What is the difference between pre-qualifying and pre-approval?
A pre-qualification for a specific loan dollar amount is based on a review of basic financial information you supply to us. No verification of this information is performed. The pre-qualification means that if the information you supplied to us is accurate, subject to verification of credit, appraisal of the property, and the lenders underwriting criteria for the loan amount, you should be able to receive a loan as described in the pre-qualification letter or document. This is not a final approval. A pre-qualification is not a commitment to lend. However, a pre-qualification letter indicates to you and the seller that in the opinion of the loan officer you are qualified to purchase the house you are making an offer on.
Pre-approval is a step above pre-qualification. Pre-approval involves verifying your credit, down payment, employment history, etc. Your loan application is submitted to an underwriter and a decision is made regarding your loan application. If your loan is pre-approved, the lender will loan you money on the basis that you requested subject to: a satisfactory appraisal (both as to value and type of product); your financial condition remains as stated on your application and satisfying any underwriting conditions from the lender.
Getting your loan pre-approved allows you to close very quickly when you do find a house. A pre-approval can help you negotiate a better price with the seller, since being pre-approved is very close to having cash in the bank to pay for the house!
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Why are interest rates different from day to day and one source to another?
To understand why mortgage rates change we must first ask the more general question, "Why do interest rates change?"
Interest rate movements are based on the simple concept of supply and demand. If the demand for credit (loans) increases, so do interest rates. This is because there are more buyers, so sellers (those who loan the money) can command a better price, i.e. higher rates. If the demand for credit reduces, then so do interest rates. This is because there are more sellers than buyers, so buyers can command a lower better price, i.e. lower rates. When the economy is expanding there is a higher demand for credit, so rates move higher, whereas when the economy is slowing the demand for credit decreases and so do interest rates.
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What documents do I need to apply for a Home Loan?
Provided below is a list of the information you should collect and have ready when you apply for your loan. Original documentation, when available, is preferred. We will make a certified copy for our file and return the original document(s) to you promptly.
Income Documentation:
- Hourly or Salaried Employment - Original W-2s for the past two years and original paycheck stubs covering most recent 30 days
- Self-Employed - Please ask Hawthorne Credit Union to mail or fax you a Self-Employed Documentation Checklist
- Retired - Original Social Security Award Letter or Pension Award Letter
Other Income: If you would like for Hawthorne Credit Union to consider income from child support, alimony, or separate maintenance, the following will be required:
- A 1-year history of receipt with 3 years remaining on the agreement
- A copy of fully executed divorce decree, if applicable
- Evidence of 1 full year receipt of payments
Assets: To verify evidence of sufficient funds for closing, the following will be required:
- Two most recent original statements (all pages) for all checking, savings, or other asset accounts (If applying for a VA loan, provide 3 months original statements.)
- If receiving a gift from a family member, please ask Hawthorne Credit Union to mail or fax a gift letter form to be completed and signed by the donor
Obligations: To verify financial obligations (debts) other than consumer credit accounts:
- Provide copy of the fully executed Divorce Decree indicating amount of child support, alimony, or separate maintenance payments, if applicable
Property: Provide copy of fully executed Purchase Contract, signed by real estate agent(s) and owner(s) insurance agents information.
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What is a Fixed-rate mortgage?
A Fixed-rate mortgage is a loan that has the interest rate and payment set for the life of the loan. The benefit is that you always know what your principal and interest costs are, which takes out the guesswork when planning.
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What is a Balloon Mortgage?
A mortgage that has level monthly payments that will fully amortize over the stated term, but which provides for a lump-sum payment to be due at the end of an earlier specified term.
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What is an adjustable rate mortgage (ARM)?
A type of mortgage instrument in which the interest rate adjusts periodically according to a predetermined index and margin. The adjustment results in the mortgage payment either increasing or decreasing. A 1-year ARM, for example, will have an initial interest rate for 1 year and then adjust on the second year, and continue to adjust annually over the life of the loan. With an ARM loan, you typically get a lower starting rate in exchange for taking a risk that rates may rise in the future. There is also a cap on how much the interest rate can go up or down.
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Does Hawthorne Credit Union have first-time home buyer programs?
Yes, we have numerous lending programs to help make home ownership affordable for low- and moderate-income home buyers.
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What is my down payment?
This is the amount of money you have available to put down toward the purchase of a home. The down payment and the loan amount make up the purchase price of the home.
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What are closing costs?
Money paid by the borrower (or seller) to effect the closing of a mortgage loan. This normally includes an origination fee, title insurance, survey attorney's fees and such prepaid items as taxes and insurance escrow payments.
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What is a Good Faith Estimate?
A Good Faith Estimate is an estimate from Hawthorne Credit Union that outlines the costs you will incur during the mortgage process. This is provided to you when you apply for your loan.
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What is an APR?
APR stands for the Annual Percentage Rate and is a measurement tool used to provide a standard basis of comparison of loans offered by competing lenders, which takes into account the loan's interest rate, closing costs, and other fees such as points. An APR lets you see the total cost of a loan, including fees and points over the life of the loan, not just the interest due.
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What is the difference between my interest rate and the APR?
An APR lets you see the total cost of a mortgage, including closing fees and points over the life of the loan, not just the interest due.
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When should I lock or float my rate?
You can lock a rate anytime after we receive and review your signed loan application, you pay your application fee and you have identified a property. The typical lock-in period is 45 days. This means that once you lock in the rate, you must close your loan within 45 days. Once you lock, you cannot un-lock. If you think rates may fall, don't lock and instead float your rate. If you are unsure or adverse to risk, it might be better to lock your rate.
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How do I lock my interest rate?
During the application process, select a rate for your specific loan, or call us anytime during the process to lock your loan.
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Can my rate change during my lock-in period?
No. As long as you stay in the same program, your rate is guaranteed throughout your lock period.
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What happens if my rate expires before I close my loan?
You may be required to pay an extension fee or other charges.
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What is an Origination Fee?
A fee or charge for the work involved in the evaluation, preparation, and submission of a proposed mortgage loan.
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What is an appraisal?
A report by a qualified person setting forth an opinion or estimate of value.
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What is Title Insurance?
Title Insurance is a policy issued to lenders or buyers to protect any losses because of a dispute over the ownership of a piece of property.
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What is Mortgage Insurance?
The function of Mortgage Insurance is to insure a mortgage lender against loss created by mortgagor's default. In the event that the borrower dies while the policy is in force, a portion of the debt is automatically satisfied by the insurance proceeds.
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What is private mortgage insurance (PMI)?
Insurance written by a private company protecting the mortgage lender against loss as a result of a mortgage default. Required for LTU greater than 80%.
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Do I need flood insurance?
Most lenders will not lend you money to buy a home in a flood hazard area unless you pay for flood insurance. Some government loan programs will not allow you to purchase a home that is located in a flood hazard area. Your lender may charge you a fee to check for flood hazards. You will be notified if flood insurance is required. If a change in flood insurance maps brings your home within a flood hazard area after your loan is made, your lender or service may require you to buy flood insurance at that time.
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What will my monthly payment include?
Principal, insurance, taxes, interest, and mortgage insurance, if applicable.
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What is my principal balance?
The outstanding balance of the mortgage, including interest and any other charges. Not including accrued interest.
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What is an escrow payment?
The portion of the mortgagor's monthly payment held by the lender to pay for taxes, hazard insurance, mortgage insurance and other items as they become due.
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