Below are some of the most common questions we are asked. If you still need help, feel free to contact one of our experienced Mortgage Loan Originators at (954) 771-8984.
FICO Scores are the most widely used credit score in U.S. mortgage loan underwriting. This 3-digit number, ranging from 300 to 850, is calculated by a mathematical equation that evaluates many types of information on your credit report. Higher FICO scores represent lower credit risks, which typically equate to better loan terms.
The best way to earn a high FICO Score is to pay all your bills on-time every month. Things that count against your score are:
- Poor payment history (example: late payments, collections, bankruptcy, repossession, foreclosure)*;
- High balances on your credit cards (general guideline – no more than 5 credit cards with balances, and each card balance lower than 75% of limit)*;
- Credit checked frequently (credit inquiries);
- Newly opened loans that do not have a 12 month payment history
* The first two items on the list affect your score the most.
You can obtain a federally-mandated free credit report once per year from all three credit reporting agencies at AnnualCreditReport.com. These do not include a free credit score, but it is inexpensive to get at the same time.
Or if you think you are ready to apply for a mortgage or would like to discuss your credit report with an experienced mortgage originator you may order a credit report.
Talk with your mortgage originator before making any large purchases (even if it’s 0% financing for a period of time). The monthly payments on any new debt may affect your debt ratios and inquiries/new loans may lower your credit score, which may adversely affect your loan approval.
When a homebuyer is pre-qualified, he or she has provided the lender with the basic information to determine which loan program the homebuyer may qualify for. Whereas, when a homebuyer is pre-approved, the lender has collected, verified and presented the information needed for underwriting and approval.
Some closing costs that are required in any purchase, even if not obtaining a mortgage; such as: state transfer taxes, recording fees, and settlement agent fees. Then there are fees that generally occur only when mortgage financing is involved. A few common fees when obtaining a mortgage are as follows: appraisal fee, credit report fee, flood certification, lender’s title policy, and lender origination fees.
Prepaids are items that a borrower would pay in advance; such as: homeowner’s insurance or prepaid interest to the lender.
These costs vary depending upon the type of mortgage, property location, and other factors. A Loan Estimate will be provided to each borrower at application detailing these estimated costs.
Your mortgage payment consists of 4 components: Principal, Interest, 1/12 of your annual Taxes, and 1/12 of annual homeowner’s Insurance (PITI is a common acronym). If your mortgage carries mortgage insurance, a portion of your monthly mortgage payment will include this also.
Mortgage insurance protects the lender against potential losses if the borrower defaults. Mortgage insurance allows the buyer to purchase a home with a lower down payment than otherwise would be required. The cost of mortgage insurance can be added to the loan amount or paid monthly or both. Mortgage insurance costs vary depending upon your down payment, type of loan you select and sometimes your FICO score.
- Private Mortgage Insurance (PMI) is required on a conventional loan generally when the Loan to Value (LTV) percentage exceeds 80%. The cost of PMI is typically added to the monthly mortgage payment.
- FHA mortgage has both an Upfront Mortgage Insurance Premium (MIP) and a monthly MIP. FHA MIP is charged on all FHA loans regardless of the LTV.
- VA Funding Fee is an upfront fee that is generally added to the loan amount. The Funding Fee varies depending upon the LTV, if the eligibility has previously been used, and if the veteran is receiving disability income from the VA.
An escrow account is a separate account that holds funds for the purpose of paying bills such as homeowner’s insurance, property taxes and mortgage insurance. The lender collects the funds to be deposited into the account each month along with your monthly payment and then pays the bills for you when they come due. By taking the annual amounts charged for insurances and property taxes and divide them by 12, a payment is determined and is added to your monthly principal and interest payment. Spreading the cost of these expenses over 12 months makes it easier for you to budget those expenses and you won’t have to come up with additional cash when bills are due. For some loans, escrow accounts are required.
There are several factors that are reviewed during the mortgage approval process including:
- Credit history
- Employment history and income
- Value of the home that you wish to purchase
Different loan programs and your financial situation may require different documentation. Your mortgage originator will advise you of required items. Because this is asked so often, Flagship has created a checklist to aid you in gathering your documents for your mortgage application.
There is no obligation for completing an application. The only upfront charge is the appraisal and credit report fee which is collected at time of application. These fees will appear at closing as a credit on your closing disclosure.
When thinking about purchasing a home it is advised that a borrower be pre-qualified prior to signing a contract. You can begin this process with a consultation with one of Flagship’s experienced mortgage originators to help you decide on the appropriate loan program and down payment preferences. You may initiate the consultation using:
- Complete the on-line pre-qualification form
- Complete the PDF/faxable pre-qualification form
- Call one of our experienced mortgage loan originators at (954) 771-8984
Flagship’s mortgage loan originators are eager to help you obtain the American dream of home ownership.