FAQs

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GENERAL MORTGAGE LOAN QUESTIONS

What's the difference between all those loan types?

There are several different loan types and pros and cons to all of them. The most common loan types are FHA, conventional (Fannie/Freddie), and VA. There are several other types, such as jumbo (over the Fannie/Freddie limits), USDA, and non-conforming loans. Which loan is best for you depends on your situation and the property itself. Call us with specifics, and we can find the right match for you.  

How much are closing costs?

Closing costs will include: 

  • The escrow fee. 
  • Processing and underwriting. 
  • Title fees (these costs are set by the state, not the title company). 
  • Origination fees. 
  • An escrow setup (taxes and insurance advance payments). 
  • Discount points. 

Other costs could include appraisals, condo questionnaires, surveys, HOA transfers, etc., but these would be specific to the property and transaction itself. Typically, the total closing costs are about 1-3% of the loan amount, but that can vary. 

What is the minimum credit score required?

For FHA loans, the minimum FICO score is 600. For conventional, VA, and USDA, the minimum score requirement is 620. Jumbo loans have different minimums based on the amount of the loan and the loan-to-value, but the lowest minimum would be 640 in most cases. Non-traditional loans can have requirements as low as 575 but usually require at least a 25% down payment. 

Do you have to pull credit?

Yes. A credit pull not only determines your creditworthiness, but it provides us with a list of current creditors, payment terms, and minimum payment requirements for each tradeline so that we can calculate your true debt-to-income ratio. The DTI is a crucial factor in underwriting being able to determine your ability to repay.  

How long does the whole process take?

Most refinances are completed in less than 30 days. Purchases are dependent on the appraisal scheduling, typically about 7-10 days after the appraisal report is submitted to us by the appraisal management company.  

Does my spouse have to be on the loan?

Your spouse does not have to be on the loan, nor do they have to be on title. However, if they are not included on the mortgage, we cannot use their income as part of the qualifying income. The non-borrowing spouse must also sign the closing disclosure and must appear at the closing to sign the title paperwork, either as a co-title holder or as a title waiver. Additionally, in Texas, if a spouse is not included on the loan, their debt liabilities must still be accounted for, either by their own income or by the borrowing spouse's income.  

Why do I need an appraisal?

The appraisal is a requirement so that all parties are aware of the home's true value, regardless of the contracted purchase price. Homes cost a lot of money, and everyone should be well aware of the actual value of a home before committing to such large amounts. An appraisal by a party completely independent of all parties (the buyer, seller, and lender) is the fairest way to determine that value.  

Why can't you talk to the appraiser?

The appraiser needs to be uninfluenced by any party to ensure that the appraisal report is completely unbiased. Although the lender orders the appraisal, it's done through a third-party appraisal management company to maintain independence. The AMC does all contact other than scheduling admittance to the property to firewall any influence.  

Do I have to pay PMI?

It depends on the loan type. FHA loans require MIP for at least 11 years on a 30-year mortgage regardless of the loan-to-value. Conventional loans only require PMI if the loan is over 80% of the value of the home. VA loans do not have any MIP/PMI. USDA loans require a 0.35% guarantee fee of the principal balance with each payment. 

What are "points"?

Points are the percentage of the loan amount paid by the borrower in exchange for a lower interest rate. It does not translate point to point as in "I'll pay 1% now and get a 1% lower rate". For example, you might be able to pay half a point (0.5% of the loan amount) in exchange for a quarter-percent lower rate or a full point for a half percent lower rate. Sometimes paying points makes a lot of sense; sometimes, it doesn't. Some lenders require paying points or origination fees to get their advertised rates and may call the points by other names such as "discount fee" or "rate reduction." They may also be included as part of an origination or admin fee. Review your Loan Estimate very carefully to look for those costs. Our team is very transparent with fees, and we do not require points; they are optional but can often save our customers a lot of interest over time. 

How long does my work history need to be?

If you are a W2 employee, you have to prove up to two years of work history. It does not have to be with the same employer but should be in similar industries. A great example is nurses. They often work for different hospitals or doctors and therefore may have multiple employers in a 2-year span. That is perfectly acceptable as long as there are no gaps in income. If you are self-employed, you'll need a 3-year history unless your new self-employment is in the same industry as your prior W2 employment.  

Do you use gross or net income to qualify?

For W2 employees, we use your gross income (before taxes and deductions). If you are self-employed, we use net income (after taxes, deductions, and expenses). If you are a business owner, we use net income multiplied by your ownership percentage. You must also show similar or increased net profit over a 2-year period as a business owner. Any self-employment borrowers must also include a YTD fully audited profit and loss statement. 

Can I count bonus, overtime, or "side hustle" income?

Yes! You must average your income over 2 years for bonus and overtime consideration, plus your YTD monthly average. You may count additional income as long as it's either:  

  1. a) W2 income (part-time jobs, for example) or 
  2. b) filed on your tax returns over 2 years. 

PURCHASES

How much down do I need to put on a home?

Minimum down payment will be dependent on the loan program and whether or not you're a first-time buyer. For VA and USDA loans on a primary residence, there is no minimum down payment. For first-time buyers, conventional (Fannie/Freddie) loans require a minimum of 3% for first time buyers; FHA is 3.5%. For buyers who have owned a home within the last 2 years, the minimum down payment for conventional and FHA is 5%. Jumbo loans and other non-traditional loans and traditional loans on investment or second properties require 10%-25% down depending on other factors such as DTI and credit history. Closing costs still must be paid out of pocket, and those costs are addressed in the question below. NOTE: down payment requirements are based on the home's APPRAISED value, not necessarily the purchase price. Call us for a more detailed explanation if you have questions! 

Do you have a down payment assistance program?

We do offer programs that will assist in closing costs and down payments. They are primarily for first-time buyers, but we are also a Homes for Heroes affiliate, assisting military, veterans, healthcare workers, educators, and first responders. Call us to see if you may qualify for one of these programs.  

REFINANCES

Why would I want to refinance my mortgage?

There are many reasons for refinancing a mortgage. The most popular reason is to save money. By lowering the rate and/or stretching out the term, the monthly payment is reduced. If you are paying PMI and want to reduce or eliminate it, a refinance may help with that as well. Some borrowers want to shorten the term to pay off their mortgage faster. Others may need to resolve title or mortgagor situations due to marriage, divorce, or death. A refinance is a solution to all of these situations. Additionally, if you have enough equity in the home, you may opt to take out some cash or pay off other debts with that equity amount when you refinance. NOTE: In Texas, you can only do a cash-out with a conventional or jumbo loan, and appraisal will ALWAYS be required, and the total loan amount cannot exceed 80% of the appraised value of the home.  

Why do I have to pay closing costs on a refinance?

You still have to go through a process, underwrite, escrow, and transaction when you refinance. Dozens of hours from several personnel are involved. That being said, the majority of closing costs are the title fees, which are set by the state and are therefore mandatory and non-negotiable. In a purchase, sometimes those fees can be negotiated by the agents to be paid partially or in full by the seller but still have to be paid. In a refinance, the homeowner is the only party to the transaction and, therefore, responsible for the cost.  

What do I have to pay out of pocket with a refinance?

As long as you have equity in the home, you can roll any closing costs and fees into the new loan's principal. In some situations, an appraisal will be required. If that is the case, the appraisal must be paid upfront by the borrower. This is because the appraiser must be an independent party. The appraisal fee is non-refundable regardless of the result of the loan. At the closing time, you may choose to pay something out of pocket to reduce your principal before starting the new loan and keep payments lower. What you pay at closing is entirely up to you. My team targets zero due at closing in most situations, but when final numbers get balanced, there might be a small amount owed, or we may also request a principal reduction to take it down to zero. 

What is an escrow reset?

If you're like most borrowers, your taxes and homeowners insurance are paid monthly with your mortgage payment. These payments go into an "escrow fund" so that the mortgage servicer can pay them in full when they are due. If you refinance before your taxes or insurance are due, your new servicer must still pay those obligations. Therefore, we collect that partial escrow to date (plus a 2-3 month cushion) so that when it's due, we will pay it in full. At the refinance, we also pay off your previous loan servicer, INCLUDING the escrow. When the prior servicer receives that payment, they will send you any balance in your escrow account. If you had paid everything up to that point correctly and on time, it should be roughly the same amount that we collected in the new loan. That escrow money is yours to do as you please, but many of our borrowers will send that escrow in with their first payment with your new servicer to knock the principal down closer to where they started.

When will my first payment be due?

If you're doing a rate and term refinance, your first payment will be due on the second "first day of the month" after closing. For example, if you close on March 10th, your first payment would be due May 1. This means, depending on your closing date, you may be able to "skip" up to two mortgage payments. If you're doing a cash-out in Texas, you are only allowed to "skip" a single payment regardless of the closing date.

DOCUMENTS

Why do we need every page, even if it's blank?

Because we don't know that a page is actually blank unless you send us that blank page. So if there's a "Page n of x" printed on the documents, we will need all x pages. If there are no numbers but the page appears to be cut off or truncated, we may require a rescan, reprint or resend.  

Why do you need all those documents?

The most important reason is to protect all parties and ensure the borrower can repay. We don't want to put you in a situation where you cannot pay your mortgage, so we're going to make sure everything adds up. The underwriters will also use the documents to verify the identities of the borrowers and to make sure they have proper access to the funds they're bringing to closing, and title needs documents to make sure there are no liens or other title issues. It is for everyone's protection. We're not just trying to keep you busy!