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Consumer
Tips
The
professionals at Your Mortgage Company
can advise you about many elements of home ownership, because total
costs affect your comfort level in a mortgage and your ability to
qualify for mortgage programs. First time buyers and borrowers
whose credit is less than perfect may qualify for a number of programs
at attractive rates with the guidance of an experienced mortgage
professional.
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| The
Cost of Home Ownership |
Determine
the total cost of buying a home
Make yourself
a checklist using the following elements and enter the dollar value of
each element. Add any elements that are unique to your situation
as well, such as real estate brokerage fees. Your loan officer and
real estate agent might be able to specify other expenses common in your
area.
| Purchase
Price |
Loan
Amount |
Loan
Term in Years |
| Interest
Rate |
Discount
Points |
Origination
Fee |
| Lender
Fees |
Credit
Report |
Escrow
Fee |
| Lender's
Title Insurance |
Recording
Fee |
Appraisal
Report |
| Survey
Fee |
Inspections |
Annual
Property Taxes |
| City,
County and State Taxes |
Annual
Homeowner's Association Dues |
Annual
Homeowner's Insurance Policy |
Closing
costs
Closing costs
include loan and administrative fees, impounds and prepaid interest.
Impound accounts are set up in escrow to fund the monthly share of
homeowner's insurance and property taxes, and are periodically
replenished by the borrower in accordance with federal guidelines.
Prepaid interest is payment for the interest expense between the loan
funding date and the first day of the next month. Closing costs
may be as much as 5% of the loan amount.
Monthly
mortgage payments
Your monthly
mortgage payment consists of the famous PITI -- principal, interest,
insurance and taxes. The insurance in this equation is PMI (private
mortgage insurance) rather than homeowner's insurance, and you may not
need PMI if your down payment is 20% or more.
Why your
credit report is so important
Lenders are
in business and they evaluate your request for a mortgage in light of
the risk they take by funding your mortgage. In particular,
lenders look at these aspects of your credit record:
Delinquent Payments. If
you have failed to make payments in the past, or if you have been late
making payments, lenders expect you to act similarly in the future.
Past Credit Usage.
If you are close to the limit on a credit card, you are considered a
greater risk than someone who has lots of credit available.
How Long You Have Used
Credit. The most-used scoring system assumes that you are a
better risk if you have been using credit wisely for a number of
years.
How Often You Apply for New
Credit. It's not a good signal if you have applied for many
new credit cards or other loans within a short period of time. A
lender evaluating your credit worthiness does not like to see a lot of
new indebtedness right before you apply for a mortgage.
Your Credit Mix.
Credit card accounts, car loans, student loans and revolving credit
accounts all concern lenders when evaluating credit risk.
Other
factors considered by a lender
The stability
of your job and the price of the house are major factors in the
equation. Your ability to make your down payment and cover closing costs
also is evaluated. If your credit score and other aspects of your
file meet or exceed what the lender expects, loan approval can be almost
automatic, considerably speeding up the closing process. That is
one reason why credit scores are so important in the mortgage industry
-- the more they process can be objective, the faster and more efficient
the process becomes. Ultimately, that translates into less cost to
you, the consumer.
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| Documents
Needed for a Mortgage Application |
At a minimum, you will
need dozens of documents. Here are some tips to help you assemble
them efficiently and correctly:
Completed Loan Application
Read through the application
carefully after you complete it. Be sure you have correct names, phone
numbers, addresses and account numbers in every part of the form.
Be sure you have the right
Social Security number not just on the application, but on all the
paperwork you submit.
Provide original materials
whenever required.
Be sure you and other borrower(s)
sign and date your application and all other paperwork where required.
Income Documents For Hourly or
Salaried Employment:
Original W-2 for the past year
AND original paycheck stub showing year-to-date income (within last 60
days)
Other Accounts and Assets
Checking and savings accounts
account numbers with complete addresses of financial institutions,
plus 3 months of statements, if available
Obligations (debts other than
consumer credit accounts)
Money market account(s)
Certificate of deposits (CDs)
Retirement and 401Ks
Stock and bonds
Equity in a life insurance
policy
Vehicle information (year,
model, and approximate value)
Approximate amount of cash gift
from a relative
Official divorce decree
indicating the amount of child support, alimony or separate
maintenance payments, if applicable
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| Special
Interest Items for First-Time or Credit-Impaired Buyers |
What you
can do before applying for a mortgage
A high debt load can affect your ability to qualify for a mortgage to
buy your dream home. It's smart to pay down your debt before you attempt
to qualify for a mortgage. Consolidating your debts into one lower
interest rate loan might be a good idea. This may make a big
difference if you have high outstanding balances on several credit card
accounts that each charge high interest rates. A good rule is to
expect down payment and closing cost expenses to equal 25% of the price
of the house you want to buy.
Your
consumer rights if denied a loan
If you are
denied a loan, get a copy of your credit report to ensure that the
information is accurate. Under the Fair Credit Reporting Act, you may
not be charged for a copy of your credit report if you request it in
writing within 30 days after being rejected for a loan. You can obtain a
copy of your credit report from the lender that rejected you or request
copies from the credit bureaus.
Here’s how to contact
the three credit bureaus:
Equifax
P.O. Box 740241
Atlanta, GA 30374-0241
800-685-1111
www.equifax.com |
Experian
P.O. Box
2104
Allen, TX 75013-0949
800-682-7654
www.experian.com |
Trans Union
Corp.
760 W. Sproul Road
Springfield, PA 19064-0390
800-888-4213
www.tuc.com |
 Learning
about mortgages and other home ownership issues is easier than ever
using the Internet, but when it comes time to apply for your own
mortgage, you will appreciate the advantages of having the professionals
at Your Mortgage Company at your side. Contact
Your Mortgage Company
today or apply online --
we'll respond quickly!
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