This is an excellent time to begin the pre-qualification process. Pre-qualifying can mean several things depending on the lender that you choose, but generally it involves knowing the following points- the area you want to live, the type of home you want, and the loan that best fits your financial needs.

Many lenders will pre-qualify you for free. A simple call, with no obligation will allow you to know the type of loan that is best for you.

There are hundreds of loans available, so you should know your best options. The lender will also ask if they can pull your credit report. This report will alert the lender to any credit/financial problems. If you’ve experienced any financial difficulties (many of us have), you should explain that to the lender so they can provide the best alternatives for you. Next, the lender will most likely ask you a number of questions regarding other things about your life such as employment history, saving habits, marital status, ownership of additional properties, and many other questions to help them determine your ability to repay the loan. This is standard procedure in the mortgage process, so please don’t be alarmed.

The following are some additional questions a lender might ask:
Are you a first time homebuyer?
A first time homebuyer has not owned a home in the last three years or is a recently divorced homemaker. Why is this important? Because there are many programs that require a lower down payment, provide a lower interest rate, or even provide down payment and closing cost assistance to new homebuyers.

Are you a Veteran?
Many Veterans qualify for a special VA loan that requires no down payment! In most cases, it is easier to qualify for a VA loan. So, why not use this special benefit?
Becoming pre-qualified is an important step in the mortgage process to enable you to get into the right house with the right terms and conditions. Furthermore, getting pre-qualified helps you strengthen your position when negotiating with the seller as they now know that they have a qualified borrower.

Now you have found the property you want and you are ready to make an offer. You must consider what sales price to offer, terms, seller concessions, earnest money, option fee, as well as closing and possession dates.

Keep in mind that a very low initial offer may anger the seller and can lead to  no compromise or a refusal to work it out.
This is a process that can be best accomplished with the help of a competent and trusted REALTOR®. The REALTOR® is also very important because they should always have your best interests in mind when negotiating with the seller. This allows them to stay objective throughout the process even when you become emotionally involved.

Acceptance occurs when all parties agree to the price and terms of the contract. At that time, the clock starts ticking to adhere to all details that are outlined in your transaction. You should be sure that all changes are initialed, no matter how insignificant you feel the change is. Absolute agreement and clarity is the key to protecting your rights and expectations for your purchase.

This process is stipulated in your contract. It is important that this process moves along quickly. Once acceptance occurs, the next days are filled with inspections, appraisals, and many other deadlines that you will need to meet to ensure a smooth closing.

At this stage of the loan process, you may experience the stress of deadlines. Remember that you have chosen competent and capable people who are working for you to ensure that this will be a smooth process. If at any time you don’t feel 100% comfortable with anyone in the loan process, you should ask another party for consultation. Remember that you are spending a large amount of money and should feel completely comfortable with the entire process. Below is list of some of the things that will happen during this time period.

Open Title

After all parties have agreed to the terms of the contract and the executed date is filled in, a copy of the contract and the earnest money must be delivered to the title company. The title company, a disinterested third party, must remain neutral throughout the transaction. They will carry out all the instructions of your contract and provide the title insurance. The address of the title company chosen will be on your contract, so you can communicate freely with them. Generally, your real estate agent will contact the title company for all key factors and they will review your final figures before closing. A good real estate agent can review the HUD-1 (closing statement) and make sure you have not been incorrectly charged.

General Inspection

You have the right to do inspections any time prior to closing. Most buyers choose to get the property inspected during the option period. In case there are problems found, the buyer can terminate the contract. The option period begins on the executed date of the contract.

If you feel there is a major item that must be addressed after the general inspection is done, you can:

• Terminate the contract within the option period.
• Propose a lower sales price.
• Request the seller do the named repairs.
• Split the cost of repairs with the seller.

Termite Inspection

If you are getting a loan, a wood destroying insect report may be required before closing. This report is filled out by a specially licensed inspector and is often done at the time of the general inspection to keep inspection costs down. If you order the general inspection with the termite inspection at the same time, you’ll most likely save yourself a trip charge. This inspection report states if there is a current infestation, there has been infestation, there are conducive conditions (areas that might attract), or the property has been treated. Please keep in mind that infestation in general is easily treatable.

Appraisal

The appraisal is required by the lender to insure the property’s market value and to certify the property meets required standards. Two important areas to focus on are the appraiser’s value and the lender-required repairs. Although the appraisal belongs to the lender, you typically pay the cost as required by the lender. Federal law entitles you to a copy of the appraisal.

Loan Approval

After the underwriter has reviewed your file, they will approve and send it to the closing department. Loan approval is the full and final approval to get your property closed. Sometimes the loan approval is conditional and you must provide documented proof that either your previous home has closed or a receipt of a paid account. Either way, the loan approval moves you one step closer to owning your property. One major factor that lenders consider when approving your loan is your credit score. For additional information on credit scores, please see the Frequently Asked Questions section. This is also a good time for you to Compare Your Lender and see if you are getting the best deal.

Repairs

All repairs are generally done after the loan approval. Sometimes a seller might agree to do them early, but don’t expect this until you have been completely approved for the loan. Repairs include lender-required repairs that must be done prior to the funding of the loan. Lender required repairs take precedence over all repairs, because the loan will not be approved unless they have been completed. Although the required repairs discussed are addressed in the contract, repairs that are needed after you are a homeowner should be a concern to you. Savvy real estate consultants should always recommend a residential contract to protect you in the coming year.

Re-Inspection

After repairs are done, it is always recommended to re-inspect the property. Often times, the general inspector you originally hired will look over the work for a nominal charge. This re-inspection trip should not be skipped. Allow yourself enough time before closing for the re-inspection of items where repairs had been requested.

Homeowners Insurance

Before closing you must obtain homeowners insurance. You will need to provide your insurance agent with the address, square footage, and age of the property. Some insurance companies ask for additional information that can be provided by your real estate agent. Your insurance will not go in effect until your loan has closed and funded. Your insurance premium will be included in your closing costs, so make sure you don’t pay for it up front.

The amount of your insurance premium is determined by the type of coverage needed:

• Replacement versus actual cash value of items in your house
• Replacement versus actual cash value of dwelling coverage
• Deductible amount
• Security system, deadbolts and smoke alarms
• Discounts may be given if you use the same insurer for your auto insurance

Please remember that flood and earthquake damage are not covered by a standard homeowner policy. You may need to buy a separate policy to cover those types of risks and is depended on the likelihood of occurrence in your area.

Survey

A survey will provide a graphic account of the property you are purchasing. It will show the structure fence line, boundary lines, encroachments, and easements of the property. The buyer customarily pays for the survey, but the cost can be negotiated if the property includes acreage.

During these final days you will need to finish up any last minute details to ensure that you get the keys to your house the day of closing. This is an exciting time, so try to relax and enjoy the process knowing that your new house is just around the corner. Below are a few last minute things that you will encounter.

Closing

Closing is the date and time set-aside for you to come in and sign the paperwork. Your real estate agent will coordinate the time and date convenient for you and the title company. As a buyer, you may want to close near the end of the month, so that you will minimize the number of days you must pay pre-paid interest. The other consideration is that most closings are scheduled for the last day of the month. A wiser strategy might be to close three days prior to the end of the month.

Funding

Funding occurs when all papers have been signed and all conditions have been met. Funding may occur on the day of the closing or on the next day. Careful planning will ensure that all expectations have been met. You will not receive the keys for the premises until the loan has funded, so plan to close early when there are definite time constraints.

Possession

After funding, your real estate consultant will give you the keys to the property and you will officially own your new home. Congratulations!

When it comes to local knowledge and local decisions on condo financing – go with the people you know! At Supreme Lending, we have a dedicated team of experienced professionals who focus on project review and bring years of condominium financing expertise to the table for you.

Program Highlights:

• • • 10, 15, 20, 25 & 30 Year Fixed Rate Terms Available
    • Up to 97% LTV on Primary Homes
    • Up to 90% LTV on Second Home
    • Up to 85% LTV on Investment Homes
    • Limited Condo Review on Primary Homes up to 75% LTV/90% CLTV or 70% LTV/75% CLTV on Second Homes Based Upon Credit Qualifications

Supreme Highlights:

Benefits

• More Financing Options
  • We help clear exceptions to achieve warrantable status
  • Non-warrantable options available

• Less Roadblocks
  • Experienced, dedicated condo and project team
  • Assistance during new build/construction

• Great Turn Times
  • 24-48 hour approvals for condos already on the approved project list
  • 48-72 hour approvals for conventional condo loan projects

A person’s primary residence is the dwelling where they live, typically a house or a condo. A person can only have one primary residence at any given time, though they may share the residence with other people.

A primary residence is considered as a legal residence for the purpose of income tax and/or acquiring a mortgage.

Advantages:

• • • All interest on the mortgage may be tax deductible*
    • Establishes credit history
    • Secured investment
    • Builds equity
    • Can be used to borrow against
    • Gift funds are allowed

*Supreme Lending is not a licensed CPA or Tax consultant and therefore, cannot determine if your mortgage interest will be eligible as a tax deduction per IRS code. You are advised to contact a tax professional. This in no way implies you are guaranteed a tax credit.

A second home refers to private ownership of a residence other than one’s primary residence. Depending on their purpose, second homes are sometimes called vacation homes or secondary residences. The property must be available for your exclusive use and enjoyment and must not be subject to any rental pools or long-term leases.

Advantages:

• Buy the home now while employed and retire in it later
• Build equity with an additional property
• Similar terms to primary residence loan

An important key point a loan officer considers when helping you decide which lender/program is best for you is to view your credit. The purpose of this report is to pull your credit history from each of the three major credit-reporting agencies: Equifax, Experian, and Trans Union. Your lender is required to use outside companies to acquire your credit report, as they are impartial to the findings on your credit report. Your account balances and account history on your report are verified. You will be provided with a “credit score”.

Two challenging questions that surround every loan are – How does a lender determine my interest rate? What can I do to ensure I get the best possible rate? To answer these questions, we must consider three criteria on which a lender bases their decision.

Credit Rating – The credit score is the most important point in mortgage lending. The credit score is not the only aspect considered in lending, however in most cases it is the most crucial. Lenders will also look for multiple late payment occurrences over the last two years.

Ratios – Secondly, the borrower’s monthly obligations (this does not include utilities, phone, or items generally not reported on a credit report) are calculated and reviewed by lenders. Two ratios are determined, front-end and back-end. For most lenders, a “grade A” conventional loan is one in which a borrower has a front-end ratio less than 28% and a back-end ratio less than 36%. For example, a borrower has a gross monthly income of $4,000, a car payment of $350, a credit card payment of $55, and a new house payment of $1,000. The calculations are as follows:

•    $4,000/1,000 = 25% Front-end Ratio
•    $4,000/1,405 = 35% Back-end Ratio

Down Payment – Thirdly, the lender factors in the amount of a borrower’s initial down payment. The less money spent on the down payment means a higher interest rate charged by the lender. Simply stated, more risk for the lender equals a higher rate for the borrower. Even if a borrower has perfect credit and wants to put 0% down, their rate will generally be about ½% higher than a person who puts 10% down.

After a lender has considered the three points described above, the borrower’s application must pass the specifications set by an underwriting department for the loan to be approved.

 Lenders generally charge discount points for the following purposes. 1 discount point equals 1 percent of the loan amount. Discount points are used to lower the interest rate. The discount fee is normally charged as a line item on your Closing Disclosure at the time of closing

Your closing costs depend on the type of loan you decide is best for you. Depending on your home state, you normally pay the following amounts.

• Origination Fee: 1% of the loan amount – cost of establishing a loan
• Discount Points: Used to lower the interest rate (refer to Discount Points section above)
• Appraisal Fee: Dependent  on the house size
• Credit Report Fee: Charge for pulling your credit report from the credit bureaus (Refer to Credit Report question in this FAQS section)
• Underwriting Fee: Payment to the end investor for services provided
• Processing Fee: Payment to the lender for services provided
• Flood Certification Fee: Certification that your property is not in the 100 yr. flood zone
• Title Charge: Payment to the title company for closing your loan
• Title Policy: 1% of purchase price depending on the state (the seller normally pays)
• Recording Fee: Payment for filing fees depending on the state

Many of these costs are third party charges and cannot be negotiated by you or the lender.

There are many differences between conventional and FHA loans. In this portion we will outline some of the major differences for you.

On FHA loans, the minimum down payment is 3.5%. On a conventional loan, the down payment can be as low as 3% depending on a consumers credit scores. Additionally, the money on a conventional loan must be “seasoned” (60 days in the bank) prior to purchasing the home or be proceeds from the sale of your existing home.

A FHA loan requires an upfront Mortgage Insurance payment; a Conventional loan does not. Both do require monthly Mortgage Insurance premiums based on the LTV.

The taxes will be the same on either type of loan. A common mistake is that people believe is their taxes will vary depending on the loan they choose.  The title company that closes the loan submits the taxes directly to the lender. If you reside in an attorney state, your representation is the one who orders the tax certificate from the appraisal district. Taxes reported to the lender will be included in your monthly loan payment. There is no mark-up or service charge over and above the actual tax amount.

Homeowner’s insurance works the same as taxes. You pay the lender for your policy amount on a monthly basis. The lender will escrow this amount and send it to your insurance company at the end of the year when renewal is due.

Interest rate differences will vary depending on the lender you choose. Most importantly, ALWAYS ask for the lowest rate for the type of loan you are obtaining.

The principal and interest portion of the payment is calculated by configuring the loan amount (MIP rolled into the balance on FHA) and term into an amortization schedule to calculate the payment amount. Ask your Supreme Lending representative for additional information on conventional and FHA loans.

Adjustable-Rate Mortgage (ARM): Mortgage in which the rate of interest is adjusted based on a standard rate index.  Most ARM’s have a cap on how much the rate may increase.

Amortization: The process through which the mortgage debt is altered, usually declining, as payments are made to the lender. “Negative-amortization” occurs when monthly payments are too small to cover either the principal or interest reductions.

Annual Percentage Rate (APR): The rate of interest to be paid on a loan projected life; sometimes referred to as the “true” rate of interest.

Appraisal: A professional evaluation of the value of a home or other piece of property.  It is often required by the lender.

Balloon Mortgage: A real estate loan in which some portion of the debt will remain unpaid at the end of the term of the loan.  A balloon will usually result in a single large payment due when the loan ends.

Cap: A limit on how much a mortgage interest rate may increase or decrease for an adjustable rate mortgage.

Conventional Mortgage: A mortgage loan with terms and conditions that meet funding criteria of Fannie Mae and Freddie Mac. Rates can be fixed or adjustable. Also known as a conforming loan.

Debt-To-Income Ratio: A ratio used by lending institutions to determine whether a person is qualified for a mortgage.  Debt-to-income is the total amount of debt, including credit cards and other loans, divided by the total gross monthly income.

Default: Failure to pay the mortgage payments over a specified period of time.

Discount Points: A percentage of the mortgage paid to the lender to lower the interest rate on a loan.  One point equals one percent of the mortgage.

Equity: The difference between the market value of a house and the amount still owed on the mortgage.

Escrow Money and documents deposited in a trust account to be held by one party for another.  Often used by brokers to hold deposit money prior  to closing.  Also used by lenders to hold money for taxes and insurance on a home.

FHA Loan: A loan guaranteed by the Federal Housing Administration. FHA issues specific guidelines for mortgages.

Loan-To-Value Ratio (LTV): The amount of the loan divided by the purchase price of the house.  If a refinance, the loan is divided by appraised value.

Margin: A set number of percentage points a lender adds to the index to determine the interest rate for an ARM.

Mortgage Insurance (MI): Insurance designed to cover the lender should the borrower default on the loan.  Depending on the loan to value, this may be required by the lender.

Paper Trail: Copies of all paperwork to cover the lender should the borrower default on the loan.

PITI: PITI stands for principal, interest, taxes, and insurance. These are the four mortgage categories in which money is held in escrow.

Points: An interest fee charged by the lender.  One point is equal to one percent of the mortgage.  The use of points allows the lender to raise its yield above the apparent interest rate.

Prepayment Penalty: A fee imposed on a borrower who pays off a mortgage before it is due.

Principal: The amount of the loan.

Second Mortgage: An additional mortgage on a property.  It often carries a shorter term and a higher interest rate than the original mortgage.

Title Company: A company that searches for titles and insurance claims. Your loan will close at a title company.

Truth in Lending Act: A federal law that requires lenders to reveal all the terms of the mortgage.

VA: A VA loan is a lower cost  mortgage loan guaranteed by the US Department of Veterans Affairs (VA). It is designed to provide  long-term financing to eligible American veterans or their surviving spouses (provided they do not remarry).