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Loan & Mortage Information

The Loan Process

The loan approval process generally begins with an initial interview where the prospective home buyer and the mortgage professional meet to discuss the potential loan. You will need to bring information to verify your income and long-term debts.

People often prefer to meet with the mortgage company before house hunting to determine in advance what price range they can realistically afford and the mortgage amount for which they can qualify. This step is called pre-qualification and can save you much time and trouble by making certain you are looking in the correct price range.

For your first meeting with the mortgage company, you should bring:

• Purchase Contract. For the house if you have one.
• Bank Information. This includes your bank account numbers, the address of your bank branch and checking and savings account statements for the previous 2-3 months.
• Proof of Employment and Income. This includes pay stubs, W2 withholding forms, tax returns for two years or other proof of employment and income verification.
• Divorce Settlement Papers. If applicable.
• Monthly Expenses. This includes credit card bills for the past few billing periods or canceled checks for rent or utility bill payments. This is to show payment history and amount of revolving debt.
• Other Consumer Debt. This includes such things as car loans, furniture loans, student loans and retail credit cards.
• Balance Sheets and Tax Returns. Applies if you are self-employed.
• Gift Letters. If you are using a gift from a parent or relative or other organization to help pay the down payment and/or closing costs, you will need these letters stating that the money is in fact a gift and will not have to be repaid.

Having these items on hand when you visit the mortgage company will help speed up the application process. Usually an application fee and the appraisal fee will have to be paid when you submit the mortgage application. This is only done after you have successfully negotiated on a home and have had your offer accepted by the seller. Generally, there is no fee for pre-qualification.

After the initial meeting with the mortgage company, you should have a general idea if you qualify for the size and type of loan you want. The mortgage company should let you know if you qualify for the loan within days. If you are denied a home loan, the mortgage company must explain the reasons. If this happens, the mortgage company will usually discuss any options with you.

Mortgage Information

Refinance Considerations
When you're making your decision, there are several things to keep in mind.
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Refinance Again
When rates fall steadily, refinancing may make sense even if you have done so once already. Bob and Michelle Barbo of Kirkland, Wash. refinanced twice within three months in 1998.
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Build Home Equity Faster
Many borrowers use a refinance to shorten the term of the mortgage. And brace yourself: Even at low rates, a shorter term means a higher monthly payment. The benefit is that you'll build up equity faster and pay far less in total interest over the life of the loan.
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Hard Money
Another way to make a refinance work for you is to refinance for more than the balance remaining on your old mortgage -- in effect, tapping your home equity, or "cashing out" in mortgage speak.
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Trade Your ARM For a Fixed Rate
By switching to a fixed-rate loan, you will not only reduce your payment, you will also likely lock in an attractive rate for as long as you own your home.
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Refinance Costs
When you refinance your mortgage, you usually pay off your original mortgage and sign a new loan. With a new loan, you again pay most of the same costs you paid to get your original mortgage.
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Analyze Your Savings
Check the market closely to determine the available rates and the costs associated with refinancing. These costs can include items such as an appraisal and other various fees and points.
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Buy Down Your Rate
In refinancing, a mortgage company usually offers a range of interest rates at different amounts of points. A point equals one percent of the loan amount. For example, three points on a $100,000 mortgage loan would add $3,000 to the refinancing charges.
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Your Personal Income Taxes
With a lower interest rate on your home loan, you will have less interest to deduct on your income tax return. That, of course, may increase your tax payments and decrease the total savings you might obtain from a new, lower-interest mortgage.
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Consider Other Mortgage Programs
If you are thinking about refinancing your mortgage, you might want to consider other types of mortgages. For example, you might want to look into a 15-year, fixed-rate mortgage.
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Deciding to Refinance
Traditionally, the decision on whether or not to refinance has meant balancing the savings of a lower monthly payment against the costs of refinancing. But in recent years, companies have introduced "no cost" and low-cost refinancing packages that minimize...
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