Locating The Right Loan
You have the option of shopping around for the best terms you can obtain. Generally,
a mortgage acceptance requires 30-45 days for conventional, 45-60 days for VA and
FHA from application to approval. In some cases, loans may be approved more quickly.
Prosperity Mortgage® Company is a joint venture between Long & Foster and Wells
Fargo Home Mortgage.
Shop Smart For Mortgage Money
It used to be that qualified homebuyers simply went to their nearest bank or savings
and loan for the standard, fixed-rate, 30-year mortgage or the VA/FHA backed loan.
Interest rates were not highly competitive—back then.
Now, of course, things have changed. Competition among lenders is lively, and smart
borrowers shop carefully to find the financing that best suits their circumstances
and needs. Here's where to shop:
Mortgage Lenders. Mortgage lenders issue mortgages to borrowers. They then
process and sell the mortgages to large investors or into the secondary mortgage
market.
Mortgage Loan Brokers. Some individuals or groups charge a fee (usually to
the borrower) to match borrowers with lenders. Sometimes they make direct loans.
An advantage of working with mortgage brokers is that they often represent many
investors and can provide you with many more financing alternatives, usually at
the same price as the mortgage banker.
Financial Institutions. Mutual savings banks, savings and loan associations,
insurance companies, and some commercial banks are the traditional sources of mortgage
loans. Savings and Loans often grant favorable terms to their own account holders.
Private Lenders. Individuals (often home sellers) and groups (sometimes seller's
employers—if the seller is being transferred) lend money. This source is especially
helpful in arranging second mortgages, but can also assist with first trusts, wrap-arounds,
and other mortgage plans.
Credit Unions. Federal credit unions can write 30-year conventional and government
insured mortgages. Some will make loans; others may not. This may be a good source
for credit union members.
Finance Companies. To compete with the more traditional lenders, some finance
companies promise quick service and some do not charge mortgage "points" or "pre-payment
penalties".
Ten Questions Most Lenders Will Ask You
Here's the information most lenders will need:
- The amount of money you wish to borrow and the length of time you will need the
money.
- Your current address and any other addresses covering the previous 24 months.
- Your social security number.
- Your current employer's name, address and phone number and the same information
for any other employers in the previous 24 months.
- Your gross monthly income including documentation: most recent pay stub, final pay
stub for any job you may have left in the current year and previous year's W-2 form(s).
- Complete account statements (all pages) for any bank, credit union, retirement,
or brokerage accounts.
- Your assets (real estate, personal property, stocks and bonds, life insurance with
cash value, etc.).
- A complete list of your debts including account numbers, balances and minimum payments.
- A copy of the sales contract.
- An account, in writing, of any problems concerning your application and any documentation
of the circumstances of those problems.
With this information in hand, here are the general steps the lender will take to
process your application:
- Verify the facts.
- Get a credit report.
- Make a property appraisal.
- Review your application.
- Decide whether or not to make the loan.
Some Questions You Should Ask Most Lenders
Here's how to shop; a few of the questions to ask a lender:
- Are both fixed-rate and adjustable mortgage loans available?
- What is the interest rate?
- What is the total origination charge?
- How long can I "lock-in" the financing at the current interest rate?
- What are the other fees a lender may charge me in conjunction with my loan?
- Are funds for a second mortgage available?
- On adjustable loans: How often will the interest rate be adjusted? Is there a maximum
limit on each rate change? How often will the monthly payment be adjusted? Is there
a ceiling on payment adjustments? Can the term of the loan be extended?
- Is there a pre-payment penalty clause? This involves extra charges for paying off
the loan before maturity. About 80% of all loans in the United States are paid off
early.
- What is the "grace" period? How late can a monthly payment be made before a late
charge is assessed? What will happen if a payment is missed?
- If you sell your house, will the new buyer be able to assume your mortgage at the
same interest rate?
- Do you have to pay "points" to get your new mortgage? Usually lenders charge points
for the cost of giving you a mortgage loan.
- Will the lender require mortgage insurance?
Slicing Interest Rates
It is important to keep the tax advantage in mind when considering whether to rent
or buy. A mortgage payment of $1,500 could result in a lower overall cost than an
$1,200 rent amount after you consider tax advantages.
Remember a buyer may not realize this "tax break" until tax time comes around unless
withholding taxes are decreased in anticipation of increased interest payment deductions.
Please contact your tax advisor for more information.