Financial FAQ

Purchasing a Home

Yes, HomeFree-USA is a leading HUD-approved homeownership development, foreclosure intervention and financial coaching organization.

Can I pay my mortgage off early?

Most mortgages can be paid off early, and that information is found in your mortgage Note.

Do people with good credit scores need guidance in the homebuying process?

Absolutely. A real estate transaction is complex, and education is helpful to getting the best deal. Many of the services earn their living off of commissions so it's critical to know as much as you can.

How do I compare loans between lenders?

First, devise a checklist for the information from each lending institution. You should include the company's name and basic information, the type of mortgage, minimum down payment required, interest rate and points, closing costs, loan processing time, and whether prepayment is allowed.

How do I select a lender?

Choose your lender carefully. Look for financial stability and a reputation for customer satisfaction. Be sure to choose a company that gives helpful advice and that makes you feel comfortable.

How large of a down payment do I need?

There are mortgage options now available that only require a down payment of 5% or less of the purchase price.

How long do property title insurance policies last?

If you purchased the policy, it will last indefinitely as of the purchase date as long as you own the property. However, any liens placed on the property later will not be covered.

How long does it take to get a loan?

As a rule of thumb, most lenders ask for 30 to 45 days to receive approval from an underwriter for a loan.

How much money will I have to come up with to buy a home?

That depends on a number of factors, including the cost of the house and the type of mortgage you get.

Should I have a home inspection?

Paying $300 to $500 for a home inspection is considered a wise investment as the inspector could reveal costly required repairs or future maintenance problems with the home.

Should I use a real estate broker? How do I find one?

Using a real estate broker is a very good idea. All the details involved in home buying, particularly the financial ones, can be mind-boggling. A good real estate professional can guide you through the entire process and make the experience much easier.

What are closing costs?

There may be closing cost customary or unique to a certain locality, but closing cost are usually made up of the following:

	Attorney's or escrow fees (Yours and your lender's if applicable)
	Property taxes (to cover tax period to date)
	Interest (paid from date of closing to 30 days before first monthly payment)
	Loan Origination fee (covers lenders administrative cost)
	Recording fees
	Survey fee
	First premium of mortgage Insurance (if applicable)
	Title Insurance (yours and lender's)
	Loan discount points
	First payment to escrow account for future real estate taxes and insurance
	Paid receipt for homeowner's insurance policy (and fire and flood insurance if applicable)
	Any documentation preparation fees

What are discount points?

Discount points allow you to lower your interest rate. They are essentially prepaid interest with each point equaling 1% of the total loan amount. Generally, for each point paid on a 30-year mortgage, the interest rate is reduced by 1/8 (or.125) of a percentage point.

What does a mortgage payment cover?

Most loans have 4 parts which are abbreviated to PITI and sometimes PITIA if there is an Association such as a condo association fee or a homeowner association fee. The parts are defined as:

What information do I need to apply for a mortgage?

Delivering thorough and detailed documents to your lender is critical to loan approval by the underwriter. A list documents include:

What is a (203k) loan?

This is a loan that enables the homebuyer to finance both the purchase and rehabilitation of a home through a single mortgage.

What is a Good Faith Estimate?

It's an estimate that lists all fees paid before closing, all closing costs, and any escrow costs you will encounter when purchasing a home.

What is earnest money?

Earnest money is money put down to demonstrate your seriousness about buying a home. It is also known as a good faith deposit.

What is mortgage insurance?

Mortgage insurance is a policy that protects lenders against some or most of the losses that result from defaults on home mortgages. It's required primarily for borrowers making a down payment of less than 20%.

What is PMI?

PMI stands for Private Mortgage Insurance or Insurer. These are privately-owned companies that provide mortgage insurance.

What is the difference between a prequalification and a preapproval?

They are quite different.

What is title insurance?

Title insurance is for your and your lender's protection. The policy insures against any defect in the title, old liens, unpaid property taxes, easements or claims on the title.

What's the difference between being prequalified and preapproved?

Prequalification is an unverified estimate of what the lender thinks you can qualify for, many times after they have run a quick credit report. Preapproval is a result of submitted documentation from the client such as, paystubs, bank statements and tax returns in addition to reviewing the credit report.

When does an ARM make sense?

An adjustable rate mortgage may make sense If you are confident that your income will increase steadily over the years or if you anticipate a move in the near future and aren't concerned about potential increases in interest rates.

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.

Down Payment Resources

Are there special mortgages for first time buyers?

Yes. Lenders now offer several affordable mortgage options which can help first-time homebuyers overcome obstacles that made purchasing a home difficult in the past.

Can I borrow an earnest money deposit?

Real estate professionals suggest that none of the earnest money deposit is from borrowed funds as this amounts documents the buyer's intent and the ability to pay for the purchase.

How do I find down payment assistance?

Ask around. Ask Realtors, lenders and friends. Many counties and cities have 1st time homebuyer programs. An online resource is http://downpaymentresource.com/.

How does the FHA help buyers purchase homes?

The FHA works to make homeownership a possibility for more Americans. With the FHA, you don't need perfect credit or a high-paying job to qualify for a loan.

How much down payment money is required to buy a home?

The mortgage menu is very diverse, and exploring the loan options takes time. What is good for one borrower, is not the best for another. Housing counselors are a good source of information.

I am going to buy my first home, is there downpayment assistance available?

Many federal, state and local agencies administer programs to assist people who need help buying a home.

What are seller concessions when buying a home?

When you purchase a home, make sure to talk to your lender and Realtor about the possibility of seller's concessions. Simply put, these concessions are a set dollar amount or percentage of the purchase price that a seller agrees to contribute to you, the buyer, towards your closing costs which will lower the amount you need to close on the property.

What is the size of down payment for FHA loans?

You must have a down payment of at least 3% of the purchase price of the home. Most affordable loan programs offered by private lenders require between a 3%-5% down payment, with a minimum of 3% coming directly from the borrower's own funds.

Who qualifies for FHA loans?

Anyone who meets the credit requirements, can afford the mortgage payments and cash investment, and who plans to use the mortgaged property as a primary residence may apply for an FHA-insured loan.

Credit Essentials

Can I correct a mistake in my credit report?

Simple mistakes are easily corrected by writing to the reporting company, pointing out the error, and providing proof of the mistake. You can also request to have your own comments added to explain problems. For example, if you made a payment late due to illness, explain that for the record. Lenders are usually understanding about legitimate problems.

How can i build my credit?

There are 3 rules to building credit:

How do I better my FICO score?

Some guidelines follow:

How do I get a copy of my credit report?

As a consumer you are entitled to 1 free credit report annually.

How do I get my credit history information?

There are three major credit reporting companies: Equifax, Experian, and Trans Union. Obtaining your credit report is as easy as calling and requesting one.

What are the factors of a FICO score?

According to NeighborWorks America, the breakdown is as follows:

1. Payment history - 35%

2. Amounts owed - 30%

3. Length of credit history - 15%

4. Types of credit - 10%

5. New credit - 10%

What credit score do I need to buy a home?

Housing counselors will typically advise a score of 620 or higher.

What if I don't pay off old debt on my credit report?

The statute of limitations varies from state to state, and may be different for various types of consumer debts.

What is a Vantage Score?

The Vantage Score is a credit rating system developed by the top three credit agencies, Experian, Equifax and TransUnion.

Why do FICO scores decrease?

1. Old derogatory accounts with balances owing

2. Public record items

3. Opening of new accounts

4. Significatnt balance increases

5. Customers do not pay as agreed, and this is reported

Mortgage Solutions

Can I buy a home again after bankruptcy?

Yes, you can purchase a home 7 years after bankruptcy according to most lenders, but it's always best to call a few lenders to confirm as lending programs are always changing.

How long does the eviction process take?

It varies but it can take as little as a week to longer than six months. Real estate laws are dictated by states.

Is 100% financing available?

There are 2 nationwide programs with zero down payments required.

My employer has announced layoffs within the coming months, what can I do now?

If you think the layoffs will lead to financial hardship and could prevent you from paying your mortgage, consider whether you can make adjustments to your budget or tap into any savings accounts that would allow you to make your payments.

What does "Short Payoff" mean?

A Short Payoff is a situation in which your lender will accept an amount for your property that is less than the total owed.

What is the difference between a short sale and a deed-in-lieu?

These two ways of exiting a property vary greatly.

What is the foreclosure process and how long does it take?

The foreclosure process varies by state. However, borrowers must receive some warning or notice before a foreclosure can occur.

What should I do if I miss mortgage payments?

Never ignore calls or letters from your lender requesting payment.