If you’re paying more interest than you should to your lender, refinancing can save you money. It’s generally a good idea to refinance when mortgage rates are at least 2% lower than the rate on your current loan. Even if the difference is only 1%, or even less, it can trim your monthly payments and save you money. Calculate your potential savings by talking to your trusted lender today.

Loan points are costs paid to a lender to get mortgage financing. Points come in two forms: Discount points – fees used to lower the interest rate on a loan. Lenders may base points in hundredths of a percent, 100 basis points = 1 point, or 1% of the loan amount. Origination points – points paid at closing for processing and underwriting the mortgage application by paying off some of the interest up-front (or at some other time).

A good way to save money on your mortgage payments is to pay discount points up-front. Discount points are one-time fees that you pay in exchange for a loan’s lower interest rate. You usually pay one discount point at the beginning of your loan, and then another one after the initial six months. Although it costs more upfront, paying discount points will typically save you money over the life of your loan because it keeps your interest rate low. You should only purchase these points if you plan on staying in your home for at least two years, since this extended period of time allows you to make back the cost of the discount points in savings.

Whether you choose to obtain a mortgage or not, it’s important to understand the basics of a mortgage contract: the annual percentage rate (APR). Your APR measures the cost of borrowing a loan or line of credit over time. It’s commonly used to compare rates and fees between different types of loans, like mortgages and personal loans — even student loans.

The following fees ARE generally included in the APR:

• Points – both discount points and origination points. 1 point equals 1% of the loan amount.
• Pre-paid interest- The interest paid from the date the loan closes to the end of the month. If you close on August 10th, you will pay 21 days of pre-paid interest.
• Admin Fee
• Loan-processing fee
• Underwriting fee
• Document-preparation fee
• Private mortgage-insurance
• Escrow/Settlement fee

The following fees are normally NOT included in the APR:

• Title or abstract fee
• Attorney fee
• Notary fee
• Document preparation (charged by the closing agent)
• Home-inspection fees
• Recording fee
• Transfer taxes
• Credit report
• Appraisal fee

A mortgage rate lock-in is a guarantee by the lender to keep the borrower’s rate fixed for a certain period of time, typically 30-60 days. The term of the lock-in can vary based on a number of factors, such as when rates could go up or down, whether it’s better to get locked in now versus later, and what your financial situation allows.

When you apply for a mortgage, you will be asked to provide a wide range of documents. The exact ones you’ll need will depend on your circumstances. However, many of these are fairly typical and the lender should let you know beforehand if any additional documentation is required.

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, or rental 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)
How is my credit judged by lenders?
Credit scoring is a multi-factor system used by lenders to evaluate an applicant’s creditworthiness in order to determine whether the applicant should receive credit. The information used in credit scoring includes: application data, payment history, length of credit history, types of credit used and other related data.

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).

When you apply for a mortgage, you will be asked to provide a wide range of documents. The exact ones you’ll need will depend on your circumstances. However, many of these are fairly typical and the lender should let you know beforehand if any additional documentation is required.

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, or rental 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 multi-factor system used by lenders to evaluate an applicant’s creditworthiness in order to determine whether the applicant should receive credit. The information used in credit scoring includes: application data, payment history, length of credit history, types of credit used and other related data.

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).

To get an accurate and up-to-date view of your credit profile, it’s important to pull a copy of your credit report from the three major credit reporting agencies. These three companies collect information about you and report back to lenders with information about your application for a loan or credit card. They use this data to create a unique score, which is used as part of their decision making process when approving loans and other offers for products or services.

Some factors used in scoring models are considered more important than others. Whether an account is positive or negative, open or closed, past due or paid on time — all are important to the credit score. However, one factor can have a greater impact on the score than others. If one factor changes and has a positive impact, your score may increase; however, improvement depends on how that factor relates to other factors considered by the model used by the creditor to evaluate your application for credit. Only the creditor can explain what might improve your score under the particular model used to evaluate it.

Nevertheless, scoring models generally evaluate the following types of information in your credit report:

• Have you paid your bills on time? Payment history, also known as credit utilization or debt utilization, is the ratio of your outstanding balances to your total available credit limits. It also considers how many accounts you use for regular payments. The higher the number of accounts with timely payments and low balances, the better in this category.
• What is your outstanding debt? If you’ve maxed out your cards, a lender can see that as a negative. The closer you are to your limit as a percentage of your available credit line, the more cautious lenders will be about extending credit to you.
• Have you applied for new credit recently? Some credit scoring models take into account the number of times you have applied for credit. However, only inquiries that are done by creditors who might offer you an account are counted as part of your score. Inquiries by creditors who monitor your accounts or look at your credit report to make “prescreened” offers will be ignored.
• How many and what types of credit accounts do you have? Having established credit accounts is generally good for your credit score, but too many accounts can negatively impact your score. In addition, most credit scoring models consider the types of credit accounts you have. For example, some finance companies such as banks and credit unions may report the enquiries on your account to the credit reporting agencies, which may result in increased inquiries associated with a higher number of open credit card accounts.

The score used to determine your credit risk may be based on information from more than just your credit report. The model may also consider any additional information that appears in your credit application, such as details about the car you are buying or a loan for a vacation home.

Your credit score will improve as you pay your bills on time, keep your debt low and take on less new debt. Generally, the greater the number of years elapsed since you first used credit and the longer you’ve been at your current job, the stronger your score.

An appraisal provides a lender with an estimate of a property’s fair market value. Appraisals are 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. An appraisal is generally required before loan approval to ensure that the mortgage loan amount is not more than the value of the property.

Private mortgage insurance is a type of insurance that protects the lender if you default on your mortgage. The amount you pay varies from lender to lender, and it may be a few hundred dollars up to a year’s worth of premiums at closing. You can avoid PMI by making a larger down payment or using other loan program options.

80-10-10 financing is a way to partially finance a home loan, which reduces or even excludes the requirement for Private Mortgage Insurance (PMI). It’s called 80-10-10 because you will be taking out an 80% first mortgage and another 10% second mortgage. Using 80-10-10 financing does not eliminate the need for PMI on homeowners who make down payments smaller than 10%. However, by reducing the down payment you have no fear of getting stuck with PMI.

To understand 80-15-5 financing, you first need to know what 80-10-10 is. While the same principle applies if you can only afford to make a 5% down, 80-15-5 is also available. However, because a smaller cash down payment increases the lender’s risk of default, you should not be surprised when you are asked to pay higher loan fees and a higher mortgage interest rate for 80-15-5 than you pay for 80-10-10.

At Closing, the seller has completed all the necessary final accounting and provided payments to you.

When you close on the property, it will be officially handed over to you—and in a sense, your hands on the deed. This can entail signing legal documents that transfer property ownership into your name, such as an escrow account agreement and title agreement. Other scenarios may involve real estate agents representing both you and the seller at closing; your attorney’s involvement; bank staffers; or even mail delivery staff.

At closing, all the legal documents your real estate professional has prepared will be finalized. This can include: the deed to the property; the mortgage and any other loans taken out against it; title insurance policies and endorsements; closing statements and escrow instructions from your attorney or broker. You may choose to do any of these tasks or none of them.

At close you will also have a final walk through to make sure the requested repairs were performed and that all agreed items remain in the house.

The closing inspection will take place at the closing agent’s office. The title company will ask you to come identify the property and its contents, inspect the title records, and sign off on any liens. Once this is completed, you will be given the keys to the property so that you can move in immediately.