FAQ2017-10-15T12:27:44-04:00

FAQ For Mortgage Loans

I’ve got excellent credit, trust me. Can’t you give me a pre-approval letter without running my credit?2017-01-11T21:56:20-05:00

No.

How long does a refinance take?2019-03-13T06:56:59-04:00

The longest part of a refinance is the time it takes to receive the appraisal and title work.  On average, a refinance should take no more than two to three weeks from start to finish.

Why does Credit Karma say I have a 640 credit score but you say my credit score is actually a 540?2019-03-14T09:19:51-04:00

Credit Karma uses what is often referred to as a FAKO score, not a FICO score. It’s not “fake” it just uses a different point system which can throw things off by as much as 100 points. Credit Karma is a free service that does a great job helping you monitor your credit, but it will not give you your accurate FICO score. I often see FICO scores up to 100 points lower than what Credit Karma shows, but 10% of the time it goes the other way and can be around 80 points higher. We truly never know until I pull  your credit and see where you really are.

How much are closing costs on a refinance?2019-03-14T09:21:08-04:00

Great question. It primarily depends upon your state and the title company. Title fees are reduced for refi’s, there is no Owner’s Title Insurance, and you won’t have to pay a year’s worth of home owner’s insurance up front because you already have a policy in place.  Escrows are the tricky part. The first thing to point out about escrows is that it is your money being held in escrow. The second part is that it all depends on when in the year you are refinancing. When you reestablish your escrows, whatever is currently in your escrow accounts will be refunded to you. So it will ultimately be a wash. Again, it’s your money. If you are refinancing closer to the end of the year when taxes are due, the lender may require a full year of taxes to ensure taxes are paid on time. If this happens, you will get the full amount that is in your escrows account refunded to you. In this example, you would be skipping potentially two house payments and a year’s worth of taxes will be refunded to you within 30 days of closing. If this takes place at the end of the year, that’s a pretty nice chunk of cash for Christmas shopping. 🙂

The bottom line is that since there are so many variables for each individual refi, it’s best if I work up those numbers specific to your situation. Just give me a call.

I had a foreclosure, can I still get a loan?2019-03-13T06:24:18-04:00

Yes. Your wait time will depend upon the loan product (FHA, Conventional, VA, USDA). We need to verify when your deed was actually transferred because the day of foreclosure is rarely the day of deed transfer–when the deed moved out of your name and into someone else’s. As long as it has been three years and your credit has recovered enough, I can help. And remember, a short sale is considered a foreclosure in the mortgage industry.

What if I don’t want to roll the closing costs into my loan when I refinance?2017-01-15T18:14:15-05:00

In that case you would need to bring cash to close and we would need bank statements to show that you have the cash available. I will always work out estimated cash to close even if we are rolling it into the loan so you know what to expect.

I’m still in Chapter 13 bankruptcy; can I still get a loan?2017-01-11T22:07:52-05:00

It is definitely possible. I need to ask you some questions, though. Call me.

My most recent mortgage statement shows my payoff as $xxx,xxx. Why do you need to order a payoff from the bank?2017-01-15T18:11:44-05:00

Mortgage payoffs are always higher than the balance on your mortgage statement for two reasons: the balance on your statement shows the principal balance but does not reflect the daily interest that accrues, and interest is paid in arrears meaning that this months payment is paying last months interest. Consequently, a payoff is your principal balance, your daily interest up to the point of funding, and last month’s interest payments.

If I have accounts in dispute, can I still get a loan?2019-03-14T09:24:22-04:00

If the account in dispute and has a zero balance, yes. If you owe money, the account often has to be out of dispute before you can get a loan. But I will run it through the Automatic Underwriting System and it will make the final determination.

How much cash can I get with a cash out refinance?2017-01-15T18:46:44-05:00

That is completely dependent upon the appraised value and the payoff on your current loan. Give me a call and we’ll figure it out.

I took care of that judgement years ago, why is it still on my credit report?2017-01-11T22:06:11-05:00

They stay on your credit report because it’s counted as “derogatory credit” history. As long as it is resolved, it doesn’t really matter.

What can I use the money for on a cash out refinance?2017-01-15T18:46:23-05:00

Whatever you want.

My student loans are in deferment, so I’m good right?2019-03-14T09:26:03-04:00

No. If your student loans are in deferment we have to take 1% of the balance on an FHA loan and add that to your monthly payments. This will definitely impact your DTI. If you still qualify after I add in 1% to all your deferred loans, then you are good to go. For conventional loans you would have to prove a $0 payment is income based. If you can do that, we can use $0.00. Otherwise it’s 1%.

Can I go from an FHA loan to a conventional loan while taking out some cash?2017-01-15T18:45:55-05:00

That depends upon the appraised value and your remaining principal. It is certainly possible.

I’m making payments on my student loans, so am I good?2019-03-14T09:28:18-04:00

Yes and no. Great job in paying them; please don’t stop. Provided your payments are more than 1% of the balance, we’re good. If they are less than 1%, we need to prove that they amortize over the life of the loan. If it’s a conventional loan, we can most likely use that payment amount. I will walk you through this. Give me a call.

What does it mean if I have a judgement on my credit?2019-03-14T09:30:01-04:00

It means court is involved. If you already addressed it and it doesn’t say “resolved”, we need documentation from the court stating it’s been taken care of. If it states it is “resolved”, we don’t need anything. If it isn’t resolved, it must be resolved before you can close on your loan. **Unfortunately these no longer show up on credit reports, but it will be found in underwriting, so please let me know up front so there are no surprises.

Do you do a hard credit pull?2017-01-11T22:04:29-05:00

Yes.

If I pay off my collections, will it raise my credit score?2017-01-11T22:03:45-05:00

Depending on how you do it and when the debt was incurred, you could actually hurt your credit score by paying it off. I can tell you the best way to address paying off collections. Call me.

Do I have to pay off all my collections?2017-01-11T22:02:33-05:00

NO. Not necessarily. I have a couple different ways to address this depending on your situation. Call me.

Why is that account still reporting on my credit report?2017-01-11T22:01:40-05:00

I have no idea. You should call them. I will give you their contact info.

Do you pull credit from all three credit bureaus?2017-01-11T22:00:53-05:00

Yes, we pull what is called a “tri-merge” report which is your Experian, Equifax, and TansUnion. We then throw out the low score and use the middle score for qualification purposes.

Why do you need 60 days a of bank statements?2017-01-11T21:41:45-05:00

This is the current “look back” period lenders require to combat money laundering and mortgage fraud. Any large deposits that cannot be sourced to their origin, i.e., large cash deposits, cannot be used. They need a full 60 days.

Why do you need more bank statements to show my earnest money deposit (EMD) leaving my account?2019-03-15T09:00:49-04:00

When you buy a home, most of the time the seller requires an earnest money deposit (EMD) to show you are serious about your offer and to compensate them for the time they have the home off the market in case you don’t close for some reason. This EMD check takes a while to get cashed or deposited into an escrow account, but once the seller accepts the offer and we have a signed contract, we have everything we need to start processing your loan. When we submit your loan to underwriting, we include 60 days of bank statements. However, the lender will want to see the EMD debited from your account in order to verify sufficient funds to close once that amount is debited. This means that as soon as the EMD shows on your account, we will either need updated bank statements depending on where in the month your bank generates monthly statements, or we will need a “transaction history” that shows all activity from the end of the last bank statement we turned in until the EMD is debited from your account.

Can I move money around to consolidate it into one account to write one check when it’s time to close?2019-03-15T09:03:04-04:00

You absolutely can, but do it at the very beginning of the loan process and supply 60 days of bank statements from ALL of the accounts so we can trace the transfers from and into your various accounts. The lender will verify available funds from each bank account and note it on the closing instructions that funds are to come from X, Y and Z accounts not to exceed the verified amount per account. If you decide at the last minute to consolidate your money, you will severely jeopardize your closing by providing more funds than were previously verified in that account. Closing will literally stop and we will have to produce bank statements showing the transfer of funds and the underwriter has to review them again. BIG problem. Do NOT move funds around at the last minute. Please. And I would prefer you don’t move them around at all… but I understand if you do.

Why can’t I use cash? It’s American money!2017-01-11T21:42:27-05:00

True. Trust me, I get it. But cash is considered “mattress money” and simply cannot be used in accordance with current regulations and lending laws. I had a client who had $500,000 cash he had been saving up and couldn’t use a dime of it. To say he was mad is an understatement. Stick it in a bank today and let it season for longer than the 60 day look back period.

Why do you need 30 days of pay stubs?2017-01-11T21:15:08-05:00

We need 30 days of pay stubs in order to extrapolate your yearly income. In addition to looking at hourly or salary wages, we look at overtime pay, shift differentials, and a myriad of other possible income sources. Your pay stubs must show your earnings year to date otherwise the underwriter will order a “verification of employment” or VOE from your employer.

Why do you need my K-1 if I am self employed?2017-01-11T21:40:02-05:00

It documents the percentage of the business or businesses you own, the profit or loss for that business, and if you have a business partner it will tell us whether or not the partner receives a cash distribution from the partnership.

Why do you need two years of my W2s?2019-03-15T09:05:57-04:00

In order to ensure you have two years of work history and meet government lending standards, we have to verify income over the past two years. W2’s are compared to your tax transcripts that we’ll order during the loan process as an extra step to eliminate mortgage fraud. If the transcripts come back with a W2 we’re not showing, we’ll need to add that other job to your application. Best to get everything up front.

Why do you need my tax returns if I’m not self employed or own any rental properties?2019-03-15T09:07:52-04:00

For two possible reasons: the first is when we have to order your tax transcripts from the IRS. They will reject the request form if there is any discrepancy at all between your tax returns and your transcript request to include the home address on your tax returns. If it’s wrong on your return, it will need to be wrong on the transcript request so it matches what the IRS has. The second reason is because you would  be surprised at how many times people leave out self-employment income or various places of employment from their employment  history. This gives me another opportunity to make sure your income is correct, otherwise the IRS transcripts will show it and we’ll get conditioned for it.

I receive alimony and/or child support, what do you need?2017-01-11T21:39:20-05:00

I need your entire divorce decree, any amendments, and any additional court documents for any changes over the years. Yes, this is very personal but you need to know a couple things: Neither I nor underwriters have the time to read these in their entirety. We skim them for the pertinent info pertaining to your child support and alimony so there is not a single instance where I have actually read the circumstances surrounding a divorce. Second, these are public records. Anyone can see them or obtain them if they want to, so holding them back just creates delays.  I had a borrower provide me the most recent amendment to their child support agreement but had an absolute fit about providing the entire divorce decree because it was apparently a nasty divorce. No level of assurance from my end would make my borrower budge. The loan was going to die in underwriting because of this. Lending regulations require the underwriter to see the entire document to trace any and all payments received or obligations. I finally just contacted the court and they faxed them right over while I was on the phone. To this day I have no idea what was in them, nor do I care. It cleared underwriting without an issue and the loan closed.

Along with the divorce decree we will also need to show these payments being deposited into your bank account because, particularly when it comes to child support, there is what the court orders and there is what is actually received.

If I receive Social Security, what do I need to provide?2017-01-11T21:37:24-05:00

In December of every year the social security administration sends out a benefits letter in the mail that explains your upcoming social security benefits. It comes folded with a perforated edge and once unfolded is quite long. We need this entire document, both sides. Otherwise you need to contact your local SS admin office and get a copy of your benefits letter.

What do I provide for disability income?2017-01-11T21:38:19-05:00

You received a benefits letter that breaks down your disability pay. We need that.

I have rental properties, can I use the full rent I receive to offset those mortgages?2019-03-15T09:10:41-04:00

It depends on how long you’ve owned them and what shows on your tax returns. If it’s a new rental property not reflected on your taxes, lending laws allow you to use 75% of your rental income per property because they are using a 75% occupancy rate and going under the standard assumption you might not have rent income for 25% of the year.

How long will my appraisal take?2017-01-14T10:36:27-05:00

On average they come back in a couple weeks, sometimes faster if we’re lucky. During peak volume times like the summer, your appraisal will often take longer. There are places in MN and CO that can take nearly 30 days. These are exceptions, but we never know until we order the appraisal which is why we like to do so as soon as possible. If you live in rural areas, your appraisal can take longer as well. Rural areas typically do not  have a strong bank of appraisers to choose from. We are more or less at their mercy, unfortunately.

How much will my appraisal be?2019-03-15T09:14:44-04:00

This completely depends on what type of loan it is, what lender you are going through, and where you live. VA loans are usually around $425-$475 but vary by state, FHA loans tend to run between $475-$550, and conventional loans can average anywhere from $475-$525 but can be more depending upon the square footage. We truly never know until we order it.

Why do I have to fill out the appraisal request form up front?2019-03-15T10:14:41-04:00

Some lenders require this up front; others cover the cost for the appraisal and then get reimbursed at closing. If they ask you for an appraisal order form, it’s because they need to order the appraisal as soon as possible and this form allows them to do so the second they get the green light. If an appraisal is paid outside of closing by the buyer, or “POC”, it’s because appraisers have to be paid up front to do their work whereas lenders and brokers only get paid if the loan closes. Paying up front with a credit card mitigates the risk of the lender being stuck with the bill for the appraisal which is a “third party” fee. Every lender/broker handles this differently. Regardless, this is why many loan officers won’t order the appraisal until the inspection is finished, so get that home inspection done ASAP so you don’t slow down the appraisal. 🙂

Does the lender or the broker make any money off of the appraisal?2017-01-14T10:38:00-05:00

No. The appraisal is absolutely a third party fee.

The appraisal came in higher than my sales price, so can I use that extra amount for my down payment or for upgrades?2017-01-14T10:38:09-05:00

No. Congratulations on your instant equity, but a lender will lend based upon the sales price or the appraised value, whichever is lower.

The appraisal came in below the sales price. What now?2019-03-15T10:18:48-04:00

Either the seller lowers the sales price to the appraised value, or you have to bring the difference between the sales price and the appraised value on top of your down payment because the lender will only lend on the appraised value if it’s lower than the sales price. You can also meet in the middle and split the difference with the seller. Your agent will help you negotiate this.

I got charged an extra fee because the house is extremely rural. What gives?2019-03-15T10:21:00-04:00

In extremely rural areas, appraisers are authorized to charge extra money to compensate them for the time and distance they have to travel. We don’t know until the appraisal management company (AMC) tells us they need to charge the additional fee. There is nothing we can do about it because it’s a third party who handles appraisals. We have zero control. Trust me, it truly stinks to call a borrower and let them know the appraisal will cost more. I’ve only had to make that call a few times, so it doesn’t happen often, but it does happen.

Why do I have to pay for the appraiser to go back out to the house a second time?2017-01-14T10:38:37-05:00

The appraisal came back “subject to completion” meaning repairs had to be made and the seller needs to make them. Unfortunately, it also means the appraiser needs to go back out and verify the repairs are complete so they can fill out a “completion report” and close out the appraisal.

Since it’s a new construction, should we wait until everything is finished before ordering the appraisal?2019-03-15T10:30:07-04:00

I recommend ordering the appraisal before completion because the initial inspection is what takes the longest and there is no guarantee when the appraiser can get out there. Waiting until the construction is complete will put your closing date in jeopardy if the appraisers are booked and can’t make it out for a while. If you order the appraisal before completion, they can do the appraisal “subject to completion” and once all construction is done we will order the completion report. Most of the time they can complete this in one to two days because the hard work is done and all they have to do is verify the work is complete and take a few pictures. This does make you incur the additional trip fee, but it’s worth it to ensure the appraisal doesn’t cause issues with your closing date.