Frequently Asked Questions

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.

Identification

• Copies of your identification card, drivers license, work visa or green card (front & back)

Your Income

• Copies of your pay-stubs for the most recent 30-day period and year-to-date

• Copies of your W-2/1099 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

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 the 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.

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 award letter from agency or organization

Source of Funds and Down Payment

• 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 Gift Affidavit and proof of receipt of funds

• 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)

Based on information appearing on your application and/or your credit report, you may be required to submit additional documentation

Lenders use a system called credit scoring to decide if they can give you credit. They look at your credit report, which shows your bill payment history, the types of accounts you have, any late payments, collections, debts you owe, and how long you've had your accounts. The total points, or credit score, show how likely you are to pay back a loan on time.

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: (888) EXPERIAN (397-3742)
TransUnion: (800) 916-8800

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

Credit scores are calculated in different ways by different lenders, so improving your score can vary. Changes to one part of your credit history might help, but it also depends on other parts of the scoring model. Contact Wrayanne for specific questions on what will help your score.

Boosting your credit score involves several steps, which can vary by lender. Here are some key actions to take:

1. Always pay your bills on time: Late payments, collections, and bankruptcies can bring down your score.

2. Lower your debt: Keep your debt well below your credit limits. High debt can negatively impact your score.

3. Maintain a long credit history: The longer your credit history, the better. Even with a short history, on-time payments and low balances are helpful.

4. Avoid too many new credit inquiries: Applying for lots of new credit at once can hurt your score. Note that not all inquiries count against you, such as those for account monitoring or pre-approved offers.

5. Diversify your credit: Having different types of credit is beneficial, but too many credit cards or finance company loans can lower your score.

Improving your credit score takes time, so be patient and keep working on these steps.

Closing is when you officially get ownership of the property. This involves transferring the property from the seller to you, which might include the seller, real estate agents, and title company staff. If you can't be there, an attorney can represent you.

Closing can take an hour or more, depending on the situation.

At closing, you'll sign documents and provide any needed payments. The title or escrow company will handle the funds and give you the keys once everything is finalized.

Refinancing is generally beneficial when interest rates are 2% lower than your current mortgage rate, but even a 1% reduction can save you money. For example, if you have a $100,000 loan at 8.5%, you pay about $770 per month. Lowering the rate to 7.5% reduces your payment to $700, saving you $70 each month. Your savings will depend on factors like your income, budget, loan amount, and rate changes. Contact Wrayanne who can help you determine the best time to refinance!

An appraisal is a report that estimates how much a property is worth. Lenders often require it to ensure the loan amount doesn’t exceed the property’s value. A licensed appraiser, trained to assess property values, looks at the property's location, features, and condition to provide this estimate.

A survey is a detailed map of a property’s boundaries, showing where the land begins and ends. It also identifies any structures, easements, or potential issues like encroachments. Surveys are important in real estate transactions to ensure that the property lines are clear and there are no disputes over land ownership.

PMI is insurance that lenders may require for loans such as FHA mortgages when your down payment is below 20% of the home's price. It ensures the lender is protected if you default on your mortgage. You may need to pay premiums for up to a year at closing, typically costing several hundred dollars.

Locking the interest rate involves securing a guaranteed rate for your mortgage loan for a specified duration, usually 30-60 days. This prevents any potential increases in interest rates from affecting your mortgage payment unexpectedly during the application process.

Points are fees paid to lenders to secure mortgage financing under specific terms. One point equals 1% of the loan amount, so on a $100,000 loan, one point would be $1,000. Discount points are fees paid upfront to lower the interest rate on a mortgage loan. Lenders often discuss costs in terms of basis points, where 100 basis points equals one point, or 1% of the loan amount.

Yes, if you expect to own the property for several years. Paying discount points upfront can reduce your monthly mortgage payment and potentially allow you to qualify for a larger loan amount. However, if you plan to own the property for just a year or two, the savings on your monthly payment may not offset the initial cost of the discount points.

The annual percentage rate (APR) reflects the total cost of a mortgage over a year, encompassing the interest rate, points, and additional fees. It's higher than the advertised rate and helps homebuyers compare mortgage options based on their annual expenses. APR reveals the true loan cost, preventing lenders from promoting low rates while concealing fees.

Your monthly payments are influenced solely by the interest rate and loan term, not APR. When comparing loans, request estimates from lenders for the same type of program (e.g., 30-year fixed) at identical interest rates. Exclude non-loan fees like insurance and attorney costs, then assess the remaining loan fees. A lower APR doesn't always translate to a better rate; consider total loan costs instead.

Additional Details:

Fees typically included in APR:

• Discount and origination points

• Prepaid interest

• Loan processing and underwriting fees

• Document preparation and private mortgage insurance

• Escrow fees

Fees usually not included in APR:

• Title or abstract fees

• Borrower attorney fees

• Home inspection fees

• Recording and transfer taxes

• Credit report and appraisal fees