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Frequently Asked Questions
Why should I buy instead of rent?
Is a large down-payment important?
How can I avoid having to get mortgage insurance on my
mortgage?
Should I pre-qualify before I start looking for a house?
Can I qualify for a mortgage even though I had problems in the
past?
What do I do if my mortgage loan application is rejected?
I am self-employed. What documentation do I need to get a
mortgage?
Do I have to have a tax and insurance escrow account?
Should I pay off my bills before buying a home?
What is the difference between a mortgage banker and mortgage
broker?
Why do mortgage rates go up and down all the time?
What are Points?
Can I benefit from discount points?
Who is an underwriter?
How do I know if it makes sense for me to refinance?
Will the lender require an appraisal? And will I get a copy
of it?
What are
biweekly mortgages?
How do I
choose a mortgage program?
1.
Why should I buy, instead of rent?
A home is an investment. When you rent, you write your monthly check and
that money is gone forever. But when you own your home, you can deduct the
cost of your mortgage loan interest from your federal income taxes, and
usually from your state taxes. This will save you a lot each year, because
the interest you pay will make up most of your monthly payment for most of
the years of your mortgage. You can also deduct the property taxes you pay
as a homeowner. In addition, the value of your home may go up over the
years (appreciation). Finally, you'll enjoy having something that's all
yours - a home where your own personal style will tell the world who you
are.
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2. Is
a large down-payment important?
This really is a matter of personal choice, and your own "comfort
zone". A large down-payment does not automatically qualify you for a
mortgage, since approval often depends on what the lender thinks you can
comfortably pay back.
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3. How can I avoid having to pay Mortgage Insurance on my loan?
Mortgage Insurance is a policy that protects lenders against losses that
result from defaults on mortgage loans. If you do not want to pay for mortgage insurance you
will need to make a down payment of at least 20%.
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4.
Should I pre-qualify before I start looking for a house?
Yes. It is easier to buy a home if you have been pre-qualified, and you
don't have to worry about whether you will get the loan or not when you
find your dream home. To pre-qualify, make an appointment with a mortgage
professional at Top Gun Mortgage. Be sure to bring all your paperwork with
you: two months of bank statements, W-2 forms for the past two years, and
the last month’s worth of paycheck stubs. At this time, we will discuss
financing programs and you will decide which financing option best suits
your needs. After completing an application, we can then have your
application “graded” by different lenders in order to offer you the most
competitive rate. (The mortgage lenders will grade your application by
reviewing your credit report and examining your documents.)
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5.
Can I qualify for a mortgage even though I had credit problems in the past?
There is a difference between someone who is a bad credit risk and someone
has had a bad credit experience in the past. The more difficult credit problems such as bankruptcy
and foreclosure will take more time to heal your credit than minor credit
problems. We are happy to work
with you and advise you as to what steps you can take to help you heal your
credit so that you can purchase a home in the future.
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6.
What do I do if my mortgage loan application is rejected?
The mortgage professionals at Top Gun Mortgage will make a commitment to
working with you to identifying what the obstacles are and how to change
them. Then it is up to you to work at removing those obstacles. If you do not qualify due to your
credit scores we can offer advice on how to help raise those FICO scores in
order to get approved in the future.
If your issue is debt ratios then we may recommend that you pay off
credit cards or other outstanding debt before you can qualify for a loan.
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7. I
am self-employed. What documentation do I need to get a mortgage?
You will need to show the following: Two years personal income tax returns,
two years business income tax returns.
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8. Do
I have to have a tax and insurance escrow account?
There is no law stating that you have to have these accounts in place. But
lenders do expect them. If, however, you have a large down-payment (25% and
over), this rule for an escrow account can some times be waived. Keep in
mind that not having an escrow account means that you have to be
disciplined enough to look after your own insurance and tax payments.
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9.
Should I pay off my bills before buying a home?
In general no, do not deplete your cash reserves, because you need to show
these reserves to the lender so he or she knows that you can save and
manage your money. An empty bank account does not inspire confidence in a
lender. Proceed with paying your bills in a normal way, and get a pre
qualified.
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10.
What is the difference between a mortgage banker and
mortgage broker?
A mortgage banker generates the loan, servicing it and collecting the
monthly payments for the investor. He or she is paid a percentage for this
service.
A mortgage broker generates a loan to sell to someone else for the
servicing part. The broker works as the liaison between the borrower and
the lender to create a cost effective and efficient loan process. The
mortgage loan process can be arduous, costly, and seemingly impossible to
the consumer which is why having a broker can help make you at ease with
the financing process.
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11.
Why do mortgage rates go up and down all the time?
There are a lot of investors making home mortgage loans in the market. In
general when the stock market goes down, the bond market often goes up as
investors change their investments. The best way to gauge the movement of
interest rates is to watch the bond market.
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12.
What are Points?
Your lender will quote you something like, 6½% interest. That
"6½%" is the interest rate your mortgage note will carry. (This
is where you will make the payments amortized over the years you selected
15-40 years.) That 6½% includes the origination fee- which is some times
called a point. The origination fee can vary, of course depending on your
loan product (usual range is 1-4%).
Some loan products give you the option of buying down your interest rate by
purchasing "a discount point" - which is 1% of the loan value.
Don't get this confused with the origination fee. This fee is in addition
to the origination fee.
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13.
Can I benefit from discount points?
Yes, you can. An IRS rule allows the buyer to deduct the discount points
(which is interest paid up-front to secure a lower interest on the entire
loan) paid by the buyer to the seller. You are entitled to the deduction of
this interest.
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14.
Who is an underwriter?
An underwriter makes sure that all the documentation in your file is
complete, and he determines if your application fits the investor's entire
guidelines and requirements. He also determines if you will get a mortgage
or not, depending upon your credit file, and your ability to make the
payments.
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15.
How do I know if it makes sense for me to refinance?
First determine your financial mortgage related goals: i.e. are you looking
to improve your monthly cash flow, reduce your mortgage term, do you need
to take out cash utilizing the equity from your home? Obtaining the right
mortgage for your particular needs could make sense even when rates are not
at their lowest levels. First identify your goal and contact a mortgage
professional at Top Gun Mortgage for suggestions on mortgage programs that
would best help you meet your objectives.
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16.
Will the lender require an appraisal? And will I get a copy of it?
Yes. The property is the collateral for the mortgage, therefore an appraisal
is almost always required. You are entitled to receive a copy once it is
completed.
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17.
What are biweekly mortgages?
You make one half of
your mortgage payment every other week rather than every month. This way
you end up making 13 full payments in a year. This often reduces the amount
of interest being charged and reduces the term of the loan as well.
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18.
How do I choose a mortgage program?
There isn't a simple
answer to this question. The right type of mortgage for you depends on many
different factors:
- Your current financial
picture.
- How you expect your finances
to change.
- How long you intend to keep
your house.
- How comfortable you are with
your mortgage payment changing.
For example, a 15-year fixed-rate mortgage can save you many
thousands of dollars in interest payments over the life of the loan, but
your monthly payments will be higher. An adjustable rate mortgage may get
you started with a lower monthly payment than a fixed-rate mortgage -- but
your payments could get higher when the interest rate changes.
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The best way to find the "right" answer is to
discuss your finances, your plans and financial prospects, and your
preferences frankly with a mortgage professional at Top Gun Mortgage, your
mortgage specialists.
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