When should I start shopping for a mortgage and how do I know what I can afford?
You should look for a mortgage before you look for a new home. That way,
you'll know exactly how much money you can borrow and how much home
you can afford.
It's best to obtain a pre-approval for a mortgage before shopping for a home. Pre-approval means that you have been approved for a mortgage loan before you make an offer on a home. Having a pre-approval can give you an advantage over other buyers who may be interested in the same home — it shows the seller and real estate agent that you're financially ready to buy the home. Many real estate agents will ask you to get pre-approved before you begin house hunting so they can show you homes that suit your budget.
Do I need to sell my current home before I apply for a new mortgage loan?
No, but depending on your income and debt levels, you
may need to sell your home before you can close on the new one. A
bridge loan may work well in this situation — it enables you to get
financing for your new home before your current home is sold.
How much down payment will I need? The minimum required down payment depends on the mortgage program you select. In general, at least 3% of the sale price is required for an FHA or VA mortgage. If you put down less than 20% on a conventional loan, you may need private mortgage insurance (PMI).
If you are concerned about not having enough money to purchase a home, you may want to consider adding your closing costs into either your interest rate or your loan amount. You will still need money for your down payment but this will help reduce the amount of money you need to bring to the closing. An experienced ERA Mortgage consultant will help you find the loan that fits your needs, including the amount of the down payment.
Can I be pre-approved for a loan if I have credit problems? Yes, we offer mortgage loan options to customers who may not have perfect credit. If you are concerned about your credit, or have other questions about credit call 1-855-480-9826 to speak with an experienced Mortgage Consultant who will help you find a mortgage loan that fits your unique financial needs.
Why is an appraisal necessary for obtaining a mortgage? Can I use the tax value of the home?
An appraisal, which estimates the current market value of your home, is used to justify the loan amount you've requested. Tax values are not a good substitute for an appraisal, because they can sometimes be higher or lower than the actual estimated value of the home. Note: The appraisal is not a guarantee of the home's value.
How do I get an appraisal? Once you have
applied for a mortgage, the lender will schedule the property
appraisal. You simply provide a contact name - usually the real
estate agent - who will provide property access to the appraiser.
Once the appraisal is complete, the appraiser will send results to
How much will my property taxes be? The seller or your real estate agent should provide you with the current taxes for the property. Property taxes are reassessed from time to time, so this amount may change. If you would like to confirm the amount of your taxes, you can contact the county Recording Office.
Why is the Annual Percentage Rate different from the interest rate?
The annual percentage rate (APR) is the total annual cost of your mortgage loan. It includes the interest rate — the fee to borrow money calculated as a percentage of the amount borrowed —plus loan fees, points and any other charges. Required by the Truth-in-Lending Act, the APR allows you to effectively compare the mortgage rates of different loan programs.
What is a Truth in Lending statement?
It contains detailed information about the total charges that you will incur over the life of your loan. Required by federal law, the Truth In Lending statement includes:
• The annual percentage rate (APR)
• The amount of interest you will pay
• The amount financed and schedule of payments
• The total of your payments
• Late payment charge
What is a Good Faith Estimate (GFE)?
A written list of the estimated closing costs associated with your mortgage transaction. Required by federal law, it includes charges from your lender and closing agent, and approximate costs for property taxes and homeowner's insurance.
How does an interest-only loan work?
An interest-only loan is a type of mortgage in which only the accrued interest is paid each month for a specified period. These loans can be an adjustable rate mortgage (ARM) where the interest rate is fixed for a portion of the loan term (typically the first 3, 5, 7 or 10 years) — after which the interest rate begins to adjust (go up or down) each year based on an economic index, or the interest rate can be fixed for the duration of the term.
After the interest-only period expires, the monthly payments would
include both principal and interest until the balance is paid in
full. A typical interest-only mortgage is a 30-year loan with
interest-only payments for the first 10 years.
Rates & Costs
How often do interest rates change?
Interest rates change regularly, based on fluctuations in the
interest rate market.
What factors go into determining my customized interest rate?
We evaluate your credit history and reward your good credit with a better rate. To learn about credit and its importance in obtaining a mortgage loan, visit our article, All About Your Credit. We also take into account factors such as your loan to value (LTV) ratio, your income, your assets, and the purpose of the loan. Naturally, rates are influenced by the current market conditions.
When should I lock my rate?
If you have a contract on a property and are within 90 days of closing, you can lock your rate. If you are refinancing, you can lock within 45 days of closing. If you have selected the rate protection option, you can lock between 15 and 5 days of closing. With all programs, you must lock your rate at least 5 days prior to closing.
Once I have selected a program, what are my rate options?
You will be presented with rate options that apply to your loan type and closing date, which may include:
Rate Protection If interest rates go up, your rate does not.
Your rate is protected.
Rate protection sets the maximum interest rate you will pay, as long as you close your loan by the expiration date of the rate protection program. If rates decrease, you will have a one-time option to lock in your loan at a lower rate. Simply call your loan processor. You must lock in a new rate at least 5 days before closing. If you are refinancing, you can lock in your rate within 15 days of closing.
A rate lock can be done only one time. Your rate will not change regardless of what happens in the interest rate market, as long as you close on or before the rate lock expiration date.
What if interest rates go down after I lock my rate?
Once you lock the rate, it cannot be changed. For that reason, you may want to consider our rate protection program to help safeguard against changes in interest rates.
What happens if my loan doesn't close before the rate lock expiration date?
When you lock your interest rate, you are guaranteed to receive that rate as long as you close your loan by the specified expiration date. If your loan closes after this date, you are no longer guaranteed your locked interest rate. Instead, you will receive the higher of the current market rate or your locked rate. Please note that you cannot receive a lower rate by allowing your lock to expire.
If I selected rate protection and don't exercise my one-time float down option, what will happen?
Your rate will automatically be locked at the market rate five days prior to your closing date. If the rate has gone up and over your capped rate, you will receive the capped rate. If the rate is lower than the cap, you'll be locked in at the lowest rate available to you.
What are points?
Points are determined as a percentage of your loan amount, paid at closing. For instance, on a $90,000 loan amount, 1 point = 1 % or $900. You may have the option to pay points to buy down (reduce) your interest rate. Alternatively, the lender may pay points to offset your closing costs in exchange for a higher rate. These are called negative points.
Are discount points tax-deductible?
In many cases they are. Consult your accountant or tax expert for advice.
If I'm short on cash, do I have options to help with my down payment and closing costs?
Yes. There are a number of options that may help you if you do not have much cash to purchase a home. Consider one of our low down payment programs, which may require as little as 3% for a down payment. If you meet the criteria, you will be offered the option to add your closing costs into either the loan amount or the interest rate. If you choose the loan amount option, closing costs will be added to your loan amount.
The amount due over the life of the loan will increase but the amount you need to bring to closing will decrease. If you choose the interest rate option, the rate for the life of the loan will increase, as will your monthly payment, but the amount of cash you need to bring to closing will decrease. You can also consider negative points. This means that in exchange for a higher rate, we will contribute funds toward your closing costs.
The Loan Decision
How can I get my loan decision?
Simple — by applying for a pre-approval.
In most cases, you will receive a pre-approval decision the same day.
What factors does a mortgage lender consider when making a loan decision?
A mortgage lender generally looks at three areas:
• Income and assets: To determine your ability to repay the loan
• Debts and credit history: To determine your total debt and your history of repaying other financial obligations
• Property information: Needed for the home appraisal
How much does it cost to get a loan decision?
We do not charge for a loan decision.
How long is my pre-approval letter valid for?
Once your application is approved you will receive a pre-approval letter. If the information you provided remains the same, the pre-approval letter will remain valid until you close your loan. If any of the information you provided changes, such as your income or debt, please contact us at
1-855-480-9826. We will need to re-evaluate your approval.
Can I change the loan amount, down payment or program after I've received my loan decision?
Yes, as long as you meet the criteria for the new loan amount or new
program you've selected. Your dedicated Mortgage Consultant can help
you determine if you do. If you have not decided upon a rate lock
option, you can make changes to your information online and resubmit
for a new loan decision.
I already put a deposit down on the property. Is this included on the Good Faith Estimate?
Yes. Any deposit or earnest money paid will be listed under "Prepaid deposit for property" on the Good Faith Estimate.
What documents will I need to provide to complete my loan transaction?
Requirements for documentation can vary state by state and depend on a variety of factors. Here is a list of some of the more common documents needed:
• A fully executed agreement of sale for the property being purchased
• Financial statements for your bank and brokerage accounts
• A HUD-1 settlement statement on the property you are selling, if applicable
• A copy of your most recent pay stub
• Previous W-2s
• A copy of a rental lease, if any
• A Homeowner's insurance policy
• A Flood insurance policy
Do I have to attend closing? What are my options?
In most cases you will need to attend, however it is not required that you attend the closing if you've granted power of attorney, or taken the steps to complete a mail away closing. Your loan processor can help determine your options based on your individual needs.
Can I bring a personal check to the closing?
You will need a cashier's check or certified check at closing. However, it is a good idea to bring some blank personal checks in case any last minute costs arise.
What is title insurance and why is it required?
Title insurance is required because it protects against losses from
disputes over the title of a property, such as unknown liens or
other discrepancies in ownership. Title insurance protecting the
lender is required at closing. There is a one-time fee for the
policy that you pay at closing. You may purchase a separate buyer's
policy to protect your interests.
How much title insurance do I need?
The amount of title insurance needed is based on the value of your home and the amount of your mortgage. Your closing agent or closing attorney will advise you on the proper coverage.
How much homeowner's insurance do I need?
Your homeowner's insurance policy, as required by the lender, needs to cover the cost to rebuild the home. The insured amount may be higher or lower than the actual purchase price as long as it meets the program requirements. The insurance company you choose can give you an actual quote based on specific information about the property.
How do I know if I need flood insurance?
We will perform a flood hazard determination for your property and inform you if your home is located in a Special Flood Hazard Area. If it is, federal law requires you to purchase flood insurance. Most standard homeowner's insurance policies do not cover loss due to flood. If you choose, you can obtain flood insurance coverage even if you are not required to do so by law.
How are my property tax bills paid?
It depends on your loan program and state requirements. If your monthly mortgage payment includes money for property taxes, those funds are held in escrow by the lender, who pays your property taxes as they come due. If your mortgage payment does not include property taxes, you are responsible for paying them by the due date.
What type of inspections do I need before I close on my home?
Certain inspections may be required under your particular loan program. However, depending on the home and location, there are a variety of inspections you may want to consider before you close on your new home even if they are not required, such as:
• Home inspections
• Termite inspection
• Water test (for well water)
• Septic tank Inspection
• Radon test