Click on the questions below for answers to our most frequently asked questions.
A credit score, or FICO, reflects your credit history, how much debt you are carrying, and your payment history on those debts. Your score will determine your loan qualification. FICO scores range from 300 to 850; the lower your score, the more risk you present to lenders which can impact your ability to get approved and the cost of your loan. A credit score is a snapshot of your payment history and it will change month to month.
FICO Scores are calculated from data that can be grouped into five categories.
Payment History reflects amounts due and delinquency on various accounts such as credit cards, loans, and mortgages. Your history also includes public records such as bankruptcy, suits, and liens.
Amounts Owed shows the amount owing on specific accounts, number of accounts with balances, proportion of credit lines used, and proportion of installment loan amounts still owing.
Length of Credit History is the time since accounts were opened, and the time since account activity.
New Credit is the number of recently opened accounts, number of recent credit inquiries, and the timing of these transactions. Another factor is the re-establishment of positive credit history following past payment problems.
Types of Credit Used considers whether it is a one-time loan you are slowly paying back, like student loans or revolving credit that fluctuates month to month, like your AMEX card.
Maybe. Mortgage rates are based on many factors including credit score, but we will also need to know about the property type, down payment and mortgage loan product before a discount for your credit can be considered.
A cosigner cannot fix your credit. Your credit report is made up of information from the three major credit repositories Equifax, Experian and Trans Union. Each reports a credit score for each borrower. The lender is going to use the lowest middle score between both the borrower and co borrower for mortgage purposes. If your credit needs to be repaired there are many non-profit agencies in Connecticut that can help you get on the right track. A McCue Mortgage loan originator can provide you with a credit counselor’s contact information.
A lender looks at your credit history as an indication of your creditworthiness, i.e. an indication of the likelihood that you will repay according to the agreement. You can be better prepared for your entrance into the mortgage market if you get a copy of your credit report and review it before you apply. This way, if there are any errors on your credit report, you can take the necessary steps to correct them before your mortgage application.
If you have had credit problems, be prepared to discuss them honestly. We understand that there can be legitimate reasons for credit problems, such as unemployment, illness or other financial difficulties. If you had a problem that has been corrected and your payments have been on time for a year or more, your credit will probably be considered satisfactory.
When you own your own home and make mortgage payments, the principal portion of the mortgage payment is applied to the unpaid balance of your loan. This reduces the debt owed and increases your equity in your home. Now your home is also your investment. The interest portion of your mortgage payment qualifies you for a tax deduction, this results in money in your pocket. Homeownership gives you the great feeling of being in control of your special space.
A tenant is subject to the management abilities of the landlord. Rents can increase, properties can fall into disrepair, the interests of your landlord may not always be your best interests.
You can answer this by asking yourself some questions:
- Do I have a stable source of income? Have I been employed on a regular basis for the last 2-3 years? Is my current income reliable?
- Do I have a good record of paying my bills?
- Do I have minimal outstanding long-term debts, like car payments?
- Do I have money saved for a downpayment?
- Do I have the ability to pay a mortgage every month plus my outstanding debts?
If you can answer “yes” to these questions, you are probably ready to buy your own home.
The Home Buying Process
Choose your lender carefully. Look for financial stability and a reputation for customer satisfaction. Be sure to choose a company that gives helpful advice and that makes you feel comfortable. A lender that has the authority to approve and process your loan locally is preferable, since it will be easier for you to monitor the status of your application and ask questions. Plus, it’s beneficial when the lender knows home values and conditions in the local area. Do research and ask family, friends, and your real estate agent for recommendations.
The best time to contact a lender is when you start thinking about buying a home. Although you can’t actually apply for a mortgage until you have chosen your home and signed a contract to buy it, you shouldn’t wait until then to start talking to us. Contacting McCue Mortgage at the beginning of the process will help you to determine how much house you can afford and how much you can afford to borrow. We will also guide you through all of the steps in purchasing your new home and help you find a mortgage that meets all of your needs.
Start by thinking about your situation. Are you ready to buy a home? Talk to friends and family, drive through neighborhoods and look in the “Homes” section of the newspaper. Call a McCue representative who will help you determine how much can you afford in a monthly mortgage payment. How much space do you need? What areas of town do you like? After you answer these questions, make a “To Do” list and start doing casual research.
Pre-qualification is an informal way to determine how much you may be able to borrow. You can be pre-qualified over the phone with no paperwork by telling us your income, your long-term debts and how large of a downpayment you can afford. Without any obligation, this helps you arrive at a ballpark figure of the amount you may have available to spend on a house.
Pre-approval is an actual commitment to lend to you. It involves assembling several financial records and going through a preliminary approval process. Pre-approval gives you a definite idea of what you can afford and shows sellers that you are serious about buying.
Often home buyers are misled by being “pre-qualified” by an online lender for a loan size they are not actually qualified for. Not all pre-approvals are considered equal. Some pre-approvals or pre-qualifications are simply a quick review of your salary and credit score, without a full analysis of your financial situation. At McCue Mortgage, we offer an approval you can count on called the Buyer’s Edge. Our Buyer’s Edge is a reliable approval of your ability to afford a house and is done before you find a house. It does not include a property appraisal and does not require a sales contract. The Buyers’ Edge pre-approval allows you to shop for a home with full confidence.
You need to provide documentation of income (to support the mortgage), assets (to make a downpayment and pay closing costs) and ongoing debts. More specifically this includes the the following information:
- W2’s for the past 2 years
- 4 current paystubs
- Residence addresses from the past 2 years
- Names and addresses of employers from the past 2 years
- Last 3 months of bank statements for all checking, savings, mutual funds/401K etc.
- Names, addresses, account numbers and monthly payments on all open loans – car, student, personal, mortgage, etc. plus credit cards and other debts
- Addresses of other real estate owned; if rental, we need leases
- Last 12 months rent checks or Landlord’s full name and mailing address for the past 2 years
- Copy of Social Security Card (FHA)
- Legal description/Deed (FHA/VA)
- Green Card (if applicable)
- Certificate of Eligibility (VA)
- If you are self-employed, we need last 2 years tax returns and all schedules
- Copy of Divorce Decree
- Purchase Agreement
- And possibly the last 3 years tax returns (CHFA)
Hopefully, at the application session, you have been able to supply the sales representative with all the necessary documentation that he/she has requested from you. If so, the sales rep will order an appraisal of the property and submit the loan package for underwriting. The loan will be reviewed by an underwriter in a day or so, and you will be contacted if any additional information is necessary. When the appraisal and any additional information is received the loan will be underwritten and if appropriate an approval will be issued. This is usually occurs within 8-14 days. When the loan is approved you will receive a Commitment Letter that will inform you of any closing conditions and instruct you to schedule the closing with the attorney.
An inspector checks the safety of your potential new home. Home inspectors focus especially on the structure, construction and mechanical systems of the house and will make you aware of repairs needed.
Generally, an inspector checks and gives prices for repairs on the electrical system, plumbing and waste disposal, the water heater, insulation and ventilation, the HVAC system, water source and quality, the potential presence of pests, the foundation, doors, windows, ceilings, walls, floors and roof.
It’s a good idea to have an inspection before you sign a written offer since, once the deal is closed you’ve bought the house “as is”. You may want to include an inspection clause in the offer when negotiating for a home. An inspection clause can also specify that the seller must fix any problems before you purchase the house. Otherwise, an inspection clause gives you an ‘out” on buying the house if serious problems are found or gives you the ability to renegotiate the purchase price if repairs are needed.
Basically, you’ll sit at the closing table with your realtor, the seller and his/her realtor and a closing attorney. The attorney will have several documents for you and the seller to sign. While he/she will give you a basic explanation of each document, you may read each one and consult your attorney to make sure you understand exactly what you are signing. Before you go to closing, your lender is required to disclose and explain the closing costs including a “good-faith estimate” of how much cash you’ll have to supply at closing and a list of documents that you will need.
The best way to expedite the home buying process is to be organized and prepared. Talk in advance to your mortgage loan originator about what documents you will need to provide. Getting pre-approved will not only alleviate the stress of wondering if you will be approved, but will also get the process moving faster. Your REALTOR® will require at least a pre-qualification before showing you properties and being pre-approved will help a seller consider you as a serious candidate. After you find your home and negotiate a sales contract, you will get the tests required in the contract performed and review the results with your REALTOR®. Any re-negotiating to address test results will then be done through your REALTOR®. Meanwhile, your lender will get a copy of your sales contract and order an appraisal. When the appraisal and any additional information are received, the loan will be underwritten and approved. You will receive a Commitment Letter that will outline any closing conditions and instruct you to schedule the closing with the attorney. This entire process can take 4 to 6 weeks.
This answer depends on a number of factors including the cost of the house and the type of mortgage that you get. In general, you need to come up with money to cover three costs:
- Earnest money, the deposit you make on the home when you submit your offer to the seller to prove that you are serious about buying the house
- The downpayment, the difference between the sales price and the mortgage amount, if that amounts differs from the earnest money and
- Closing costs, the costs associated with the processing and closing of the loan.
There are mortgage options that we offer that only require a downpayment of 5% or less of the purchase price. But the larger the downpayment, the less you have to borrow and the more equity you’ll have. Mortgages with less than a 20% downpayment generally require mortgage insurance to minimize the risk to the lender. When deciding the size of your downpayment, consider that you’ll also need money for closing costs, moving expenses and possibly, repairs and decorating for your new home.
There may be closing costs customary or unique to a certain locality, but closing costs are usually made up of the following:
- 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
- Recording fees
- Survey fee
- First premium of mortgage Insurance (if applicable)
- Title Insurance
- Loan discount points
- First payment to escrow account for future real estate taxes and insurance
- Paid receipt for homeowner’s insurance policy (and fire and flood insurance if applicable) and
Any documentation preparation fees
Terminology – The Language of Mortgage Lending
Generally speaking, a mortgage is a loan obtained to purchase real estate. The “mortgage” itself is a lien (or legal claim) on property that secures a promise to pay back the debt.
The Good Faith Estimate (GFE) is a disclosure that you will receive at the initial application session for your mortgage loan. It will estimate for you the cost and fees that are associated with the particular mortgage loan that you have selected. The disclosed fees would include but are not limited to fees for points, an appraisal, a credit report, flood certification, processing fees, mortgage insurance, attorney and title costs, interest, recording and escrows. Some fees are collected at application, while other fees are collected at closing. All lenders are required to supply GFEs so that loan applicants can make accurate judgments when shopping for a loan.
Points are loan fees paid to lenders. 1 point=1% of the loan amount. Therefore, on a $100,000 loan 1 point is $1,000. Points may be further classified as origination points or discount points. Origination points are charged by a mortgage company as a fee to process and approve your loan, while discount points are used to buy down the rate of interest.
It is your decision whether to pay points or have a higher rate, however several other factors are important in making this choice. Contact your sales representative to see which option is the best for your situation.
The loan to value ratio (LTV) is the amount of money you borrow compared with the price or appraised value of the home you are purchasing. If a borrower makes a 20% downpayment, he/she is said to have a 80% LTV on the loan. Each loan type has a maximum LTV limit. The LTV ratio reflects the amount of equity borrowers have in their homes. The higher the LTV the less cash homebuyers are required to payout of their own funds. So, to protect lenders against potential loss in case of default, higher LTV loans (80% or more) usually require mortgage insurance.
Mortgage insurance (MI) is insurance that protects lenders against some or most of the losses that result from defaults on home mortgages. It’s usually required on all government insured loans and on conventional loans with a downpayment of less than 20%. In most cases, mortgage insurance can be dropped after the LTV declines to under 78%. Information regarding the cancellation of any MI on your loan will be disclosed to you at application and again at closing.
APR stands for Annual Percentage Rate. This percentage rate expresses the charges imposed on a borrower to obtain a loan. It includes the interest, points and other costs and fees that are paid by the borrower.
For most homebuyers, the monthly mortgage payment included three separate parts: a payment on the principal of the loan (the amount borrowed); a payment on the interest; and a payment if applicable into a special account (called an escrow account) that we maintain to pay for things like hazard insurance and property taxes. These elements are referred to as PITI that is “Principal-Interest-Taxes-Insurance”.
At the time of loan application, the applicant has the ability to choose to enter into an agreement with the lender to guarantee the current interest rate for a specified time period. This is called a rate lock period. On the other hand the applicant, for whatever reason, may not wish to lock into this type of an agreement with the lender. The applicant then chooses to float the interest rate until prior to the closing. Locking and/or floating the interest should be discussed with your sales representative prior to the application session.
There isn’t a simple answer to this question. The right kind of mortgage depends on several different factors:
- Your current financial picture;
- in what way you expect your finances to change;
- how long you intend to keep your house;
- and how comfortable you are with changes in you mortgage payment from time to time.
The best way to find out which mortgage is right for you is to discuss your finances and preferences with a representative at McCue.
Before you start looking at homes you need to have some idea of what you can afford. At McCue Mortgage, it is possible to pre-qualify or get pre-approved for a mortgage. Doing this before you start looking for a home will allow you to know exactly how much house you can afford and how much you can afford to borrow. Most importantly, a pre-approval indicates to the seller that you are serious and it gives you more buying power.
Yes. McCue Mortgage offers several affordable mortgage options which can make buying your first home a positive experience that is easier and less stressful than you might think. We can help borrowers who don’t have a lot of money saved for the down payment and closing costs, have no credit or poor credit history, have quite a bit of long-term debt or have experienced income irregularities. Visit our “Buying Your First Home” page for more information.
Rates are based on many factors such as the type of property, how you will use the property (primary residence, 2nd home or investment property), the mortgage loan product, amount of the down payment and your credit score. Once our licensed mortgage loan originators know this information regarding your purchase, they can quote you a rate.
There are some mortgage products available that will allow you to finance the down payment and closing cost. One of our licensed mortgage loan originators can discuss these products with you to see if you qualify.