Home Loan FAQ’s: Common Questions and Answers
Do you have questions about applying for a loan, refinancing your home, or how to
manage your credit score? We’ve got the answers! See our FAQ sections below for
answers to commonly asked questions.
THE LOAN APPLICATION PROCESS
Q. How do I apply for a mortgage?
You may apply through Stonegate’s website at
https://www.stonegatemtg.com/apply.aspx, or call our toll-free application
line at 866-925-5771. An application interview by phone typically takes about
30 minutes.
Q. Is there a cost to apply? If so, how much?
Initially, the only fee collected will be for the cost of a credit report. All other
up-front fees such as an appraisal or application fee that may apply to your request
will be disclosed to you as part of the application process and collected following
your receipt of the early Truth-in-Lending disclosure and your approval to continue
with the application.
Q. How long does it take to obtain loan approval?
The average number of days from application to approval will vary, however 7-10
business days is typical. Depending on your credit history, down payment or equity
in your home, and the loan program selected, Stonegate may be able to approve your
mortgage in less time.
Q. What might delay approval of my loan?
If you provide complete, accurate information, the loan process should run smoothly.
If the underwriter discovers credit problems, however, there could be delays. Make
sure you notify us if you change jobs, increase or decrease your salary, incur additional
debt or change marital status between the time you submit an application and the
time the loan is funded.
Q. How long will it take to close after I am pre-approved?
Once you’ve been approved, 45-60 days from application to closing is typical. However,
this timeframe can be as little as 15 days, so ask your Stonegate Mortgage Advisor
about your specific loan conditions.
Q. What documents will I need to apply for a mortgage?
Traditional loans usually require documents that verify your employment, income
and assets, and may include:
- Your Social Security number
- Pay stubs for the last two months
- W-2 forms for the past two years
- Bank statements for the past two or three months
- One to two years of federal tax returns
- A signed contract of sale (if you've already chosen your new home)
- Information on current debt, including car loans, student loans and credit cards
For a complete list, visit our homepage and click on the
Application Checklists link.
Q. What is the difference between pre-qualification and pre-approval?
Pre-qualification is the method of determining the maximum amount a prospective
homebuyer will be eligible to borrow before the loan application process occurs.
Pre-approval allows you to get approved for a specific loan amount prior to finding
the home you want to purchase. The loan is underwritten and the lender commits to
a specific loan amount. Pre-approval can provide a great advantage when negotiating
the purchase price of a home, as most sellers will give preference to a buyer who
has been pre-approved for a loan.
Q. How much do I need for a down payment?
There is no set amount. In fact, you might be surprised to learn that many first-time
homebuyer programs require as little as 3.5% down. Today, there are many loan programs
that can be tailored to fit your needs and financial resources. Keep in mind that
for down payments of less that 20%, private mortgage insurance (PMI) may be required.
Q. What is the minimum down payment for conventional, FHA, and VA loans?
While conventional loans (those not backed by a government agency) usually require
a minimum down payment of 5%, Stonegate Mortgage has low-down payment programs available.
For example:
- FHA mortgages, insured by the Federal Housing Administration, are available for
as little as 3.5% down.
- VA mortgages, guaranteed by the Department of Veterans Affairs, have a no-down payment
option for eligible veterans buying a home.
Please contact a Stonegate Mortgage Advisor for specific down-payment requirements
and programs.
Q. How much money will be required at closing?
The amount of money needed for cash to close is comprised of your down payment,
closing costs, as well as the prepaid items for your initial taxes and insurance
escrow accounts. Stonegate will provide you with a Good Faith Estimate (GFE) of
settlement costs at the time of application. Also, typically within 24 hours prior
to your closing, you will be provided with the final sum of money required for the
closing.
Q. Can I close on a home without having to be at the closing table?
Stonegate Mortgage can accommodate what is termed a "mail away" closing. You may
also appoint someone to act for you by using a Power of Attorney (POA). In this
scenario, you would actually assign someone to sign on your behalf. Each state has
its own specific requirements, so please check with your Stonegate Mortgage Advisor
for state specific requirements. If you select a "mail away," the lender will coordinate
overnight delivery of the documents to ensure a timely closing. Please note, this
process may require some additional coordination time.
7 Questions to ask your Mortgage Advisor
At Stonegate Mortgage, we feel a well-informed client is likely to be more satisfied
with the loan process. So we’ve provided a list of questions below that should be
asked of any lender when applying for a home loan.
1. What is the interest rate on this mortgage?
To determine exactly what you'll pay over the term of the loan, you need to know
the rate. Rates change quickly, and there are several factors, such as your credit
score and the value of the property you are purchasing vs. the amount of the loan
(LTV), which will affect the rate you qualify for.
2. How many discount and origination points will I have to pay?
You have the option to pay prepaid mortgage interest points to lower your interest
rate. Ask your Stonegate Mortgage Advisor to clarify these costs and how they will
impact your interest and payment amounts.
3. What are my closing costs?
Mortgages come with fees for various services provided by lenders and other parties
involved in the transaction. You want to know what those fees will be as early as
possible. Stonegate will provide you with a written Good Faith Estimate (GFE) of
closing costs within three days of receiving a loan application. Beware of any lender
who is unwilling to do so!
4. When can I lock in the interest rate and what will it cost me to do so?
Your interest rate may fluctuate between the time you apply and closing. To prevent
it from going up, you may want to lock in the rate, and even points, for a specified
period. Ask your Mortgage Advisor if lock-in fees apply.
5. Is there a pre-payment penalty on this loan?
There may be a pre-payment penalty on your loan. Some penalties are one percent
of the loan amount, others are equal to six months' interest, some apply only when
you refinance or reduce the principal balance by more than 20 percent, and some
kick in if you sell your home. Find out the duration of any penalty period and how
the penalty is calculated.
6. What is the minimum down payment required for this loan?
The rate and terms of your loan will be based on a down payment figure, typically
5 to 20 percent of the purchase price. If you can put more money down, you may be
able to lower your rate and improve your terms; if you come up short, you may be
required to purchase private mortgage insurance (PMI).
7. What are the qualifying guidelines for this loan?
These requirements relate to your income, employment, assets, liabilities and credit
history. First-time home buyer programs, VA loans and other government-sponsored
mortgage programs typically offer easier qualifying guidelines than conventional
loans.
SELECTING THE BEST
LOAN
Q. What is a conventional loan?
A conventional loan is a fixed rate loan over a specific time frame. It’s secured
by a mortgage or deed of trust with an acceptable loan-to-value (LTV) ratio range
and is not guaranteed by VA or insured by FHA, FMHA or State Bond agencies.
Q. What is a jumbo loan?
A jumbo loan is a conventional loan that exceeds the maximum agency (Fannie Mae,
Freddie Mac) mortgage amount guidelines for a conventional loan.
Q. How do I know what loan is best for me?
Review your current situation and future goals, and then answer these questions
by yourself or with your Mortgage Advisor to help determine the best options for
you:
- How long do you expect to stay in the house?
- Which is more important: low monthly payments or low closing costs?
- Will my income increase or decrease in the next three years?
- How comfortable are you with your monthly payment potentially increasing?
Everyone's situation is different. Most people will benefit from either consulting
by phone or in person with a mortgage professional who is committed to discovering
your needs, and helping you match those needs with a mortgage product that's right
for you.
Q. What is the difference between a fixed rate and adjustable rate mortgage
(ARM)?
With a fixed rate mortgage, the interest rate and payment remains constant over
the life of the loan. With an adjustable rate mortgage, the interest rate can either
increase or decrease, based upon the terms of the loan. This could cause the monthly
payments to increase in order to have the loan paid in full by maturity.
MONEY, RATES AND FEES
Q. What is a buy-down? A buy-down is a fee paid to lower the interest
rate on a mortgage. The buyer, seller or any other interested party may pay it.
A permanent buy-down would lower the rate for the entire term of the mortgage, while
a temporary buy-down lowers the rate for a specified shorter term, generally three
years or less.
Q. What are closing costs?
Closing costs are fees and expenses that both the buyer and seller must pay at closing.
They generally include:
- origination fee
- discount point(s)
- appraisal fee
- credit report
- title search
- recording fees
- other costs described in the HUD I at settlement
Q. How much money will be required at closing?
The amount of money needed for cash to close is comprised of your down payment,
closing costs, as well as the prepaid items for your initial taxes and insurance
escrow accounts. Stonegate will provide you with a Good Faith Estimate (GFE) of
settlement costs at the time of application. Also, typically within 24 hours prior
to your closing, you will be provided with the final sum of money required for the
closing.
Q. Will Stonegate include my closing costs in the loan amount?
On a purchase transaction, you typically cannot finance your closing costs into
the loan amount. However, there are special programs that may allow you to finance
some, or all, of the costs by agreeing to a slightly higher interest rate. Also,
if you are refinancing, you may be able to refinance some, or all, of your closing
costs. See your Stonegate Mortgage Advisor for details.
Q. What is an escrow account?
An escrow account is maintained by the lender to collect funds from the borrower
in order to pay the taxes and property insurance due on the loan.
Q. Which is better: a fixed or adjustable interest rate?
If you plan to be in your home for more than seven years, you may want to consider
a fixed rate mortgage, which offers predictable payments and long-term protection
against rising mortgage interest rates. If you plan to be in your home for seven
years or less, an adjustable rate mortgage could be attractive. Keep in mind that
with an adjustable rate mortgage, your monthly payments have the potential to go
up each time your interest rate adjusts.
Q. When should you pay discount points?
When you pay a discount point, you are essentially paying part of your interest
to the lender up front. This will lower your interest rate — as well as your monthly
payment — over the life of the loan. One discount point is typically equal to 1%
of the loan amount. For example, one point on a $100,000 loan would require payment
of $1,000 at closing. Generally speaking, the longer you plan to remain in a property
or hold your mortgage, the more advantageous it is to pay points. There is no requirement
to pay discount points; whether or not you decide to pay points is completely up
to you.
Q. How can I determine what mortgage amount I might be eligible for?
Based on your income, your current debts and estimated down-payment, your lender
can usually help you determine the maximum mortgage amount for which you could qualify.
Many lenders have a toll-free 800 number where you may speak with a mortgage professional
or you may also reference the lender's mortgage calculator located on its mortgage
Internet site. This process is frequently referred to as a "prequalification analysis".
Q. What is title insurance?
Title insurance provides the lender and the buyer (if you purchase owner's coverage)
with coverage for losses resulting from specific title defects listed in the policy.
In cases where land and property have changed hands over time, there is always the
possibility an error has occurred. If an error has occurred, it may be that someone
else may be in title to or have an interest in the property, improvements encroach
on property lines or that other similar problems may exist. In these scenarios,
if you do not have title insurance you could lose your investment in your home.
Lenders require "lender's coverage" to protect their investment and it only protects
the lender. Owner's coverage is optional and provides separate coverage for the
borrower.
Q. Does Stonegate Mortgage require title insurance for purchase transactions?
Yes, a Mortgagee's Title Insurance Policy will be required on purchase transactions.
Q. What is PMI and why is it required?
Private mortgage insurance (PMI) is insurance written by a private company that
protects the lender from losses in the event the borrower defaults on the mortgage.
Borrowers are required to pay the premium for private mortgage insurance. Private
mortgage insurance limits a lender's exposure to financial loss resulting from loan
default. If you make a down payment of less than 20%, even if you have a good credit
profile, lenders generally require private mortgage insurance.
Q. How much does mortgage insurance cost?
The cost of PMI is divided into two parts. The first part is a payment made at the
time of closing. The second is an ongoing payment made each month with your principal
and interest payment.
Q. How long will I be required to have PMI on my loan?
The Homeowner's Protection Act of 1998 allows borrowers whose loans originated after
July 29, 1999, to request cancellation of PMI at 80% loan-to-value (LTV) based on
amortization, or actual payments, if the borrower has a good payment history, if
the borrower provides evidence the property value has not decreased, and certifies
there are no subordinate liens on the property.
Lenders are required to terminate borrower paid PMI at 78% LTV based on the amortization
schedule if the loan is current. If none of the above is done, PMI will terminate
automatically at the midpoint of the loan term.
For loans originated prior to July 29, 1999, PMI guidelines will vary from lender
to lender and can change at any time. Some investors will not allow the cancellation
of PMI. Typically, PMI is required on your loan for a minimum of 24 consecutive
payments absent any law to the contrary. After that time, if you have 20% or more
equity in your property and meet certain other conditions, you may request to have
it removed. Typically, there is no guarantee that your PMI will be removed, and
most loan investors will require a new appraisal at your expense prior to removing
PMI.
Q. What is the minimum down payment required by a lender in order to eliminate
PMI?
Typically, on a primary residence, the minimum that you need to put down to eliminate
PMI is 20%. If you are putting less than this down, but wish to avoid PMI, your
lender may have alternative products and pricing options they may provide in lieu
of PMI.
Q. What is a rate lock?
This lock gives you protection from financial market fluctuations in interest rates
by setting the range of pricing available to you. Your final rate, which may not
be determined until closing, will reflect the pricing that was available at the
time you locked for loans with your specific transaction characteristics and your
credit profile. While locking does not guarantee that a specific rate will apply,
it does ensure that your loan pricing will not be affected for a set period of time
by changes in financial market conditions.
Q. When can I lock in my rate?
You can lock or float your interest rate at any time during the process of your
loan. Your Mortgage Advisor will discuss these options with you upon taking your
loan application.
Q. How long is my rate lock valid?
Depending on the type of transaction and the time you need, lock periods can be
valid anywhere from 10 to 180 days.
Q. How much do I need for a down payment?
There is no set amount. In fact, you might be surprised to learn that many first-time
homebuyer programs require as little as 3.5% down. Today, there are many loan programs
that can be tailored to fit your needs and financial resources. Keep in mind that
for down payments of less that 20%, private mortgage insurance (PMI) may be required.
Q. What is an origination fee?
The origination fee is charged by the lender, typically 1% of the loan amount you
borrow. It’s used to cover expenses during the process of the loan.
Q. What is a discount point?
A discount point is paid to the lender to permanently buy down or lower an interest
rate. It is usually a percentage of the loan amount.
Q. May I pay additional discount points to reduce my interest rate?
Yes, most lenders will allow you to pay additional discount points to lower your
interest rate.
Q. How are rates determined?
Rates are determined by the financial markets. These rates can change daily or even
more than once within the same day. The changes are based on many different economic
indicators in the financial markets. To obtain current interest rates, contact your
Stonegate Mortgage Advisor.
Q. How can I compare different loan offers when shopping for a mortgage?
When shopping, compare loan terms, settlement charges and the Annual Percentage
Rate (APR). The APR, which is usually higher than the interest rate, expresses the
total cost of the mortgage as an ongoing annual rate and includes certain fees,
discount points, closing costs and other expenses that are charged on your loan.
Although one lender may have a slightly lower rate, they may charge more fees, and
hence have the same APR as a lender with the slightly higher rate. Refer to the
comparison charge on the Good Faith Estimate (GFE).
Q. What is the difference between APR and interest rate?
The APR (annual percentage rate) reflects the cost of your mortgage loan as a yearly
rate. It takes into account interest, discount points paid on the loan, any fees
paid to the lender for making the loan, and any mortgage insurance premiums you
may have to pay. The interest rate is the actual note rate, which is used to determine
the monthly principal and interest payment.
Q. Why is the Annual Percentage Rate (APR) on the Truth-in-Lending disclosure
higher than the rate shown on my mortgage note?
The APR reflects the cost of your mortgage loan as a yearly rate. This rate is generally
higher than the rate stated on your mortgage note because, in addition to the interest
rate, APR includes prepaid interest, discount points paid on the loan, any fees
paid to the lender for making the loan, and any mortgage insurance premiums you
may have to pay. The APR allows you to compare, in addition to the interest rate,
the total cost of financing your loan, among various lenders.
Q. What is prepaid interest?
This is the interim interest that accrues on the mortgage loan from the date of
the loan closing to the beginning of the period covered by the first monthly payment.
For example, if your closing date is scheduled for June 15, the first mortgage payment
is due August 1. The lender will calculate a per-day interest amount that is collected
at the time of closing. This amount covers the interest accrued from June 15 to
July 1.
Q. What is the difference between 'locking' and 'floating'?
A lock gives you a specified period of time of protection from financial market
fluctuations in interest rates by setting the range of pricing available to you.
Your final rate, which may not be determined until closing, will reflect the pricing
that was available at the time you locked for loans with your specific transaction
characteristics and your credit profile. While locking does not guarantee that a
specific rate will apply, it does ensure that your loan pricing will be unaffected
during the lock-in period by changes in financial market conditions. If you choose
to "float" or defer "locking," your rate will fluctuate with the market and will
be subject to both upward and downward movements in the market. The benefit to floating
is if interest rates were to decrease, you would have the option of locking in at
a lower level of rates.
Q. Which mortgage and homeowners costs are tax-deductible?
Three types of mortgage and homeowners costs may be tax-deductible: discount points,
interest paid on a home loan or home equity loan and property taxes. After the year
of sale, your mortgage interest and annual property taxes are the only deductible
costs. For a refinanced loan, points must be deducted over time. Consult your tax
advisor for advice about your situation.
REFINANCING YOUR LOAN
Q. What are the benefits of refinancing?
You may want to consider refinancing if you are interested in paying off high-interest-rate
debt, shortening the length of your repayment term for your mortgage or lowering
your monthly mortgage payment. Generally speaking, one or more of the following
conditions needs to be present before you should consider refinancing your mortgage:
- Mortgage interest rates are falling.
- Your home has significantly appreciated in market value.
- You've been making payments on your original 30-year mortgage for less than ten
years.
Q. Can I refinance to take cash out of my house?
Yes, Stonegate Mortgage offers a variety of options that allow you to tap into your
home's equity and take cash out. Consult a Stonegate Mortgage Advisor for the best
cash-out refinancing option for you.
Q. How can I consolidate debt when refinancing my mortgage?
Cash-out refinancing can help homeowners who want to consolidate high-interest,
nondeductible debt. Because your mortgage interest rate is likely to be lower than
rates on credit cards or other types of bank loans, consolidating debt may reduce
your overall monthly debt payments. In addition, your mortgage interest may be tax-deductible,
while your credit card interest is not.
The amount you save on loan consolidation may vary by loan. Since a home loan may
have a longer term than some of the bills you may be consolidating, you may not
realize savings over the entire term of your new loan. In addition, your loan may
require you to incur premiums for hazard and, if applicable, flood insurance and
mortgage insurance which would affect your monthly payment reduction.
Q. Do I need to have my house appraised in order to refinance?
Yes, in most cases. However, depending on the circumstances, an appraisal may not
be required.
Q. If I refinance my loan with my existing lender, will I have to pay all the
closing costs again?
Typically, yes, as there is a cost to process any new loan application. This cost
may include fees paid to third parties, such as the appraisal provider and the title
and closing providers.
Q. What’s the difference between Cash-Out Refinance and Home Equity Financing?
Accessing your home's equity may be a sensible way to manage your finances and pay
for important purchases, such as college tuition or home improvements. Your equity
is the difference between your mortgage balance and your home's estimated market
value.
While both cash-out refinance and home equity accounts are potentially tax-deductible,
you should be aware of their differences. Comparing the features of each option
can help you make the decision that's right for you.
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Cash-Out Refinance
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Home Equity Financing
|
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One loan with a monthly loan payment
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You can choose between a lump sum loan or a revolving line of credit
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Your existing mortgage is refinanced for a higher overall amount using some of the
accumulated equity in your home
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You can borrow a portion of your home's equity
|
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Get available funds and spread the payments out over a longer term
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A home equity loan can provide the flexibility of a shorter term to help to build
equity faster because you can pay the loan off sooner OR reduced monthly payments
by spreading the cost over a longer term
|
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May have a lower interest rate than home equity financing
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On a line of credit, interest is only paid on the funds you draw, and you can access
available funds without having to reapply
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YOUR CREDIT
Q. How is my credit report used in the loan application process?
Your credit report is used to evaluate your mortgage request by showing how you
have handled your credit obligations in the past. The following companies can provide
you with a copy of your credit report, often free of charge.
Equifax
Website:
www.equifax.com
Phone: 1-800-685-1111
Experian
Website: www.experian.com
Phone: 1-888-397-3742
TransUnion
Website: www.transunion.com
Phone: 1-800-888-4213
Q. Can I buy a home if I have less-than-perfect credit?
Yes. Keep in mind that we don't just look at your past history, but also at your
ability and willingness to pay in the future. Stonegate may be able to help you
buy a home, even if your credit isn't perfect.
Q. Can my credit history prevent me from getting a mortgage?
It can, but check with a Stonegate Mortgage Advisor first to evaluate your credit
situation and how it may impact your loan options. A Stonegate Mortgage Advisor
can also work with you to improve your credit score.
Q. Why isn’t my score higher?
When we receive your FICO score, up to four "score reason codes" are also delivered.
These score reasons are more useful than the score itself in helping you determine
whether your credit report might contain errors, and how you might improve your
score over time.
These are the top 10 most frequently given score reasons. Note that the specific
wording may vary.
- Serious delinquency.
- Serious delinquency, and public record or collection filed.
- Derogatory public record or collection filed.
- Time since delinquency is too recent or unknown.
- Level of delinquency on accounts.
- Number of accounts with delinquency.
- Amount owed on accounts.
- Proportion of balances to credit limits on revolving accounts is too high.
- Length of time accounts have been established.
- Too many accounts with balances.
Q. Does my income affect my credit score?
Income might affect your ability to get a loan, but it does not affect your credit
score. Only your credit history — such as timely payments and how much you owe —
affects your score. Regardless of income, if you manage your debt responsibly, you
can have a high score.
Q. Will my score drop if I order my credit report?
Self-inquiries do not affect your score, as long as you order your credit report
directly from the credit reporting agencies, or through an organization authorized
to provide credit reports to consumers. It's a good idea to check your credit report
once a year.
Q. Will a low score haunt me forever?
No. In fact, it changes as new information is added to your credit history and you
change the way you handle credit. For example, past credit problems impact your
score less as time passes.