Hey there! Nathan Soliday here with Success Mortgage Partners. We welcome you to our first time home buyers webinar. We’re going to answer 20 of the top questions that most first time home buyers want to ask. Before we get started, I want to make sure that you have my contact information in case you have any questions that I can help you with.
You can reach me at:
Nathan Soliday @ 812-620-0046
Email: [email protected]
Apply for an Indiana Mortgage Online at
So let’s jump right into the questions that we have:
- What is a Mortgage?
A mortgage is actually a loan on a property. We always hear the phrase “Mortgage” all the time so basically it’s the promise to pay. So you’re going to take out loan, the collateral for the loan itself is the mortgage or the collateral is actually the house itself.
2.Are There Special Mortgages for First-Time Homebuyers?
As a homebuyer, we always want to be up to date on what kind of options are available out there. There are several options to choose from. Many of those options are the FHA loan, USDA loan, VA loan (it’s a great option to go with), Construction Loan, 203k Loan and even a Conventional loan with 3% or 5% down payment so there’s a lot of different options out there. One way to find out what you can qualify for is basically just to do a short loan application to see which program may work for you.
- What Steps Need to Be Taken to Secure a Loan?
In order to complete an application , there are steps to be taken to secure a loan. There are different items that are needed for to get an actual pre-approved loan.
You see the list here such as:
✔YTD Pay Stub for the past 1 month
✔ W-2 forms for the past 2 years (Tax Returns if self-employed)
✔ Information on long-term debts
✔Recent Bank Statements (Checkings, Savings, 401(k), Etc)
✔ Tax Returns for the past 2 years
✔ Proof of any other income
✔ Address and Description of the property you wish to Purchase
✔ Sales Contract
✔ 12 month Rental History
So these are some of the basics that are needed for a loan application along with the fact that we have to double check credit so see what kind of credit scores you have if you meet the requirements of the different programs that are out there.
- How are a Mortgage Pre-Qualification and a Mortgage Pre-Approval Different?
A Mortgage Pre-Qualification is an informal process that can be done over the phone. It has no obligation and no paperwork. A lot of times you will break the ice to see and get a ball park idea of what you can do from a loan standpoint.
A Mortgage Pre-Approval is more of a formal commitment to lend. That’s where we will gather some of the items listed in “How to Secure a Loan” slide. We will really dig in of what you can afford. We will get that narrow down and make sure that you’re good to go if you’re looking for a house so that’s the difference between the two types.
- What is a Credit Score and How Do Lenders Use Them?
Credit Score is basically a snapshot of what your credit looks like today. So if you made a 30 day late payment a couple of weeks ago, it’s going to report on your credit today and it is going to have a significant effect on your scores. So credit history is important especially your recent credit history is very important because anything new will factor into that. From a credit score standpoint, if you want to buy a house right now, what we offer we could go down to a 600 credit score so FHA, VA we could go down to that.
If you want to buy with no money down, with the USDA program that requires a 640 credit score or a zero credit score, we have something along those lines so you’ll keep that in mind. From a credit score standpoint specially if you’re over 700, you know things are really good there, you will have your best interest rate when you’ll have 740 or better, the interest rate are really good right now. So even if you’re at 640 or 660, you’ll still have a pretty good interest rate specially on FHA loan.
- How Can I Find Out Information About My Credit Report?
When we do a loan application, we’re going to review your credit information with you so that you understand exactly where you stand in the home buying process. You can also go to http://www.annualcreditreport.com and request a free credit report as well. You can monitor your report each year by requesting your report.
- How Do I Choose The Best Loan Program For Me?
Now this is a good question. A lot of that depends on what you can qualify for. You may want to buy with no money down but you’re credit score might be too low or you don’t want to pay mortgage insurance and if you have a high credit score, you’ll be able to pay mortgage insurance so that’s a nice option too.
So Ask Yourself These Questions:
→ How do you expect your finances to change over the next few years?
→ Are planning to live in this home for a long period of time?
→ Are you comfortable with the idea of a changing mortgage payment amount?
→When do you want to be “Mortgage Debt-Fee”? which means you may want to do it 15 years, 20 years or 30 years. A lot of that just depends on your personal goals, your income goals, and your retirement goals.
- What Types of Loans Are Out There and What Advantages Do They Have?
FHA is the most lenient of all programs. It allows you to have a high debt ratio. It also allows you to have a little down payment so FHA is a really good program. You can also have a fixed rate on FHA and it’s usually 3 1/2% down payment it’s the minimum that you have for that. The 203(k) loan is a loan that if you have a “Fixed Upper” house, you will qualify for it. There’s a lot of steps to take depending on how much work and how involve that work is so that could also be an option for you.
- What is “Locking In” a Rate?
To build a “Locking In” interest rate, you always need to have a property obviously so you can lock it in for that property so if you’ve got a contract on a house, we can lock so let’s say you have a contract or an address in mind, the Locking In a Rate guarantees you an interest rate for a certain period of time. It protects against interest rates fluctuating everyday because they do change based on what the markets do.
Then it has a question, “Should I Wait to Lock?”It depends on the interest rate environment at the time that it’s really volatile. You’ll definitely want to lock right away. But what I usually recommend is if you’re comfortable with the payment, and the interest rate that’s included then I’ll go ahead and locked it in just to make sure that you will not lose any money. So that’s something that every borrower needs to look at specifically to see what’s the best option.
- What Are Discount Points?
Discount Points are basically a way to lower your interest rate by paying a little extra in closing cost. One of the questions that I get all the time is what are your closing cost and discount points. We don’t typically charge any type of points unless it is recommended or requested from the borrower to get a lower interest rate. But the interest rate environment is so good right now, a lot of times it takes several years for you to see the actual benefit out of that.
The next thing about Discount Points is that it is recommended if you plan to stay in your home for awhile. So if you found your dream home and you’ll never think that you ever refinance that house again then points will be a good idea. But then again it’s something that we need to talk about. Discount Points are typically tax deductible based on your tax bracket and that type of thing.
- What is Included In Your Monthly Mortgage Payment?
It’s a good question, so when you’re talking about payment of course there’s a principal amount that you have to pay back. You have the interest that you have on the loan. But you also have mortgage insurance depending on the program. You also have your real estate taxes and your home owners insurance. So on your taxes and insurance, basically what I’m telling everybody is once you have a quote on your insurance, I want you know how much your annual taxes are on the property. You basically just divide those 2 numbers by 12, that’s what gets added to your actual payment.
So on the mortgage insurance side of things, it will depend on the term of your loan. If you’re doing FHA loan, Conventional loan or even a USDA, as far as what that amount would be so again you will get a custom quote on that for you to be sure that you have a good idea of what that payment would be. But all of those things can and most likely will be included in your mortgage payment.
- Can I Use Gift Money?
Yes! There’s a certain process that you have to do but as long you’re getting gift money from a family member, as long we can document the transfer of that money and have the gift letter completed and that type of thing then yes, actually gift money is a great way to go and again that depends on the program. We can look at that and see what’s the best option for you. It’s perfect for your parents or grandparents that would help their child or grandchild purchase a home it’s a great way to do that.
- What is LTV and How Does it Determine the Size of My Loan?
LTV stands for Loan-To-Value that’s the amount of money that you can borrow compared to your purchase price. Your loan value is basically your mortgage amount divided by your appraised value of the property. So for example, if your mortgage amount was $96,500 and the appraisal was $100,000 and you’re actual Loan-To-Value would be 96.5. That’s important because it tells you basically your minimum down payment requirements for each program that’s out there. Again FHA is 3 1/2% down payment, USDA is 0% down payment, VA Loan is 0% down payment, Conventional Loan is 3% to 5% and so on. So that gives you an idea of your Loan-To-Value and how that is determined.
- What is Private Mortgage Insurance?
Private Mortgage Insurance is required with a down payment of less that 20%. So a lot of people don’t have the luxury of putting 20% down on a house. That’s okay, just make sure you pay a little more on your house payment to make up for that 20% down payment that you don’t have. It provides basically “Default” insurance to the lender and like with the Conventional Loan, it’s going to stay in the loan until you’re down below 80% of the value of the house. So it will stay on there for a while.
Also on FHA, at this point it will stay on for the loan. It will have a different name but it still works out the same as far as with the PMI. So that’s how it work. Again, a lot of people get hang up on Private Mortgage Insurance but it is a nice thing because it does allows you to buy a house before you have 20% down payment which in a lot of cases that may never happen as far as they’re in it so it’s still a good tool to buy a house sooner rather than later.
- What Makes Up Closing Cost?
✔Attorney’s or Escrow fees
✔Property taxes (to cover tax period to date)
✔Interest (paid from date of closing to 30 days before first monthly payment)
✔Loan Origination fee (covers lenders administrative cost)
✔First premium of mortgage insurance (if applicable)
✔Title Insurance (yours and lender’s)
✔Loan discount points
✔First 2-3 payments to escrow account for future real estate taxes and insurance)
✔Paid receipt for homeowner’s insurance policy (fire and flood insurance if applicable)
✔Any documentation preparation fees
✔Third Party Appraisal Fee
So there’s a lot of things that can make up Closing Costs but with a help of a Real Estate Agent, you can also negotiate to the seller to help you pay some or all of this Closing Costs. This gives you an idea of what Closing Costs could be whenever you buy a house.
- What is an Escrow Account?
An Escrow account is an account that you have that breaks up your Annual Tax and Insurance Costs into monthly payment. So I’ve mentioned that earlier, you just basically divide those 2 numbers by 12 and it gets added to your actual house payment. It also keeps you from paying the taxes and insurance separately, in a separate bill, once or twice a year in a larger amount to the provider.
It also prevents Tax Liens, Loss of Property and any lapse of insurance coverage because they do keep an eye on your insurance to make sure its active at all times. So that’s what an Escrow Account is and again, most people like an Escrow Account from time to time the Escrow can get behind based on the insurance cost is raised, the taxes are raised but for most part, it works out really well.
- What Happens After I’ve Applied for a Loan?
Again if you go to http://www.LoansWithNate.com or http://www.NathanSoliday.com, you can apply for a loan and then what you will do is to do the process of checking your credit, and then go into the phase of Closing, Funding and Moving In so that’s the great thing about that. Providing requested documentation in a timely manner is also very important.
- What Responsibilities Do I Have During The Lending Process?
- I. You should not change jobs, become self-employed, or quit your job.
- II. You should not buy a vehicle or boat.
- III. You should not use charge cards excessively or let your accounts fall behind.
- IV. You should not spend money you have set aside for closing.
- V. You should not omit debts or liabilities from your loan application.
- VI. You should not buy furniture.
- VII. You should not originate any inquiries into your credit.
- VIII. You should not make any deposits or transfer money into your checking and/or savings accounts without first checking with your Mortgage Advisor.
- IX. You should not change back accounts.
- X. You should not co-sign a loan for anyone.
So before you make any changes in your financial situation, make sure to ask your loan officer.
- What Should I Look Out For During The Final Walk-Through?
→Examine every corner of the empty house
→Check floor to ceiling
→Be sure Seller fixed any problems promised
→Make sure everything is perfect before you close
- What Can I Expect To Happen on Closing Day?
→Bring your Paid Home Owners Insurance
→Bring a Cashiers Check for money you for down payment and closing costs
→You will get proof of inspections and/or warranties
→Sign on the dotted line
→Binding Sales Contract
→Keys to your new home
And then you have the opportunity to enjoy your new home! So again it’s a very exciting day and the best part of the process.
Thank you for taking the time to watch this video. Hopefully it was helpful for you. Again I just wanted to make sure so if you have any questions at all about any mortgage questions at all, maybe what you’ve heard today, or anything that you’re not sure of from the income standpoint or credit scores, feel free to give me a call. I’d be happy to help.
Nathan Soliday, NMLS #166402
FREE Interest Rate Quote: http://www.NathanSoliday.com
Mortgage Banker – 812-620-0046
Success Mortgage Partners, NMLS #130562
190 W Becks Mill Road, Suite K
Salem IN 47167
Email: [email protected]
Equal Housing Lender