved BEFORE starting your house hunt. Offers are much stronger and likely to be accepted when submitted with a pre-approval letter from your lender showing you already qualify to purchase a home at the price you are making the offer.
Q: What is mortgage insurance or PMI?
When a borrower puts less than 20% down, the lender is taking extra risk, so they require Private Mortgage Insurance, which gets added to your monthly payment. PMI isn't a bad thing - it allows you to make a lower down payment and still qualify for the loan.
Q:How much will I have to pay in closing costs?
Closing costs can make up about 3-6% of the loan amount. We can negotiate with the seller to help cover closing costs, which are called seller concessions. As we negotiate the sales contract for you, we work to limit the number of closing costs for which you will be responsible.
Q: What are some benefits of government backed loans, such as FHA, VA, or USDA?
These programs make it easier to purchase a home for those who otherwise may not be able to afford it. They tend to offer lower down payments and more flexible underwriting.
Q: Can I "buy down" my rate using discount points?
When selecting your loan program, you do have the option to "buy down" your rate using discount points. A discount point is generally a percentage of the loan amount and is paid to the lender in exchange for a lower interest rate. We do a break-even analysis for each loan to determine the value of buying down your rate. There are various factors at play, including how much cash you have to spend and the amount of years you plan to live in the home.
Q: What is a Reverse Mortgage?
Reverse mortgages are available to homeowners age 62+. They help homeowners to convert their home equity into cash without having to sell their home or incur monthly mortgage payments. The main difference between reverse mortgages and regular home loans is that they don't need to be repaid as long as one homeowner remains living there. This is because monthly interest charges are added to the loan balance, and collected at the end of the loan rather than every month. Interest is only charged on the amount used (like a credit card or home equity line of credit). Reverse mortgages can be a really great option for older homeowners who have a lot of equity in their home, but need more cash to live comfortable on through retirement.
Q: When is the right time to refinance?
People refinance with different goals in mind. Are you refinancing to lower your rate and monthly payments? Are you refinancing to cash out some home equity? Do you want pay off your loan sooner? These are various reasons people decide to refinance, and we will work with you to determine your goals and loan options.