FAQ

The following is a list of frequently asked questions when beginning the loan process. If you have any further questions, please contact us either by email or at (770) 992-3034.

What is a "no-closing-costs" loan?
Can we qualify with past credit problems?
Why does the qualifying process take so long?
What are ratios?
Do I have to wait until my divorce is final to qualify?
Will a recent job change affect my loan approval?
What are the qualifying steps for corporation owners?
What is a truth-in-lending statement?

What is a "no-closing-costs" loan?
If advertisements said "Higher Interest Rate -- You Pay No Closing Costs," they would be more accurate. One of the choices you have when selecting your mortgage is the option of financing the cost to obtain your loan and letting your lender write the check at closing to pay the fees.
[back to top]

As an example, if you select a $100,000 mortgage with an interest rate of 8 1/2 percent, the costs involved with the closing will be approximately $2,500. With a 30-year mortgage, each month you will pay principal and interest payments of $768.92. If you selected the "no cost" program, your lender would pay the $2,500 at closing and your interest rate is 9 1/2 percent. The principal and interest payment would be $840.86 per month.
[back to top]

Can we qualify with past credit problems?
We are finding many borrowers that have rearranged their priorities as well as their spending habits. Many have learned valuable lessons from their bad experiences and have come through their "healing time." They are now ready for home ownership.

It is important to note that there is a big difference between a person who had a bad experience in his or her life and a person who is a bad credit risk. The three main questions in the mind of your lender will be:

• What happened? What was the cause of your particular problem?
• What did you do about it? Did you give every effort to try to work things out?
• Why will it never happen again? Are you back on your feet? Did you make the right changes?

The more difficult credit problems, such as bankruptcy and foreclosure, the more important the explanation and the more healing time that would be necessary.

We have all had some pretty tough times at one point or another. Do not be afraid or embarrassed about trying to start again. Everyone deserves a second chance!
[back to top]

Why does the qualifying process take so long?
One of the biggest problems with lending today is communication about the loan process itself. Our industry seems to assume that borrowers know what is happening from the day they make application to the time of closing.
Our business has three basic "busy times":

1. When your application is turned in for processing
2. When your loan is ready for submission to underwriting
3. When you go to closing. There is a large gap of "quiet time" between application and submission to underwriting.

After you have received your initial needs list from your loan officer and your appraisal and credit report are ordered, we are in a wait position. This is the time you probably felt that there was nothing happening with your file.

Once your important documents are received (including the appraisal and credit report) your loan file is ready for submission to underwriting. At this time, you will probably receive another needs list from your lender to tie up any loose ends. You are now almost ready to close. Once your loan is approved, your closing papers are drawn and sent to the attorney or the title company to close.
[back to top]

What are ratios?
Through the years, investors have tracked the performance of the loans they have approved. Acceptable ratios pertain to the amount of house payment you should have.

The total house payment (which includes the monthly principal and interest, taxes, insurance, mortgage insurance and monthly homeowners' dues) divided by your gross monthly income gives you the percentage allocated to housing. This is the "front" ratio.

If you add your monthly debt obligations to the total house payment and divide this amount by your monthly gross income, this percentage is your debt or "back" ratio.
[back to top]

Do I have to wait until my divorce is final to qualify?
If you can personally carry all of your joint debt based upon your income alone, there is a possibility that you can buy the home without the final divorce decree. Your lender will probably require that your spouse sign some documents at closing. If you are in "perfect" agreement, your spouse should understand and be willing to help.

Unfortunately, until a divorce is final, your financial picture is subject to change. If you are negotiating a large monthly expense, such as child support or alimony, you will probably be required to wait. There is a danger that your spouse could decide to make alterations in your agreement and you may have bought a home that you cannot afford. Your lender does not want to put you in this position and would rather wait until your divorce is final.
[back to top]

Will a recent job change affect my loan approval?
Although there is no rule about the time a new employee puts into a new job, in many cases it is a good idea for you to wait a few months before you buy a home.

Because we interview so many people and see the history of employment changes, we often see employment changes that do not work out for our borrowers. Once you have determined that your job change was a good one, the prospect of making a monthly mortgage payment is much more comfortable. The last thing a lender wants to do is to add to your employment adjustment the financial obligation of a home mortgage.

Many occupations have job changes as a normal event. In these professions, the underwriter will want to see that your moves have been for advancement and that there are not long periods of unemployment between jobs.

Every case is different. You should sit down with your lender and discuss your circumstances before you write a contract to buy a home.
[back to top]

What are the qualifying steps for corporation owners?
As the owner of your corporation, you decide what your salary will be. You must furnish your lender with personal tax returns as well as corporation returns. Most investors require returns from the most recent two years plus a current profit and loss statement and balance sheet for the corporation. Your corporate returns are important. The performance of your corporation in the past will give a good indication of the corporation's ability to pay your salary in the future. Although the underwriter of your file will probably use your current salary as your income, the corporation must be strong enough to pay you that salary.

What are the documentation requirements for the self-employed borrower?  Although you may feel a bit overwhelmed with paperwork, a lender who understands the self-employed borrower will not hesitate to ask for all of the following:

• Two years' personal income tax returns
• Two years' business income tax returns (if you are incorporated)
• A current balance sheet
• A current profit and loss statement

[back to top]

What is a Truth-In-Lending statement?
This is the Number One Question asked in the lending business.

At the time of or shortly after application, you were given a Good Faith Estimate of your closing costs and your payment. This information was based on the actual loan amount and interest rate along with estimated costs incurred with your loan.

By law, your lender must enter all of these actual figures, along with some of the costs you pay (such as your loan origination fee, discount fees and prepaid interest), into a computer and show you the annual percentage rate (APR) based on all of these numbers. The statement you received is the computer's rendition of your true cost amortized over the term of your mortgage.

The purpose of this disclosure is to enable you to make application with several lenders and compare this APR. You will notice that the signature line says, "I received this notice," not "I agree with and understand this notice." There is one thing for sure - it will be confusing.

The good news is that at closing your note will state the actual rate, and your fees will once again be separated and charged as your Good Faith Estimate indicated.
[back to top]