Resources

Learning Center
Obtaining home financing can be a real challenge. Whether you're buying a home, refinancing, or looking for a home equity loan - there are many things to consider.

I constantly add new information in this section to provide you with the tools necessary to make an informed decision. My goal is to provide you with information on the mortgage process and make the process as easy as possible. Feel free to call me, or fill out my contact form and I'll get right back with you.

The Mortgage Learning Center contains these resources:

• Mortgage Information
• Shopping Around
• It's Greek To Me
• FAQ
• Loan Process
• Worried About Credit?
• Don't Get Fooled
• Pre-approval
• Free Credit Report
• Mortgage Industry

Shopping Around

HERE’S THE INSIDE SCOOP ON HOW TO DO IT RIGHT!
First: make sure you are working with an experienced, professional loan officer. The largest financial transaction of your life is far too important to place into the hands of someone who is not capable of advising you properly and troubleshooting the issues that may arise along the way. But how can you tell?

Here are FOUR SIMPLE QUESTIONS YOUR LENDER ABSOLUTELY MUST BE ABLE TO ANSWER CORRECTLY. IF THEY DO NOT KNOW THE ANSWERS…RUN…DON’T WALK… RUN…TO A LENDER THAT DOES!

1) What are mortgage interest rates based on? (The only correct answer is Mortgage Backed Securities or Mortgage Bonds, NOT the 10-year Treasury Note. While the 10-year Treasury Note sometimes trends in the same direction as Mortgage Bonds, it is not unusual to see them move in completely opposite directions. DO NOT work with a lender who has their eyes on the wrong indicators.)

2) What is the next Economic Report or event that could cause interest rate movement? A professional lender will have this at their fingertips.

3) When Bernanke and the Fed “change rates”, what does this mean… and what impact does this have on mortgage interest rates? The answer may surprise you. When the Fed makes a move, they can change a rate called the “Fed Funds Rate” or “Discount Rate”. These are both very short- term rates that impact credit cards, Home Equity credit lines, auto loans and the like. On the day of the Fed move, Mortgage rates most often will actually move in the opposite direction as the Fed change. This is due to the dynamics within the financial markets in response to inflation. For more information and explanation, just give me a call.

4) Do you have access to live, real time, mortgage bond quotes? If a lender cannot explain how Mortgage Bonds and interest rates are moving in real time and warn you in advance of a costly intra-day price change, you are talking with someone who is still reading yesterday’s newspaper, and probably not a professional with whom to entrust your home mortgage financing. Would you work with a stockbroker who is only able to grab yesterday’s paper to tell you how a stock traded yesterday, but had no idea what the movement looks like at the present time and what market conditions could cause changes in the near future? No way!
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Be smart... Ask questions… Get answers!
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More than likely, this is one of the largest and most important financial transactions you will ever make. You might do this only four or five times in your entire life… but we do this every single day. It’s your home and your future. It’s our profession and our passion. We're ready to work for your best interest.

Once you are satisfied that you are working with a top-quality professional mortgage advisor, here are the rules and secrets you must know to “shop” effectively.

First, IF IT SEEMS TO GOOD TO BE TRUE, IT PROBABLY IS. But you didn’t really need us to tell you that, did you? Mortgage money and interest rates all come from the same places, and if something sounds really unbelievable, better ask a few more questions and find the hook. Is there a prepayment penalty? If the rate seems incredible, are there extra fees? What is the length of the lock-in? If fees are discounted, is it built into a higher interest rate?

Second, YOU GET WHAT YOU PAY FOR. If you are looking for the cheapest deal out there, understand that you are placing a hugely important process into the hands of the lowest bidder. Best case, expect very little advice, experience and personal service. Worst case, expect that you may not close at all. All too often, you don’t know until it’s too late that cheapest isn’t BEST. But if you want the cheapest quote – head on out to the Internet, and we wish you good luck. Most importantly, remember that the cheapest rate on the wrong strategy can cost you thousands more in the long run. This is the largest financial transaction most people will make in their lifetime. That being said – we are not the cheapest. Of course our rates and costs are very competitive, but we have also invested in the systems and team we need to ensure the top quality experience that you deserve.

Third, MAKE CORRECT COMPARISONS. When looking at estimates, don’t simply look at the bottom line. You absolutely must compare lender fees to lender fees, as these are the only ones that the lender controls. And make sure lender fees are not “hidden” down amongst the title or state fees. A lender is responsible for quoting other fees involved with a mortgage loan, but since they are third party fees – they are often under-quoted up front by a lender to make their bottom line appear lower, since they know that many consumers are not educated to NOT simply look at the bottom line! APR? Easily manipulated as well, and worthless as a tool of comparison.

Fourth, UNDERSTAND THAT INTEREST RATES AND CLOSING COSTS GO HAND IN HAND. This means that you can have any interest rate that you want – but you may pay more in costs if the rate is lower than the norm. On the other hand, you can pay discounted fees, reduced fees, or even no fees at all – but understand that this comes at the expense of a higher interest rate. Either of these balances might be right for you, or perhaps somewhere in between. It all depends on what your financial goals are. A professional lender will be able to offer the best advice and options in terms of the balance between interest rate and closing costs that correctly fits your personal goals.

Fifth, UNDERSTAND THAT INTEREST RATES CAN CHANGE DAILY, EVEN HOURLY. This means that if you are comparing lender rates and fees – this is a moving target on an hourly basis. For example, if you have two lenders that you just can’t decide between and want a quote from each – you must get this quote at the exact same time on the exact same day with the exact same terms or it will not be an accurate comparison. You also must know the length of the lock you are looking for, since longer rate locks typically have slightly higher rates.

Again, our advice to you is to be smart. Ask questions. Get answers.
As you can imagine, we wouldn’t be encouraging you to shop around if we weren’t pretty confident that we feel that we can give you a great value and serve you the very best.
Please call us with any further questions you may have at this time – we are ready to work for your best interest!

Important terms to know:

Appraisal
An expert opinion on the value of a property

Annual Percentage Rate
This is not the note rate applied for, but rather is a government mandated formula that shows the cost of the loan in a yearly rate by using the note rate plus certain other upfront costs

ARM Loan
Adjustable Rate Mortgage. Mortgage characterized by an interest rate that can adjust up or down at certain intervals based on a current index (commonly the 1 year T-Bill) plus a preset margin.

Balloon
Mortgage characterized by level fixed payments for a predetermined time frame followed by either a refinance or adjustment in interest rate

Capital Gains
The tax paid upon certain types of real estate transactions. Contact accountant for specifics.

Cash to Close
The amount needed from the borrower at closing. Consists of down payment, closing costs and prepaid items. This amount needs to be in the form of a cashier check made payable to the buyer.

Closing Date
Date stated on the purchase agreement that buyer and seller agree to finalize or close the transaction

Closing Costs
Various costs of setting up and funding the transaction - including closing fee, title insurance, appraisal fees, underwriting fee, mortgage registration tax etc.

Condo/Town Home
Property types that usually have the following characteristics: they are attached, have a homeowners association and dues, the outside maintenance is taken care of by the association, and common areas and amenities available to all owners in the association.

Conventional Financing
Standard, non-government financing.

Credit Bureaus
Agencies that provide compilations of your credit history. The three main credit bureaus are Experian, Trans Union, and Equifax

Credit Report
Report provided by the credit bureaus which shows the history, current status, and profile of an individual

Credit Scores
The number generated by the credit bureaus which is a numerical representation of the subjects credit profile, range is from 450 on the low side to 900 being the highest score possible.

Debt Ratios
Ratio of debt to pretax income, often expressed as a front (housing payment only) or back (all debt) ratios. Ex- $5000 monthly income, $1400 housing payment, $1700 total debt would equal ratios of 28%/34%.

Discount Points
One point equals one percent of the loan amount. Points are used to lower the interest rate. One point does not equate into lowering the interest rate one percent. Generally lowering the interest rate 1/8 will cost about 1/2 point, although this can vary based on daily pricing. Typically is tax deductible.

Down Payment
Difference between loan amount and purchase price.

Earnest Money
Deposit toward down payment submitted with a purchase agreement as evidence of the buyers commitment

Equifax Information Services
PO Box 740243
Atlanta, GA 30374
(800) 685-1111

Escrows
The portion of the monthly payment that is not applied to principal or interest, but rather is used to pay mortgage insurance, homeowners insurance and property taxes.

Experian Information Services
PO Box 2002,
Allen, TX 75013-3742
(888) 397-3742

Fannie Mae
Short name for the Federal National Mortgage Association. One of the main Government Sponsored Agencies which are the companies who sell mortgage backed bonds to investors. They are the ultimate source of the money that we lend. Fannie Mae protects its investors by issuing underwriting guidelines that are to be followed to ensure quality lending; also see schematic under "commonly asked questions"

Freddie Mac
Short name for Federal Home Loan Mortgage Corporation - see above

FHA Financing
Government backed minimum down financing program which has a lower mortgage insurance premium and greater credit leeway as compared to conventional minimum down programs

Fixed Loan
Most common type of financing. Terms ranging from 10 to 30 years. Interest rate and P&I payment remains constant throughout life of loan.

Floating
Not locking in a rate, but rather choosing to float the interest rate as the market moves up or down.

Flood Certification
Required document on all loans. Confirms if the property is in or out of a FEMA designated flood zone

Funds held in Escrow
Generally only applies to new construction. Monies held from the seller to provide payment for repairs or non completed items.

Good Faith Estimate
Document prepared by lender which estimates and delineates the various fees and closing costs associated with the home purchase

Government Financing
Financing provided from government agencies such as FHA, VA etc…

HELOC
Home Equity Line of Credit. Second mortgage product, generally characterized by interest only payments and the ability to draw, pay back, and redraw

Home Inspection
Not required by lender. This is a private inspection done by the buyers choice to confirm that the property is in acceptable condition.

Homeowners Association Dues
Amount paid by owner of a townhome or condo to cover various amenities or services provided by the homeowners association (examples -- common areas, hazard insurance, garbage, mowing, snow removal)

Homeowners/hazard Insurance
Insurance which covers damage or loss to the property. The premium is usually paid into an escrow account held by the mortgage company, which then pays the insurance company once a year

HUD-I (Settlement statement)
Document prepared by title company at closing which shows where all of the money in the transaction was coming from and going to.

Jumbo Loan
Loan with an initial balance greater than $417,000.00.

Jumbo Pricing
Refers to the fact that rates are generally slightly higher on jumbo loans.

Loan-to-Value (LTV)
Ratio of liens versus value of property or sales price. Ex. 80,000 owed on a property worth 100,000 equals an 80% LTV

Lock-in Period
Time period that a rate is protected for during the loan process

Locking in
Choosing to protect a particular rate and program for a specific period of time

Mortgage Insurance (MI)
Insurance which protects the LENDER against default. Generally the higher the loan-to-value the higher the monthly premium.

Mortgage -- Document. This document signed at closing is the collateralization of the property to the note or loan.

Note Document. This document signed at closing is the promise by the signers to repay the loan.

Origination Fee
1% of the loan amount. Can be avoided by paying a higher rate; typically is tax deductible.

Odd Days Interest/Per Diem InterestCollected at closing, it is money collected/refunded to borrower to synchronize the closing to the monthly payments

Paying Points
Money paid upfront to lower the interest rate. Rule of thumb - breakeven point is (where monthly savings meets/exceeds money paid upfront) usually around 60 payments or 5 years. This means that in many cases paying points will pay off as long as you do not sell or refinance your loan before the breakeven point. (actual breakeven point may vary, please talk to us about your exact situation) Some niche programs and products may require points to be paid.

Piggy Back
A second mortgage closed at the same time as a first mortgage. Usually purpose is to avoid mortgage insurance, jumbo pricing, or for future needs.

PITI
Monthly payment. Stands for Principal, Interest, Tax escrow, Insurance (both hazard and mortgage) escrow

Pre-Approval
Based on documented income, assets, and credit.

Pre-paids
Group of items paid at closing including monies to set up the escrow account and to pay prepaid or odd days interest.

Pre-Qualification
Based on stated income, assets and debt. Information not verified, not as useful or informative as a Pre-Approval.

Pre Payment Penalty
An option on certain loan types. A benefit in that the rate is lower on these products compared to other similar products.

Property Taxes
Amount of tax due on a property. Usually is collected as part of the escrow portion of the monthly payment, with the lender being responsible to forward the escrowed money as the bills come due on May 15 and Oct 15.

Purchase Agreement
Contract between buyer and seller outlining the terms of the agreement.

Rate vs. Price
Rate refers to the interest rate. Price refers to points. It is easy to become confused as both rate and points are usually referred to in 1/8 percent increments. A good rule of thumb is that often a 1/8% change in interest rate reflects a 1/2% change in points (actual rate and points may vary slightly)

Single Family Residence
Standard, one unit home, as opposed to a Condo/Town Home with a homeowners association

Title Company
Company that prepares title work and is where the closing is held

Title Insurance
Policy provided by the title company on their title work guaranteeing the accuracy and completion. Lenders Policy is required and only protects the Lender from loss, Owners Policy is available at buyers discretion and protects the owner

Title Work
Document prepared by title company which outlines the ownership of the property and other various details

Trans Union Information Services
PO Box 1000
Chester, PA 79022
(800) 916-8800

Underwriting
Act of approving a loan application. Underwriters are bound by guidelines set forth by Fannie Mae, Freddie Mac, FHA or VA as applicable

VA Financing
Government backed financing available only for service veterans, characterized by no down payment, no mortgage insurance, but with a funding fee

Frequently Asked Questions

WHY DID MY REALTOR REFER ME TO YOU?

A high quality realtor knows that the key to a successful transaction means TEAMWORK with a professional mortgage banker. Any experienced realtor could tell you horror stories about times when a client made a poor choice of mortgage company, and ended up with big surprises at the closing table, or worse, no closing taking place at all! A good realtor will form relationships with trusted individuals who have proven themselves time and time again, so that they know you will be given the excellent service that you deserve. It is important to know that your realtor is NOT given any compensation or "kickbacks" for referring you to a mortgage banker. As mortgage professionals, we desire more referrals, both from you and your realtor, so consider the extra motivation this provides for us to take great care with your satisfaction!

WHY SHOULD I USE A REALTOR?

First and foremost, because you need an experienced professional working on your behalf. The realtor's commission is not paid by the buyer, but by the seller of the home being purchased, and it is in each party's best interest to have professional representation. As a seller, profits are generally maximized by having an experienced realtor market and sell your home, rather than deal with the headaches of trying to do it all on your own. See our page on "selecting a realtor" for more information.

WHY AND HOW DO INTEREST RATES CHANGE?

Many people are surprised to learn that rates change on a daily and sometimes hourly basis. Interest rates fluctuate in response to changes in the financial markets. The bond market is generally a good indicator of the general trend of interest rates.

WHAT HAPPENS ONCE I AM PREAPPROVED?

You are ready to buy a home! Remember that it is very important to inform us of any changes in the financial information that was provided at the time of approval, as it may make a change in the amount or type of loan that you can qualify for.

WHEN SHOULD I CONSIDER REFINANCING?

The old rule of thumb was at least 2%, but this is no longer the case. Many different individual factors need to be analyzed to determine if refinancing is right for you, such as the length of time you intend to stay in your home, or the type of loan you currently hold. We are always happy to provide a recommendation to you for your particular circumstances.

WHAT IS AN ORIGINATION FEE?

Typically, it is 1% of your loan amount, and works exactly like a discount point. You can avoid all or part of this fee by paying a higher interest rate.

WHAT IS TITLE INSURANCE?

It is a policy provided by the title company guaranteeing the accuracy of the title work done on your home at the time of purchase. As a buyer, you are required to purchase a lenders policy of title insurance as part of your standard closing costs, which only protects the mortgage company. You may also choose to purchase an owners policy, which would protect you against any loss in the event of any legal issues relating to the title of your home.

WHAT IS MORTGAGE INSURANCE?

This is generally required in one form or another when the down payment is less than 20%, and protects the lender in the event of loan default. The lower the down payment, the higher the risk for the lender, and thus the higher the monthly premium. Depending on your particulars, there are ways in which mortgage insurance can sometimes be avoided at purchase, or dropped altogether at some point in the future.

Worried About Credit
Are you worried about your credit history? Just about everyone has something in their past credit that is less than perfect. The most important thing is to learn what is on your report, determine what impact that information has on your credit rating, and work on repairing and restoring any damage that may have been done.

Mortgage loan options are rated by credit, labeled like school grades - "A" credit is the best, then down to A-, B, C, etc. Even if you do not have an A credit rating, we can let you know what your options are if you fall into an A- or lower category. The rates are generally going to be higher, and may require a down payment. If you determine that you are not satisfied with this type of financing, then together we can map out what you need to do with your credit and finances for the next six to twelve months in order to qualify for an A credit loan.

There are three main credit bureaus that most creditors (such as credit card companies, banks, leasing companies, etc) provide information to on a monthly basis. Each month, your credit holders report information to the credit bureaus about your current balance, minimum payment requirements, and credit history. If you need specific information from one of the major credit bureaus, following is the contact information for each of them:

Experian Information Service (XPN)
PO Box 2002
Allen, TX 75013
(888) 397-3742

TransUnion (TUC)
PO Box 1000
Chester, PA 79022
(800) 916-8800

Equifax Information Services (EFX)
PO Box 740243
Atlanta, GA 30374
(800) 685-1111

Don't Get Fooled

Well, you may be thinking - hey, I'm a smart enough person - how on earth could I be fooled? And who would want to fool me?

Excellent questions - here are some answers.
Buying a home or refinancing is one of the largest financial decisions you will make in your life - and unfortunately, this means you may experience some stress as you approach these decisions. As in many other industries, the mortgage industry has more than its share of unethical individuals that are out to make a buck, but do not have your best interest at heart, and may try to take advantage of your stress at this point in your life. For example, I have heard numerous stories about people being called and told that they need to "quickly come into the office and get all the paperwork signed, rates are changing". Not true - you should never be made to feel panicked or pressured about making this size of a financial decision. If you are truly ready, a rate can be locked right over the phone.

Advertisements in the newspaper or online are also rampant with misinformation, designed only to get phones ringing. Rates change daily, sometimes hourly, so just by virtue of being in print somewhere, they are almost sure to be outdated. The trick is, lenders can put anything out there, and if it gets the phone to ring, that is all they need. The following conversation ensues….."Hello, I'm calling about the 7% rate I saw that you advertised in Saturday's newspaper?" "Well, it's wonderful that you called! Rates did change a bit this morning, and are now at 7.5%, but let's talk a little more about you……"

Lenders will also frequently promote "free appraisals" or "discounted origination fees". This is great, but BE AWARE that if you are not paying for it one place, you are paying for it somewhere else. Interest rates and closing costs go hand in hand, so it is important to look at the overall loan package, not just one individual item that seems discounted. We all work off the same financial markets with essentially the same profit margins. Do we make money when we do your loan? Certainly, just like you get paid for working at your job. What we seek for you is the best balance between a great interest rate and reasonable closing costs.

Online lending is also particularly scary - ANYONE can throw up a mortgage website, and be aware that the person behind that great rate you are seeing online might be some guy working out of his basement who has been in the business for 6 months. For example, closing costs vary significantly state to state - out of state lenders frequently misquote fees, as they are not aware of local and state requirements. I have personally been involved in bailing out several individuals who were lured in by an offer that seemed too good to be true, but then the lender could not come through at the closing. I have been in mortgage banking for over ten years, and I would not trust my own loan to an online, unknown lender. Are you really willing to take this risk?

THE TRUTH:

Is buying a home stress free?
Absolutely not! Purchasing a home is a major financial commitment, and moving is a major life event. What we desire is that your stress will not be in any way related to your home financing - save it for which new sofa you should choose or what color to paint that hideous bathroom.

Are we the cheapest place in town?

No, but we are always very competitively priced. I believe that to a certain degree, you get what you pay for. Consider this: Have you ever been on a taxi ride? How about a limo ride? Did they both get you where you wanted to go? Probably, but my guess is that you enjoyed the limo experience, and tolerated the taxi ride. Which driver would you recommend to your family, friends, and coworkers? Probably not the taxi driver, even though he was a few bucks cheaper. My desire is that your experience with us is one you will enjoy, and would be excited to refer us to others. Our service to you is not only to provide you with competitive rates and costs, but to handle your transaction with the personal care and professional treatment you deserve.

What about the horror stories we have all heard about?

At the last minute, the loan is suddenly not approved, or the rates and costs change dramatically? Or worse yet, the loan falls through entirely, and the transaction falls apart? Unfortunately, it happens - I hear the stories too. This is exactly why it is so important to trust your business to a professional, not a bargain basement operation. A horror story like that has never happened to one of my clients, and you will not have surprises at the closing table.

How do you know I will do a great job for you?

Almost 100% of my business has been referred to me by either a satisfied former client, or an experienced, high quality realtor - the only type of realtor I work with! Chances are, you did not stumble across my website by accident, as I do not promote myself blindly to the general public. While most loan officers spend their time mass marketing and looking for new business from just anywhere, I devote my time and energy to my clients only, educating them, discussing the best loan options for each individual situation, and taking care of details to ensure that the loan process runs as smoothly as possible.

QUESTIONS YOU SHOULD ASK YOUR LOAN OFFICER:

• How long have they personally been in the mortgage business?
• Do they have any underwriting experience?
• Do they charge for a pre-approval? (beware - they are doing this to hold "bond" money from you so that you feel obligated to continue doing business with them)
• Do they have the capability to offer many different investors rates and products, or just their own?

How many transactions do they generally close on a monthly basis? (note: if they do not seem very busy, you should wonder why. Good loan officers are in high demand for good reason)

Do they have a dedicated team working for you?

The answers to these questions should tell you what caliber of a person with whom you are considering entrusting the largest financial transaction you will make in your life. We would love to have the opportunity to discuss all of these questions and the many more you probably have, personally with you. Please call or email us at your convenience.

Pre-approval

What does it take to get pre-approved? Not as much as you might think! With a short phone conversation, I can provide you with your credit rating, approximate amount you qualify for, and list of items needed to finish the approval. Generally, if you have a few basic items available to fax, such as a recent pay stub, last two years W2 statements, and a recent bank statement, I can provide most clients with a pre-approval letter within 15 minutes.

You can also complete the items below to have more information sent to you. I want to work toward your specific goals and needs - just as every person is unique, so are their home financing desires. I will always present you with options, so that you can make an informed decision on what is best for you.

For Teachers, Police Officers, Firefighters, Health Care Workers, and Eligible Military Personnel

Are you a teacher, police officer, firefighter, health care worker, or member of the United States Armed Forces who could use extra help buying a home?

If so, MyCommunityMortgageTM with the Community SolutionsTM option might be right for you. With MyCommunityMortgage, you may need little or no contribution from your own funds; funds for down payment and/or closing costs can come from gifts, grants, or loans from relatives or nonprofit groups; employerassisted housing; or a secured loan from a lender.

And, your lender will work with you to consider all types of income and credit histories to help you qualify for the mortgage you need.

Is this Mortgage Right for You?

If you are a teacher, police officer, firefighter, or health care worker or other employee in those fields, or an active or retired member of the military, and any of these situations describes you, MyCommunityMortgage with the Community Solutions option might be a good fit:

• You have limited savings for a down payment and/or closing costs.
• You have access to other sources of funds, such as gifts or loans from family members or your employer.
• You do not have a “traditional” credit history, but can show other ways you have handled credit well, such as paying rent.
• You would benefit from a temporary interest rate buydown that would make your monthly payments lower for up to the first three years of the mortgage.
• You have regular part-time or overtime income that will help you to qualify for a mortgage.

How Community Solutions Works

MyCommunityMortgage with the Community Solutions option is available to help you buy or refinance a single-family home or condo or a two-family home that you will live in as your primary residence. Income that can qualify you for mortgage approval includes many sources besides wages, such as part-time or overtime income and boarder income from relatives or nonrelatives. Proof that you handle credit responsibly can include rent payments; payments for electricity, water, or other utilities; or other payments you make on a regular basis.

MyCommunityMortgage with the Community Solutions option is available throughout the United States. Borrowers in lower-cost areas of the country may face maximum income limits, but income limits are higher in more expensive areas and rural areas. There are no income limits in certain inner-city areas. Your lender can tell you about income limits in your area.