LOAN APPLICATIONS

1) Your residence history
• Your previous addresses for the past two years
• The length of time you’ve lived at each address
• If you currently rent, your landlord’s name and addresses (for past 12 months)

2) Your employment history
• The names and addresses of all your employers for the past two years
• The dates you worked at each place of employment
• If there have been any gaps in your employment, explain why

3) All outstanding loans and credit cards
• The creditor’s name(s) and address(es)
• Your account number(s)
• The current total balance you owe and the months left to pay
• The amount of the monthly payment

4) Savings, checking or investment accounts
• The names and addresses for each financial institution
• Your account numbers
• The current balance or value

5) Real estate you currently own
• The property address(es)
• The estimated market value
• The outstanding loan balance
• The amount of your monthly payment (including taxes, insurance, homeowner’s association dues)
• The amount of your rental income (if applicable)

6) Personal property you own
• The net cash value of your life insurance
• The make, year and value of your automobile(s)
• The value of your furniture, jewelry and other personal property

7) Tax records

• Some lenders may require copies of your tax records from the previous two years.

Historically, Savings and Loan organizations have concentrated on home loans. However, with deregulation, the U.S. government has opened the door for S & Ls to provide checking accounts, savings accounts, personal and business loans, etc. Nevertheless, their primary lending focus still is on home loans.

The largest and most diverse of all finance institutions, commercial banks offer a wide variety of services including savings accounts, investments, charge cards, as well as commercial, personal, residential and business loans, among others.

Mortgage bankers typically use their own money to fund mortgages; however, they ultimately sell the loans to another entity such as a bank, a savings and loan, pension or retirement funds, private investors or government agencies such as FNMA ("Fannie Mae") or GNMA ("Ginnie Mae"), which purchase residential mortgages. When mortgage bankers sell a block of mortgages, they often will continue to service the loan and will be responsible for the collection of your payments. The mortgage banker is paid a small percentage of the interest (usually 1/4 % to 1/2 %) for this servicing agreement.

Unlike mortgage bankers, mortgage brokers do not loan their own money. Mortgage brokers will arrange financing for a borrower from a lender, which could be a bank, savings and loan, a private individual or a credit union or pension fund. As the liaison between borrowers and lenders, they are paid a commission or a fee, which is paid by the borrower, the seller or even the lender.

In exchange for your mortgage, you will pledge your home as security for the repayment of your loan. The lender agrees to hold the title to your property until you have paid back your loan plus interest. A mortgage loan is composed of two major components: principal and interest.

Principal 

- is the actual amount of money you borrow. If you borrow $150,000, your mortgage principal is $150,000.

Interest 

- is what you pay for the use of the money you borrow. How much you pay depends on a number of factors, including the interest rate, the type of loan and other factors, which are outlined in this guide. Interest can be deducted from your taxes, making it one of the most attractive practical benefits of homeownership. Your tax advisor will be able to provide more details about the tax savings benefits.

Amortization 

-refers to the way in which the balance of principal versus interest changes over time. During the first few years of your mortgage (typically for the first 2 to 3 years of a 30-year loan), most of your payments will be applied toward interest. During the final years of your loan, your payments will be applied almost exclusively to the remaining principal. This process is called amortization.

How should I choose a lender?
Carefully! Look for financial stability and a reputation for customer satisfaction. Select a company that gives helpful advice and that makes you feel comfortable. It is best to select a lender that has the authority to approve and process your loan locally, so you can more easily monitor the status of your application and ask questions. Plus, it helps when the lender knows about local home values and conditions. Do research -- ask your agent, family, and friends for recommendations.

What is the best way to compare loan terms between lenders?
Speak with companies by phone, in person, or search the Internet. In addition to your research, I can provide a variety of proven lender and mortgage options. While competitive rates are important, remember that most lenders get their money from the same sources and therefore essentially have the same rates. As a result, the decision often comes down to other factors.

The Interest Rate
Interest Rates are most important when you lock a loan. What is important is that you have a loan program that fits your particular financial situation and needs at the time you purchase your home. Remember that each 1/4 point (0.25%) may not have as much impact as you think.

Principal

The original balance of money loaned, excluding interest. Also, the remaining balance of a loan, excluding interest. Interest is calculated based on the principal.

Interest

The charge, in dollars, for the use (loan) of the money.

Taxes

The county assessor determines the property tax based on the value of your home. There are two tax installments due each year. The first installment is due November 1st and is delinquent after December 10th. The second installment is due February 1st and is delinquent after April 10th.

Taxes may be impounded, depending on the amount of your down payment. (A down payment of less than 20% usually requires an impound account).

An impound account, set up by the lender, is a trust account to which a portion of the monthly payment is credited so that funds will be available for the payment of taxes and insurance when they’re due. This way, the lender actually pays your tax bill for you. (Supplemental taxes usually are still the responsibility of the homeowner.)

Hazard Insurance

An insurance policy pays for the loss of a home from certain hazards, including fire. You obtain homeowner’s insurance from your own insurance agent. The standard policy pays replacement costs, minus depreciation based on the actual cash value. Talk to your insurance agent about the different types of insurance available. Hazard insurance expenses may also be impounded in the trust account with taxes.

Private Mortgage Insurance (PMI)

Depending on the amount of your down payment, you may be required to have PMI. A down payment of less than 20% usually requires PMI. Because loans with small down payments involve substantially more risk for the lender, they need protection in case the loan goes into foreclosure. Mortgage insurance helps cover the lender’s loss in the event of a foreclosure. Because of this insurance, lenders are able to offer loans with lower down payments.

PMI premiums are collected monthly as a part of your mortgage payment. The cost of PMI varies with the amount of your down payment. Can you pay off your loan ahead of schedule? Yes. By sending in extra money each month or making an extra payment at the end of the year, you can accelerate the process of paying off the loan. When you send extra money, be sure to indicate that the excess payment is to be applied to the principal. Most lenders allow loan prepayment, though you may have to pay a prepayment penalty to do so. Ask your lender for details.