Athen Apaquette

FAQs for Home Buyers

FAQ's for home buyers

What documents do I need to qualify for a home loan?

Standard underwriting guidelines require:

  • 1 month of paystubs.
  • W2’s and tax returns for the past 2 years.
  • 2 months of bank statements with all pages for checking, savings, 401k’s, IRA’s, any liquid assets especially those funds used for the down payment.
  • A picture ID.
  • For government loans you will need a copy of your social security card.
  • DD214 (honorable discharge) if applying for a VA loan.

What is the difference between being pre-qualified and pre-approved?

Pre-qualification is a quick assessment about what you can afford, based on the opinion of a loan officer, 1-800 order clerk, website calculator, or Realtor.Essentially they will ask you about your debts, income, job, down payment, and other questions that will give you the “gist” of your financial picture.Pre-quals are usually done online or over-the-phone.There is no paperwork and you are under no obligation to use that lenders service.Pre-approval will provide you with the exact loan amount that you qualify for.

To be pre-approved for a loan you will need:

• A credit report within the last 30 days.
• 1 month of paystubs.
• W2’s and tax returns for 2 years.
• 2 months of bank statements with all pages for checking, savings, 401k’s, IRA’s, any liquid assets especially those funds used for the down payment.
• A picture ID.
• For government loans you will need a copy of your social security card.
• DD214 (honorable discharge) if applying for a VA loan.These documents are given to the decision maker/lender who will review them.

Your approval is based on the data they collect.

However, if you are missing any critical documents, then you are not pre-approved, as the missing documents can change the outcome of the analysis.

If you would like help with pre-qualification or with pre-approval then contact me today.

What is the minimum credit score for a loan?

The credit score requirements vary from program to program,  and whether PMI (Private Mortgage Insurance) is required.PMI is required if you are unable to put a 20% down payment or more on a home. PMI protects the lender in case you default on your home loan.
Your credit score can be as low as 580 on FHA loan programs.
However, some PMI programs require a minimum 740 credit score.
To determine your credit score visit: Experian at www.experian.com
If you need to improve your credit score, I can help. Contact me today.

My husband has good credit but I don’t. Can he buy without me?

Yes he can.
However, if you are doing an FHA loan, the debt payments of the spouse are used in the qualifying process.

What is the minimum down payment for a condo?

In the case of condos, not only does the buyer qualify, but the condo association has to be “qualified” as well.
Lenders will look at the condo association’s rules (called CC&R’s), the ratio of occupant owners versus renters, insurance, assess whether the condo complex is financially secure by checking their reserves, and more…
With that said, how much down you need depends on the viability of the association and the buyer’s qualifications.  It can be as little as zero down, 3.5% down, or might require all cash.Contact me for more information.

Is it true that there is a special program for teachers?

Yes and no.
There was a program called CalSTRS, same name as their retirement program.
CalSTRS allowed teachers to qualify for a loan on 80% of the price of the property, put 3% down, and with no PMI (Primary Mortgage Insurance). The other 17% of the price came from the pool of funds in the CalSTRS retirement plan.
At the end of 5 years, the teacher would start repayment on the loan that represented 17% of the price plus any accrued interest.
Although it was a good program, it ended in November 2012 for lack of use according to the press release from CalSTRS. The same goes for the CalPERS program.
However their website says that they are working hard to bring it back.
For more information, visit: http://www.calstrs.com

What is a “no-cost” loan?

In addition to the purchase price of the home, there are other fees associated the home buying process such as escrow fees, appraisal fees, notary fees and more.Typically, a no-cost loan is used when you’re refinancing, but it can also be used for purchases.
The estimate in the loan application package will show all the fees involved in the loan and then show a credit for the same or greater amount. The credit from the lender is typically to cover escrow, title, notary, recording, etc.
So what do you pay?
On a no-cost loan you typically keep the same loan balance as you have now, and bring the “pre-paids” interest taxes (if due or you want impounds), and insurance policy renewal or impounds to escrow. If you have enough equity you can also finance these.
Because of the transparency in lending laws, your mortgage advisor should show you everything that’s being paid on your behalf.
Typically, the interest rate is higher on this loan.  So if you decide you want to lower your monthly payment or want to pay your own costs, then let your mortgage advisor know. That way he or she will make the appropriate adjustments.

My parents want to buy me a home. Is that ok?

It depends on the loan program and type of property.If you are planning to put a minimum down payment, then FHA allows it.
However if you are buying 3-4 units, under the FHA program, you will need 3.5% down of your own money plus 3 months reserves.
If you are buying under Fannie Mae or Freddie Mac then you will need 5% down of your own money and the rest can be gift.

What is PMI and why do I have to pay it?

PMI or Private Mortgage Insurance is required whenever you put less than 20% down on your new home. PMI protects the lenders if the buyer defaults on the loan.
It is usually added to the monthly mortgage payment.
However, FHA loans require that you pay PMI even if you are able to put 20% down on your home.

When can I get rid of PMI?

With true Private Mortgage Insurance, you can request that it be removed when you have 20% equity in your home OR when the loan is paid down to 80% of the original appraised value.
For example, if the original appraised value of your home was $300,000 you would have to pay $60,000 towards the principle to have the PMI removed.Generally however, they will not remove it less than 1 year.
There are new rules concerning FHA mortgage insurance.FHA mortgage insurance might be permanent if you received your loan after June 2013. However, if you got your loan prior to June 2013, it could be a minimum 5 years or when the loan balance gets paid down to 78% of the original appraised value.  This generally takes about 11 years if the original loan was 3.5% down.To find out when you are eligible to remove the FHA insurance, contact me and I can find that out.

What is a FHA Loan?

A Federal Housing Administration or FHA loan is backed by the federal government and allows home buyers with a low credit score or with little money to put down on a home to qualify for a loan.It has no income limits and anyone who meets the criteria can use a FHA loan.

Do I have to use the seller’s bank for my financing?

No.
No one can force you to use any particular lender.
However, to make yourself the most qualified candidate it may be best to qualify with their lender.
That way, the seller will see that you are a strong borrower, and you won’t have to divulge any of your personal data, like your social security number, bank account numbers, etc.Many buyers feel apprehensive when giving “anyone who asks” their personal information.  But there are ways to be compliant and reassure the seller without risking your personal information.

What is a short sale/short pay?

A short sale or short pay is when the seller asks their current mortgage holder(s) to take less than what they owe as payment in order to sell their property.
For example, the seller may have bought a home in 2007 for $500,000, put 5% down, and now has a loan of about $470,000.
Now maybe they can only sell the house in today’s market for $400,000, so they have a short fall or excessive debt of $70,000 plus the cost of sale.
Since they don’t have the money in the bank, they ask for the debt to be waived.  That way they can still sell their home. They are “selling short” or have a “short pay off.”
Unfortunately, the process of approval can take months if the seller has ever approached their bank previously; and the complexity of getting this approved depends on who holds the loan on the house, and whether a PMI was involved.
Want to know more about short sales? Book your appointment for a free 90 consultation with me today.

Can I use a co-signer to qualify for a more expensive home?

Yes!
Certain loan programs allow you to have a co-signer such as your parents or a sibling to increase your chances of qualifying.
However, they must provide the same full documentation and will be responsible for the mortgage if you fail to pay.
FHA allows this and Freddie Mac allows for a co-signer. It’s called “blending of ratios.”
Need help getting a clearer picture about your financial situation? Contact me for a free 90 minute consultation.

Do I need 2 years of work history to get a home loan?

Yes.
The general rule is that you need to be employed for a minimum of 2 years, with no gaps in your employment.
However, if you just graduated from a professional program or upper level degree and immediately get a job, the requirement is waived since school can be counted as the work history.
However, in general there cannot be a gap of more than 1 month in your school history. A diploma and first paycheck on the new job will be required before loan approval is issued.

Do I have to be a citizen of the United States to get a home loan?

No.
You do not have to be a U.S. citizen, but you must be a legal resident or on a valid visa.
Please note that some visas, such as a diplomat’s visa is not eligible.

I am retired. Can I still qualify to buy a home?

Yes!
It is illegal for a lender to discriminate.
However, you still have to qualify based on your income.
All permanent retirement plans, annuities, social security etc… are counted as income, but you must have the corresponding documents. An award letter and proof of receipt of the retirement income must be shown.

I am disabled. Can I still qualify to buy a home?

Yes!
If you are on permanent disability the income can be counted towards qualifying.
Proof of permanency including a letter from a physician, government paperwork, or the institution who is issuing the disability checks will have to be provided.
If it is temporary disability then the income cannot be counted.
The basic rule in lending is that income must have a two year look back and three year look forward.