Frequently Asked Questions
1. Driver’s License
2. Last two years of W2s and Federal Tax Returns
3. Last 30 days of pay stubs
4. Last two months of bank statements
5. For any other properties and/or mortgages, provide: current mortgage statements, homeowners insurance declarations, and if there’s an Home Owners Association, include an HOA statement
6. If self employed, provide most recent business license and all corporate returns
7. If applicable, include social security awards letter and/or pension
A pre-approval letter is a document provided by a licensed loan officer stating that a buyer can afford a property purchase up to a specific amount. Essentially, it answers the question that many sellers have when talking to potential buyers: Are You Good For It?
While it’s never too early to start speaking to a mortgage professional about home financing, we advise getting pre-approved when you’re ready to start seriously looking at homes. You don’t want to scramble for a pre-approval after you find a home that you want to make an offer on… but keep in mind that pre-approvals last for four months (assuming there aren’t dramatic changes to income or your debt). So, if you find a property five or six months down the road, the lender will have to re-pull your credit, and that will be another hard inquiry.
Mortgage points are fees that are paid to the mortgage lender for a lower interest rate…hence the phrase: “buying down the rate”. Which explains why mortgage points can sometimes be referred to as “discount points”.
Generally, pre-approvals last for four months, assuming there aren’t dramatic changes to income or your debt. If, for example, you find your property five or six months after the initial pre-approval, a lender will have to re-pull credit, and that will be another hard inquiry, which is not ideal.
Unless your bank is able to offer a significantly lower interest rate, we recommended minimizing your stress and using a mortgage broker. No matter what, research reviews of your mortgage provider. It will give you some much-needed peace of mind as you navigate your home purchase.
It would be best to start prepaying as soon as you can. The way amortization works is that interest is front loaded in the early months. So the sooner you can start knocking out that principal, the better.
Second home and primary residence purchases typically have similar interest rates. An investment property will almost always have higher interest rates.
Much of this decision depends on the breakeven point – which is when your $100 per month in savings equals the closing costs for the refi. Additionally, compare how much of the new payment will be going towards principal vs the existing because that determines the lifetime of the loan.
Getting an appraisal during a renovation, is not advisable since the goal is to achieve the highest appraisal value possible in order to lower the loan to value (LTV) for a refinance. Unfinished construction projects will not help the value of the home in these cases.
You may be able to refinance out of your FHA loan into a conventional loan. And assuming you have at least 20% equity, you would be able to get rid of the private mortgage insurance. Depending on your credit score and other factors, you may be able to lower your rate, but when you pull cash out on a conventional loan, there is an interest rate adjustment that increases the rates. So you’ll want to talk to a loan officer about your situation.