What is PITI ?
PITI is a term commonly used in the mortgage industry that stands for principal, interest, taxes, and insurance.
These are the components that make up your monthly mortgage payment to the lender. PITI is part of the financial
analysis to determine your ability to repay the mortgage along with your income and other expenses.
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What is an Interest Rate Lock ?
This is a process where the mortgage lender guarantees a certain
interest rate for a period of time thus eliminating any market fluctuations.
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What are Discount Points ?
Discount points are front end fees paid to the lender to reduce the interest rate. A discount point is
equal to 1% of the loan amount.
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What is Private Mortgage Insurance ?
Private Mortgage Insurance is a monthly insurance premium required by
lenders for borrowers where the loan to value ratio exceeds 80%.
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What is a Pre-Qualification" ?
Pre-qualification is a process where the mortgage company makes an
estimate as to the loan amount an individual may qualify for based on
certain financial information supplied to the mortgage company.
This is a helpful tool when dealing with Realtors® who are
interested in the credit worthiness of the buyer.
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Can I get a mortgage loan without much "credit" ?
It is possible; but you do have to prove your credit-worthiness. Some "proofs" of good credit are: The
fact you currently pay rent and you pay it on time, credit letters from utility companies, rental agencies
(such as furniture or appliance rentals), and references from cars who've purchased and paid for on times. Any company or person who gave you credit in
the past can be used to substantiate you as a good credit risk.
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Can I qualify for a mortgage even though I had problems in the past ?
Yes, you can qualify - because bad credit in the past means that you fixed whatever financial problem you had and that demonstrates responsibility.
Your past credit problems do not necessarily mean that you are a bad credit risk today.
Recognize, however, that credit problems you've had in the past will be considered in determining whether to give you a mortgage now and the interest rate and terms offered.
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Will my spouse's poor credit history affect me ?
Yes, it will. So if possible and your income is sufficient to qualify, you may want to try to arrange a mortgage under your own name alone. Be certain, however, that
your spouse is happy is going to be OK with this arrangement, as he or she will have to sign documents at the time of closing. Also, consult with your attorney or
title company to make sure you have complied with all state laws, since some state mortgage loan laws require certain information on your spouse regardless of
whether or not his or her name will be on the mortgage.
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Will a past personal bankruptcy affect my ability to buy a home ?
Bankruptcy itself will not keep you from being approved for a mortgage. You may be able to buy a home sooner than you
might expect after bankruptcy, because a lender may look at your credit history before the bankruptcy, the cause of
your bankruptcy, and how you've handled your financial responsibilities since the bankruptcy.
You must recognize, of course, that with the fairly recent bankruptcy on your record, lenders are not likely to offer you their best interest rates and terms so
if possible, it's always best to avoid a bankruptcy.
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What should I do if my mortgage loan application is rejected ?
It is not common that a mortgage loan application is just rejected outright. Rather, you are often told that a loan is "not possible at this time."
The last three words of this phrase are crucial. You can actually work at getting approved. Meet with the lender who rejected your application
and ask for the reason of the rejection. Then work at removing that reason or reasons. Perhaps in a few months, you can re-apply again and be approved.
Once you fully understand the reasons for your current rejection, simply ask the lender politely: "Will I be approved if I resolve all of those concerns ?"
He may say, "yes." Banks and mortgage companies are in the business of providing mortgage loans. They make no money by turning them down. They are just assessing
their risk and acting accordingly based on the information at hand at the moment.
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I am self-employed. What documentation do I need to get a mortgage ?
You will need to show a lot of documentation. You will surely be asked for two years of personal income tax returns, two years business income tax returns (if you are incorporated), a current balance sheet, a current profit and loss statement,
a business credit report, and a personal credit report. Some lenders may ask for a longer list of documents. Understand that it is far more difficult to understand your credit worthiness when the mortgage provider cannot
simply request payroll documents from an employer you've worked for for a number of years
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What is a "Truth-in-Lending" Statement?"
The federal was originally enacted by Congress in 1968 as a part of the Consumer Protection Act. It was subsequently The law was simplified and reformed as a part the Depository Institutions Deregulations and Monetary Control Act in 1980. The law is designed to protect consumers in credit transactions by requiring clear disclosure of key terms of the lending arrangement and all costs.
The "Truth in Lending" statement gives you the entire list of all costs you will be required to pay (loan origination fee,
discount fees, and prepaid interest and all other items of cost to you), along with the actual figures of the carrying the loan during its lifetime. All of these items are entered into a computer to calculate the true "Annual Percentage Rate (APR).
The end result is a statement that shows you the true cost amortized over the term of the mortgage. It is this number that you should use to compare mortgage offerings. One mortgage provider may offer a lower
interest rate but higher up-front costs or vice versa. The "Truth in Lending" statement is your valid way to honestly compare the offerings.
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What service providers are used for the mortgage process ?
Appraisers, title companies, underwriters, lenders and in case cases, attorneys are all key participants in today's mortgage
process. You will get to know all of them by the time your mortgage is approved and you close on your new home purchase.
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