Becoming a homeowner is one of the biggest (and best) decisions you’ll ever make. Because there is a significant financial investment involved, the process of buying a home isn’t as simple as checking out at the grocery store. However, it also does not need to be overly complicated. Rob Yo The Mortgage Pro recognizes that you may have questions about the process of obtaining a home loan. My mission is to educate you about mortgages so that you can make the best decision and obtain the best rate. If you have questions, you can visit us in my Clayton NC or Raleigh offices, or see some answers to commonly asked questions below.
About the Loan Process
How do I start the process on obtaining a mortgage?
The first step to getting a mortgage is to find a top mortgage lender, so if you are reading this…you can cross that off the list!
What is the difference between pre-approved and pre-qualified?
When you are pre-qualified, this means you have provided your lender with the basic information they need to determine which loans you can qualify for. This is one of the first steps in the loan process. Although pre-qualification is an important step, you should note not all realtors will work with you just because you are pre-qualified. Realtors tend to prefer clients that are pre-approved, which is when your lender has collected and verified all of the information needed for underwriting and approval, and has presented it as well.
What documentation is needed to obtain a mortgage?
The documentation that is required to get a mortgage can vary borrower to borrower. For the most part however, the documentation required to obtain a mortgage will be fairly similar. Here are a few of the items that are needed for nearly all borrowers:
- Valid photo ID
- Most recent 60 days of FULL statements for liquid as well as non-liquid assets (ALL pages, even if left intentionally blank)
- Most recent 30 day’s of pay stubs
- Copies of most recent 2 years of tax returns (ALL schedules)
- Copies of most recent 2 years of W-2’s and/or 1099’s
How much are my closing costs?
Closing costs can range depending on such things as attorney fees, escrows, and origination charges among other things. Closing costs can range anywhere from $3,000 – $5,000+. Ask me
how to get $0 closing costs!
What is PMI?
PMI is Private Mortgage Insurance. PMI is in place in the event if you are unable to pay your mortgage. Since the bank loses money in this scenario, PMI pays it to offset that loss. You can expect to pay about 0.3% to 1.15% of your home loan in PMI. This can be a sizable sum, but it may make sense if you want to buy a home now rather than wait until you can amass a bigger down payment.
Can I avoid PMI by putting less than 20% down?
Utilizing a program referred to as “Lender Paid Mortgage Insurance” allows to you put as little as 5% down and still avoid PMI. This is an excellent product to achieve an overall lower monthly payment. Ask me
how to avoid PMI!
What is included in my monthly payments?
This depends on your individual mortgage, including what type of a loan you obtain. If it is a fully amortizing mortgages, part of your monthly payment goes to the loan principle and interest. Interest-only mortgage payments only include interest due on the outstanding principle balance.
If your home loan includes mortgage insurance, part of your monthly payment will cover this. In some cases, your lender pays your mortgage insurance or you pay upfront. If you have an escrow account, then part of your monthly payments will go to property taxes and home insurance costs. Ask me how to lower monthly payments!
How much can I afford?
This depends on a variety of factors. Fill out this quote
and I’ll be able to help you determine what you can afford based on your unique situation!
What is a comparable sale?
Comparable sales look at a property or home that sold recently and is similar to the property you’re interested in when considering elements such as the location in North Carolina, amenities, size and age of the property. These are important factors to consider when determining an approximate market value. Appraisers are responsible for researching the local real estate market and choosing which comparable sales best match the characteristics of your subject property.
What is “market value”?
The market value of a home is the most likely selling price of a home on the open market.
What is an escrow account?
Escrow accounts are separate accounts to hold funds for paying bills, including homeowners insurance, property taxes and more. Your lender will collect the funds to deposit into the escrow account every month, along with your monthly payment. Your lender will then pay the bills for you when they are due.
The amount due is determined by taking the annual amount owed for homeowners insurance, property taxes and several other bills, and dividing them by 12. This will then be added to your monthly principal and interest payment.
By spreading the costs over 12 months, it is easier for you to budget for these expenses. This way, you will not have to come up with extra cash when bills are due. Depending on what loan you obtain, an escrow account may be required.
Questions about Rates
What are interest rates?
An interest rate is the monthly cost paid on the unpaid balance of the mortgage. When you obtain a home loan, the lender finances a large portion of the home’s cost, and you agree to pay them back over time, with interest. Interest is an additional cost for the use of the money the lender covers for you. The interest rate is expressed as a percentage rate on the amount owed.
What is APR?
Annual Percentage Rate (APR) includes both the interest rate as well as any prepaid finance charges and additional costs. Some of these may include points, private mortgage insurance, origination fees, and underwriting/processing fees.
What is the difference between APR and interest rate?
APR is a universal measurement that assists in comparing the costs of home loans offered by different mortgage lenders, whereas interest rates are unique to an individual and refers to the rate they make their monthly mortgage payments at.
What is an interest-only loan?
Interest-only loans have a significant amount of inherent risk, and as such, are not always the best choice for your situation. It is important to discuss the pros and cons of an interest-only loan with your lender to determine if it is right for you.
If you obtain an interest-only loan, you will only make monthly payments of interest for a set period of time before you begin to make principal payments. During this time, you will not build any additional equity in your home unless it appreciates in value. When the interest-only period ends, your payments increase (often by a substantial amount). This is to ensure the outstanding principal balance is repaid before the loan term ends.
After discussing with your lender, if you are comfortable with the risks of an interest-only loan, they do provide flexibility for you in managing your monthly cash flow. Depending on the loan option you select, it may not be available. Even if it is available for your loan program, there are specific requirements you must meet to qualify.
Can I lock in an interest rate when buying my home?
You can lock in an interest rate when purchasing your house. Locking in a rate means that you and your lender agree upon a particular interest rate, and it will not go up or down between when you lock it in and when you close on the home.
Additionally, fixed-rate mortgages have the same rate throughout the life of the loan. Mortgage interest rates tend to fluctuate constantly. If you start house hunting assuming a specific interest rate, you could be surprised with a higher interest rate later on in the process.
How can I get the lowest rate? What will my rate be?
No two home loans are the same, and every mortgage is unique to you and your situation. Some of the factors that play into determining your rate include the purpose of your loan, your credit history, your ability to repay the loan, the value of the collateral, the loan amount and more. Ask me
how we can get you the best rate based on your personal situation!
What is a fixed rate loan?
A fixed interest rate loan is a loan where the interest rate charged remains for the entire life of the loan. The rate does not go up or down, regardless of what market interests rates do. The result of a fixed rate loan is that your payments will remain the same over the entire loan, because you will be sure of total interest you pay over the whole term of the loan.
What is an adjustable rate loan?
An adjustable rate loan, also known as a variable rate mortgage or floating rate loans, is a mortgage that has interest rates that fluctuate over the life of the loan in line with the market interest rates. This type of loan tends to have a lower starting interest rate than a fixed rate loan, during the initial fixed rate period. However, over time your rates and payments will change.
What is the difference between a fixed and adjustable rate loan?
Part of it will depend on the interest rate environment at the time of your loan and the duration of your loan. If you plan on living in your home for a long time, fixed rate might be better for you. If the market interest rate environment is unpredictable, a fixed rate mortgage may be better since you can’t predict how much your payments may go up by. If you are planning on selling your home sooner, before the initial fixed rate period changes to variable, an adjustable rate mortgage may be a better choice for you, since the initial ARM rates are typically lower.
All About Refinancing
What is a refinance?
A refinance is the process of swapping out your loan by moving the debt to a different loan or a different lender. If you have an existing loan, you can apply for a new one. This new loan will pay off the remaining balance of your initial loan, leaving you with the new loan. A refinance does not change the amount of debt you have- unless you increase the debt due to closing costs or taking out cash. Collateral also does not change – it will still be at stake and required for your new loan.
Why should I refinance?
There are plenty of reasons to refinance your mortgage. Here are several of the benefits of refinancing:
- Save money by lowering your monthly payment
- Lower your interest rate and improve your cash flow. If you have a long term loan, this can save you significant money.
- Change your loan type from a fixed rate mortgage to an adjustable rate mortgage, or vice versa
- Refinance for a higher amount so that you can pay off other debts or acquire cash
- Change the duration of your loan. You can shorten the length of your loan, which will result in larger payments, but allow you to get rid of the debt quicker. Alternatively, you can refinance for a longer term, which will leave you with lower monthly payments, although you will likely pay more over the life of the loan.
- Consolidate your debt – especially if you have multiple loans, which you can roll into one single loan.
What can I expect during the mortgage process?
- Gather your financial information and documentation to submit your loan application. Use our HomespireGO® app to apply on your phone in just minutes!
- I’ll review your documents and send a pre-approval so you have a clear idea of your homebuying power while shopping around.
- Once you find your dream home, you’ll put in an offer you’re your real estate agent and negotiate with the sellers to come to an agreement.
- We’ll order an appraisal to help finalize the loan amount.
- You’ll order an inspection to check for potential issues.
- Head to the closing table – don’t forget to bring money for your closing costs – and sign!
- Congratulations & celebrate!
What are some things to avoid doing during the mortgage process?
- Don’t open a new line of credit. Or close old ones, for that matter. Either one can negatively affect your credit.
- Don’t take out payday advances. You want to show that you’re responsible and lend-worthy, and taking out payday advances…doesn’t do that.
- Don’t pay your bills late. You’ll definitely take hits on your credit for that one.
- Don’t quit or change jobs. After you’ve closed – do it! But in the meantime, it’s best to wait.
- Don’t co-sign a loan for someone. This is a tough one. You want to help someone out by doing so, but then you are legally responsible to pay that debt if they default. Plus, it increases your debt-to-income ratio.
- Don’t change banks. Then you’ll have to show statements for each bank and sources for funds. It’s really a lot of hassle. If you really want to switch banking institutions, just wait until after closing.
- Don’t make large purchases. I’m talking a car, a boat… whatever. It will affect your credit, and it’s just not worth the extra paperwork and possible delay.
- Don’t let another lender pull your credit. Remember, credit inquiries can lower your score.
- Don’t make a big ol’ deposit into your bank account. Of course, your paycheck is fine. But when your lender sees a large sum of money deposited into your account, you’ll need to provide source information, which could slow things down.
- Don’t ignore your lender! Keep your phone nearby and check your email frequently. You’ll want to answer your lender’s questions and provide info as soon as it’s needed to keep things moving along.
How do I find a real estate agent?
- We work with some wonderful real estate agents and would love to connect you with one that will help guide you through your home search. Reach out today, and I’ll recommend a great match!
Why should I choose you and Homespire Mortgage?
- At Homespire Mortgage, we pride ourselves on offering personalized service and expert guidance every step of the way, ensuring that you find the perfect mortgage tailored to your unique needs and financial situation.
What credit score do I need to get approved?
Which states are you licensed in?
- Virginia, North Carolina, and South Carolina
Whether you are first time home buyer, purchasing your dream home, refinancing an outstanding loan, or consolidating debt, I can help you take that first step toward a mortgage solution. We have a variety of products available such as Conventional Loans, FHA Loans, VA Loans, USDA Loans, Jumbo Loans, MCC and even North Carolina Down Payment Assistance. We have offices in Clayton NC and Raleigh, and also work with clients in Charlotte, Wilmington, Greensboro, and throughout the beautiful state of North Carolina.