Frequently Asked Questions

Refinancing has been a hot topic lately, with everyone from the media to the U.S. President either extolling the benefits of refinancing or warning people away from even considering it. The truth is, every situation is unique. The end goal is to better your financial standing, either immediately through lower payments or overall by shortening your term (some are able to accomplish both). Refinancing is also a wonderful way to finance home repairs or consolidate other outstanding debt you may carry.

To get a real answer to this question you need to call and speak with us. Explain your current situation, outline your goals, and ask questions. We'll work with you to find the best possible loan for your situation and, if refinancing won't benefit you, we'll let you know. After all, everyone is different.

A FICO score is a credit score developed by Fair Isaac & Co. Credit scoring is a method of determining the likelihood that credit users will pay their bills. Credit scoring is widely accepted by lenders as a reliable means of credit evaluation.

Credit scores analyze a borrower's credit history considering numerous factors such as:

• Late payments
• The amount of time credit has been established
• The amount of credit used versus the amount of credit available
• Length of time at present residence
• Negative credit information such as bankruptcies, charge-offs, collections, etc.

To obtain a copy of your credit report, contact any of these credit-reporting agencies:

Experian Information Systems, Inc.
P.O. Box 919
Allen, TX 75013
www.experian.com

Trans Union LLC
P.O. Box 505
Woodlyn, PA 19094-0505
www.transunion.com

Equifax
P.O. Box 740123
Atlanta, GA 30374
www.equifax.com

While it is difficult to increase your score over the short run, here are some tips to increase your score over a period of time:

• Pay your bills on time. Late payments and collections can have a serious impact on your score.
• Do not apply for credit cards frequently. Having a large number of inquiries on your credit report can worsen your score.
• Reduce your credit-card balances. If you are "maxed" out on your credit cards, this will affect your credit score negatively. Keeping your balances below 50% of the card's limit is ideal, but you should never go over 70% of the card's total limit.
• If you have limited credit, obtain additional credit. Not having sufficient credit can negatively affect your score.

This can depend on the purpose of the credit check. Applying for several credit cards within a short period of time will cause multiple inquiries to appear on your credit report. While this type of credit activity is often associated with increased risk, inquiries from auto, mortgage, and student loan lenders are viewed differently. It's understood that these larger transactions often involve "shopping" for the best deal and are typically treated as a single inquiry and will have little impact on your credit score.

We do strongly recommend you refrain from applying for any additional credit lines or auto loans once we start the loan process. Assuming additional debt can not only affect your credit score, but may also negatively impact your Debt-to-Income ratio (DTI), which is a key figure used to determine whether you qualify for your loan. Waiting to establish new credit lines until after your loan closes will help avoid situations that might cause your loan to be denied.

Check myFICO.com for more details regarding what factors determine yor score and what you can do to improve it.

To correct any errors on your credit report, you must write to the credit card company and explain the error.

If the creditor concurs that an error has occurred, the credit card company must report and correct the error to the credit-reporting agency.

Interest rate movements are based on the simple concept of supply and demand.

If the demand for credit (loans) increases, so do interest rates. This is because there are more buyers, so sellers can command a better price, i.e. higher rates.

If the demand for credit reduces, then so do interest rates. This is because there are more sellers than buyers, so buyers can command a lower better price, i.e. lower rates.

When the economy is expanding there is a higher demand for credit, so rates move higher; whereas when the economy is slowing, the demand for credit decreases and so do interest rates.

Inflation drives interest rates.

Higher inflation is associated with a growing economy. When the economy grows too quickly, the Federal Reserve increases interest rates to slow the economy down and reduce inflation. Inflation results from prices of goods and services increasing.

When the economy is strong, there is more demand for goods and services, so the producers of those goods and services can increase prices. A strong economy therefore results in higher real-estate prices, higher rents on apartments and higher mortgage rates.

In short, yes. Your loan can be sold at any time regardless of who you may finance with. There is a secondary mortgage market in which lenders frequently buy and sell pools of mortgages. This secondary mortgage market results in lower rates for consumers. The good news is, even if your loan is sold, the lender buying your loan assumes all terms and conditions of the original loan.

As a result, the only thing that changes when a loan is sold is to whom you mail your payment. In the event your loan is sold you will be notified. You'll be informed about your new lender, and where you should send your payments.

A rate lock is a lender's promise to "lock" a specified interest rate and a specified number of points for you for a specified period of time while your loan application is processed.

During that time, interest rates may change. But if your interest rate and points are locked in, you will be protected against increases. Conversely, a locked-in rate could also keep you from taking advantage of price decreases.

There are four components to a rate lock:

• Loan program
• Interest rate
• Points
• Length of the lock period

The longer the length of the lock period, the higher the points or the interest rate will be. This is because the longer the lock, the greater the risk for the lender offering that lock.

Loans where the borrowers' down payment is less than 20% often require mortgage insurance (MI), which can be provided privately or publicly.

Conventional loans requiring MI are insured by private mortgage insurance. FHA loans are those whose MI is provided by the Federal Housing Administration, a public, government program backed by taxpayers.

Both mortgage insurance options have premiums, often paid by the borrower. Each program has advantages and disadvantages depending on your unique situation.

How much you will pay each month will depend a lot on the term of your loan. That is, how long do you plan on paying the loan back. Most mortgages are either 30-year or 15-year terms. Longer term loans require less to be paid back each month; whereas shorter terms require larger monthly payments, but pay off the debt more quickly.

Most monthly payments are based on four factors: Principal, Interest, Taxes and Insurance, commonly referred to as PITI.

Principal: This is the amount originally borrowed to buy a home. A portion of each monthly payment goes to paying this amount back. In the beginning, only a small fraction of the monthly payment will be applied to the principal balance. The amount applied to principal will then increase until the final years, when most of the payment is applied toward repaying the principal.

Interest: To take on the risk of lending money, a lender will charge interest. This is known as the interest rate, and it has a very direct impact on monthly payments. The higher the interest rate is, the higher the monthly payment.

Taxes: While real estate taxes are due once a year, many mortgage payments include 1/12th of the expected tax bill and collect that amount along with the principal and interest payment. This amount is placed in escrow until the time the tax bill is due. Borrowers may be able to opt out of escrowing this amount, which would reduce the monthly payment, but also leave them responsible for paying taxes on their own.

Insurance: Insurance refers to property insurance, which covers damage to the home or property, and, if applicable, mortgage insurance. Mortgage insurance protects the lender in the event of default and is often required in cases where borrowers have less than 20% equity in the home.

Like real estate taxes, insurance payments are often collected with each mortgage payment and placed in escrow until the time the premium is due. Again, borrowers may be able to opt not to escrow the insurance amount, instead paying the total amount due in one lump sum on their own.

The best way to decide whether you should pay points or not is to perform a break-even analysis:
Calculate the cost of the points. Example: 2 points on a $100,000 loan is $2,000.
Calculate the monthly savings on the loan as a result of obtaining a lower interest rate. Example: $50 per month
Divide the cost of the points by the monthly savings to come up with the number of months to break even.

In the above example, this number is 40 months. If you plan to keep the home for longer than the break-even number of months, then it makes sense to pay points, otherwise it does not.

The Annual Percentage Rate (APR) is the actual cost of the mortgage, based on the mortgage interest rate and factoring in other costs, including points paid and underwriting and processing fees The Federal Truth-in-Lending law requires mortgage companies to disclose the APR when they advertise a rate. Typically the APR is found next to the rate.

Example
30-year fixed	6%	1 point	6.325% APR

The APR does NOT affect your monthly payments. Your monthly payments are a function of the interest rate and the length of the loan.

Save time and avoid delays by having this information available when you call to speak with us.

Copy of Purchase Sales contract or Offer to Purchase and all addenda (signed by buyer and seller).
Past 2 years' tax returns and W-2s.
Past 2 years' employment history.
Last 3 consecutive paycheck stubs (5 if paid weekly).
Name, address and phone for past 2 years' residence(s) and landlord(s). Renters should bring evidence of 12 months' rent payments.
Last 3 months' statements for savings, checking, CD, money market accounts, etc.
Recent statement on retirement accounts (IRA, 401K, 403-B, Annuity, etc.).
Divorce decree (if applicable).
Bankruptcy schedules/Discharge papers (if applicable).

What loan program and type is best for your situation?

There are so many options for both loan program and loan type it is often difficult for customers to determine the best choice for their specific situation. The best option is often to speak with one of our Licensed Loan Officers to determine what will return the most benefit for you. or check our Team Roster for contact info for all our specialists
Think about how long you plan to keep the loan. If you plan to sell your home in a few years, you may want to consider an adjustable-rate mortgage (ARM). If you plan to keep your home for a longer time a fixed-rate loan offers more long-term security.
Understand the relationship between rates and points. Points are considered prepaid interest and may be tax deductible. Each point is equal to 1 percent of the loan. For example 1 point on a $150,000 loan is $1,500. The more points you pay, the lower your rate. Click here for a closer look at points and how to determine if they will be a benefit.
Compare different loan programs. With so many programs to choose from, it's hard to figure out which program is best for you. Give us a call and we will help you find a loan program that best fits your short and long-term plans.

All the research and preparation you've done to this point makes this step an easy one.

Submit your application by clicking our Apply Online link at the top right of this page. If you have any questions simply prefer to apply over the contact us form and we will gladly help you with your application.

Once your loan application has been received, the loan approval process starts immediately. This involves verifying your:

Credit history.
Employment history.
Assets including your bank accounts, stocks, mutual fund and retirement accounts.
Property value.

Based on your specific situation, additional documents or verifications may be required. To expedite getting a loan approval:

Respond promptly to any requests for additional documents. This is especially critical if your rate is locked or if you plan to close by a certain date.
Anything that causes your debts to increase might have an adverse affect on your loan approval.
Do not move money into your bank accounts unless it can be traced. If you are receiving money from friends, family or other relatives, please contact us.
Notify us before applying for any other credit, including credit cards, personal loans, auto loans, or even with another mortgage company.
Some loan programs have strict guidelines regarding your credit score. Unnecessary credit inquiries may lower your credit score and may have an adverse affect on your loan approval.

After your loan is approved and we schedule your closing, you will be required to sign the final loan documents. Be prepared to:

Bring a cashiers check for your down payment and closing costs (if required). Personal checks are normally NOT accepted.
Review the final loan documents carefully to verify the accuracy of the name(s) and address listed.
Sign the loan documents. The closing agent will require that you have your picture ID with you for identification purposes.
Your loan will normally fund shortly after you have signed the loan documents. On refinance transactions, federal law requires that you have three days to review the documents before your loan transaction can be finalized. Purchase transactions do not have a three-day rescission period and are final immediately.