join our Mailing list
Sign up below to receive email updates on mortgage information.
Can I apply for a loan before I find a property to purchase?
Yes, applying for a mortgage loan before you find a home may be the best thing you could do. When you apply in advance, we issue a pre-qualification letter subject to you finding your new home. We then go one step further, and get you approved, and provide you with a "DU Approval." With a pre-approval letter and DU Approval, you assure Real Estate Agents and sellers that you are a qualified buyer. Additionally, the pre-qualification process helps ensure that you are looking in the right price range to comfortably fit your budget. And speeds the underwriting process.
When you find the perfect home, simply call us for your custom pre-approval letter and to complete your application. And then once your offer is accepted and you enter escrow, we'll lock in your rate and complete processing your application.
Is there a fee charged or any other obligation if I complete the online application? Not with us. Many lenders and banks charge an application fee or a non-refundable credit-report fee. We do not. We are confident enough in our rates and fees that we do not need to make buyers pay a “commitment fee.”
How do you decide what you need from me to process my loan?
We take full advantage of an automated underwriting system that allows us to request as little information as possible to verify the data you provided during your loan application. The automated underwriting system compares your financial situation with statistical data with millions of other homeowners, and uses that comparison to determine the level of verification needed. In most cases, you will need to provide: two pay stubs, two months’ bank statements, at least the most recent year’s Federal Returns, and copy of your driver’s license or passport.
Can I apply for a mortgage if I want to buy or refinance a manufactured home?
Underwood Mortgage Group defines manufactured housing as a housing unit that is “factory built” with a steel undercarriage that remains as a structural component and limits the structure to a single story. These types of manufactured homes are sometimes known as “mobile homes.”
In order to qualify for our loan programs a manufactured home must:
- Be built on a permanent chassis and attached to a permanent foundation system.
- Be a one-family dwelling that is legally classified as real property.
- Have been built in compliance with the Federal Manufactured Home Construction and Safety Standards that were established June 15, 1976. (Generally, compliance with these standards is evidenced by the presence of a HUD Data Plate that is affixed near the main electrical panel of the home or in another readily accessible and visible location.)
- Be at least double-width, 24 feet wide, and have a minimum 600 square feet of gross living area.
- Be acceptable to typical purchasers in the market area.
- The towing hitch, wheels and axles must have been removed and the home must be permanently attached to a foundation system that meets state and local codes as well as the manufacturer's requirements.
- The foundation system must be appropriate for the soil conditions for the site and meet local and state codes.
- The land on which the manufactured home is situated must be owned by you. We do not provide financing for manufactured homes located on rented or leased land.
Will my overtime, commission, or bonus income be considered when evaluating my application?
Yes, but 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.” Usually, we will request 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 then average the amounts you have received over the past two years to calculate the amount that can be considered a regular part of your income. Keep in mind, if you have not received bonus, overtime, or commission income for at least one year, it probably will not be given full value when your loan is reviewed for approval.
Is my second job income considered when reviewing my application?
Yes. Typically, income from a second job is considered if a one-year history of secondary employment can be verified.
I am retired and my income is from a retirement program or Social Security. What do I need to provide when applying?
Underwood Mortgage Group asks 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 is necessary to verify that this income will continue for at least three 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 do not have an award letter, your mortgage professional can contact the source of this income directly for verification. If you are receiving tax-free income, such as Social Security earnings in some cases, we consider the fact that taxes are not deducted from this income when reviewing your request.
How is rental income verified?
If you own rental properties, your mortgage professional generally asks for the most recent year's Federal Tax Return to verify your rental income. We 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 is not counted against your rental income. If you have not owned the rental property for a complete tax year, we ask for a copy of any leases you have executed and estimate the expenses of ownership.
I have income from dividends and/or interest. What documents do I need to provide?
Generally, two years of personal tax returns are required to verify the amount of your dividend and/or interest income so that an average amount can be calculated. In addition, we need to verify your ownership of the assets that generate the income using copies of statements from your financial institution, 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.
Do I have to provide information about my child support, alimony or separate maintenance income?
Information about child support, alimony or separate maintenance income does not need to be provided unless you wish to have it considered in your total income for repaying of your mortgage loan.
If I have income that is not reported on my tax return, can it be considered?
Generally, only income that is reported on your tax return can be considered when applying for a mortgage. If the income is legally tax-free and is not required to be reported, it can be considered.
If I have student loans that are not in repayment yet, are they considered debts?
If your student loans are reflected on your final credit report, which are not scheduled to go into repayment in the next six months, we may need to ask you for verification that repayment is required during this time period. Any student loan that goes into repayment within the next six months will be considered when evaluating your loan. If you are not sure exactly what the monthly payment is, the minimum monthly payment will need to be provided by the creditor.
If I have co-signed a loan for another person, does that affect my ability to get a mortgage?
Generally, a co-signed debt is considered when determining your qualifications for a mortgage. If the co-signed debt does not affect your ability to obtain a new mortgage we 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 and has made the required payments, by obtaining copies of their cancelled checks for the last six months.
Will a past bankruptcy or foreclosure affect my ability to obtain a new mortgage?
If you have 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 generally require two to four years to pass after the bankruptcy or foreclosure. It is also important that you re-established an acceptable credit history with new loans or credit cards. Keep in mind, these guidelines change frequently, so we always double-check the most recent ruling.
How do you verify my income if I am self-employed?
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. We review and average the net income from self-employment that is reported on your tax returns to determine the income that can be used to qualify. We do not consider any income that has not been reported as such on your tax returns. Typically, we need at least a one- or two-year history of self-employment to verify that your self-employment income is stable.
If I have had a few employers in the last few years, does this affect my ability to get a new mortgage?
Having changed employers frequently is typically not a hindrance 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 also look at your income advancements as you have changed employment. If you are paid on a commission basis, a recent job change may be an issue since we may have a difficult time predicting your earnings without a history with your new employer.
If I was in school before obtaining my current job, how do I complete the application?
If you were in school before your current job, often we can use your education as “employment history.” It depends upon the job and the schooling, but often education will satisfy the typical two-year history requirement.
What should I enter on my application, if I am relocating because I have accepted a new job, but I have not started yet?
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 receiving at your new location. If your employment is with a new employer, complete the application as if your new employer is your current employer and indicate that you have been there for one month. The information about the employment you are leaving should be entered as a previous employer. Your mortgage professional sorts out the details after you submit your loan for approval.
What is a credit score and how does it affect my application?
A credit score is one of the pieces of information that Underwood Mortgage Group uses to evaluate your application. Credit scores are based on information collected by three credit bureaus (Equifax, Experian and Trans Union), 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 determine the likelihood that you will repay the loan on schedule. The credit score is calculated by the credit bureaus, 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 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 850. Generally, the higher your credit score, the lower the risk that your payments will not be paid as agreed. Using credit scores to evaluate your credit history allows lenders 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 we never evaluate an application without looking at the total financial picture of a customer. And if your scores are lower than average or we find an error, we can often correct and improve your credit within a week.
Does the inquiry about my credit affect my credit score?
An abundance of credit inquiries can sometimes affect your credit scores since it may indicate that your use of credit is increasing. But don't overreact. The data used to calculate your credit score does not include any mortgage or auto loan credit inquiries that are made within the 30 days prior to the score being calculated. In addition, all mortgage inquiries made in any 45-day period are always considered one inquiry. So, don't let anyone tell you that you cannot shop around for fear of affecting on your credit score.
Will I be charged any fees if I authorize my credit information to be accessed?
No, you will not. Many lenders charge you just to pull your credit. While it is a cost to us, we provide this free of charge in order to best evaluate your qualifications. And we never charge an application or lock fee as do other lenders.
Can I borrow funds to use towards my down payment?
Yes, you can borrow funds to use as your down payment. However, any loan you take out for a down payment 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 is 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.
Can I use a gift from someone else for my down payment?
Gifts are an acceptable source of down payment, if the gift-giver is related to or an employer to you or your co-borrower. We ask you for the name, address and phone number of the gift giver, as well as the donor's relationship to you. Prior to closing, we 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.
If the appraised value of my property is more than the purchase price, can I use the difference towards my down payment?
No. Unfortunately, if you are purchasing a home, you are required to use the lower of the appraised value or the sales price to determine your down payment requirement. It is still a great benefit for your financial situation if you are able to purchase a home for less than the appraised value, but you just cannot use the difference when making the loan-to-value calculations.
How are interest rates determined?
Interest rates fluctuate based on a variety of factors, including inflation, the pace of economic growth, and Federal Reserve policy. Over time, inflation has the largest influence on the level of interest rates. A modest rate of inflation will almost always lead to low interest rates, while concerns about rising inflation normally cause interest rates to increase. Our nation's central bank, the Federal Reserve, implements policies designed to keep inflation and interest rates relatively low and stable.
Should I pay points/origination in exchange for a lower interest rate?
Points/origination is considered a form of interest. Each point is equal to one percent of the loan amount. Points are paid 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 points/origination, you should compare the cost of the points/origination to the monthly payments savings created by the lower interest rate. We regularly help borrowers make this determination by calculating their “breakeven point.” Divide the total cost of the points/origination by the savings in each monthly payment. This calculation provides the number of payments you must make before you actually begin to save money by paying points/origination. If the number of months it takes to recoup the points/origination is longer than you plan to have the mortgage, you should consider the loan program option that does not require points/origination to be paid.
Is comparing APRs the best way to decide which lender has the lowest rates and fees?
The Federal Truth in Lending law requires that all financial institutions disclose the APR when they advertise a rate. The APR is designed to present the actual cost of obtaining financing, by requiring that some, but not all, closing fees are included in the APR calculation. These fees, in addition to the interest rate, determine the estimated cost of financing over the full term of the loan. Since most people do not keep the mortgage for the entire loan term, it may be misleading to spread the effect of some of these up-front costs over the entire loan term.
Also, unfortunately, the APR does not include all the closing fees, and lenders are allowed to determine which fees to include. Fees for things like appraisals, title work and document preparation are not included even though you generally have to pay them. For adjustable rate mortgages, the APR can be even more confusing. Since no one knows exactly what market conditions will be in the future, assumptions must be made regarding future rate adjustments. You can use the APR as a guideline to shop for loans but you should not depend solely on the APR in choosing the loan program that is best for you. Look at total fees and possible rate adjustments in the future and consider the length of time that you plan on having the mortgage.
Don't forget that the APR is an “effective interest rate” —not the actual interest rate. Your monthly payments will be based on the actual interest rate, the amount you borrow, and the term of your loan.
How do I know if it's best to lock in my interest rate or to let it float?
Mortgage interest rate movements are as difficult to predict as the stock market, and no one can really predict for certain whether they will go up or down. Underwood Mortgage Group subscribes to many forecasting services, so we can advise you based upon the highly-paid pundits, but they are not always accurate. If you have a hunch that rates are on an upward trend then you may 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 will not do any good to lock your rate if you cannot close during the rate lock period.
If you are 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. If you think rates might drop while your loan is being processed, take a risk and let your rate "float" instead of locking.
When can I lock in my interest rate and points/origination?
Once we have reviewed your documentation, we notify you when you are in a position to lock. Then, we will educate and advise you on the forecast, and help you determine whether it would be better to “lock” or “float” in hopes of a lower interest rate.
What is a fixed rate mortgage?
A conventional fixed rate mortgage is a loan product featuring a fixed interest rate for the entire term of the loan. Monthly mortgage payments remain the same for the life of your loan. A fixed rate mortgage may be right for you, if you:
- Prefer easy budgeting and long-term planning
- If want to lock in a favorable rate for the long term
- Prefer predictable financing for an investment property
- Don't plan to relocate, refinance or move in the next few years
- Don't expect a significant increase in income in the next few years
How much money will I save by choosing a 15-year rather than a 30-year fixed rate loan?
A 15-year fixed rate mortgage provides for a more aggressive payment schedule, and gives you the ability to own your home free-and-clear in 15 years. And, while the monthly payments on a 15-year mortgage are higher than a 30-year, the interest rate on a 15-year is usually a little a bit lower. And therefore, you pay less than half the total interest cost of the traditional 30-year mortgage. However, if you can't afford the higher monthly payment of a 15-year mortgage, don't feel alone. Many borrowers find the higher payment out of reach and choose a 30-year mortgage. A 30-year mortgage is by far the most popular financing option for most people.
Who should consider a 15-year fixed rate mortgage?
The 15 year-fixed rate mortgage is popular among younger homebuyers with sufficient income to meet the higher monthly payments to pay off the house before their children start college. They own more of their home faster with this kind of mortgage, and can then begin to consider the cost of higher education for their children without having a mortgage payment to make as well. Other borrowers, who are more established in their careers, have higher incomes, and those who desire to own their homes before they retire, may also prefer this mortgage.
What is an adjustable rate mortgage ARM?
An adjustable rate mortgage (ARM) is a loan type that offers a lower initial interest rate than most fixed-rate loans. The trade off is that the interest rate can change periodically, usually in relation to an index, and the monthly payment will go up or down accordingly. Against the advantage of the lower payment at the beginning of the loan, you should seriously consider the risk that an increase in interest rates will lead to higher monthly payments in the future. In short, you get a lower rate with an ARM in exchange for assuming more risk. For many people in a variety of situations, an ARM is the right mortgage choice, particularly if your income is likely to increase in the future, or if you only plan to be in your home for three to five years. Here's how ARMs work.Adjustment Period
With most ARMs, the interest rate and monthly payment are fixed for an initial time period, such as one, three, five, seven or even ten years. After the initial fixed period, the interest rate can change every year. For example, one of our most popular adjustable rate mortgages is a five-year ARM. The interest rate will not change for the first five years but can change every year after the first five years.Index
Typical ARM interest rate changes are tied to changes in an “index rate.” The most common indices one-year Treasury rates or the LIBOR index (an acronym for the London Interbank Offered Rate) or the COFI index (Federal Reserve Cost of Funds Index).
Using an index to determine future rate adjustments provides you with assurance that rate adjustments will be based on actual market conditions at the time of the adjustment. The current value of most indices is published weekly in the Wall Street Journal. If the index rate moves up, your mortgage interest rate will move up as well, and you will probably have to make a higher monthly payment. On the other hand, if the index rate goes down, your monthly payment may decrease.Margin
To determine the interest rate on an ARM, a predisclosed amount is added to the index rate – this is called the margin. If you are still shopping, comparing one lender's margin to another's can be more important than comparing the initial interest rate, since it will be used to calculate the interest rate you will pay in the future.Interest-Rate Caps
An interest-rate cap places a limit on the amount your interest rate can increase or decrease. There are two types of caps:
- Periodic or Adjustment Cap: Limits the interest rate increase or decrease from one adjustment period to the next.
- Overall or Lifetime Cap: Limits the interest rate increase over the life of the loan.
Negative amortization occurs when your monthly payment changes to an amount less than the amount required to pay interest due. If a loan has negative amortization, you might end up owing more than you originally borrowed. None of the ARMs we offer expose you to the dangers of negative amortization.
What is an interest-only loan?
An interest-only mortgage is a loan product that allows you to pay only the interest on your mortgage for a fixed term. After the end of that term, generally five to seven years, you start paying off the principal. The principal payments will be considerably higher than the interest payments. You may also refinance, or pay the balance in a lump sum at the end of the fixed term. Interest-only loans are not for everyone. An interest-only loan might be right for you if:
- Your income is mostly in the form of infrequent commissions or bonuses
- You expect a large increase in income in the next few years
- You are guaranteed to invest the savings on the difference between an interest-only mortgage and an amortizing mortgage, and are confident your investments will return a profit
What is the maximum percentage of my home's value that I can borrow?
The maximum percentage of your home's value depends on the purpose of your loan, how you use the property, and the loan type you choose. So the best way to determine what loan amount we can offer is to complete our online application. (link to application)
What is an appraisal and who completes it?
To determine the value of the property you are purchasing or refinancing, an appraisal is usually required. An appraisal report is a written description and estimate of the value of the property performed by a certified appraiser. National standards govern not only the format for the appraisal; they also specify the appraiser's qualifications and credentials. In addition, most states now have licensing requirements for appraisers evaluating properties located within their states.
The appraiser will create a written report for us. You will receive a copy of the report prior to your loan closing. Usually the appraiser will inspect both the interior and exterior of the home. However, in some cases, only an exterior inspection will be necessary based on your financial strength and the location of the home. Exterior-only inspections usually save time and money. But if you are purchasing a new home, your Loan Consultant will contact you to determine if you would be more comfortable with a full inspection.
After the appraiser inspects the property, he will compare the qualities of your home with other homes that have sold recently in the same neighborhood. These homes are called comparables and play a significant role in the appraisal process. Using industry guidelines, the appraiser will weigh the major components of these properties (i.e., design, square footage, number of rooms, lot size, age, etc.) to the components of your home in or der to determine an estimated value of your home. The appraiser adjusts the price of each comparable sale (up or down) depending on how it compares (better or worse) with your property.
As an additional check on the value of the property, the appraiser also estimates the replacement cost for the property. Replacement cost is determined by valuing an empty lot and estimating the cost to build a house of similar size and construction. Finally, the appraiser reduces this cost by an age factor to compensate for depreciation and deterioration. If your home is for investment purposes, or is a multi-unit home, the appraiser will also consider the rental income that will be generated by the property to help determine the value.
Using these three different methods, an appraiser will frequently come up with slightly different values for the property. The appraiser uses judgment and experience to reconcile these differences, and then assigns a final appraised value. The “comparable sales approach” is the most important valuation method in the appraisal because a property is worth only what a buyer is willing to pay and a seller is willing to accept.
It is not uncommon for the appraised value of a property to be exactly the same as the amount stated on your sales contract. This is not a coincidence, nor does it question the competence of the appraiser. Your purchase contract is the most valid sales transaction there is. It represents what a buyer is willing to offer for the property and what the seller is willing to accept. Only when the comparable sales differ greatly from your sales contract is the appraised value very different.
What types of things does an underwriter look for when they review the appraisal?
In addition to verifying that your home's value supports your requested loan amount, we also verify that your home is as marketable as others in the area. We want to be confident that if you decide to sell your home, it is as easy to market as other homes in the area. We certainly don't expect you to default under the terms of your loan, forcing a sale, but as the lender, we also need to make sure that if a sale is necessary, it won't be difficult to find another buyer.
We review the features of your home and compare them to the features of other homes in the neighborhood. For example, if your home is on a 20-acre lot, or has a large accessory building, we want to make sure that there are other homes in the area on similar size lots or with similar outbuildings. It is hard to place a value on such unique features if we can't see what other buyers are willing to pay for them. In some areas, additional acreage or outbuildings could actually be a detriment to a future sale. Finding comparable properties can be more challenging in rural areas where it is more difficult to find homes that have similar features.
We also make sure that the value of your home is in the same range as other homes in the area. If the value of your home is substantially more than other homes in the neighborhood, it could affect the market acceptance of the home if you decide to sell. We also review the market statistics about your neighborhood. We look at the time on the market for homes that have sold recently and verify that values are steady or increasing.
Do I get a copy of the appraisal?
Of course. As soon as we receive your appraisal, we update your loan package with the estimated value of the home. As a standard practice, we provide a copy of your appraisal prior to closing.
Are there any special requirements for condominiums?
Since the value and marketability of condominium properties is dependent on items that don't apply to single-family homes, there are some additional steps that must be taken to determine if condominiums meet lending guidelines.
One of the most important factors is determining if the project in which the condominium is located is completed. In many cases, it will be necessary for the project, or at least the phase in which your unit is located, to be complete before underwriters will approve financing. The primary reason is because underwriters need to be certain that the remaining units will be of the same quality as the existing units. This could affect the marketability of your home.
In addition, we consider the ratio of non-owner occupied units to owner-occupied units. This could also affect future marketability – since many people would prefer to live in a project that is occupied by owners rather than renters. We also carefully review the appraisal to insure that it includes comparable sales of properties within the project, as well as some from outside the project.
Do I need a home inspection and an appraisal if I am purchasing a home?
Both a home inspection and an appraisal are designed to protect you against potential issues with your new home. Although they have totally different purposes, it makes the most sense to rely on each to help confirm that you have found the perfect home. The appraiser will make note of obvious construction problems such as termite damage, dry rot or leaking roofs or basements. Other obvious interior or exterior damage that could affect the salability of the property will also be reported.
However, appraisers are not construction experts, and won't find or report items that are not obvious. They won't turn on every light switch, run every faucet or inspect the attic or mechanicals. That's where the home inspector comes in. They generally perform a detailed inspection and can educate you about possible concerns or defects with the home. We always recommend that the buyer accompany the inspector during the home inspection. This is your opportunity to gain knowledge of major systems, appliances and fixtures, learn maintenance schedules and tips and to ask questions about the condition of the home.
How long does it take for the property appraisal to be completed?
Licensed appraisers who are familiar with home values in your area perform appraisals. We order the appraisal as soon as possible. Generally, it takes five to seven days before the written report is sent to us. We follow up with the appraiser to insure that it is completed as soon as possible. If you are refinancing, and an interior inspection of the home is necessary, the appraiser should contact you to schedule a viewing appointment. If you are purchasing a new home, the appraiser will contact the Real Estate Agent, if you are using one, or the seller to schedule an appointment to view the home.
What is title insurance and why do I need it?
If you have purchased a home before, you may already be familiar with the benefits and terms of title insurance. But if this is your first home loan or you are refinancing, you may wonder why you need another insurance policy.
The answer is simple: the purchase of a home is most likely one of the most expensive and important purchases you will ever make. You, and especially your mortgage lender, want to make sure the property is indeed yours, that no individual or government entity has any right, lien, claim or encumbrance on your property. The function of a title insurance policy is to make sure your rights and interests to the property are clear, that transfer of title takes place efficiently and correctly, and that your interests as a homebuyer are fully protected.
Title insurance companies provide services to buyers, sellers, real estate developers, builders, mortgage lenders, and others who have an interest in real estate transfer. Title companies typically issue two types of title policies
- Owner's Policy - covers you, the homebuyer
- Lender's Policy - covers the lending institution for the life of the loan
Both types of policies are issued at the time of closing for a one-time premium, if the loan is a purchase. If you are refinancing your home, you probably already have an owner's policy that was issued when you purchased the property, so Underwood Mortgage Group only requires a lender's policy.
Before issuing a policy, the title company performs an in-depth search of the public records to determine if anyone other than you has an interest in the property. The search may be performed by title company personnel using either public records or, more likely, the information contained in the company's own title plant.
After a thorough examination of the records, any title problems are usually found and can be cleared up prior to your purchase of the property. Once a title policy is issued, if any claim covered under your policy is ever filed against your property, the title company will pay the legal fees involved in the defense of your rights. They are also responsible to cover losses arising from a valid claim. This protection remains in effect as long as you or your heirs own the property. Title insurance premiums are generally very affordable and protect you against the slim chance that a claim may be filed against you.
What is mortgage insurance and when is it required?
Mortgage insurance should not be confused with mortgage life insurance, which is designed to pay off a mortgage in the event of a borrower's death. Mortgage insurance makes it possible for you to buy a home with less than a 20% down payment by protecting the lender against the additional risk associated with low down-payment lending. Low down-payment mortgages are becoming more and more popular. It also provides you with the ability to buy a more expensive home than might be possible if a 20% down payment were required.
The mortgage insurance premium is based on loan-to-value ratio, credit score, type of loan, and amount of coverage required by the lender. Traditional mortgage insurance (often called PMI), is paid as a monthly premium and is included in your monthly payment. In the last few years many other mortgage insurance options have evolved. Mortgage insurance can be paid monthly, paid as a one-time cost through closing, paid by way of a slightly higher interest rate, or – in some cases – we can include the cost in your loan amount. This last option is usually the most affordable and our recommendation.
It may be possible to cancel private mortgage insurance at some point, such as when your loan balance is reduced to a certain amount―below 75% to 80% of the property value. Recent federal legislation requires automatic termination of mortgage insurance for many borrowers when their loan balance has been amortized down to 78% of the original property value. If you have any questions about when your mortgage insurance could be cancelled, please contact your Underwood Mortgage Group Consultant.
Does Underwood Mortgage Group Home Mortgage require flood insurance?
Federal law requires all lenders to investigate whether or not each home they finance is in a special flood hazard area as defined by the Federal Emergency Management Agency (FEMA). Floods can happen anytime and anywhere. But the Flood Disaster Protection Act of 1973 and the National Flood Insurance Reform Act of 1994 help to ensure that you will be protected from financial losses caused by flooding. Underwood Mortgage Group uses a third party company who specializes in the reviewing of flood maps prepared by FEMA to determine if your home is located in a flood area. If it is, then flood insurance coverage will be required, since standard homeowner's insurance doesn't protect you against damages from flooding.
What happens at the loan closing?
The closing takes place at the office of an Escrow company, an attorney who acts as our agent, or at our office. During the closing, you review and sign several loan papers. The closing agent or attorney conducting the closing should be able to answer any questions you have. If you prefer, you can also contact your Underwood Mortgage Group Consultant. Just to make sure there are no surprises at closing, your Mortgage Consultant will contact you a few days before closing to review your final fees, loan amount, first payment date, etc.
What important documents can you expect to sign at closing?
The Hud-1 Settlement Statement is also commonly known as the closing statement, and both the buyer and seller must sign it. This document provides an itemized listing of the final fees charged in connection with your loan. If your loan is a purchase, the settlement statement includes a listing of any fees related to the transaction between you and the seller. If the loan is a refinance, the settlement statement shows the pay-off amounts of any mortgages that paid in full with your new loan. Most items on the statement are numbered according to a standardized system used by all lenders. These numbers correspond to the numbers listed on the Good Faith Estimate that is provided in your initial disclosures.Truth-in-Lending Statement
The Truth-in-Lending Statement (TIL) provides full written disclosure of the terms and conditions of a mortgage, including the annual percentage rate (APR) and other fees. It is exactly the same as the TIL that you received immediately after your initial application, except it has been updated to reflect the final rate and fee information. Federal law requires that all lenders provide you with this document at closing.Note
The note is the document you sign to contractually agree to repay your mortgage. The note provides you with all of the details of your loan including the interest rate and length of time to repay the loan. It also explains the penalties that you may incur if you fall behind in making your payments.Mortgage/Deed of Trust
The mortgage/deed of trust document pledges a property to the lender as security for repayment of a debt. Essentially this means that you give your property up to the lender in the event that you cannot make the mortgage payments. The mortgage restates the basic information contained in the note, as well as details the responsibilities of the borrower. In some states, the document is called a deed of trust instead of a mortgage. If your loan is a refinance, federal law requires that you have three days to decide positively that you want a new mortgage after you sign the documents. This means that the loan funds won't be disbursed until three business days have passed. The closing agent provides more details at the closing.
If I am selling my current home to purchase a new home, what documentation is required before I close?
If you are selling your current home to purchase a new home, you need to provide a copy of the settlement or closing statement you receive at the closing on your current home to verify that your current mortgage has been paid in full and that you have sufficient funds for the closing on your new home. Often the closing of your current home is scheduled for the same day as the closing of your new home. If that is the case, just bring your settlement statement with you to your new mortgage closing.
What are closing fees and how they are determined?
A home loan often involves many fees, such as the appraisal fee, title charges, closing fees and state or local taxes. These fees vary from state to state and also from lender to lender. Any lender or broker should be able to give you an estimate of their fees, but it is more difficult to tell which lenders have done their homework and are providing a complete and accurate estimate. Underwood Mortgage Group takes quotes very seriously. We do not disclose fees until we have received a quote from Title, Escrow, Notary, insurance, and have completed the research necessary to make sure that the fees we quote are accurate.
To assist you in evaluating our fees, we've grouped them as follows:
Fees that we consider third-party fees include the appraisal fee, the credit report fee, the settlement or closing fee, tax service fees, title insurance fees, flood certification fees and courier/mailing fees. Third-party fees are fees that we collect and pass on to the person who actually performed the service. For example, an appraiser is paid the appraisal fee, a credit bureau is paid the credit report fee, and a title company or an attorney is paid the title insurance fees. Typically, you see some minor variances in third-party fees from lender to lender since a lender may have negotiated a special charge from a provider they use often, or choose a provider that offers nationwide coverage at a flat rate. You may also see that some lenders absorb minor third-party fees such as the flood certification fee, the tax service fee, or courier/mailing fees.Taxes and Other Unavoidable Fees
Fees that we consider to be taxes or unavoidable include state and local taxes and recording fees. Some lenders don't quote fees that include taxes and other unavoidable fees; don't assume that you won't have to pay them. It probably means that the lender who doesn't tell you about the fee hasn't done the research necessary to provide accurate closing costs – or more common, the lender is intentionally “underquoting” fees in order to appear less expensive. With Underwood Mortgage Group, we will “overquote” fees if we are not certain. We never want our clients to be surprised by anything at closing.Lender Fees
Fees such as points/origination, document preparation fees, and loan processing fees are retained by the lender and are used to provide you with the lowest rates possible. This is the category of fees that you should compare very closely from lender to lender before making a decision.Required Advances
You may be asked to prepay some items at closing that are actually due in the future. These fees are sometimes referred to as “prepaid” items. One of the more common required advances is called “per diem interest” or “interest due at closing.” If your loan is closed on any day other than the first of the month, you pay interest, from the date of closing through the end of the month at closing. For example, if the loan is closed on June 15, we collect interest from June 15 through June 30 at closing. This also means that you won't make your first mortgage payment until August 1. This type of charge should not vary from lender to lender, and does not need to be considered when comparing lenders. All lenders will charge you interest beginning on the day the loan funds are disbursed.
Some borrowers prefer to include their property taxes and insurance in with their mortgage payment every month. This is usually optional and primarily for convenience. This is called an “escrow account” or “impound account.” If you wish to have one established, you make an initial deposit into the escrow account at closing so that sufficient funds are available to pay the bills when they become due. If your loan is a purchase, you also need to pay for your first year's homeowner's insurance premium prior to closing. We consider this to be a required advance.
What is an escrow account?
An escrow account requires borrowers to make monthly payments toward real estate taxes and/or home-related insurance as part of the regular monthly mortgage payment. Bills for the taxes and/or insurance are sent directly to the lender who makes the required payments.
Will I need to have an attorney represent me at closing?
In some areas of the country it is very customary, and sometimes required by law, to have an attorney represent you at the closing. In California, it is not.
What options are there if I can't attend the closing?
If you won't be able to attend the loan closing, contact your Underwood Mortgage Group Consultant to discuss other options. If someone you trust is able to attend on your behalf, you can execute a Specific Power of Attorney so that this person can sign documents on your behalf. In other cases, we are able to mail you the documents in advance so that you can sign them and forward them to the closing agent.
Where does the closing take place?
Most closings are conducted at the office of the Escrow Company handing the transaction. If this is not convenient, we can schedule your closing to take place near your home for your convenience.
Whether you're a first-time homebuyer or a long-time homeowner, Underwood Mortgage Group has mortgage loan options to meet your needs. We'll partner with you to ensure your buying or refinancing experience is a success.
Conventional fixed-rate mortgages have a consistent interest rate for their entire term, so your payments will remain predictable for the life of your loan. A fixed-rate mortgage may be right for you, if you prefer to budget a specific payment amount into your monthly expenses.
- Allows for easy budgeting and long-term planning
- If interest rates are low, allows you to lock in favorable rates for the long term
- Provides predictable financing for investment properties
- Includes jumbo loan financing options
- Consistent loan payment amount
- Easy budgeting and long-term planning
- Lets borrower lock in low rates
- Stable financing for investment property
- Wants a consistent monthly payment
- Doesn’t expect to relocate, refinance or move in the next few years
- Is not sure if they’ll see an income increase in the next few years
Planning to refinance or move over the next few years? Do you expect your income to increase? If so, an adjustable-rate mortgage (ARM) from Underwood Mortgage Group may be right for you. ARMs offer lower initial interest rates, and after a specified period, may adjust annually or semi-annually to a new rate.Benefits:
- Typically, lower payments at the beginning of your loan term
- Opportunities to finance a larger loan amount
- Annual and lifetime rate caps
- Want an initially lower monthly payment
- Expect a future increase in income
- Plan to relocate, refinance or move in the next few years
Many 3-, 5-, 7- and 10-year adjustable-rate mortgage options.
Building a new home? Renovating the one you have? With an Underwood Mortgage Group construction-to-permanent loan, your lot, construction and mortgage financing can be covered in a single loan.Benefits:
- Interest-only payments during construction
- Fixed construction interest rate
- Fixed and adjustable-rate loan options
- No prepayment penalties
- A single set of closing costs
- Are building a primary residence or vacation home
- Need to buy a lot and build and finance construction
- Want to prepay the loan without penalty
The following housing requirements must be met to qualify for a construction-to-permanent loan:
- Your new home must be a one-unit, single-family detached home.
- It must become your primary residence or a second home, such as a vacation home.
- Your builder of choice must be a licensed contractor.
Veteran’s Administration Loan
Veteran's Administration (VA) loans are available to qualified veterans, active duty, reserves and National Guard personnel. Loans are residential mortgages, allowing for the purchase or refinance of an owner-occupied home. Underwood Mortgage Group offers a variety of payment terms for VA loans.Benefits:
- Low or no-down-payment options
- Financing of VA funding fee
- Unlimited seller contribution to buyer's closing costs
- Gift funds allowed
- Perfect for limited income and marginal credit history
- A retired veteran, active duty military, National Guard or reservist buying or refinancing a home
- Would like to make a low down payment
- Are interested in 100% financing
- Lack credit history
- Have income limitations
First-Time Home Buyer and Low Down Payment
Underwood Mortgage Group offers a variety of programs to help first-time home buyers and buyers with limited credit history or income realize their dream of homeownership. Your Mortgage Consultant will help you determine which loan is best for you.
Loans may include the following features:
- Low down payment options
- Alternative credit histories accepted
- Down payment funding in the form of gifts or grants
- Non-occupying co-borrower allowed
Federal Housing Administration (FHA) loans are offered in conjunction with the U.S. Government to help home buyers overcome many of the obstacles to owning their own homes.
- Low down payment
- Closing costs can be funded by gifts or grants
- No cash reserves needed
- Non-occupying co-borrowers are allowed
- Loan may be fully assumable depending on loan program
Recommended For Those Who:
- Are a first-time homebuyer
- Lack a sufficient down payment, or plan to use gift or grant monies for down payment assistance
- Lack credit history
- Are concerned about qualifying income