Q) What are the lender's criteria in making a loan?
A) Every lender uses its own criteria in making a determination whether to approve the borrower's application for a loan. However, most lenders follow guidelines set forth by Fannie Mae (Federal National Mortgage Association) or Freddie Mac (Federal Home Loan Mortgage Association). The general wisdom is that lenders look to the "Three C's" e.g. the borrower's credit history, capability to pay, and collateral. The credit history is examined through a credit report provided by a credit reporting agency. The cash on hand is verified by your depository and the collateral or property you finance is appraised by a state licensed lender approved appraiser.

Q) How can I verify my credit history?
A) Your credit history is summarized by a credit bureau. There are several national agencies and you can order directly a copy of your credit report, or Valley Mortgage Company can assist you with this process. If your credit report reveals incorrect information you must contact the bureau and request that the inaccurate information be removed or corrected from your report. Late payments indicated on a credit report do not necessarily disqualify you from qualifying for a loan, but have a good clean credit report is essential.  Often borrowers start the process by just reviewing their credit reports.

Q) If I want to buy a house but don't know what I can afford, what should I do?
A) The first step for any potential homeowner is prequalification. For no charge Valley Mortgage Company, Inc. will meet with you and review all the necessary information to make a preliminary determination of the amount of loan your income can support. The pre-qualification is not a guarantee but it serves to give you a price range when looking for a home.

Q) Can I get a loan if I am single?
A) The law prohibits lenders from discriminating against a loan applicant based on marital status.  A couple may have an advantage only to the extent that if both parties work, both incomes can be used in the loan qualification process. A single person should remember, however, that in certain circumstances income from commissions, overtime and part-time work can be used in the qualification process.

Q) Can I get a loan if I am self-employed?
A) A self-employed applicant can qualify for a loan but must support the application with supplemental information including a two year history of averaged earnings. Valley Mortgage Company, Inc. can advise you about the type of verification required by each lender and recommend which lender best suits your needs.

Q) Can I get a loan if I live on a fixed income?
A) For loan qualification purposes, income is income. Social Security payments, private pension income and disability entitlements all can qualify you for a loan. Federal law prohibits discrimination against a loan application based on age.

Q) How much of a down payment do I need?
A) Historically, lenders required a 20% down payment for conventional financing. However, several programs today enable the borrower to provide as little as a 3% down payment or even no down payment under certain strict guidelines. In some cases you may receive a gift for the down payment from a family member or grant from a designated government agency.

Q) What are closing costs?
A) Closing costs are costs paid by the borrower at or prior to closing charged by the lender and other parties to make the loan. These costs include points, origination fees, title insurance fees, recording fees and bank attorney fees. In addition, the lender typically will establish an escrow account at closing, and you will need to fund the account with cash. The escrow monies are used to pay your taxes and homeowners insurance as they become due. Generally, borrowers should estimate that their closing costs total between 5% and 7% of the loan amount.

Q) What is refinancing and when should I do it?
A) A refinance is the process of paying off your loan and taking a new loan with the same or different lender at a better rate or for the purpose of extracting equity. Very often lenders advertise that you should refinance when the prevailing rate drops two points below the rate of your current loan rate. A better way to evaluate the situation is to consider your current payments, the term left on the loan and the payments under a refinanced loan. Valley Mortgage Company, Inc. can review these criteria with your and advise you accordingly. Often if you intend to remain owning the property, you would benefit from refinancing even where the rate differential is less than two percentage points.

Q) Can I reduce my monthly payment or shorten my loan term if I refinance?
A) Rate and term reductions are two common motives to refinance.  We try to look at the total picture carefully to make sure a refinance is justified.  Simply reducing rate at the expense of lengthening term may not save you money.  On the other hand some borrowers refinance onto a longer term to reduce the monthly payment.  It is common for families to consider a refinance to extract more equity from the property to increase cash on hand to pay other debts, make home improvements or afford college tuition.  In short, the purpose of the refinance is as important as the rate or monthly payment.

Q) How long does the loan process take?
A) Typically the mortgage process from application to commitment takes about 30 days.  This is not to say that a preliminary approval cannot come to us within days.  However, the full process that considers all the supporting documentation including the appraisal report and results in a firm commitment from a lender without lots of conditions takes longer.  We always operate at Valley Mortgage with a sense of urgency in moving the process forward on your behalf to resolve the mortgage contingency as quickly as possible.  Often we are finished with the application process well before the closing date anticipated by the parties.

Q) How do I find out what my interest rate will be?
A) There is no great mystery or secret about interest rates.  Lenders deliver interest rates every day, sometimes several times a day, depending on the market.  We will keep you apprised of the rates from the start, and it will always be your call when to lock the rate.  Generally, rate lock periods run for sixty days, so it will be important that you anticipated closing fall within that time frame.  Longer rate locks may apply for construction financing or other niche programs.

Q) Does filling out an application obligate me to complete a loan with you?
A) From the start it is your decision to work with Valley Mortgage.  You are free at any point to change course and pursue your financing elsewhere.  We believe that our clients work with us because we have earned your relationship by our smarts, our ethics and our service.

Q) What are the advantages of a fixed-rate loan versus an adjustable-rate loan?
A) The type of financing your chose will depend on your needs.  Suffice it to say there are dozens of types of loan programs available on the market, and part of our effort is to listen and learn from you so that we can offer advice about these options.  For the borrower planning a shorter term on the property a variable rate might make sense.  Again, you will have lots of information from us to help make a choice.

Q) Will I need an appraisal on my new home?
A) Every mortgage loan requires an appraisal.  If you are just starting the process then the appraisal is part of the loan processing we perform on your behalf.  If you are in possession of a valid appraisal it may apply to your loan application.

Q) Do I have to pay Private Mortgage Insurance (PMI)?
A) Private mortgage insurance applies when you borrow over the 80% mark.  That is, if you purchase a property for $100,000 and seen a $90,000 loan you payment likely will include a monthly mortgage insurance premium.  Sometimes lenders offer a “No MI” option whereby the monthly mortgage insurance does not apply in return for a slightly higher interest rate.  Again, we can explore all options to customize the loan to meet your needs.

Q) How much of my home equity can I use?
A) Home equity lines of credit and loans can vary in rate and amount according to the type of property and the credit profile of the borrower.  While the terrain of mortgage financing constantly changes, there are some programs now that allow as much as a 100% equity extraction from the property.  Many factors contribute to this determination, and a borrower needs to understand fully the pluses and minuses of the typical variable rate line of credit.

Q) What are the tax benefits to owning a home?
A) We are not accountants at Valley Mortgage, so you are best advised to consult with the proper professional.  However, it is commonly understood that real estate taxes and mortgage loan interest paid by the borrower/home owner is tax deductible against ordinary income.  A financial planner can explain to you how a mortgage payment compares against rent in terms of real dollars.

Q) What's the best loan program for me?
A) This a big question that does not lend itself to a single answer.  We consider ourselves mortgage consultants, and as such our job at the start is to listen and listen more.  Learning about your purchase, your qualifications, your intent and your financing approach helps us advise you about appropriate options.  Our strength as a general mortgage broker fluent with a broad selection of mortgage products allows us the flexibility to fit the mortgage plan around you, rather than fit you into a single available product.  In the end it is about listening.