Your Financial Future:

1. Loan Origination Fees: Cost for processing and administering a new mortgage.

2. Appraisal Fees: Cost to determine the fair market value of the property. These are typically paid to a third party appraisal management company (AMC).

3. Credit Report Fees: Cost for the lender to pull your credit report.

4. Title Search and Title Insurance: Fees for searching the property's title history and purchasing title insurance to protect against title defects.

6. Recording Fees: Fees charged by the county or local government to record the new deed and mortgage.

7. Survey Fees: Cost for property boundary survey, if required.

8. Home Inspection: Fees for the general home inspection, and possibly additional inspections like pest or radon.

9. Legal Fees: Attorney fees, if applicable.

10. Underwriting or Fees: Costs associated with evaluating the loan application.

11. Points: Points are upfront fees you pay to the lender to reduce your interest rate, effectively lowering your monthly mortgage payment. One point typically equals 1% of the loan amount.

12. Property Taxes and Homeowners Insurance: Sometimes required to be paid in advance or placed into escrow.

13. Homeowners Association (HOA) Fees: Initial setup fees or prorated annual fees, if applicable.

14. Private Mortgage Insurance (PMI): Upfront premium, if applicable.

Both buyers and sellers should receive a Closing Disclosure or settlement statement prior to closing that outlines all the fees and how they are distributed. Always review these documents carefully and consult professionals if you have questions.

Points are upfront fees you pay to the lender to reduce your interest rate, effectively lowering your monthly mortgage payment. One point typically equals 1% of the loan amount.

There are two primary types of mortgage points

1. Discount Points: These are the most common type of mortgage point. When you buy discount points, you're essentially paying some interest upfront in exchange for a lower interest rate on your mortgage. The more points you buy, the lower your interest rate will be, though the exact reduction varies by lender and current market conditions.

2. Origination Points: These are not the same as discount points and don't reduce your interest rate. Origination points are used to cover the lender's costs for processing the loan. These are often negotiable, but not all loans have origination points.

Buying points can be advantageous if you plan on keeping the mortgage for a long time because you'll save more in interest over the life of the loan than you paid upfront. However, if you plan to sell or refinance in the short term, the upfront cost may not be recouped through lower monthly payments.

Always run the numbers carefully and consider your long-term plans when deciding whether to buy points. Mortgage calculators that account for points can help you figure out your break-even point—the time it will take for the monthly savings to outweigh the upfront cost of the points. This can help you make an informed decision.

An earnest money deposit serves as a financial commitment and is required when you enter into a contract to purchase a property. This deposit demonstrates to the seller that you are a committed buyer and provides them with a level of assurance that you intend to complete the purchase. The earnest money is typically held in an escrow account and will be applied towards your down payment and closing costs upon successful closing of the transaction.

Should the sale not proceed due to contingencies outlined in your purchase agreement, such as failure to secure financing or unsatisfactory inspection results, the earnest money is generally refundable. However, if you choose to cancel the transaction without fulfilling the contract terms, you may forfeit the earnest money deposit.

An escrow or impound account is a special account set up by your mortgage lender to hold funds that are designated for specific expenses related to your property, such as property taxes and homeowner's insurance. Each month, when you make your mortgage payment, a portion of that payment goes into this escrow account. When the time comes to pay these large, recurring expenses, the lender will use the funds in the escrow account to make the payments on your behalf. This ensures that these important bills are paid on time and in full, reducing the risk for both you and the lender.

The requirements for escrow or impound accounts can vary by lender and jurisdiction, but there are some common scenarios in which these accounts are typically mandatory:

1. Federal Housing Administration (FHA) Loans: If you have an FHA loan, you are generally required to have an escrow account for property taxes and insurance premiums.

2. Loan-to-Value Ratio: Some lenders require an escrow account if your loan-to-value ratio is above a certain percentage. This is often the case for borrowers who make a down payment of less than 20%.

3. High-cost Mortgage Loans: Certain types of "high-cost" or "subprime" mortgage loans may have mandatory escrow account requirements.

4. State Laws: Some states have specific laws that require escrow accounts for certain types of loans or under certain conditions.

5. Lender Policy: Even if not required by law or specific loan type, some lenders may insist on an escrow account as part of their standard lending policies.

It's important to review your loan documents and consult with your lender to determine if an escrow account is mandatory in your specific circumstance.

A prepayment penalty is a clause in your mortgage contract that stipulates a fee will be charged if you pay off your mortgage earlier than the agreed-upon terms. This fee is in place to compensate the lender for the interest payments they'll miss out on should you pay off your loan early. The specifics of the penalty, including how much it will be and when it applies, can vary and should be clearly outlined in your mortgage agreement.

It's important to understand whether your mortgage has a prepayment penalty when considering refinancing or paying off your loan ahead of schedule, as this could significantly impact the financial benefits of doing so.

Always make sure to consult your mortgage contract or speak with your lender for the most accurate information on any potential prepayment penalties.

Various factors can influence your credit rating, some more significantly than others.

Payment History (35%) The most substantial factor affecting your credit score is your payment history, which accounts for approximately 35% of your score. Missed payments, defaults, and bankruptcies have a negative effect.

Credit Utilization Ratio (30%) This is the ratio of your current credit card balances to your credit limits. A lower ratio is viewed more favorably, as it suggests that you are not overly reliant on credit.

Length of Credit History (15%) The longer your credit history, the better it is for your score. Lenders prefer borrowers who have a longer track record of timely payments.

Types of Credit In Use (10%) Having a variety of credit types (credit cards, mortgage, auto loans, etc.) can be beneficial for your credit score.

New Credit (10%) Opening multiple new credit accounts in a short period can be risky behavior, lowering your credit score. Each "hard" credit check can also marginally decrease your score.

Public Records: Bankruptcies, tax liens, and civil judgments can severely impact your credit score.

High Balances: Owing a lot on your credit accounts can signify to lenders that you are overly dependent on credit, which can impact your score negatively.

Frequent Balance Transfers: Frequently transferring balances from one account to another can indicate that you are unable to pay off your debts, which can negatively impact your credit score.

Co-Signing: Co-signing a loan can also affect your credit score, especially if the other individual does not make timely payments.

Credit Inquiries: Each time you apply for credit, an inquiry is added to your credit report. Multiple inquiries within a short period can lower your credit score.

Inactivity: Not using your credit accounts or letting them become inactive can adversely affect your score since lenders can’t evaluate your credit management skills.

Understanding these factors can help you take proactive steps to maintain or improve your credit score. Keep in mind that different credit bureaus might use slightly varying criteria for calculating your credit score.

It is a misconception that 20% down is required for a purchase however down payments depend on the type of loan you are looking to attain:

Federal Housing Administration (FHA) loans: allow for lower down payments, often as low as 3.5%,

VA Loans: If you're a veteran or active-duty service member, you may be eligible for a VA loan, which can often be obtained with no down payment at all.

United States Department of Agriculture (USDA) loans: can sometimes be obtained with no down payment, although they are subject to geographic and income limitations.

Conventional loans (Fannie Mae or Freddie Mac): traditionally required 20% down however they do allow for lower down payments, often as low as 3% or 5% down.

Jumbo Loans: For homes that exceed conforming loan limits, you'll likely need a down payment of at least 20% or more, and possibly higher based on lender requirements and your credit score.

Factors Influencing Down Payment:

Credit Score: A higher credit score may qualify you for a lower down payment.

Debt-to-Income Ratio: A lower debt-to-income ratio can make you more appealing to lenders, possibly reducing the down payment required.

Property Type: Investment properties often require larger down payments than primary residences.

Market Conditions: In a highly competitive market, offering a larger down payment could make your offer more appealing to sellers.

Private Mortgage Insurance (PMI): Putting down less than 20% often requires you to pay PMI, which is an additional monthly fee that protects the lender if you default on the loan.

Loan Programs: Special loan programs for first-time homebuyers may offer reduced down payment options.

When applying for a mortgage loan, lenders typically require various forms of employment documentation to verify your income and employment status. Here's a general list of what you may need to provide:

For Salaried Employees:

1. Recent Pay Stubs: Usually, lenders will ask for your last two or three pay stubs. Some may ask for even more.

2. W-2 Forms: These tax forms, which you receive from your employer, show your annual earnings. Lenders typically want to see W-2s from the last two years.

3. Employment Verification Letter (VOE): This is a letter from your employer confirming your employment status, job position, and salary. Some lenders may even directly contact your employer for verification.

For Self-Employed:

1. Tax Returns: Lenders usually want to see at least two years of full tax returns, including all schedules.

2. 1099 Forms: If you've done contract work, you may need to provide 1099 forms.

3. Profit and Loss Statements: Current year-to-date profit and loss statement to show the current status of your business income.

4. Business License: Proof that you own the business you claim to own.

For Both:

1. Bank Statements: Lenders may ask for recent bank statements to see your savings and other assets.

2. Investment Income: If you have income from investments, you may need to provide statements showing dividends or interest earned.

3. Additional Income: If you receive alimony, rental income, or other types of income, you may need to provide documentation for those as well.

4. Social Security, Pension, and Disability: If any of these apply, relevant documentation like award letters or statements will be needed.

5. Credit Report: While not directly related to employment, lenders will pull your credit report (though you won't have to provide this yourself).

6. Contact Information for Previous Employers: Some lenders will ask for this if you've changed jobs recently.

7. Driver's License or Government-Issued Photo ID: To confirm your identity.

Different lenders may have slightly different requirements, so it's always best to check with your specific lender for their list of required documents. Preparing these documents in advance can help speed up the mortgage application process.

We need to verify a 24-month employment history.

If you just graduated school and began a new role, confirmation can be covered by schooling (transcripts and degrees work)

You don’t need to be with the same employer for 2 years; they are checking for a total of 2-year work history. Part time employment counts for history, too.

We understand everyone’s employment history is unique. There are tailored programs for those who do not fit this profile (i.e self-employed.)

Both pre-qualification and pre-approval are preliminary steps in the mortgage process that give you an idea of how much you might be eligible to borrow, but they are not the same thing. Understanding the difference can be crucial when you're shopping for a home.

Pre-Qualification: Pre-qualification is an initial assessment of your creditworthiness based on basic financial information you provide to the lender.

Process: Generally involves a quick conversation with a lender. You'll provide an overview of your financial history, including income, assets, debts, and credit score.

Documentation: Typically, no documentation is required.

Credit Check: Usually involves a "soft" credit inquiry that won't affect your credit score.

Outcome: You'll receive an estimate of the mortgage amount for which you may qualify.

Time: Can be done in a matter of minutes.

Pre-Approval:

Pre-approval is a more thorough process where a lender verifies your financial background and credit rating to determine exactly how much they are willing to lend you.

Process: You'll complete an official mortgage application and provide the lender with necessary documentation.

Documentation: Proof of income (W-2 statements, recent pay stubs), proof of assets (bank statements), employment verification, and other necessary financial documentation.

Credit Check: Involves a "hard" credit inquiry that may have a small impact on your credit score.

Outcome: You'll receive a more concrete commitment in writing for a specific loan amount.

Time: Can take several days to a week.

Commitment: Stronger than a pre-qualification and may give you an edge when home shopping, as it shows sellers that you are a serious buyer with financing in place.

Understanding these two terms can help you know where you stand financially and what your next steps should be in the home buying process. Always consult with your mortgage advisor for the most accurate and personalized advice.

Depending on the type of loan, approval can take place from 24 hours to 21 days.

Factors that Can Impact Timeline:

Documentation: Delays in producing required documents can prolong the process.

Appraisal: An appraisal of the property may be required and can take up to a week or more.

Loan Type: Some loan types, like VA or FHA loans, might take longer due to additional verification steps.

Market Conditions: During busy home-buying seasons, lenders might be dealing with high volume, which could delay your approval.

Credit Issues: If there are discrepancies or issues with your credit history, additional time may be needed for review.

Be Prepared: Have all your required documents ready to submit as soon as possible.

Prompt Responses: Quickly responding to lender inquiries can help expedite the process.

Work with Professionals: Engaging with a reputable mortgage advisor and real estate agent can help things move more smoothly.

Knowing the APR of a loan will allow for better budgeting, transparency of the true cost of borrowing and comparison of loans to make the most informed decision.

A loan with a lower interest rate but high fees may actually cost more over the long term than a loan with a slightly higher interest rate but no fees.

When you're shopping around for a mortgage, comparing APRs can help you find the best deal. It's like comparing "out-the-door" prices when you're shopping for a car, not just the sticker prices.

APR is calculated by taking into account:

Interest Rate: The base rate charged on the borrowed amount.

Fees and Charges: These could include loan origination fees, processing fees, underwriting fees, etc.

Loan Term: The length of time you will take to repay the loan.

Down Payment Assistance Programs are special programs aimed at helping first-time homebuyers cover the initial costs of buying a home. These programs can provide grants, low-interest loans, or gifts to help you reach the down payment amount needed to secure a mortgage. These are typically offered by federal, state, and local governments, as well as some non-profit organizations.

Types of Assistance:

Grants: Free money that you don't have to pay back but may come with conditions like completing a homebuyer education course.

Low-Interest or Deferred Loans: Loans with low or no interest rates, and you usually don't have to start paying them back right away.

Employer Programs: Some employers offer down payment assistance as a job benefit.

Gift Funds: Some programs allow the use of gift money from family or friends, but these usually have to be documented properly.

First-Time Buyer: You generally need to be a first-time homebuyer, but some programs define this as not having owned a home in the last 3 years.

Requirements:

Income Limits: Many programs have income restrictions based on the area's median income.

Credit Score: Some programs require a minimum credit score.

Education: You may need to complete a homebuyer education course.

We highly recommend scheduling an appointment with a local Aequalend Advisor to explore assistance programs available in your area. This could be a great opportunity to find resources tailored to your specific needs.