- My real estate agent recommended that I get a prequalification letter. What is a prequalification letter, and why should I get one?
The lender gives you a prequalification letter stating the lender agrees to provide a mortgage
to you (a homebuyer) based on certain criteria. Prequalification letters help you set realistic
goals while you're house hunting, provide the same negotiating ability as a cash buyer and enable
you to move quickly once the perfect home is found.
- Do I need to be prequalified before I begin searching for my home?
Definitely! Getting approved prior to your house hunt will help the process go much smoother.
The prequalification process is simple. To arrange to be prequalified for your purchase, take the
- Gather your personal financial information, including bank statements, W-2 forms, and paycheck
stubs and meet with your Highland HomeLoans Loan Officer.
- Your Highland Mortgage Professional will pull your credit report and evaluate your financial
documents. With this information, you and your Highland HomeLoans Loan Officer are able to discuss
the home financing options that will help you best achieve your financial goals.
- To inform both your real estate agent and the seller of the property that you are a preferred
and serious potential buyer, Highland HomeLoans will write a prequalification letter for you. This
will give any offer you extend on a property more weight so you can relax and enjoy the process of
looking for your new home!
- When I apply for a mortgage, what documents will I need?
You will need to provide documents that verify your employment, income and assets. There are
some loan programs that have limited requirements in terms of documentation for certain homebuyers.
Typical loan programs require the following documents:
- A copy of your Social Security card
- Pay stubs for the last two months
- W-2 forms for the past two years
- Bank statements for the past two or three months
- One to two years of federal tax returns
- A signed contract of sale (if you've already chosen your new home)
- Information on current debt, including car loans, student loans and credit cards
- If I am not a citizen, can I qualify?
Different guidelines are established for non-citizens. Each loan type varies.
As a requirement, the home being purchased in this country must be the primary residence for FHA
loans. Non-citizens also must have a Social Security card and all other documentation regularly
required for FHA buyers.
Freddie Mac underwrites loans for permanent and nonpermanent residents alike, with no special
requirements for the latter.
Through Fannie Mae, non-citizens are required to hold a green card (have permanent resident
alien status). Non permanent resident aliens are required to supply an additional down payment and
proof of permission to work in the United States for extended periods through a work visa.
Additionally, they must occupy the purchased property.
Be sure to meet with your Highland HomeLoans Loan Officer before choosing a home. This will help
you be aware of your specific financing opportunities.
- Is it still possible to qualify for a loan even if I have past credit problems?
When a consumer decides to move forward into home ownership after experiencing credit problems,
it is common to wonder what affect those issues will have on the journey to homeownership. Higher
credit scores do provide more opportunity for the homebuyer to gain lower interest rates and better
terms. However, Highland HomeLoans offers loan programs that suit a wide range of credit
If you have encountered credit problems in your past, contact your Highland HomeLoans Loan
Officer to learn about your options.
- How will I know the loan program that is best for me?
Deciding on the best loan program for you will depend greatly on your personal financial
situation. You can focus on the most beneficial options by asking yourself a few questions:
- In the next few years, do you anticipate your finances to change?
- Do you plan to live in this home for a substantial amount of time?
- Would an adjusting mortgage payment make you comfortable or uncomfortable?
- When you enter the next phases of life (children's college, your retirement, etc…), would you
aim to be out of mortgage debt?
When you cover these questions with your Highland HomeLoans Loan Officer, you can determine
answers together that will help you choose the loan program that best fits your needs and helps you
attain your goals.
- What is the difference between a FHA and a VA loan?
A FHA loan is a loan guaranteed by the Federal Housing Administration. FHA issues specific
guidelines for mortgages. A VA loan is a loan guaranteed by the Veterans Administration. To obtain
a VA loan, the borrower must have served in the Armed Forces for a specific amount of time.
- How do I know what my interest rate will be?
Discuss this with your Highland HomeLoans Loan Officer who will advise you of the rates
available for your loan product. You will then "lock" the rate and discount points with your loan
- How does the Annual Percentage Rate differ from the interest rate?
According to the Consumer Financial Protection Bureau (CFPB): “The interest rate is the cost of
borrowing money expressed as a percentage rate. It does not reflect fees or any other charges you
may have to pay for the loan. An Annual Percentage Rate (APR) is a broader measure of cost to you
of borrowing money. The APR reflects not only the interest rate but also the points, broker fees,
and certain other charges that you have to pay to get the loan, including certain of your closing
costs. For that reason, your APR is usually higher than your interest rate.”
- Should I get a fixed or adjustable interest rate?
When deciding on the type of rate you want, it's all a matter of time. You'll want to consider a
fixed rate mortgage if you plan to be in your home for more than seven years. Fixed rates provide
you with set payments and protection against increasing mortgage interest rates. An adjustable rate
mortgage might be more suitable if you anticipate living in your home for less than seven years.
With an adjustable rate mortgage, you are at risk of having your monthly payments increase each
time your interest rate changes.
- What does my mortgage lender mean by origination fee or points?
Origination fees pay the lender to do the loan. One point is equal to one percent of the loan
amount. Points are used to buy down the interest rate.
- When mortgage lenders refer to "PITI" what are they referring to?
PITI is principal, interest, taxes, and insurance: the components of a monthly mortgage
- What amount is required for a down payment?
Down payments vary between loan types. Depending on your situation and eligibility, you may find
very low down payment options available. Your Highland HomeLoans Loan Officer will be able to help
you find a loan program that best fits your financial goals and needs. Remember that private
mortgage insurance may be required for down payments less than 20%.
- How does mortgage insurance work?
Mortgage insurance operates very similar to auto insurance. It protects the lender against loss,
requires payment of a premium, and is used in the case of an emergency. If the borrower fails to
repay the mortgage loan, the lender will file a claim with the mortgage insurer to recoup
- How do I know if I need mortgage insurance? If I do need it, how do I get it?
If you make a down payment less than 20% of the purchase price, you will be required to have
mortgage insurance. Your Highland HomeLoans Loan Officer can provide details on how to acquire
- Do I need to have a certain amount of money left after I buy my home?
Cash reserve requirements vary between loan types. Your Highland HomeLoans Loan Officer will
review this information with you.
- When my loan officer asks me if I want to waive escrows, what exactly does this mean?
An escrow account sets money aside from your monthly payments to pay annual property taxes and
home insurance. If you do not want your taxes and insurance costs divided up and collected monthly
with your principal and interest payments, you will want to waive escrows. The borrower will be
responsible for paying property taxes and home insurance in full when due. Waiving escrows may add a small fee to closing
- Will I get a copy of my credit report and appraisal?
You may obtain a copy of your credit report through the credit bureaus. You will receive a copy
of your appraisal at your closing.
- What inspections are required by the lender?
The lender requires an appraisal on most transactions. A clear termite report is required on
government transactions. If the appraiser recommends repairs or if repairs are mentioned in the
contract, the lender will require that those repairs be done before closing. A final inspection
will be performed to assure that the repairs were completed. If the termite report recommends
treatment, treatment is required. A receipt showing the name and amount of chemicals used and a
clear termite report will be required.
- When will I find out what the total closing costs amount?
The Settlement Statement (HUD-1) is prepared by the title company according to closing
instructions prepared by the lender. This is available 24 hours prior to closing by contacting the
- Where do I go for closing?
Your closing will take place at the title company. The title company name and address appears in
your sales contract. Speak to your loan officer to discuss the details of your closing.
- Will I have two separate payments if I have a second lien?
Yes. Each lien is a separate loan. Two separate payments are required.
- Where do I send my first mortgage payment?
Refer to your "First Payment Letter" in your closing documents to determine where to send your
first mortgage payment.