Frequently Asked Questions

How do I compare one loan with another?

Ask about specific terms – most importantly, how long the offered rate is “locked in” or available. Look at the length (sometimes called duration) of the loan. Not every mortgage is for 30 years. Look at the fine print of the annual percentage rate (APR), as not every advertised rate is calculated in the same way. And ask about fees and what specific services they cover. Each lender is required to provide you with a Good Faith Estimate disclosing their fees within three days of your application.

What is an ARM?

An Adjustable Rate Mortgage (ARM) has the interest rate adjusted periodically, based upon a pre-selected index. First-time homebuyers are often encouraged to consider ARMs that are fixed for an initial period to keep their payments low. The interest rate fluctuates periodically after that initial time period.

How can I strengthen my offer?

There are several ways to strengthen your offer. You can increase the amount of your down payment, agree to close in less than 30 days, and if this applies, note there is no “home contingency”—that your offer is not subject to the sale of your current home.

What inspections are required?

Home inspections are part of the purchase contract process, as they could reveal material defects that could affect the property’s value. Some lenders require termite inspections, but both buyer and seller must agree to have one.

What goes into a purchase and sale contract?

The process of purchasing your first home is often more complex than expected. Contract terms can have a significant impact on the success of your transaction – and your stress levels! These are several key items to consider:

Loan contingency – the period of time the seller is giving you to obtain full, formal loan approval, typically 15-21 days.

Pre-approval – click here for a full explanation and application.

Contract period – this is how long you have to compete all due diligence, including loan approval, property appraisal, home and termite inspection reports and any others, typically 30, 45 or 60 days.

Home inspection contingency – an agreed-upon length of time in which to complete a home inspection, usually with a third party service. Once this time period expires, you lose the ability to renegotiate the purchase price.

Seller rent back – When the buyer and seller are unable to agree upon a specified closing date for the transaction, the real estate agent involved will negotiate a “rent back” period where the buyer doesn’t take occupancy of the property immediately, even though the property has been transferred into the buyer’s name. The seller rents from the buyer for that period, which should be less than 30 days.

Seller contributions – Depending on the seller’s eagerness to close the transaction, the seller may offer to pay some or all of the non-recurring closing costs or origination points associated with the purchase on the buyer’s behalf. This can drive down the interest rate and provide a more affordable monthly payment. Lenders often limit seller contributions to no more than 6 percent of the purchase price and restrict them to non-recurring closing costs.

What are points and should I pay them?

Points are interest paid up front at the time of closing to obtain a lower interest rate on a loan. One point equals one percent of the amount of money borrowed. For a $300,000 loan, one point would be $3,000. This generally lowers interest rates by ¼ to 3/8 of a percent. Paying points makes sense if you expect to have the loan for a long time. If you plan to move or refinance at some point, this approach may not be recommended. You need to recoup the total cost of points in less time than you expect to have the loan.

Can I qualify for a loan with a low credit score?

There are loan programs available even if you’ve had a recent bankruptcy. While you may not get the interest rate you hoped for, it’s a chance to start building up your credit again. Once you begin making mortgage payments in full and on time, your credit score will improve and we can seek refinancing at a lower rate.

What other fees are involved in buying a home?

The appraisal fee, which surveys similar homes in the area to compare prices and conditions, the credit report fee, which pays for the lender to check your credit score, the escrow or attorney fee for legal services in drawing up the contract, title insurance fee for the title to the home, recording fee to record the change in ownership, notary fee to notarize the documents as official, and transfer taxes to the town and sometimes state.

Are there credit activities to avoid once the loan application is submitted?

Yes, a number of actions could raise red flags while your loan is under consideration. A general rule of thumb: follow your normal spending patterns. Don’t apply for new credit of any kind. Don’t close any credit card accounts, and don’t max out existing credit. These can all change your ratio of debt to available credit. And pay your bills on time!

What financial incentives can help close the deal?

You should discuss with your broker what concessions you want before signing a contract. If a seller is eager to close, they can reduce the price, offer to make the first three mortgage payments, the first year to three year’s principal, or carry back a second trust deed.

What special financial considerations are there for the purchase of a second or vacation home?

There’s no penalty for buying a second home if you qualify for supporting two mortgages under conventional guidelines. You can get the same conventional lending terms, programs and rates as on the purchase of an existing home. Often with a second home, buyers are getting Jumbo rates for mortgages in excess of $417,000, but without incurring penalties or additional fees.