MORTGAGE APPLICATION CHECKLIST
Enjoy a smoother closing by gathering your paperwork before you apply. Here is a list of documents you and your co-borrowers may need to complete your mortgage application. Additional documents may also be needed later in the process.
Copy of your Purchase & Sale Agreement.
Your present mortgage information.
Two-year history of employment and verification of all income sources.
If self-employed, copies of past two years Federal Income Tax Returns.
Information about your checking, savings, and credit card accounts.
Name, account number, and outstanding balance of each of your debts.
Application deposits.
Information about any assets.
Information regarding any other assets that will be used as funds to close.
If FHA - Copy of Social Security card and photo ID.
If VA - Certificate of Eligibility or DD214.
If Employee Relocation Client - include relocation information and copy of offer, promissory note and copy of check on bridge loan.
FINANCING OPTIONS
Fixed Mortgage Rate
The interest rate stays the same throughout the term of the loan—usually 15 or 30 years—so the principal interest portion of your payment remains the same. Payments are stable but initial rates tend to be higher than adjustable-rate loans and often cannot be assumed by a subsequent buyer.
Balloon Mortgage
This is a loan which must be paid off after a certain period. The advantage they offer is an interest rate that is lower than a mortgage that is made for 30 years.
Adjustable-Rate Mortgage
The interest rate is linked to a financial index, such as a treasury security or a cost of funds, so your monthly payments can vary up or down over the life of the loan—usually 25 to 30 years. Interest rates can change monthly, annually, or every 3 or 5 years. Some ARMs have a cap on the interest rate increase to protect the borrower. Other terms relating to adjustable-rate mortgages:
Adjustment period: The length of time between interest rate changes. Example: one-year ARM interest changes annually.
Cap: The limit on how much an interest rate or monthly payment can change at each adjustment or over the life of the loan.
Conversion clause: A provision in some loans that enables you to change an ARM to a fixed-rate loan, usually after the first adjustment period. This may require additional fees.
Index: A measure of interest rate changes used to determine changes in the loan's interest rate over the term of the loan.
Margin: The number of percentage points a lender adds to the index rate to calculate the ARM's interest rate at each adjustment.
VA Loan
The VA does not lend money; it guarantees a portion of the loan so that lenders who originate the loan feel comfortable with their risk. Qualified veterans can obtain loans up to $203,000 with no down payment. VA-guaranteed loans can be combined with second mortgages and are assumable upon qualifying by any future buyer.
FHA Loan
FHA does not lend money or make a loan; rather, it insures loans. The down payment can be as low as 2.25%. Discount points may be paid by either buyer or seller. FHA charges a 2.25% up front Mortgage Insurance Premium (or as little as 2% for a first time home buyer) that can be financed in the mortgage amount or paid in cash (no premium is required for condominiums). The borrower must also pay an annual Mortgage Insurance Premium or .5% which is collected monthly.
Seller-Assisted Second Mortgage
The seller of the house lends the buyer enough to make up the difference between the purchase price and the down payment plus first-mortgage balance (a commercial lender may also make this kind of loan). The terms including the interest rate, are based on buyer/seller agreement. It is often a short-term (5 to 15 year) loan; sometimes "interest only" payments until the term date when the balance is due in full. A buyer can then refinance the home.
Assumable Mortgage
The seller of the house lends the buyer enough to make up the difference between the purchase price and the down payment plus first-mortgage balance (a commercial lender may also make this kind of loan). The terms including the interest rate, are based on buyer/seller agreement. It is often a short-term (5 to 15 year) loan; sometimes "interest only" payments until the term date when the balance is due in full. A buyer can then refinance the home.