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| LOAN PROCESS |
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Application |
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What can you expect when you apply for a mortgage? |
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What supporting documentation will I be required to provide? |
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After I've submitted my application, can I make changes? |
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Can I obtain pre-approval before finding a property? |
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Do I need to sell my existing home before I apply for a new mortgage loan? |
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Is there an application fee or any upfront costs? |
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Should I pay discount points in exchange for a lower interest rate? |
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Who is my contact person? |
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How frequently am I updated regarding the status of my loan? |
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How do I receive my loan documents? |
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How do I calculate my Loan-to-Value ratio (LTV)? |
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How do I calculate the value of my property? |
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How do I know if it makes sense to refinance? |
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Can I set up a direct debit to make my monthly payment? |
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How do I know if it's best to lock in my interest rate or to let it float? |
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What is a credit score and how will Shearson Mortgage use credit scoring to evaluate my application? |
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I'm self-employed. How will you verify my income? |
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Will Shearson Mortgage consider my overtime, commission or bonus income when evaluating my application? |
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I am retired and my income is from pension or social security. What will I need to provide? |
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If I have income that's not reported on my tax return, can it be considered? |
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How will Shearson Mortgage verify the rental income I have? |
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I have income from dividends and/or interest. What will I need to provide? |
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Do I have to provide information about my child support, alimony or separate maintenance income? |
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Will my second job income be considered? |
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I am relocating because I have accepted a new job that I haven't started yet. How should I complete the application? |
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I've had a few employers in the last few years. Will that affect my ability to get a new mortgage? |
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I was in school before obtaining my current job. How do I complete the application? |
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If my property's appraised value is more than the purchase price can I use the difference towards my down payment? |
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I'm getting a gift from someone else. Is this an acceptable source of my down payment? |
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I am selling my current home to purchase this home. What type of documentation will be required? |
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What will be required if I withdraw money from a 401K account for my down payment? |
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Can I really borrow funds to use towards my down payment? |
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I've co-signed a loan for another person. Should I include that debt here? |
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I have student loans that aren't in repayment yet. Should I show them as installment debts? |
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How will a past bankruptcy or foreclosure affect my ability to obtain a new mortgage? |
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What is an installment debt? |
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What if I can't supply the standard documentation necessary to get a loan? |
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What can you expect when you apply for a mortgage? |
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First, you'll complete our on-line application.
The application will ask you questions about the home and your finances and takes less than 20 minutes to complete. As soon as you've finished the application we'll review your request for instant approval. If your application is approved on-line, we'll ask you for a deposit to cover the cost of the appraisal and the final credit report so that we can begin to process your request immediately. This deposit will be credited towards your closing fees at closing.
Within three business hours of completing your application, a loan advisor will contact you to introduce themselves and to answer any questions you may have. Your loan advisor is a mortgage expert and will provide help and guidance along the way. If your request wasn't approved on-line, they'll ask you for any information required to make a decision about your loan.
If you are purchasing a new home, the loan advisor will also contact the Real Estate Broker or the seller so that they'll know whom to contact with questions.
We'll order the appraisal and the title.
We'll order the appraisal from a licensed appraiser who is familiar with home values in your area. Depending on your finances and the loan amount requested, different types of appraisals are used. Sometimes they can do their evaluation from the street and won't have to make an appointment with you to view the inside of your home.
Title insurance will be necessary, if you're purchasing a home we'll work with the real estate broker or seller to insure the title work is ordered as soon as possible. If you are refinancing we'll take care of ordering the title work for you. We'll use the title insurance policy to confirm the legal status of your property and to prepare the closing documents.
Your loan processor will keep you informed every step of the way via e-mail.
We'll contact you to coordinate your closing date.
After we receive all the necessary documents, including the appraisal and title work, we'll contact you to schedule your loan closing. If you are purchasing a home, we'll also schedule the closing with the real estate broker and the seller.
The closing will take place at the office of a title company or attorney in your area who will act as our agent. A few days before closing your loan advisor will contact you to walk through the final information so that there won't be any surprises at closing.
That's all there is to it! You're on your way to the most convenient home loan ever!
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What supporting documentation will I be required to provide? |
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You will generally be asked to support your income with a recent pay stub and the prior year's W-2 Form.
Self-employed individuals must support their income with the prior two years' tax returns.
Funds needed to close the transaction are supported with a copy of a recent bank statement or other liquid financial instruments.
If proceeds from the sale of another property are being used for the down payment, an estimated closing statement on that transaction will be required to support the necessary funds to close.
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Some transactions may require additional documentation.
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After I've submitted my application, can I make changes? |
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Yes.
Loan Advisor can help you with any changes.
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Can I obtain pre-approval before finding a property? |
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Yes.
It's always a good idea to know the amount of financing you qualify for before you begin shopping for a home.
Additionally, having a lender pre-approval in hand will strengthen your offer in the eyes of the seller. Our pre-approval will help you determine the monthly payment you can afford and the amount of cash required to close the transaction.
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Do I need to sell my existing home before I apply for a new mortgage loan? |
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Absolutely not!
You can apply for a new mortgage loan before you sell your current home.
However, depending on your income and debt levels, you may need to sell your current home before you can close on your new home.
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Is there an application fee or any upfront costs? |
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No!
There is no upfront costs. No costs and No obligation. Shearson does not require an up-front fee to submit an application and begin the loan process.
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Should I pay discount points in exchange for a lower interest rate? |
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Discount points are considered a form of interest. Each discount points is equal to one percent of the loan amount. You pay them, up front, at your loan closing in exchange for a lower interest rate over the life of your loan. This means more money will be required at closing, however, you will have lower monthly payments over the term of your loan.
To determine whether it makes sense for you to pay discount points, you should compare the cost of the discount points to the monthly payments savings created by the lower interest rate. Divide the total cost of the discount points by the savings in each monthly payment. This calculation provides the number of payments you'll make before you actually begin to save money by paying discount points.
If the number of months it will take to recoup the discount points is longer than you plan on having this mortgage, you should consider the loan program option that doesn't require discount points to be paid.
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Who is my contact person? |
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Upon receipt of your loan application, a loan advisor is immediately assigned to your loan. Within two hours the loan advisor will call or e-mail you and be your primary contact until your loan is officially opened. After your loan is officially opened, your loan advisor will assign a loan processor to your loan and be your primary contact until your loan is closed.
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How frequently am I updated regarding the status of my loan? |
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Your loan processor will contact you at least once a week with an update on your loan.
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How do I receive my loan documents? |
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After you complete your application with a loan advisor, Shearson Mortgage will provide a package to you via email or mail.
This package will contain your loan application and disclosure documents.
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How do I calculate my Loan-to-Value ratio (LTV)? |
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The Loan-to-Value ratio (or LTV) is one of the most important factors in your loan process. It is used to determine the limits within which your Housing and Debt ratios must fall for you to be approved. It can also determine which fees you will be charged for your loan, and the amount of these fees. It will also determine whether you must pay Private Mortgage Insurance (PMI) and use an Impound/Escrow Account.
Loan-to-Value ratio (LTV) is simply the amount you are borrowing divided by the value of the subject property you are purchasing or refinancing. This gives you a simple ratio. The value of your property is its appraised value OR the amount you pay for the property whichever is lower. In the initial stages of qualification and approval, your property's value is understood to be an estimate. It will be confirmed, if necessary for your particular loan, by a professional appraiser hired by Shearson Mortgage.
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How do I calculate the value of my property? |
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Since a mortgage is a loan secured by a piece of real property, a crucial factor is in the correct value of the property in question. Property value can be determined in a number of ways:
- The Market Value of the property - that is, what a buyer will pay for it, and what other comparable properties in the neighborhood have recently sold for.
- The Appraised Value of the property - that is, what a trained and licensed professional deems the property to be worth based on an inspection, comps, and a thorough analysis of the property and its neighborhood.
Additionally, the appraiser estimates the replacement value of the property, that is, the cost to build a house of similar size and construction in a vacant lot. The appraiser reduces this cost by an age factor to take into account deterioration and depreciation.
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How do I know if it makes sense to refinance? |
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The simple rule of thumb for determining if it makes sense to refinance is to analyze the amount that it will cost you to refinance compared to the monthly savings you'll have by reducing your payment. By dividing the cost of refinancing by the monthly savings you can determine how many monthly payments you'll have to make before you've recaptured the initial refinance cost. If you plan on staying in your home longer than the recapture time it may make sense for you to refinance.
If you are looking to obtain cash for some of the equity in your home, but the interest rate on your current first mortgage is near or lower than current mortgage rates, you may want to consider a home equity loan. With a home equity loan you can obtain the cash you need without paying off your existing first mortgage. If you don't need cash right now or want to have easy access to funds in the future, a home equity line of credit may be just what you are looking for!
To fully analyze whether it's the time to refinance or to obtain a home equity loan you'll have to look deeper. The remaining term of your current loan must also be considered, as well as your tax bracket.
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Can I set up a direct debit to make my monthly payment? |
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Most of our services allow you to set up a direct debit to make your monthly payment. Upon receiving notification regarding the servicer for your loan, contact the toll-free number provided to set up your direct debit.
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How do I know if it's best to lock in my interest rate or to let it float? |
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Mortgage interest rate movements are as hard to predict as the stock market and no one can really know for certain whether they'll go up or down.
If you have a hunch that rates are on an upward trend then you'll want to consider locking the rate as soon as you are able. Before you decide to lock, make sure that your loan can close within the lock in period. It won't do any good to lock your rate if you can't close during the rate lock period. If you're purchasing a home, review your contract for the estimated closing date to help you choose the right rate lock period. If you are refinancing, in most cases, your loan could close within 30 days. However, if you have any secondary financing on the home that won't be paid off, allow some extra time since we'll need to contact that lender to get their permission.
If you think rates might drop while your loan is being processed, take a risk and let your rate "float" instead of locking. You can watch rates and lock in at any time, but at least 5 days prior to your closing.
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What is a credit score and how will Shearson Mortgage use credit scoring to evaluate my application? |
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A credit score is one of the pieces of information Shearson Mortgage will use to evaluate your application. Banks and other financial institutions have been using credit scores to evaluate credit card and auto applications for many years, but only recently have mortgage lenders begun to use credit scoring to assist with their loan decisions.
Credit scores are based on information collected by credit bureaus and information reported each month by your creditors about the balances you owe and the timing of your payments.
A credit score is a compilation of all this information converted into a number that helps a lender to determine the likelihood that you will repay the loan on schedule.
The credit score is calculated by the credit bureau, not by the lender.
Credit scores are calculated by comparing your credit history with millions of other consumers. They have proven to be a very effective way of determining credit worthiness.
Some of the things that affect your credit score include your payment history, your outstanding obligations, the length of time you have had outstanding credit, the types of credit you use and the number of inquiries that have been made about your credit history in the recent past.
Credit scores used for mortgage loan decisions range from approximately 300 to 900. Generally, the higher your credit score, the lower the risk that your payments won't be paid as agreed.
Using credit scores to evaluate your credit history allows us to quickly and objectively evaluate your credit history when reviewing your loan application. However, there are many other factors when making a loan decision and Shearson Mortgage never evaluates an application without looking at the total financial picture of a customer.
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I'm self-employed. How will you verify my income? |
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Generally, the income of self-employed borrowers is verified by obtaining copies of personal (and business, if applicable) federal tax returns for the most recent two-year period. However, based on your entire financial situation, we may not need full copies of your tax returns.
We'll review and average the net income from self-employment that's reported on your tax returns to determine the income that can be used to qualify. We won't be able to consider any income that hasn't been reported as such on your tax returns. Typically, we'll need at least one, and sometimes a full two-year history of self-employment to verify that your self-employment income is stable.
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Will Shearson Mortgage consider my overtime, commission or bonus income when evaluating my application? |
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In order for bonus, overtime, or commission income to be considered, you must have a history of receiving it and it must be likely to continue. We'll usually need to obtain copies of W-2 statements for the previous two years and a recent pay stub to verify this type of income. If a major part of your income is commission earnings, we may need to obtain copies of recent tax returns to verify the amount of business related expenses, if any. We'll average the amounts you have received over the past two years to calculate the amount that can be considered as a regular part of your income.
If you haven't been receiving bonus, overtime, or commission income for at least one year, it probably can't be given full value when your loan is reviewed for approval.
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I am retired and my income is from pension or social security. What will I need to provide? |
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Shearson Mortgage will ask for copies of your recent pension check stubs, or bank statement if your pension or retirement income is deposited directly in your bank account. Sometimes it will also be necessary to verify that this income will continue for at least 3 years since some pension or retirement plans do not provide income for life. This can usually be verified with a copy of your award letter. If you don't have an award letter, we can contact the source of this income directly for verification.
If you're receiving tax-free income, such as social security earnings in some cases, we'll consider the fact that taxes will not be deducted from this income when reviewing your request.
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If I have income that's not reported on my tax return, can it be considered? |
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Generally, only income that is reported on your tax return can be considered when applying for a mortgage. Unless, of course, the income is legally tax-free and isn't required to be reported.
Some lenders may offer a stated income program, which means that you can be qualified for a loan based on the income you state rather than that which can be verified. Usually these programs require larger down payments and offer interest rates that are substantially higher than regular mortgage rates. Shearson Mortgage doesn't offer stated income programs at this time.
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How will Shearson Mortgage verify the rental income I have? |
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If you own rental properties, we'll generally ask for the most recent year's federal tax return to verify your rental income. We'll review the Schedule E of the tax return to verify your rental income, after all expenses except depreciation. Since depreciation is only a paper loss, it won't be counted against your rental income.
If you haven't owned the rental property for a complete tax year, we'll ask for a copy of any leases you've executed and we'll estimate the expenses of ownership.
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I have income from dividends and/or interest. What will I need to provide? |
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Generally, two years personal tax returns are required to verify the amount of your dividend and/or interest income so that an average of the amounts you receive can be calculated. In addition, we'll need to verify your ownership of the assets that generate the income using copies of bank statements, brokerage statements, stock certificates or Promissory Notes.
Typically, income from dividends and/or interest must be expected to continue for at least three years to be considered for repayment of your mortgage loan.
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Do I have to provide information about my child support, alimony or separate maintenance income? |
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Information about child support, alimony, or separate maintenance income does not need to be provided unless you wish to have it considered for repaying this loan.
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Will my second job income be considered? |
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Typically, income from a second job will be considered if a one-year history of secondary employment can be verified.
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I am relocating because I have accepted a new job that I haven't started yet. How should I complete the application? |
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Congratulations on your new job!
If you will be working for the same employer, complete the application as such but enter the income you anticipate you'll be receiving at your new location.
If you're employment is with a new employer, complete the application as if this were your current employer and indicate that you have been there for one month. The information about the employment you'll be leaving should be entered as a previous employer. We'll sort out the details after you submit your loan for approval.
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I've had a few employers in the last few years. Will that affect my ability to get a new mortgage? |
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Having changed employers frequently is typically not a detriment to obtaining a new mortgage loan. This is particularly true if you made employment changes without having periods of time in between without employment. We'll also look at your income advancements as you have changed employment.
If you're paid on a commission basis, a recent job change may be an issue since we'll have a difficult time of predicting your earnings without a history with your new employer.
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I was in school before obtaining my current job. How do I complete the application? |
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If you were in school before your current job, enter the name of the school you attended and the length of time you were in school in the "length of employment" fields. You can enter a position of "student" and income of "0".
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If my property's appraised value is more than the purchase price can I use the difference towards my down payment? |
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Unfortunately, if you are purchasing a home, we'll have to use the lower of the appraised value or the sales price to determine your down payment requirement.
It's still a great benefit for your financial situation if you are able to purchase a home for less than the appraised value, but our investors don't allow us to use this "instant equity" when making our loan decision.
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I'm getting a gift from someone else. Is this an acceptable source of my down payment? |
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Gifts are an acceptable source of down payment, if the gift giver is related to you or your co-borrower. We'll ask you for the name, address, and phone number of the gift giver, as well as the donor's relationship to you.
If your loan request is for more than 80% of the purchase price, we'll need to verify that you have at least 5% of the property's value in your own assets.
Prior to closing, we'll verify that the gift funds have been transferred to you by obtaining a copy of your bank receipt or deposit slip to verify that you have deposited the gift funds into your account.
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I am selling my current home to purchase this home. What type of documentation will be required? |
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If you're selling your current home to purchase your new home, we'll ask you to provide a copy of the settlement or closing statement you'll receive at the closing to verify that your current mortgage has been paid in full and that you'll have sufficient funds for our closing.
Often the closing of your current home is scheduled for the same day as the closing of your new home.
If that's the case, we'll just ask you to bring your settlement statement with you to your new mortgage closing.
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What will be required if I withdraw money from a 401K account for my down payment? |
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If you'll be withdrawing funds from a 401K or retirement account to fund your down payment, we'll probably ask you to provide evidence that you have the funds available by providing a recent statement.
We may also need to verify whether or not repayment is required.
If repayment is required, it's not a problem.
We'll just consider that monthly payment when making your loan decision.
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Can I really borrow funds to use towards my down payment? |
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Yes.
you can borrow funds to use as your down payment!
However, any loans that you take out must be secured by an asset that you own. If you own something of value that you could borrow funds against such as a car or another home, it's a perfectly acceptable source of funds.
If you are planning on obtaining a loan, make sure to include the details of this loan in the Expenses section of the application.
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I've co-signed a loan for another person. Should I include that debt here? |
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Generally, a co-signed debt is considered when determining your qualifications for a mortgage. If the co-signed debt doesn't affect your ability to obtain a new mortgage we'll leave it at that.
However, if it does make a difference, we can ignore the monthly payment of the co-signed debt if you can provide verification that the other person responsible for the debt has made the required payments by obtaining copies of their cancelled checks for the last six months.
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I have student loans that aren't in repayment yet. Should I show them as installment debts? |
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Any student loan that will go into repayment within the next 6 months, should be included in the application.
If you are not sure exactly what the monthly payment will be at this time, enter an estimated amount.
If other student loans are reflected on your final credit report, which will not go into repayment in the next six months, we may need to ask you for verification that repayment will not be required during this time period.
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How will a past bankruptcy or foreclosure affect my ability to obtain a new mortgage? |
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If you've had a bankruptcy or foreclosure in the past, it may affect your ability to get a new mortgage. Unless the bankruptcy or foreclosure was caused by situations beyond your control, we will generally require that 2 to 4 years have passed since the bankruptcy or foreclosure.
It is also important that you've re-established an acceptable credit history with new loans or credit cards.
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What is an installment debt? |
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An installment debt is a loan that you make payments on, such as an auto loan, a student loan or a debt consolidation loan.
Do not include payments on other living expenses, such as insurance costs or medical bill payments. We'll include any installment debts that have more than 10 months remaining, when determining your qualifications for this mortgage.
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What if I can't supply the standard documentation necessary to get a loan? |
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We offer special loan programs that include low documentation or even no documentation. You can indicate how much documentation you'll be able to provide in your online application, or you can call your personal loan consultant for more details.
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