How does my credit score affect my loan application?
Your credit score plays a significant role when you apply for a loan. Higher credit scores allow you more loan options and better interest rates. If you've had credit difficulties in the past, you may still qualify for some mortgage programs, but these usually cost more, depending on the severity of your credit problems.
How do I improve my credit score?
You can establish or improve your credit score by following these tips:
- Pay your bills consistently and on time
- Check your credit report yearly and file a dispute to correct any errors
- Keep your spending and debt under control
- Maintain only a reasonable amount of unused credit
For example, keep the number of credit cards you use to a minimum. Avoid too many credit inquiries. Contact creditors immediately if you cannot make a payment on time. This may keep them from reporting your delinquency to a credit agency.
What if I have little or no credit?
There are still ways to show a credit history. You can prove your good payment history on rent and utilities by obtaining references or credit letters from your landlord and utility companies. Provide a year's worth of checks to validate consistent payments. This information will become part of your loan application.
I struggle to meet my monthly payments. How can I consider buying a home?
There are steps you can take to improve your financial situation. The best thing to do is seek professional counseling to help you stabilize your credit situation. National Foundation for Credit Counseling (NFCC) is a nationwide non-profit organization that provides credit counseling usually free, or for a reasonable fee. They can help you develop a solid plan for regaining control of your finances.
How can I ensure that the information on my credit report is correct?
Your credit report reflects the information reported to the credit bureaus by each of your creditors. The information changes each time something is added or deleted from your credit file. Paying off an account, opening several new credit accounts, or making a late payment on one of your accounts will appear on your credit record. The best way to make sure that the information in your credit report is accurate is to request copies of your credit report at least once a year. If you identify an error, notify the appropriate credit bureau and request a correction.
Contact information for the three leading credit reporting agencies:
How much will I need for a down payment?
Most home loans require a down payment. Depending on the terms of your loan, you may be required to make a down payment between 3% and 20% of the home's sale price. Three percent is considered a low down payment. Generally, loans with down payments of less than 20% require private mortgage insurance (PMI).
If you are concerned about having enough money to purchase a home you may want to consider our options for rolling your closing costs into either your interest rate or your loan amount. You will still need to come up with money for your down payment but this will help reduce the amount of additional money that you will need to bring to close.
If I'm short on cash, do I have options to help with my down payment and closing costs?
There are a number of options that may help you if you do not have much cash to purchase a home.
You can look into one of our low down payment programs. These programs may require as little as 3% for a down payment.
If you meet the criteria, you will be offered the option to roll your closing costs into either the loan amount or the interest rate.
If you choose the loan amount option, we will take the amount due at closing and add that to your loan amount. The amount due over the life of the loan will increase but the amount you need to bring to closing will decrease.
If you choose the interest rate option, then the rate for the life of the loan will increase, as will your monthly payment, but the amount of cash you need to bring to closing will decrease.
You can also consider negative points. This means that in exchange for a higher rate, we will contribute funds toward your closing costs.
Why do New York and New Jersey residents get a home loan pre-approval instead of an approval?
State law does not allow us to issue a home loan "approval" until any required loan information which is beyond the borrower's control has been reviewed. One example of the type of information needed prior to issuing home loan approval in New York and New Jersey is an appraisal. Therefore, customers in these states receive a "pre-approval," until all such home loan information has been reviewed. Please contact us for additional information.
What does a mortgage lender consider when making a loan decision?
A mortgage lender generally looks at three areas:
- Income and Assets: To determine your ability to repay the loan.
- Debts and Credit History: To evaluate your buying habits and your history of repaying other financial obligations.
- Property Information: An appraiser compares the home you are buying to similar homes in your area to make sure the property provides sufficient collateral for your loan.
What documents will I need to provide to complete my loan transaction?
We have included a list of some sample documents you may be required to submit. This list is not all inclusive.
- A fully executed agreement of sale for the property being purchased
- Financial statements for bank and brokerage accounts
- A HUD-1 settlement statement on the property you are selling
- Copy of your most recent pay stub
- Previous W2s
- Copy of a rental lease
- Form 4506
- Homeowner's insurance policy
- Flood insurance policy
Can I bring a personal check to the closing?
You will need a cashier's check or certified check for closing. Since this is such a large transaction, a cashier's check provides verification that the funds are actually available.
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