The Annual Percentage Rate (APR) is the total cost of your mortgage, including interest payments and other fees, all expressed on a yearly basis. It is usually higher than the initial rate that you were quoted as it takes into account hidden costs such as points or credit costs. APR helps prospective homeowners compare mortgage options and helps prevent lenders from hiding high rates with extra fees.

Points are essentially fees that you pay to the lender when taking out a loan. One point is equal to 1% of the loan’s total value, so if you take out a $100,000 loan, one point would cost you $1000. It’s important to consider these fees when deciding your mortgage financing terms. Discount points are additional fees that help decrease the interest rate on a mortgage loan. They can either be referred to as basic points, where 100 basis points will equal 1 point, or expressed in terms of percentages- 1% of the loan amount..

For those looking to refinance, now might be a great time as mortgage rates are currently 2% lower than the rate on your loan. Even if the difference is only 1%, you can still save money on your monthly mortgage payments. Lowering the interest rate on your loan from 8.5% to 7.5% can save you around $70 per month on a $100,000 loan. This can be a significant amount depending on your income, budget and other factors. So it is worth considering if you have the opportunity to reduce your monthly payments. Talking to your trusted lender can help you consider all the options and decide what is best for you.

Investing in discount points to reduce your interest rate may be beneficial if you plan on staying in the property for several years. Doing so can decrease your required monthly loan payment and increase what you’re able to borrow. But, if you’re only planning to stay in the home for a short time, the cost of discount points can outweigh the monthly savings they bring. This means it might not be worth paying up-front if it’s just for a year or two.

• Document-preparation fee
• Escrow fee
• Pre-paid interest fee
• Private mortgage-insurance Fee
• Loan-processing fee
• Underwriting fee

1. Appraisal fee.
2. Borrower Attorney fee.
3. Credit report.
4. Home-inspection fees.
5. Recording fees.
6. Title or abstract fee.
7. Transfer taxes.

Mortgage rates can be precarious and can fluctuate from the day you apply for a loan to the day you close it. If interest rates take a sudden peak increase during this period, it could unfortunately have an effect on your monthly mortgage payment. Consequently, lenders can help borrowers secure a loan’s interest rate for a predetermined period, usually 30-60 days, at times for an additional charge. This lock-in system safeguards the rate against any fluctuations during that period.

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.

(1) Property

Copy of signed sales contract including all riders

Verify of the deposit you placed on the property

To ensure that all realtors, builders, insurance agents and attorneys are taken into account, we need the relevant contact details such as names, addresses, and phone numbers.

We require a copy of the Listing Sheet and the legal description (if accessible). If the property is a condominium, please provide documentation containing its declaration, by-laws and most recent budget.

(2) Income

Please provide your most recent 30-day pay stubs along with a summary of earnings for the current year.

Provide copies of your W-2 forms for the past two years

The names & addresses of all your employers for the past two years

This letter provides an explanation for any employment gaps over the past 2 years.

A copy of a green card or working visa (front & back)

If self-employed, or receiving commission, bonus, interest, dividends, or rental income.

(3) Tax & Icome

Please provide full tax returns for the last two years, as well as a year-to-date Profit and Loss statement. This should include any attached schedules and statements. If you have filed an extension, please include a copy of it.

Please double-check your return, as most K-1s for all partnerships and S-Corporations for the last two years are not attached to the 1040.

For any individual who owns at least 25% in a company, two years worth of completed and signed Federal Partnership (1065) and/or Corporate Income Tax Returns (1120), along with their respective schedules, statements and addenda are required.

Personal & Others

(4) If you are using alimony or child support to qualify, provide a divorce decree or court order stating the amount, as well as proof of receipt of funds for the past year.

(5) If you receive Social Security income, Disability, or VA benefits, provide an award letter from the relevant agency or organization as a source of funds and down payment.

(6) Provide a copy of the signed sales contract on your current residence and a statement or listing agreement if it is unsold. At closing, you must also provide a settlement/closing statement for the sale of your existing home.

(7) Savings, checking, or money market funds – provide copies of bank statements for the last three months.

(8) Stocks and bonds: Provide copies of your statement from your broker or copies of certificates.

(9) If part of your cash to close is in the form of a gift, provide a Gift Affidavit and proof of receipt of funds.

(10) Based on the information in your application and/or credit report, you may be required to submit additional documentation.

(11) 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

(12) Include all names, addresses, account numbers, balances, and monthly payments for mortgage holders and/or landlords for the last two years

(13) If you are paying alimony or child support, include a marital settlement/court order that states the terms of the obligation. Check to cover the application fee(s).

Lenders will typically assess your credit by looking at your credit report, which shows your payment history and any delinquent payments. They may also consider your credit score, a three-digit number that reflects your overall creditworthiness. Factors such as income, debt-to-income ratio, and other financial obligations may also be taken into account. Ultimately, the lender will decide whether or not to extend you credit based on their evaluation of your creditworthiness.

The most widely used credit scores are FICO scores, developed by the Fair Isaac Company, Inc. Your score will range from 450 (high risk) to 850 (low risk).

It is essential to ensure the accuracy of your credit report before submitting a credit application, as it is an integral part of many credit scoring systems. To obtain 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 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.

Credit scoring models can be quite complex from one creditor to another. Even a slight alteration in one factor might have an effect on your score; however, the outcome will mainly rely upon how those factors interact with each other are weighted by the model. Only the creditor can explain what might improve your score under the particular credit evaluation model used for your application.

Making sure you pay your bills on time is critical for keeping a good credit score. If you’ve been late on payments, sent to collections, or declared bankruptcy, it will most likely be reflected in your report and could negatively affect your score. Knowing the amount of debt you owe is essential, as several credit scoring models look at this in relation to your credit limit. If the balance is close to or meeting your maximum credit limit, it may have a negative effect on your score.

An appraisal is an estimate of a property’s fair market value. Depending on the loan program, it is generally a document required by a lender before loan approval to ensure that the mortgage loan amount is not greater than the value of the property. TThe appraisal is typically performed by a state-licensed professional, known as an “appraiser,” who is trained to render expert opinions concerning property values, its location, amenities, and physical conditions.

When you purchase a home and make a down payment less than 20% of the overall cost, lenders typically require Private Mortgage Insurance (PMI) to provide coverage in case of default on the mortgage. This is a common practice with traditional mortgages. If you want to avoid paying a lump sum for your private mortgage insurance (PMI) premiums, try making a larger down payment. A 20% down payment is typically enough to waive the PMI requirement and save you a significant amount of money upfront. Alternatively, inquire about other loan program options available that could also make it easier on your budget.

Surprisingly, some people with high incomes find it difficult to save enough money for a 20% cash down payment on their dream homes. Conventional buyers must purchase Private Mortgage Insurance (PMI) to finance their home, which increases the cost of ownership and ironically makes it even harder to qualify for the mortgage. Though your budget may be limited, with an adequate income it’s possible to evade the financial burden of private mortgage insurance (PMI). If you properly manage your funds, you’ll be spared from having to pay PMI. 80-10-10 financing was created for this exact purpose. 80% of the money comes from a traditional lender, 10% is given by a second mortgage and the remaining 10% is paid in cash at purchase. This setup has proven to be very efficient in making homeownership more accessible.Through this approach, you can avoid needing to pay Private Mortgage Insurance on your property. This can lead to substantial savings and make owning a home more affordable.

The same principle applies if you can only afford to make a 5% down payment; 80-15-5 financing is also available. However, since a smaller cash down payment increases the lender’s risk of default, you may be asked to pay higher loan fees and a higher mortgage interest rate than you would with an 80-10-10 loan.

Closing or Funding is the process where ownership of a property is legally transferred from the Seller to you. It officially marks the end of your buying journey!

Please keep in mind that, in addition, the closing meeting involves many people, including sellers, real estate agents, and attorneys. If the seller is out-of-state they can have an attorney represent them. Closing times vary from 1 hour to multiple hours depending on any contingencies or accounts that need to be established.

Prior to closing, you should have a final inspection, or “walk-through,” to ensure that requested repairs were performed and that items agreed to remain with the house, such as drapes and lighting fixtures, are still present.