FAQs

It's generally a good time to refinance when mortgage rates are 2% lower than the current rate on your loan. It may be a viable option even if the interest rate difference is only 1% or less. Any reduction can trim your monthly mortgage payments. Example: Your payment, excluding taxes and insurance, would be about $770 on a $100,000 loan at 8.5%; if the rate were lowered to 7.5%, your payment would then be $700, now you're saving $70 per month. Your savings depends on your income, budget, loan amount, and interest rate changes. Your trusted lender can help you calculate your options.

A point is a percentage of the loan amount, or 1-point = 1% of the loan, so one point on a $100,000 loan is $1,000. Points are costs that need to be paid to a lender to get mortgage financing under specified terms. Discount points are fees used to lower the interest rate on a mortgage loan by paying some of this interest up-front. Lenders may refer to costs in terms of basic points in hundredths of a percent, 100 basis points = 1 point, or 1% of the loan amount.

Yes, if you plan to stay in the property for a least a few years. Paying discount points to lower the loan's interest rate is a good way to lower your required monthly loan payment, and possibly increase the loan amount that you can afford to borrow. However, if you plan to stay in the property for only a year or two, your monthly savings may not be enough to recoup the cost of the discount points that you paid up-front.

The annual percentage rate (APR) is an interest rate reflecting the cost of a mortgage as a yearly rate. This rate is likely to be higher than the stated note rate or advertised rate on the mortgage, because it takes into account points and other credit costs. The APR allows homebuyers to compare different types of mortgages based on the annual cost for each loan. The APR is designed to measure the "true cost of a loan." It creates a level playing field for lenders. It prevents lenders from advertising a low rate and hiding fees.
The APR does not affect your monthly payments. Your monthly payments are strictly a function of the interest rate and the length of the loan.
Because APR calculations are effected by the various different fees charged by lenders, a loan with a lower APR is not necessarily a better rate. The best way to compare loans is to ask lenders to provide you with a good-faith estimate of their costs on the same type of program (e.g. 30-year fixed) at the same interest rate. You can then delete the fees that are independent of the loan such as homeowners insurance, title fees, escrow fees, attorney fees, etc. Now add up all the loan fees. The lender that has lower loan fees has a cheaper loan than the lender with higher loan fees.
The following fees are generally included in the APR:
Points - both discount points and origination points
Pre-paid interest. The interest paid from the date the loan closes to the end of the month.
Loan-processing fee
Underwriting fee
Document-preparation fee
Private mortgage-insurance
Escrow fee
The following fees are normally not included in the APR:
Title or abstract fee
Borrower Attorney fee
Home-inspection fees
Recording fee
Transfer taxes
Credit report
Appraisal fee

Mortgage rates can change from the day you apply for a loan to the day you close the transaction. If interest rates rise sharply during the application process it can increase the borrower’s mortgage payment unexpectedly. Therefore, a lender can allow the borrower to "lock-in" the loan’s interest rate guaranteeing that rate for a specified time period, often 30-60 days, sometimes for a fee.

Below is a list of documents that are required when you apply for a mortgage. However, every situation is unique and you may be required to provide additional documentation. So, if you are asked for more information, be cooperative and provide the information requested as soon as possible. It will help speed up the application process.
Your Property
Copy of signed sales contract including all riders
Verification of the deposit you placed on the home
Names, addresses and telephone numbers of all realtors, builders, insurance agents and attorneys involved
Copy of Listing Sheet and legal description if available (if the property is a condominium please provide condominium declaration, by-laws and most recent budget)
Your Income
Copies of your pay-stubs for the most recent 30-day period and year-to-date
Copies of your W-2 forms for the past two years
Names and addresses of all employers for the last two years
Letter explaining any gaps in employment in the past 2 years
Work visa or green card (copy front & back)
If self-employed or receive commission or bonus, interest/dividends, orrental income:
Provide full tax returns for the last two years PLUS year-to-date Profit and Loss statement (please provide complete tax return including attached schedules and statements. If you have filed an extension, please supply a copy of the extension.)
K-1's for all partnerships and S-Corporations for the last two years (please double-check your return. Most K-1's are not attached to the 1040.)
Completed and signed Federal Partnership (1065) and/or Corporate Income Tax Returns (1120) including all schedules, statements and addenda for the last two years. (Required only if your ownership position is 25% or greater.)
If you will use Alimony or Child Support to qualify:
Provide divorce decree/court order stating amount, as well as, proof of receipt of funds for last year
If you receive Social Security income, Disability or VA benefits:
Provide award letter from agency or organization
Source of Funds and Down Payment
Sale of your existing home - provide a copy of the signed sales contract on your current residence and statement or listing agreement if unsold (at closing, you must also provide a settlement/Closing Statement)
Savings, checking or money market funds - provide copies of bank statements for the last 3 months
Stocks and bonds - provide copies of your statement from your broker or copies of certificates
Gifts - If part of your cash to close, provide Gift Affidavit and proof of receipt of funds
Based on information appearing on your application and/or your credit report, you may be required to submit additional documentation
Debt or Obligations
Prepare a list of all names, addresses, account numbers, balances, and monthly payments for all current debts with copies of the last three monthly statements
Include all names, addresses, account numbers, balances, and monthly payments for mortgage holders and/or landlords for the last two years
If you are paying alimony or child support, include marital settlement/court order stating the terms of the obligation
Check to cover Application Fee(s)

Credit scoring is a system creditors use to help determine whether to give you credit. Information about you and your credit experiences, such as your bill-paying history, the number and type of accounts you have, late payments, collection actions, outstanding debt, and the age of your accounts, is collected from your credit application and your credit report. Using a statistical program, creditors compare this information to the credit performance of consumers with similar profiles. A credit scoring system awards points for each factor that helps predict who is most likely to repay a debt. A total number of points -- a credit score -- helps predict how creditworthy you are, that is, how likely it is that you will repay a loan and make the payments when due.

The most widely use credit scores are FICO scores, which were developed by Fair Isaac Company, Inc. Your score will fall between 350 (high risk) and 850 (low risk).

Because your credit report is an important part of many credit scoring systems, it is very important to make sure it's accurate before you submit a credit application. To get copies of your report, contact the three major credit reporting agencies:

Equifax: (800) 685-1111
Experian (formerly TRW): (888) EXPERIAN (397-3742)
Trans Union: (800) 916-8800
These agencies may charge you up to $9.00 for your credit report.

You are entitled to receive one free credit report every 12 months from each of the nationwide consumer credit reporting companies – Equifax, Experian and TransUnion. This free credit report may not contain your credit score and can be requested through the following website: https://www.annualcreditreport.com

Credit scoring models are complex and often vary among creditors and for different types of credit. If one factor changes, your score may change -- but improvement generally depends on how that factor relates to other factors considered by the model. Only the creditor can explain what might improve your score under the particular model used to evaluate your credit application.
Nevertheless, scoring models generally evaluate the following types of information in your credit report

Payment history typically is a significant factor. It is likely that your score will be affected negatively if you have paid bills late, had an account referred to collections, or declared bankruptcy, if that history is reflected on your credit report.

Many scoring models evaluate the amount of debt you have compared to your credit limits. If the amount you owe is close to your credit limit, that is likely to have a negative effect on your score.

Generally, models consider the length of your credit track record. An insufficient credit history may have an effect on your score, but that can be offset by other factors, such as timely payments and low balances.

Many scoring models consider whether you have applied for credit recently by looking at "inquiries" on your credit report when you apply for credit. If you have applied for too many new accounts recently, that may negatively affect your score. However, not all inquiries are counted. Inquiries by creditors who are monitoring your account or looking at credit reports to make "prescreened" credit offers are not counted.

Although it is generally good to have established credit accounts, too many credit card accounts may have a negative effect on your score. In addition, many models consider the type of credit accounts you have. For example, under some scoring models, loans from finance companies may negatively affect your credit score.
Scoring models may be based on more than just information in your credit report. For example, the model may consider information from your credit application as well: your job or occupation, length of employment, or whether you own a home.
To improve your credit score under most models, concentrate on paying your bills on time, paying down outstanding balances, and not taking on new debt. It's likely to take some time to improve your score significantly.

An Appraisal is an estimate of a property's fair market value. It's a document generally required (depending on the loan program) by a lender before loan approval to ensure that the mortgage loan amount is not more than the value of the property. The Appraisal is performed by an "Appraiser" typically a state-licensed professional who is trained to render expert opinions concerning property values, its location, amenities, and physical conditions.

On a conventional mortgage, when your down payment is less than 20% of the purchase price of the home mortgage lenders usually require you get Private Mortgage Insurance (PMI) to protect them in case you default on your mortgage. Sometimes you may need to pay up to 1-year's worth of PMI premiums at closing which can cost several hundred dollars. The best way to avoid this extra expense is to make a 20% down payment, or ask about other loan program options.

The property is officially transferred from the seller to you at "Closing" or "Funding".

At closing, the ownership of the property is officially transferred from the seller to you. This may involve you, the seller, real estate agents, your attorney, the lender’s attorney, title or escrow firm representatives, clerks, secretaries, and other staff. You can have an attorney represent you if you can't attend the closing meeting, i.e., if you’re out-of-state. Closing can take anywhere from 1-hour to several depending on contingency clauses in the purchase offer, or any escrow accounts needing to be set up.

Most paperwork in closing or settlement is done by attorneys and real estate professionals. You may or may not be involved in some of the closing activities; it depends on who you are working with.

Prior to closing you should have a final inspection, or "walk-through" to insure requested repairs were performed, and items agreed to remain with the house are there such as drapes, lighting fixtures, etc.

In most states the settlement is completed by a title or escrow firm in which you forward all materials and information plus the appropriate cashier's checks so the firm can make the necessary disbursement. Your representative will deliver the check to the seller, and then give the keys to you.

Introduction
This topic contains information on Higher-priced mortgage loan, including:
· Definition of the HPML
· Requirements for HPML loan

Definition of the HPML
In general, a higher-priced mortgage loan is one with an annual percentage rate, or APR, higher than a benchmark rate called the Average Prime Offer Rate.

The Average Prime Offer Rate (APOR) is an annual percentage rate that is based on average interest rates, fees, and other terms on mortgages offered to highly qualified borrowers.

Your mortgage will be considered a higher-priced mortgage loan if the APR is a certain percentage higher than the APOR depending on what type of loan you have:
· First-lien mortgages: APR is 1.5 percentage points or more higher than the APOR.
· Jumbo Loan: APR is 2.5 percentage points or more higher than the APOR
· Subordinate-lien mortgages（2nd Lien）: APR of this mortgage is 3.5 percentage points or more higher than the APOR

Requirements for HPML loan
A higher-priced mortgage loan will be more expensive than a mortgage with average terms. Therefore, your lender will have to take extra steps to make sure you can pay your loan back and won’t default. Your lender may have to:
·Obtain a full interior appraisal from a licensed or certified appraiser
·Provide a second appraisal of your home for free, if it is a “Flipped” home
·In many instances, maintain an escrow account for at least five years

Introduction
This topic contains information on ATR Rule and Qualify Mortgage, including:
· What is ATR rule？
· Loan types exempt from the Qualify Mortgage

What is the ATR rule?

The ability-to-repay rule is the reasonable and good faith determination most mortgage lenders are required to make that you are able to pay back the loan. 

Under the rule, lenders must generally find out, consider, and document a borrower’s income, assets, employment, credit history and monthly expenses. Lenders cannot just use an introductory or “teaser” rate to figure out if a borrower can repay a loan. For example, if a mortgage has a low interest rate that goes up in later years, the lender has to make a reasonable effort to figure out if the borrower can pay the higher interest rate too.
One way a lender can follow the ability-to-repay rule is by making a “Qualified Mortgage”.

Loan Types exempt from the Qualify Mortgage
· An “interest-only” period, when you pay only the interest without paying down the principal, which is the amount of money you borrowed.
· “Negative amortization” which can allow your loan principal to increase over time, even though you’re making payments.
· “Balloon Payments” which are larger-than-usual payments at the end of a loan term. The loan term is the length of time over which your loan should be paid back. Note that balloon payments are allowed under certain conditions for loans made by small lenders.
· Loan terms that are longer than 30 years.

Fidelity bonds are designed to protect their policyholders from any loss that occurs as a result of harmful or deceitful actions by specifically indicated parties. In most cases, fidelity bonds are used to protect corporations from the actions of dishonest employees.
Despite the fact that they are called bonds, fidelity bonds are really a type of insurance policy for businesses/employers, insuring them against suffering losses resulting from employees (or clients) who intentionally cause harm to the business. They cover any actions that improperly benefit an employee financially or intentionally hurt the business financially. Fidelity bonds can’t be traded and don’t accrue interest like normal bonds.
 
Summary
Fidelity bonds protect their policyholders from malicious and harmful acts committed by employees or clients.
There are two types of fidelity bonds: first-party bonds (which protect companies from harmful acts by employees or clients) and third-party bonds (which protect companies from the harmful acts of contracted workers).
The bonds are useful because they are part of a company’s risk management strategy, hedging the company against acts that would negatively affect their assets.

The bonds cover many of the same things that are covered by basic crime insurance policies such as burglary and theft, but they also cover things that these policies might not. This includes things such as fraud, forgery, embezzlement, and many other “white collar” crimes that can be committed by employees in financial institutions and large companies.

A home equity loan—also known as an equity loan, home equity installment loan, or second mortgage—is a type of consumer debt. Home equity loans allow homeowners to borrow against the equity in their home. The loan amount is based on the difference between the home’s current market value and the homeowner’s mortgage balance due. Home equity loans tend to be fixed-rate, while the typical alternative, home equity lines of credit (HELOCs), generally have variable rates.

KEY TAKEAWAYS:
A home equity loan, also known as a “home equity installment loan” or a “second mortgage,” is a type of consumer debt.
Home equity loans allow homeowners to borrow against the equity in their residence. 
Home equity loan amounts are based on the difference between a home’s current market value and the mortgage balance due.
Home equity loans come in two varieties—fixed-rate loans and home equity lines of credit (HELOCs). 
Fixed-rate home equity loans provide one lump sum, whereas HELOCs offer borrowers revolving lines of credit.

In a delayed financing transaction, you can take cash out on a property immediately in order to cover the purchase price and closing costs for a property you had previously bought with cash. . This allows you to have the advantage of being a cash buyer and giving sellers the chance to know the transaction will close, while giving you the ability to get a mortgage shortly thereafter in order to avoid having all your savings tied up in your house.

You can think of delayed financing as a way to give yourself the negotiating advantage that comes along with paying in cash for the home, while still giving yourself the long-term financial flexibility afforded by making monthly payments on a mortgage instead of making yourself “house poor.”

Escrow impound accounts are those accounts which lenders set up to collect 'up-front' money from you when you take out a mortgage to cover future expenses such as property taxes and insurance. Lenders like to set up these impound accounts, as they are then certain that the property taxes and insurance will be paid on time, as they will be holding the money and paying these expenses for you.

The rental value is critical for purchasing an investment property. How can we determine the rental value then? The following websites might help you.
No login required, free of charge.

Zillow.com

http://www.realtor.com/

The above two websites are most commonly used. They have the largest inventory, the most site traffic, and offers services that take the landlord from marketing to rent collection.

https://www.huduser.gov/portal/datasets/fmr.html

Official website of OFFICE OF POLICY DEVELOPMENT AND RESEARCH.

Those three websites above should be enough for you to know the estimated market rent.
However, this is for your reference only, if rental income will be used for qualifying income, appraisal report or lease agreement might still be required.

Conventional loans have restrict requirements of DTI ratio/ Reserves/ LTV/ Credit situation. Generally, most of the borrowers may qualify a conventional loan with higher income and credit score. While for some borrowers, their income is lower or having variety types of income, resulting in bad tax returns; Fannie Mae loans may not accept these kind if house mortgage loans.
In these case, you may try to find out some mortgage lender providing Non-QM products. AAA Lendings now provides Bank Statement, Platinum Jumbo, Investor Cash Flow (No need employment information, No need DTI), Asset depletion and Foreign National programs. Everyone can find a appropriate product with low rate and best price.
Here are a few examples of grateful scenarios recently:
Real estate investors with multiple properties including non-warrantable condos. ----Investor Cash Flow
Self-employed borrower with excellent credit whose income stated on their tax return won’t qualify them for the luxury home they can afford. ----Bank Statement Only
Fall-out situation where a borrower was only two years out of a foreclosure. ---- Platinum Jumbo
A borrower sold their multi-million dollar business and then found the home of their dreams but had no source of income to document.----Asset Depletion