Frequently
Asked Mortgage Questions
How much money do I need
to buy a home?
What are “closing costs” and “prepaids”?
What is PMI (Private Mortgage Insurance) and what
does it do for me?
How long will it take to close my loan?
What is the difference between being "pre-qualified"
and "pre-approved"?
What is "APR" and why is it different from
my interest rate?
What kind of documentation will I need to provide
the lender for verification?
What is a FICO score?
How will my credit score affect my loan application?
How do I increase and protect my credit rating?
What if I have little or no credit?
What if I have really bad credit?
What is an Appraisal?
What is a title exam?
What is Title Insurance?
What is PITI?
What is homeowner's insurance?
What is an escrow account?
What is a whole House Inspection?
What is a survey?
When should I choose a fixed-rate loan?
When should I choose an Adjustable Rate Mortgage
or ARM?
When should I pay points on a loan?
How much money do I need to buy a home?
Lighthouse Mortgage, LLC offers unique programs that require NO
MONEY DOWN and do not require PMI. We offer true 100% financing;
loans with the ability to include all necessary costs and get you
to the closing table with NO MONEY OUT OF POCKET. Most of our competitors
require a minimum down payment of 3% to 5%, plus the funds to cover
closing costs, prepaids, discounts, and two or more payments in
reserve. On top of that they usually require you to pay a large
monthly PMI payment. ↑ back
What are “closing costs” and
“prepaids”?
Closing costs are all of the fees that are paid in conjunction with
your closing. Some examples of these fees paid to third parties
are; survey, courier, appraisal, and title exam. Prepaid expenses
include items such as prepaid interest (interest from the day you
close until the 1st payment is made), homeowners insurance, real
estate taxes, and setting up escrow accounts for taxes and insurance. ↑ back
What is PMI (Private Mortgage Insurance)
and what does it do for me?
In short, PMI is an insurance policy that some loan programs require
when you have less than a 20% down payment. PMI usually requires
a monthly fee (which is added to your house payment) and/or an initial
upfront premium payment depending on you loan's structure.
The PMI policy only benefits the Lender, and only in the event you
default on the loan. So essentially, PMI is a monthly charge
you pay to protect the Lender from something that is probably not
going to happen and it has absolutely no benefit to you what-so-ever.
It isn’t even tax deductible! Obviously, in most
cases it is wise to avoid PMI if at all possible**. Most of
our competitors will REQUIRE YOU TO PAY a PMI premium, but Lighthouse
Mortgage, LLC has loan programs that allow you to borrow up to 125%
of your home’s value with NO PMI!
** One our trained professional Loan Officers can also explain
the only instance when a loan with PMI may be in your best interest. ↑ back
How long will it take to close my loan?
Once you have given us all necessary information, you can expect
to have your loan processed and closed in approximately 20 business
days. ↑ back
What is the difference between being "pre-qualified"
and "pre-approved"?
Pre-qualified means the information you provided about your income
and debts has been reviewed by a loan officer, but not verified
for accuracy. Based on this information, the lender can calculate
the amount of mortgage for which you may qualify. Pre-approved takes
the process one step further by verifying your credit and asset
information. If you are pre-approved, you will be ready to close
on your mortgage more quickly than if only pre-qualified. Many
Real Estate Agents will not show you any homes or write an offer
for you if you are not pre-approved. ↑ back
What is "APR" and why is it
different from my interest rate?
The federal government developed a standard format called an "Annual
Percentage Rate" to allow consumers to comparison shop for
an “effective” interest rate. Some of the costs that
you pay at closing are factored into the APR for ease of comparison.
Your actual monthly payments are based on the Note Rate, NOT on
the APR. APR is the total yearly cost of a mortgage. It is stated
as a percentage of the loan amount which includes the base interest
rate, mortgage insurance, loan origination fees, points and certain
other expenses. This should ALWAYS be disclosed to you in writing
on a Truth In Lending disclosure supplied along with your Good Faith
Estimate. Even though the government’s intent with the development
of the APR was to make comparison easier, this is probably the most
confusing part of the mortgage disclosure process for most consumers. ↑ back
What kind of documentation will I need
to provide the lender for verification?
Since each loan has different variables, there is no single list
of documents needed for all applicants. With the use of automated
underwriting, the documentation needed is usually less than the
list below, however you should be prepared to provide copies of
the following documents to us.
Employment & Income Data
W-2 tax forms, past two years
Pay stub showing current year-to-date earnings (two most recent
stubs)
Your job history and any explanation of a job change within the
past two years
If self employed you need business and personal federal tax returns
(two years, including all schedules), and a current year-to-date
profit & loss statement
Assets
Two most recent bank account statements
Most recent investment account(s) statement
Most recent retirement account(s) statement
Liabilities
All liabilities will be pulled directly from Credit Report and
discussed with you to make sure they are complete and accurate. ↑ back
What is a FICO score?
A FICO score is a credit score developed by Fair Isaac & Company.
It is a credit scoring method to determine the likelihood of credit
users paying their bills. Since the 1950s, Fair Issac & Co have
been pioneers in setting credit scoring standards and even today
their method has become the most widely accepted scoring method
used by lenders in credit evaluation.
A credit score attempts to condense your credit history into a single
number. Credit scores analyze your credit history by considering
numerous factors such as:
Late payments (30 day, 60 day, 90, and 120)
The number of accounts with balances
The amount of time credit has been established
The amount of credit available vs. balance
Negative credit information such as bankruptcies, charge-offs,
collections, & liens
Credit scores are calculated by using scoring models and mathematical
tables that assign points for different pieces of information which
best predict future credit performance. ↑ back
How will my credit score affect my loan
application?
Credit scoring plays a significant role when you apply for a loan.
Higher credit scores help you to be eligible for more loan options.
If you've had credit difficulties in the past, there are still mortgage
programs available, but they will usually cost more and will vary
depending on the severity of your credit problems.
For most score driven programs, credit scores over 720 are considered
excellent or “AA”, scores from 680-719 are considered
very good or “A”, scores from 640-679 are considered
good or “B”, scores from 600-639 are considered average
or “C”, scores from 560-599 are considered below average
or “D” and scores from 520-559 are considered poor or
“DD” and scores below 520 may not be “lendable”
depending on circumstances. ↑ back
How do I increase and protect my credit
rating?
Here are a few general tips to assist you in raising and maintaining
your credit score:
-
Maintain two to three revolving charge accounts (such as Visa
or MasterCard) in good standing. Keep balance minimal or pay
off monthly.
-
Keep few other credit card accounts, such as department stores
or gas cards, and keep them in good standing.
-
Avoid multiple credit inquiries; they could lower your credit
score.
-
Don’t max out your credit cards-the ratio of available
credit to your total credit balances is a factor used to calculate
credit scores.
-
Don’t apply for multiple credit lines; this triggers
an inquiry of your credit, which lowers your credit score.
-
Never co-sign a loan for someone else. ↑ back
What if I have little or no credit?
Use your good payment history on rent and utilities, as well as
credit obtained through other non-traditional tradelines like car
insurance, cable, and cell phones. Provide a year’s worth
of cancelled checks to validate consistent monthly payments on any
accounts that do not report to the credit bureau and we can have
them added to the report. This information will become part of your
application for the mortgage loan. ↑ back
What if I have really bad credit?
The only way to know for sure if you qualify is to complete a loan
application and have it processed for pre-approval. If by some chance
you don’t qualify for any type of mortgage financing, we will
work with you and help guide you with the proper steps to improve
your credit standing. It will take time and effort on your part,
but if you really ant to buy a home it will be well worth it. ↑ back
What is an Appraisal?
An appraisal is an estimate or opinion of fair market value of a
specific piece of real estate made by a qualified person as of a
certain date. The estimate of value is arrived at through application
of certain techniques which consider many market condition and economic
aspects. The most common and reliable type of appraisal technique
used to estimate the fair market value of residential real estate
is called the sales comparison approach and relies on comparison
of the subject property to at least three other recent sales of
similar homes located nearby. ↑ back
What is a title exam?
A title exam is a complete and thorough search through public records
to uncover any and all recorded legal interests in the property.
A purchaser or lender must be certain that the seller has the legal
right to sell the property and that the property is unencumbered
by undisclosed liens or other legal issues. A thorough review of
the county records will provide information to the purchaser, seller,
lender, attorney, and all other parties of interest, regarding the
title to the property. Without proper and accurate title examinations,
all parties could be subjecting themselves to future liability and/or
losses. To protect themselves from losses, most lenders require
the borrower to purchase a title insurance policy. The buyer has
no coverage under this policy and is only covered against loss through
the purchase of and additional “Owner’s Coverage”
title insurance policy. ↑ back
What is Title Insurance?
Insurance that protects the lender against loss arising from a dispute
over ownership of a piece of property. The property may have changed
ownership many times before reaching the current buyer, and errors
and discrepancies may have happened along the way. Title insurance
is the lender's way of insuring their interest in the property.
The cost for title insurance is paid once, by the borrower, at the
closing of the loan. ↑ back
What is PITI?
PITI is an acronym for Principle, Interest, Taxes and Insurance.
These are the four parts that make up your monthly payment if you
have an escrow account. If you do not have an escrow account, the
tax and insurance bills are paid directly by you. ↑
back
What is homeowner's insurance?
Homeowner's insurance is designed to protect your home. It is also
known as hazard insurance, or fire insurance. While the lender requires
this coverage, you determine which insurance company will carry
the policy. Homeowner's insurance premiums are either paid directly
to the insurance agency or by your lender through an impound/escrow
account. ↑ back
What is an escrow account?
An escrow or sometimes called and impound account is a non interest
bearing account that your lender uses to set aside the TI (taxes
and insurance) portion of your monthly payment. The money in the
account will be used to pay the appropriate bill when it arrives. ↑ back
What is a whole House Inspection?
A whole house inspection is a thorough visual inspection of all
components of a home by a qualified inspector. The inspection should
include, but is not limited to visual inspections of the following:
foundation, roof, gutters, exterior walls, doors and windows, porches,
decks, sidewalks, driveways, attic insulation, plumbing, water heater,
HVAC system, electrical panel, switches, receptacles, light fixtures,
and fireplaces. A whole house inspection can also provide for a
termite report, air quality testing, and any environmental concerns. ↑ back
What is a survey?
There are two different types of surveys that pertain to real estate;
a mortgage location survey and stake survey. Your lender may require
a “mortgage location survey" which is a drawing that
shows the property boundaries and where the improvements are located
in relation to the property boundaries. Although the "mortgage
location survey" is a drawing completed by a licensed surveyor,
it is not a substitute for a stake survey. A stake survey will have
property corners staked and property lines marked as well as provide
a drawing of the results of the stake survey. Although more expensive,
there are instances when it is wise to have a stake survey completed
prior to closing. ↑ back
When should I choose a fixed-rate loan?
A fixed-rate loan offers a borrower the comfort of knowing exactly
what their payments will be, month after month, for the life of
the loan. Loan terms range from 10 to 40 years with the most common
terms being 10,15,20,and 30. In a low-rate environment, borrowers
tend to prefer a fixed-rate product that can protect them from possible
interest-rate increases. ↑ back
When should I choose an Adjustable Rate
Mortgage or ARM?
Generally speaking, an ARM enables borrowers to secure a loan at
an initially lower interest than a fixed-rate loan. This means a
borrower has lower monthly payments for a specific period of time
when compared to other loan options. Lower monthly payments may
allow you to qualify for a higher loan amount. ↑ back
When should I pay points on a loan?
The decision to pay points on a loan depends heavily on your circumstances.
In certain situations, it can be very advantageous for you to pay
points on your loan. Generally speaking, the longer you plan to
keep a loan the more sense it makes to pay points to get a lower
interest rate. One way to determine this is to calculate the break-even
point of how long you would have to keep the loan in order to save
over the cost of paying points up front. If you are comparing two
loans with the same interest rate, and one of them doesn't require
you to pay points, then there is no reason to pay points. Another
consideration may be tax purposes. Points paid on a new home loan
are immediately deductible as interest. ↑ back
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