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FAQ
- What are appraisals and surveys?
An appraisal is the estimate of the value of the home you are purchasing and is provided by a professional, state-certified appraiser, trained in estimating the value of real or personal property. They are looking for the value of your home compared to other similar homes within a certain vicinity of your home.
On newly constructed homes, the home may not be 100% complete when the appraiser does the actual inspection. In these instances, a final review fee may be charged by the appraiser to return the property after construction is complete. A copy of the appraisal will be provided to you at closing or upon request.
In some locations, an 'Automated Value Model' or AVM may be used to determine the value of your home. A full appraisal report would not be available to you in these instances.
Surveys are an overhead view of your lot and foundation. They determine whether there has been an encroachment on the property lines, building lines or easements. If you purchase a resale home, the seller can usually provide an existing survey and a new survey would not be required, assuming that no new structures have been added to the property. If your home is new construction, the builder may order the survey just after completion or just before closing.
- What are discount points?
A point equals one percent of the loan and is usually paid at closing.
For example, if your loan amount is $100,000…then one point would equal $1,000 OR one percent.
Discount Points are fees paid by the buyer to the lender to reduce the loan's interest rate. On most fixed rate loan programs, if you plan to keep your residence for five or more years, it may be worthwhile to pay discount points to reduce your monthly payment and achieve greater savings over the life of the mortgage.
The number of discount points required to buy down your interest rate will vary based on the loan type. Contact Midland Funding for details and rate options regarding your specific transaction.
Generally speaking, points are tax deductible when you are buying a primary residence. Consult your tax advisor for more information on tax deductibility of points and mortgage interest.
- What are the bank statement guidelines? Is it okay to use Internet statements, instead of hard copy bank statements, to verify my bank and investment accounts?
When submitting statements, please include all pages, even if there's nothing on the last page or the first page is an advertisement. If printed on, the back portions of the statements are required, too. Standard mortgage guidelines require all pages of a statement to verify accounts. Missing pages can cause unnecessary frustrations and delays in processing your loan.
As part of your approval process your lender may want to see previous asset account statements. Printing out a transaction history from an online bank account is usually not acceptable unless it is a print out of your last physical statement.
If you've applied for an FHA or VA loan, we will need original bank statements. Copies are not acceptable. Ask your loan officer for guidelines on your specific loan program.
(Important: Bank and investment statements always count their total number of pages. ie. Page 1 of 3)
- What does the term lock mean?
When a lender "locks" the interest rate, you are guaranteed a specific interest rate for a specific period of time. That period of time is called the lock period.
The lock guarantees your rate as long as your loan closes and funds prior to the expiration date of your lock period. If your closing is delayed beyond your lock expiration date, you may have to pay for an extension or be subject to higher market rates.
It is good advice to lock for a period longer than you need. In other words, lock for a period beyond your actual closing date. This will protect you against any unforeseen circumstances that could delay your closing.
Typical lock periods are 30, 60 and 90 days, although longer term locks are available for up to 360 days. In a stable rate environment, shorter lock periods generally provide you a better interest rate. However, the market can be volatile and rates move with market activity, both up and down.
If you have not locked in an interest rate when you receive your application, you may notice that the rate on the application is somewhat higher than the market interest rate. You are not committed to that interest rate. Your loan officer has intentionally used a higher rate with which to qualify you in the event that rates do go up prior to locking in. You are still approved, and will not have to get re-approved or do any more paperwork.
Once you have a property under contract, you can lock your rate by simply requesting a rate and lock term. Your loan officer will mail, fax or e-mail a confirmation to you and request you sign and return the document.
- What is the closing?
Closing will typically take place at an attorney's or at your home.
Your mortgage professional will give you instructions on where the closing will be conducted, along with a phone number and a fax number for the closing attorney in case you have any questions.
All borrowers associated with the loan transaction will be required to bring a government issued photo ID such as a driver's license or passport to closing.
Here's what you can expect to happen at the closing table:
1. The attorney reviews the HUD-1 Settlement Statement with both you.
2. Evidence of required insurance and inspections are presented, if not previously provided.
3. Signatures are collected for loan documents including the HUD-1, mortgage or deed note and the Truth-in-Lending statement.
4. You submit a certified or cashier's check to cover your down payment and closing costs. (Applicable to a purchase).5. Your lender provides funds to the attorney or title company to cover your home's loan amount. If your monthly payments are to include property taxes and insurance, an escrow account (or reserve) is established.
6. Congratulations! The process is complete, now you can sleep at night with the perfect home loan.- What is the difference between APR and Interest Rate?
The APR, or Annual Percentage Rate, is often higher than the quoted interest rate, or note rate. This is because the APR includes, in addition to interest, some of the additional costs of obtaining your financing. Simply stated, if there were no costs in obtaining financing, your note rate and your APR would be the same.
Your APR will be noted on your Truth-in-Lending disclosure that you receive after application.
- What is the difference between pre-qualification and pre-approval?
Pre-qualification is a lender's opinion of your ability to purchase a home and is based on your verbal statement of income, asset, and employment history. This may also include a credit check and submission to an automated underwriting system.
Pre-approval is a lender's underwriting decision that you are conditionally qualified and is subject to the lender's review of your completed application and supporting income and asset documents.
When it comes to writing an offer for a home, a pre-approval letter contains stronger language to the seller and the listing agent than a pre-qualification. You, the buyer, have the increased negotiating leverage of cash buyer status because the mortgage is already in place.
A pre-approval can often be a determining factor in winning the contract in a competitive bid situation.- What should I do between contract and closing?
Once you have a finalized contract, forward a copy to your loan officer to inform him or her of the property address, price and agents' contact information.
Your lender should prepare your loan package send you a copy of your loan terms via mail. Some loan documents do require your acknowledgement of the terms and you may be required to sign and return the documents. At this time you may be charged an application fee to submit your file into processing.
Next, you should shop and obtain Homeowners Insurance (or Hazard Insurance). This compensates you for physical damage to your property by fire, wind or other natural causes. It is very important for you to obtain your Homeowners Insurance at the earliest possible date so that there are no delays in your closing. Some areas may be within a FEMA determined flood zone and flood insurance may also be required.
The Declaration Page of your homeowner’s insurance policy must be sent to your loan processor at least 5 days before closing. Normally, one year's worth of insurance coverage is required. Your loan officer and processor may request additional documentation prior to your closing depending on your specific loan and details of the transaction. It is imperative that you provide these documents to your lender in a timely manner to ensure a timely closing.
Prior to and/or at your closing, you will receive a HUD-1 Settlement Statement which lists all settlement charges associated with your loan. These usually include lender fees, title fees, government recording fees, insurance, taxes and title insurance. The HUD-1 also specifies the amount of certified funds you will need to bring to closing. (if applicable).
You will be notified of the date and time of your closing and what to bring with you. Although we don't anticipate any variation from charges in the HUD-1, you should bring your personal checkbook to closing in case there are last minute adjustments. If you are due a refund or cash back at closing, the attorney or title agent will issue you a check after the recession period.
- When am I committed to borrow?
Some people feel like once they have signed the application, they are obligated to borrow. That is absolutely not the case. In fact, none of the documents you have received are contractual until you are actually at closing and sign your note.
All you are doing is getting your financing approved so you are in a position to make an offer, purchase a home and close the home loan. You are not obligated for the loan transaction until you sign your closing documents. The same is true with the bank, they are not obligated to lend until they come to the conclusion that the loan has been approved, and they are willing to lend on the borrower and property at hand.
