+ When should I refinance?

It's generally a good time to refinance when mortgage rates are 2% lower than the current rate on your loan. It may be a viable option even if the interest rate difference is only 1% or less. Any reduction can trim your monthly mortgage payments. Example: Your payment, excluding taxes and insurance, would be about $770 on a $100,000 loan at 8.5%; if the rate were lowered to 7.5%, your payment would then be $700, now you're saving $70 per month. Your savings depends on your income, budget, loan amount, and interest rate changes. We can help you calculate your options.

+ What is an APR?

The annual percentage rate (APR) is an interest rate reflecting the cost of a mortgage as a yearly rate. This rate is likely to be higher than the stated note rate or advertised rate on the mortgage because it takes into account points and other credit costs. The APR allows homebuyers to compare different types of mortgages based on the annual cost for each loan. The APR is designed to measure the "true cost of a loan". It creates a level playing field for lenders. It prevents lenders from advertising a low rate and hiding fees.

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

Because APR calculations are affected by the various different fees charged by lenders, a loan with a lower APR is not necessarily a better rate. The best way to compare loans is to ask lenders to provide you with a good-faith estimate of their costs on the same type of program (e.g. 30-year fixed) at the same interest rate. You can then delete the fees that are independent of the loan such as homeowners’ insurance, title fees, escrow fees, attorney fees, etc. Now add up all the loan fees. The lender that has lower loan fees has a cheaper loan than the lender with higher loan fees.

The following fees are generally included in the APR:

• Points - both discount points and origination points
• Prepaid interest. The interest paid from the date the loan closes to the end of the month.
• Loan-processing fee
• Underwriting fee
• Document-preparation fee
• Private mortgage-insurance
• Escrow fee

The following fees are normally not included in the APR:

• Title or abstract fee
• Borrower Attorney fee
• Home-inspection fees
• Recording fee
• Transfer taxes
• Credit report
• Appraisal fee

+ What documents do I need to prepare for my loan application?

Below is a list of documents that are required when you apply for a mortgage. However, every situation is unique and you may be required to provide additional documentation. So, if you are asked for more information, be cooperative, and provide the information requested as soon as possible. It will help speed up the application process.

Your Property

• Copy of signed sales contract including all riders
• Verification of the deposit you placed on the home
• Names, addresses, and telephone numbers of all realtors, builders, insurance agents, and attorneys involved
• Copy of Listing Sheet and legal description if available (if the property is a condominium please provide condominium declaration, by-laws and most recent budget)

Your Income

• Copies of your pay-stubs for the most recent 30-day period and year-to-date
• Copies of your W-2 forms for the past two years
• Names and addresses of all employers for the last two years
• Letter explaining any gaps in employment in the past 2 years
• Work visa or green card (copy front & back)

If self-employed or receive commission or bonus, interest/dividends, or rental income:

• Provide full tax returns for the last two years PLUS year-to-date Profit and Loss statement (please provide complete tax return including attached schedules and statements. If you have filed an extension, please supply a copy of the extension.)
• K-1's for all partnerships and S-Corporations for the last two years (please double-check your return. Most K-1's are not attached to 1040.)
• Completed and signed Federal Partnership (1065) and/or Corporate Income Tax Returns (1120) including all schedules, statements, and addenda for the last two years. (Required only if your ownership position is 25% or greater.)

If you will use Alimony or Child Support to qualify:

• Provide divorce decree/court order stating amount, as well as, proof of receipt of funds for last year

If you receive Social Security income, Disability, or VA benefits:

• Provide an award letter from agency or organization

Source of Funds and Down Payment:

• Sale of your existing home - provide a copy of the signed sales contract on your current residence and statement or listing agreement if unsold (at closing, you must also provide a settlement/Closing Statement)
• Savings, checking or money market funds - provide copies of bank statements for the last 3 months
• Stocks and bonds - provide copies of your statement from your broker or copies of certificates
• Gifts - If part of your cash to close, provide a Gift Affidavit and proof of receipt of funds
• Based on information appearing on your application and/or your credit report, you may be required to submit additional documentation

Debt or Obligations:

• Prepare a list of all names, addresses, account numbers, balances, and monthly payments for all current debts with copies of the last three monthly statements
• Include all names, addresses, account numbers, balances, and monthly payments for mortgage holders and/or landlords for the last two years
• If you are paying alimony or child support, include marital settlement/court order stating the terms of the obligation
• Check to cover Application Fee(s)

+ How is my credit judged by lenders?

Credit scoring is a system creditors use to help determine whether to give you credit. Information about you and your credit experiences, such as your bill-paying history, the number and type of accounts you have, late payments, collection actions, outstanding debt, and the age of your accounts, is collected from your credit application and your credit report. Using a statistical program, creditors compare this information to the credit performance of consumers with similar profiles. A credit scoring system awards points for each factor that helps predict who is most likely to repay a debt. A total number of points -- a credit score -- helps predict how creditworthy you are, that is, how likely it is that you will repay a loan and make the payments when due.

The most widely use credit scores are FICO scores, which were developed by Fair Isaac Company, Inc. Your score will fall between 350 (high risk) and 850 (low risk).

Because your credit report is an important part of many credit scoring systems, it is very important to make sure it's accurate before you submit a credit application. To get copies of your report, contact the three major credit reporting agencies:

Equifax: (800) 685-1111 Experian (formerly TRW): (888) EXPERIAN (397-3742) Trans Union: (800) 916-8800 These agencies may charge you up to $9.00 for your credit report.

You are entitled to receive one free credit report every 12 months from each of the nationwide consumer credit reporting companies – Equifax, Experian and TransUnion. This free credit report may not contain your credit score and can be requested through the following website: https://www.annualcreditreport.com

+ What is an appraisal?

An Appraisal is an estimate of a property's fair market value. It's a document generally required (depending on the loan program) by a lender before loan approval to ensure that the mortgage loan amount is not more than the value of the property. The Appraisal is performed by an "Appraiser" typically a state-licensed professional who is trained to render expert opinions concerning property values, location, amenities, and physical conditions.

+ What is PMI (Private Mortgage Insurance)?

On a conventional mortgage, when your down payment is less than 20% of the purchase price of the home mortgage lenders usually require you get Private Mortgage Insurance (PMI) to protect them in case you default on your mortgage. Sometimes you may need to pay up to 1-year's worth of PMI premiums at closing which can cost several hundred dollars. The best way to avoid this extra expense is to make a 20% down payment or ask about other loan program options.

+ What happens at closing?

The property is officially transferred from the seller to you at "Closing" or "Funding".

At closing, the ownership of the property is officially transferred from the seller to you. This may involve you, the seller, real estate agents, your attorney, the lender’s attorney, title or escrow firm representatives, clerks, secretaries, and other staff. You can have an attorney represent you if you can't attend the closing meeting, i.e., if you’re out-of-state. Closing can take anywhere from 1-hour to several depending on contingency clauses in the purchase offer, or any escrow accounts needing to be set up.

Most paperwork in closing or settlement is done by attorneys and real estate professionals. You may or may not be involved in some of the closing activities; it depends on who you are working with.

Prior to closing, you should have a final inspection, or "walk-through" to insure requested repairs were performed, and items agreed to remain with the house are there such as drapes, lighting fixtures, etc.

In most states, the settlement is completed by a title or escrow firm in which you forward all materials and information plus the appropriate cashier's checks so the firm can make the necessary disbursement. Your representative will deliver the check to the seller, and then give the keys to you.