Mortgage Basics (FAQs)

Here are seven of the fastest ways to increase your score:
1.  Remove any inaccuracies on your credit report.
2.  Pay down your credit card balances.
3.  Pay bills twice a month.
4.  Increase your credit limits.
5.  Open a new account.
6.  Negotiate outstanding balances on closed accounts.
7.  Become an authorized user on someone else’s credit card.

To increase your credit score in 30 days you must do the following:
-Pay down revolving balances to less than 30%.
-Remove recent late payments.
-Remove a collection account, not just pay it off.
-Raise your credit limits.
-Charge small amounts to inactive credit cards.

More than 90% of lenders prefer the FICO scoring model, but Credit Karma uses the Vantage 3.0 scoring model. … Overall, your Credit Karma score is an accurate metric that will help you monitor your credit — but it might not match the FICO scores a lender looks at before giving you a loan.

Absolutely, you can submit a loan application before finding a property. The Pre-Approval process encompasses all of the aspects of the approval procedure, except for the property details. You will need to provide proof of your income, employment, assets, and debts, which your lender will verify, including a review of your credit history. Upon approval, you’ll receive a Pre-Approval letter, conditional on finding a property. You may use the letter to demonstrate to home sellers that you meet the criteria for a certain mortgage amount, which could aid in your negotiations to purchase a house.

The amount of down payment required is one of the most common questions asked by homebuyers. Unfortunately, there is no universal answer. The down payment amount varies from 0% (with VA loans) to 30% or more (with some non-conforming loans). On average, most homebuyers put down between 3.0% to 15%, but your individual circumstances may necessitate a larger or smaller down payment. It is important to note that when budgeting for a down payment, you should also consider Closing Costs and Pre-Paid Items, which can add up to an additional 2-5% due at closing.

A seller’s concession is an agreement whereby the seller pays (from the proceeds of the sale) some or even all of the buyers Closing Costs and/or Pre-Paid Items to purchase the home. This allows a buyer to purchase with less out-of-pocket expense.

Private mortgage insurance, or PMI, is insurance that is required of a borrower that is designed to protect the lender. The amount paid is determined by numerous factors, including your loan program and your down payment amount.

The process of Pre-Qualification involves the lender reviewing your credit report and assessing your verbal information to determine if you meet the qualifications for a home loan. No financial documentation is verified at this stage. It tells the seller you should be able to qualify for the loan amount.

Pre-Approval involves verifying all credit and employment documents to ensure that the mortgage can be approved. This type of approval is typically subject to the appraisal of the property you have selected to purchase. It tells the seller you are approved for the loan amount, but there is still the possibility of some hiccups.

A Loan Commitment means your file has been fully processed and underwritten and we are committing to providing financing once you find a property. This tells the seller that once the accept your offer, the financing is guaranteed upon a few conditions related to the property.

1. Principal: The repayment of the original amount borrowed on a monthly basis.
2. Interest: The cost of borrowing the principal amount, repaid on a monthly basis.
3. Taxes: Real Estate taxes paid to a local government agency.
4. Insurance: Includes homeowners, flood and mortgage insurance on the home.

The total of these items is known as the PITI (Principal/Interest/Taxes/Insurance) payment.

There are two main types of mortgage loans – fixed and adjustable. A fixed mortgage has a predetermined term, such as 15, 20 or 30 years, and a fixed interest rate. This means that the interest rate and monthly payment amount for principal and interest will remain the same throughout the term of the mortgage.

On the other hand, an adjustable-rate mortgage (ARM) has an interest rate that can be adjusted up or down based on the current interest rate levels. The monthly payment amount for principal and interest will also go up or down with these rate changes. Typically, the initial interest rate will remain the same for the first 5, 7, or 10 years of the loan term.