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Yes but with some conditions. Clear Lending will help you "build" credit with non-traditional tradelines. That is providing proof of twelve consecutive months of payments ontime on at least three different accounts.
Contact us and we will help you establish the minimum credit history required in order to qualify.
Yes but on a case by case basis. Every case offers different solutions and a credit report must be carefully analyzed prior submitting a loan to underwriting for approval.
Clear Lending offers programs for customers whom have gone thru challenges in the past and have not been able to clear bad payment history from credit. Other factors are taken into consideration such as employment stability, income, assets and maybe how recent were collections before making a final decision.
A credit score is one of the pieces of information that Clear Lending uses to evaluate your application. Credit scores are based on information collected and reported each month by your creditors about the balances you owe and the timing of your payments to the three major credit bureaus Equifax, Experian and Transunion. A credit score is a compilation of all this information converted into a number that helps a lender determine the likelihood that you will repay the loan on schedule. The credit score is calculated by the credit bureau, not by the lender. Credit scores are calculated by comparing your credit history with millions of other consumers. They have proven to be a very effective way of determining credit worthiness.
Some of the things that affect your credit score include your payment history, your outstanding obligations, the length of time you have had outstanding credit, the types of credit you use and the number of inquiries that have been made about your credit history in the recent past. Credit scores used for mortgage loan decisions range from approximately 300 to 850. Generally, the higher your credit score, the lower the risk that your payments will not be paid as agreed.
Using credit scores to evaluate your credit history allows Clear Lending to quickly and objectively evaluate your credit history when reviewing your loan application. However, there are many other factors when making a loan decision and we never evaluate an application without looking at the total financial picture of a customer.
An abundance of credit inquiries can sometimes affect your credit scores since it may indicate that your use of credit is increasing. But don't overreact. The data used to calculate your credit score does not include any mortgage or auto loan credit inquiries that are made within the 30 days prior to the score being calculated. In addition, all mortgage inquiries made in any 14-day period are always considered one inquiry.
If you have had a bankruptcy or foreclosure in the past, it may affect your ability to get a new mortgage. Unless the bankruptcy or foreclosure was caused by situations beyond your control, we generally require two to four years to pass after the bankruptcy or foreclosure. It is also important that you re-established an acceptable credit history with new loans or credit cards.
A borrower with a Chapter 7 Bankruptcy discharged less than two years is ineligible unless significant extenuating circumstances, such as a serious long-term uninsured illness or death of a wage earner exist. Loss of employment is not considered an extenuating circumstance. Loans for borrowers with bankruptcies discharged less than one year will not be considered.
A borrower with a Chapter 13 Bankruptcy will need to document at least one year into the payout plan has elapsed, document all required payments have been made on time and if the borrower is still in repayment, obtain court permission to enter into the new mortgage.
Clear Lending offers certain portfolio loan programs where seasoning requirement may be lower or none if you are able to purchase again with large down payments. Contact us to revise your case.
Clear Lending charges a one-time non-refundable $29.00 fee for the credit information we access about you, with your permission, in order to evaluate your application and submit to underwriting for approval.
You may request a copy on the same day we obtain your report. The report includes the three major credit bureaus Experian, Equifax and Transunion and is good for 120 days. In some cases we are able to increase your scores allowing you to get better interest rates.
Applying for a mortgage loan before you find a home may be the best thing you could do. When you apply in advance, Clear Lending issues a pre-approval letter subject to you finding your new home. You can use the pre-approval letter to assure real estate brokers and sellers that you are a qualified buyer.
The pre-approval process helps assure that you are looking in the right price range to comfortably fit in your budget. Having been pre-approved for a mortgage may also give more weight on any offer you make. When you find the perfect home, simply call Clear Lending to complete your application. At this point, you may lock in your rates and we will complete processing your application.
To apply online there is no fee per se. However when Clear Lending reviews your file and contacts you to issue a pre-approval, we will need a non-refundable credit report payment of $29.00 for completing your application.
We take full advantage of an automated underwriting system that allows us to request as little information as possible to verify the data you provided during your loan application. The automated underwriting system compares your financial situation with statistical data from millions of other homeowners and uses that comparison to determine the level of verification needed. In many cases, a single W-2 or pay stub can be used to verify your income or a single bank statement can be used to verify the assets needed to close your loan.
However refer to our FORMS section at the footer of our website for a standard list of documents needed to purchase.
In order for bonus, overtime or commission income to be considered, you must have a history of receiving it and it must be likely to continue. Clear Lending will request copies of your taxes with W-2 statements for the previous two years and the most recent month of consecutive pay stubs to verify this type of income. We also will need to verify the amount of business-related expenses, if any, to analyze how they affect to overall qualifying income.
If you have not received bonus, overtime, or commission income for at least one year, it probably will not be given full value when your loan is reviewed for approval.
Typically, income from a second job is considered if a two-year history of secondary employment can be verified.
Clear Lending asks for copies of your recent pension check stubs or bank statement if your pension or retirement income is deposited directly in your bank account. Sometimes it is necessary to verify that this income will continue for at least three years since some pension or retirement plans do not provide income for life. This can usually be verified with a copy of your award letter. If you do not have an award letter, your mortgage professional can contact the source of this income directly for verification.
If you are receiving tax-free income, such as Social Security earnings in some cases, we consider the fact that taxes are not deducted from this income when reviewing your request.
Clear Lending also offers a stated-income program, which means that you can be qualified for a loan based on the income you state rather than that which can be verified. Usually these programs require larger down payments and offer substantially higher interest rates than regular mortgage rates.
If you own rental properties, Clear Lending generally asks for the most recent two years’ federal tax returns to verify your rental income. We review the Schedule E of the tax return to verify your rental income after all expenses except depreciation. Since depreciation is a non-cash flow expense, it is not counted against your rental income.
If your rental property was your primary residence and do not have yet a complete tax year, we ask for a copy of a lease agreement you have executed to estimate rental income.
Generally, two years of personal tax returns are required to verify the amount of your dividend and/or interest income so that an average amount can be calculated. In addition, we need to verify your ownership of the assets that generate the income using copies of statements from your financial institution, brokerage statements, stock certificates or Promissory Notes.
Typically, income from dividends and/or interest must be expected to continue for at least three years to be considered for repayment.
Information about child support, alimony or separate maintenance income does not need to be provided unless you wish to have it considered for repaying this mortgage loan.
Generally, only income that is reported on your tax return can be considered when applying for a mortgage. If the income is legally tax-free and is not required to be reported, we can consider it.
If the income is taxable but for some appropriate legitimate reason has not been reported we may consider it in conjunction to portfolio programs with different document requirements.
Any student loan that goes into repayment within the next twelve months will be considered when evaluating your loan. If you are not sure exactly what the monthly payment is, enter 1% of the outstanding balance. If other student loans are reflected on your final credit report, which are not scheduled to go into repayment for more than twelve months then we will need verification that repayment will not be required during this time period in order to exclude from your liabilities.
Generally, a co-signed debt is considered when determining your qualifications for a mortgage. If the co-signed debt does not affect your ability to obtain a new mortgage we leave it at that. However, if it does make a difference, we can ignore the monthly payment of the co-signed debt if you can provide evidence:
1. The person for whom the borrower co-signed has made the payments (via 12 month cancelled checks), and
2. All payments have been made within the month due (Evaluated on a case-by-case basis generally for a minimum 12-month period), and
3. The person making the payments is obligated on the excluded co-signed liability.
The income of self-employed borrowers is verified by obtaining copies of personal (and business, if applicable) federal tax returns for the most recent two-year period. However and under certain programs for self-employed, we may be able to work with only most recent tax return. Then if you are applying after first quarter, a profit and loss statement may be needed as well.
We review and average the net income from self-employment that is reported on your tax returns to determine the income that can be used to qualify. We do not consider any income that has not been reported as such on your tax returns. Typically, we need at least a one- or two-year history of self-employment to verify that your self-employment income is stable.
Having changed employers frequently is typically not a hindrance to obtaining a new mortgage loan. This is particularly true if you made employment changes without having periods of time in between without employment. We also look at your income advancements as you have changed employment.
If you are paid on a commission basis, a recent job change may be an issue since we may have a difficult time predicting your earnings without a history with your new employer. However, we may be able to consider on a case by case basis an average of two jobs (present and previous) if both jobs clearly demonstrate similar payout patterns, same industry and position.
If you were in school before your current job, enter the name of the school you attended and the length of time you were in school in the Length of Employment fields. You can enter a position of student and income of 0.
Congratulations on your new job!
If you will be working for the same employer, complete the application as such but enter the income you anticipate receiving at your new location.
If your employment is with a new employer, complete the application as if your new employer is your current employer and indicate that you have been there for one month. The information about the employment you are leaving should be entered as a previous employer. Your mortgage professional sorts out the details after you submit your loan for approval.
Yes, you can borrow funds to use as your down payment. However, any loan you take out for a down payment must be secured by an asset that you own. If you own something of value that you could borrow funds against such as a car or another home, it is a perfectly acceptable source of funds. If you are planning on obtaining a loan, make sure to include the details of this loan in the Expenses section of the application.
Gifts are an acceptable source of down payment, if the gift giver is related to you or your co-borrower. We ask you for the name, address and phone number of the gift giver, as well as the donor's relationship to you. On conventional loans, if your loan request is for more than 80% of the purchase price, we need to verify that you have at least 5% of the property's value in your own assets. On Federal Housing Administration loans, all your downpayment and closing costs may be gifted as long as giver is related to you or your co-borrower.
Prior to closing, we verify that the gift funds have been transferred to you by obtaining a copy of your bank receipt or deposit slip to verify that you have deposited the gift funds into your account. However before accepting gift ask your mortgage professional how gift payment needs to be completed.
Unfortunately, if you are purchasing a home, we have to use the lower of the appraised value or the sales price to determine your down payment requirement. It is still a great benefit for your financial situation if you are able to purchase a home for less than the appraised value, but our investors don't allow us to use this instant equity when making our loan decision.
Interest rates fluctuate based on a variety of factors, including but not limited to inflation, the pace of economic growth, Federal Reserve policy or world events triggering fluctuations within the financial markets to name a few.
Over time, inflation has been the largest influence on the level of interest rates. A modest rate of inflation will almost always lead to low interest rates, while concerns about rising inflation normally cause interest rates to increase. Our nation's central bank, the Federal Reserve, implements policies designed to keep inflation and interest rates relatively low and stable.
Points are considered a form of interest. Each point is equal to one percent of the loan amount. You pay them up front at your loan closing in exchange for a lower interest rate over the life of your loan. This means more money will be required at closing. However, you will have lower monthly payments over the term of your loan.
To determine whether it makes sense for you to pay points, you should compare the cost of the points to the monthly payments savings created by the lower interest rate. Divide the total cost of the points by the savings in each monthly payment. This calculation provides the number of payments you must make before you actually begin to save money by paying points. If the number of months it takes to recoup the points is longer than you plan to have the mortgage, you should consider the loan program option that does not require points to be paid.
The Federal Truth in Lending law requires that all financial institutions disclose the APR when they advertise a rate. The APR is designed to present the actual cost of obtaining financing, by requiring that some, but not all, closing fees are included in the APR calculation. These fees, in addition to the interest rate, determine the estimated cost of financing over the full term of the loan. Since most people do not keep the mortgage for the entire loan term, it may be misleading to spread the effect of some of these upfront costs over the entire loan term.
Also, unfortunately, the APR does not include all the closing fees, and lenders are allowed to determine which fees to include. Fees for things like appraisals, title work and document preparation are not included even though you generally have to pay them.
For adjustable rate mortgages, the APR can be even more confusing. Since no one knows exactly what market conditions will be in the future, assumptions must be made regarding future rate adjustments. You can use the APR as a guideline to shop for loans but you should not depend solely on the APR in choosing the loan program that is best for you. Look at total fees and possible rate adjustments in the future and consider the length of time that you plan on having the mortgage.
Don't forget that the APR is an effective interest rate—not the actual interest rate. Your monthly payments will be based on the actual interest rate, the amount you borrow, and the term of your loan.
Mortgage interest rate movements are as hard to predict as the stock market and no one can really know for certain whether they will go up or down. If you have a hunch that rates are on an upward trend then you may want to consider locking the rate as soon as you are able. Before you decide to lock, make sure that your loan can close within the lock in period. It will not do any good to lock your rate if you cannot close during the rate lock period.
If you are purchasing a home, review your contract for the estimated closing date to help you choose the right rate lock period. If you are refinancing, in most cases, your loan could close within 30 days. However, if you have any secondary financing on the home that will not be paid off, allow some extra time since your Mortgage Professional must contact that lender to get their permission.
If you think rates might drop while your loan is being processed, take a risk and let your rate "float" instead of locking.
Generally is best to lock once you have successfully completed your appraisal. At that point you know for sure whether you can close in few days or will need to start a lengthy negotiation with seller. Issues found by appraiser or a short value may require revising and negotiating original terms and the cost to extend a rate may be higher than if would have taken a chance and wait.
Once we have reviewed your documentation and credit package, we notify you when you are able to request the rate lock. Please read our rate lock policy next for further details.
What is our Rate Lock Policy?
The interest rate market is subject to movements without advance notice. Locking in a rate protects you from the time that your lock is confirmed to the day that your lock period expires.
A lock is an agreement between the borrower and the lender that specifies the number of days for which a loan's interest rate and points are guaranteed. Should interest rates rise during that period, Clearlending is obligated to honor the committed rate. Should interest rates fall during this period, the borrower must honor the lock.
Once we have reviewed your documentation and credit package, we notify you when you are able to request the lock.
Clear Lending does not charge a fee for locking in your interest rate.
We currently present a 30 day-lock in price in our online application. Additional lock periods can be discussed with your mortgage professional after completing the application.
When you submit your online application, the loan rate agreement will show that you are floating. When you lock your loan with your mortgage professional, a loan rate agreement will be provided.
A conventional fixed rate mortgage is a loan product featuring a fixed interest rate for the entire term of the loan. Monthly mortgage payments remain the same for the life of your loan. A fixed rate mortgage may be right for you, if you:
- Prefer easy budgeting and long-term planning.
- If want to lock in a favorable rate for the long term.
- Prefer predictable financing for an investment property.
- Don't plan to relocate, refinance or move in the next few years.
- Don't expect a significant increase in income in the next few years.
A 15-year fixed rate mortgage gives you the ability to own your home free and clear in 15 years. And, while the monthly payments are somewhat higher than a 30-year loan, the interest rate on the 15-year mortgage is usually a little lower, and more importantly, you pay less than half the total interest cost of the traditional 30-year mortgage.
However, if you can't afford the higher monthly payment of a 15-year mortgage, don't feel alone. Many borrowers find the higher payment out of reach and choose a 30-year mortgage. It still makes sense to use a 30-year mortgage for most people.
The 15 year-fixed rate mortgage is popular among younger homebuyers with sufficient income to meet the higher monthly payments to pay off the house before their children start college. They own more of their home faster with this kind of mortgage and can then begin to consider the cost of higher education for their children without having a mortgage payment to make as well. Other homebuyers, who are more established in their careers, have higher incomes and whose desire is to own their homes before they retire, may also prefer this mortgage.
An adjustable rate mortgage (ARM) is a loan type that offers a lower initial interest rate than most fixed-rate loans. The tradeoff is that the interest rate can change periodically, usually in relation to an index, and the monthly payment will go up or down accordingly.
Against the advantage of the lower payment at the beginning of the loan, you should weigh the risk that an increase in interest rates will lead to higher monthly payments in the future. In short, you get a lower rate with an ARM in exchange for assuming more risk.
For many people in a variety of situations, an ARM is the right mortgage choice, particularly if your income is likely to increase in the future or if you only plan to be in your home for three to five years. Here's how ARMs work.
With most ARMs, the interest rate and monthly payment are fixed for an initial time period, such as one year, three years, five years, seven years or ten years. After the initial fixed period, the interest rate can change every year. For example, one of our most popular adjustable rate mortgages is a five-year ARM. The interest rate will not change for the first five years but can change every year after the first five years.
Our ARM interest rate changes are tied to changes in an index rate. Using an index to determine future rate adjustments provides you with assurance that rate adjustments will be based on actual market conditions at the time of the adjustment. The current value of most indices is published weekly in the Wall Street Journal. If the index rate moves up, your mortgage interest rate will move up as well, and you will probably have to make a higher monthly payment. On the other hand, if the index rate goes down, your monthly payment may decrease.
To determine the interest rate on an ARM, we add a predisclosed amount to the index called the margin. If you are still shopping, comparing one lender's margin to another's can be more important than comparing the initial interest rate, since it will be used to calculate the interest rate you will pay in the future.
An interest-rate cap sets a limit on the your interest rate can increase or decrease. Two types of caps:
Periodic or Adjustment Cap:
Limits the interest rate increase or decrease from one adjustment period to the next.
Overall or Lifetime Cap:
Limits the interest rate increase over the life of the loan.
As you can imagine, interest rate caps are very important since no one knows what can happen in the future. All of the ARMs we offer have both adjustment and lifetime caps.
Negative amortization occurs when your monthly payment changes to an amount less than the amount required to pay interest due. If a loan has negative amortization, you might end up owing more than you originally borrowed. None of the ARMs Clear Lending offers allow for negative amortization.
Some lenders may require you to pay special fees or penalties if you pay off the ARM early.
An interest-only mortgage is a loan product that allows you to pay only the interest on your mortgage for a fixed term. After the end of that term, generally five to seven years, you start paying off the principal. The principal payments will be considerably higher than the interest payments. You may also refinance, or pay the balance in a lump sum at the end of the fixed term. Interest only loans are not for everyone. An interest-only loan might be right for you if:
- Your income is mostly in the form of infrequent commissions or bonuses.
- You expect a large increase in income in the next few years.
- You are guaranteed to invest the savings on the difference between an interest-only mortgage and an amortizing mortgage, and are confident your investments will return a profit.
The maximum percentage of your home's value depends on the purpose of your loan, how you use the property, the loan type you choose and in wich state you are applying for the mortgage loan. The best way to determine what loan amount we can offer is to complete our online application.
To determine the value of the property you are purchasing or refinancing, an appraisal is required. An appraisal report is a written description and an opinion of value for the property. National standards govern not only the format for the appraisal; they also specify the appraiser's qualifications and credentials. In addition, most states now have licensing requirements for appraisers evaluating properties located within their states.
The appraiser will create a written report which we will deliver as soon as we receive it or at least 3 days before your loan closing.
The appraiser will inspect both the interior and exterior of the home. After the appraiser inspects the property, s/he will compare the qualities of your home with other homes that have sold recently in the same subdivision. These homes are called comparables and play a significant role in the appraisal process. Using industry guidelines, the appraiser will try to weigh the major components of these properties (i.e., design, square footage, number of rooms, lot size, age, etc.) to the components of your home to come up with an estimated value of your home. The appraiser adjusts the price of each comparable sale (up or down) depending on how it compares (better or worse) with your property.
As an additional check on the value of the property, the appraiser also estimates the replacement cost for the property. Replacement cost is determined by valuing an empty lot and estimating the cost to build a house of similar size and construction. Finally, the appraiser reduces this cost by an age factor to compensate for depreciation and deterioration. If your home is for investment purposes, or is a multi-unit home, the appraiser will also consider the rental income that will be generated by the property to help determine the value.
Using these three different methods, an appraiser will frequently come up with slightly different values for the property. The appraiser uses judgment and experience to reconcile these differences and then assigns a final appraised value. The comparable sales approach is the most important valuation method in the appraisal because a property is worth only what a buyer is willing to pay and a seller is willing to accept.
It is not uncommon for the appraised value of a property to be exactly the same as the amount stated on your sales contract. This is not a coincidence, nor does it question the competence of the appraiser. Your purchase contract is the most valid sales transaction there is. It represents what a buyer is willing to offer for the property and what the seller is willing to accept. Only when the comparable sales differ greatly from your sales contract is the appraised value very different.
In addition to verifying that your home's value supports your requested loan amount, we also verify that your home is as marketable as others in the area. We want to be confident that if you decide to sell your home, it is as easy to market as other homes in the area. We certainly don't expect you to default under the terms of your loan, forcing a sale, but as the lender, we also need to make sure that if a sale is necessary, it won't be difficult to find another buyer.
We review the features of your home and compare them to the features of other homes in the neighborhood. For example, if your home is on a 20-acre lot, or has a large accessory building, we want to make sure that there are other homes in the area on similar size lots or with similar outbuildings. It is hard to place a value on such unique features if we can't see what other buyers are willing to pay for them. In some areas, additional acreage or outbuildings could actually be a detriment to a future sale. Finding comparable properties can be more challenging in rural areas where it is more difficult to find homes that have similar features.
We also make sure that the value of your home is in the same range as other homes in the area. If the value of your home is substantially more than other homes in the neighborhood, it could affect the market acceptance of the home if you decide to sell. We also review the market statistics about your neighborhood. We look at the time on the market for homes that have sold recently and verify that values are steady or increasing.
As soon as we receive your appraisal, we update your loan with the estimated value of the home. As a standard practice, Clear Lending provide a copy of your appraisal as soon as we receive a copy from the Appraisal Management Company so you can review it prior to closing.
Since the value and marketability of condominium properties is dependent on items that don't apply to single-family homes, there are some additional steps that must be taken to determine if condominiums meet guidelines.
One of the most important factors is determining if the project that the condominium is located in is complete. In many cases, it will be necessary for the project, or at least the phase that your unit is located in, to be complete before we can provide financing. The main reason for this is, until the project is complete, we can't be certain that the remaining units will be of the same quality as the existing units. This could affect the marketability of your home.
In addition, we consider the ratio of non-owner occupied units to owner-occupied units. This could also affect future marketability since many people would prefer to live in a project that is occupied by owners rather than renters. We also carefully review the appraisal to insure that it includes comparable sales of properties within the project, as well as some from outside the project.
Both a home inspection and an appraisal are designed to protect you against potential issues with your new home. Although they have totally different purposes, it makes the most sense to rely on each to help confirm that you have found the perfect home.
The appraiser will make note of obvious construction problems such as termite damage, dry rot or leaking roofs or basements. Other obvious interior or exterior damage that could affect the salability of the property will also be reported.
However, appraisers are not construction experts and won't find or report items that are not obvious. They won't turn on every light switch, run every faucet or inspect the attic or mechanicals. That's where the home inspector comes in. They generally perform a detailed inspection and can educate you about possible concerns or defects with the home.
Accompany the inspector during the home inspection. This is your opportunity to gain knowledge of major systems, appliances and fixtures, learn maintenance schedules and tips and to ask questions about the condition of the home.
Licensed appraisers assigned by Appraisal Management Companies and who are familiar with home values in subject area perform appraisals.
Clear Lending orders the appraisal as soon as the credit report fee deposit is paid. Generally, it takes 10-14 days before the written report is sent to us. We follow up with the appraiser to insure that it is completed as soon as possible.
If you are refinancing, and an interior inspection of the home is necessary, the appraiser should contact you to schedule a viewing appointment. If you don't hear from the appraiser within seven days of the order date, please inform Clear Lending. If you are purchasing a new home, the appraiser will contact the real estate agent, if you are using one, or the seller to schedule an appointment to view the home.
The purchase of a home is most likely one of the most expensive and important purchases you will ever make. You and especially your mortgage lender want to make sure the property is indeed yours, that no individual or government entity has any right, lien, claim or encumbrance on your property. The function of a title insurance company is to make sure your rights and interests to the property are clear, that transfer of title takes place efficiently and correctly, and that your interests as a homebuyer are fully protected.
Title insurance companies provide services to buyers, sellers, real estate developers, builders, mortgage lenders, and others who have an interest in real estate transfer. Title companies typically issue two types of title policies
1. Owner's Policy: Covers you, the homebuyer
2. Lender's Policy: Covers the lending institution for the life of the loan
Both types of policies are issued at the time of closing for a one-time premium, if the loan is a purchase. If you are refinancing your home, you probably already have an owner's policy that was issued when you purchased the property, so the bank may only require a lender's policy.
Before issuing a policy, the title company performs an in-depth search of the public records to determine if anyone other than you has an interest in the property. The search may be performed by title company personnel using either public records or, more likely, the information contained in the company's own title or abstract plant.
After a thorough examination of the records, any title problems are usually found and can be cleared up prior to your purchase of the property. Once a title policy is issued, if any claim covered under your policy is ever filed against your property, the title company will pay the legal fees involved in the defense of your rights. They are also responsible to cover losses arising from a valid claim. This protection remains in effect as long as you or your heirs own the property.
Title insurance premiums are generally very affordable and protect you against the slim chance that a claim may be filed against you.
Mortgage insurance should not be confused with mortgage life insurance, which is designed to pay off a mortgage in the event of a borrower's death. Mortgage insurance makes it possible for you to buy a home with less than a 20% down payment by protecting the lender against the additional risk associated with low down-payment lending. Low down-payment mortgages are becoming more and more popular, and by purchasing mortgage insurance, lenders are comfortable with down payments as low as 3.5 to 5% of the home's value. It also provides you with the ability to buy a more expensive home than might be possible if a 20% down payment were required.
The mortgage insurance premium is based on loan to value ratio, type of loan, and amount of coverage required by the lender. Usually, the premium is included in your monthly payment and one to two months of the premium is collected as a required advance at closing.
It may be possible to cancel private mortgage insurance at some point, such as when your loan balance is reduced to a certain amount―below 75% to 80% of the property value.
The Homeowners Protection Act (HOPA), also known as the "PMI Cancellation Act”, is a federal law passed in 1998 that gives homeowners the right to cancel a mortgage insurance policy once equity requirements are met. Before the act, many homeowners found it challenging to cancel PMI, and policies varied according to individual lenders. As of 1999, clear disclosure and notification requirements serve to help homeowners eliminate excessive or unnecessary private mortgage insurance. A borrower may request cancellation or automatic termination may be required as soon as the principal balance of the mortgage reaches 78 percent of the original value of the home. Borrowers must be current on their payments, according to HOPA, and exceptions apply for loans considered high-risk or nonconforming.
Federal law requires all lenders to investigate whether or not each home they finance is in a special flood hazard area as defined by the Federal Emergency Management Agency (FEMA). Floods happen anytime, anywhere. But the Flood Disaster Protection Act of 1973 and the National Flood Insurance Reform Act of 1994 help to ensure that you will be protected from financial losses caused by flooding.
Banks use third party companies who specializes in the reviewing of flood maps prepared by FEMA to determine if your home is located in a flood area. If it is, then flood insurance coverage will be required, since standard homeowner's insurance doesn't protect you against damages from flooding.
Selecting the right insurance for your home is important. Clear Lending can help obtain 3 to 5 quotes from the largest insurance agencies in the nation so we can provide 100% replacement cost quotes at competitive rates. Here are some types of insurance you may want to consider:
Homeowners' Insurance: Required for all mortgage loans, protects the home from damage and theft
Owner's Title Insurance: Optional policy ensuring the title will not be subject to a claim of ownership, lien or other encumbrance
Private Mortgage Insurance (PMI): Required by most lenders when the down payment is less than 20%
Federal Housing Administration (FHA) Mortgage Insurance Premium:Required on all FHA loans
Mortgage Life Insurance: Optional policy that protects family and estate by paying off the loan in case of death
Disability Insurance: Optional policy that guarantees loan payments will be made in case of disability
The closing takes place at the Title Company or Attorney who acts as our agent. If you are purchasing a new home, the seller may also be at the closing to transfer ownership to you but in some states these two events actually happen separately.
During the closing, you review and sign several loan papers. The closing agent or attorney conducting the closing should be able to answer any questions you have. If you prefer, you can also contact your Loan Officer. Just to make sure there are no surprises at closing, your mortgage professional will contact you a few days before closing to review your final fees, loan amount, first payment date, etc.
The most important documents you will be signing at the closing include:
Loan Closing Document:
The Loan Closing Document formerly known as HUD Settlement Statement is signed by both, buyer and seller. This document provides an itemized listing of the final fees charged in connection with your loan. If your loan is a purchase, it includes a listing of any fees related to the transaction between you and the seller. If the loan is a refinance, the it shows the pay-off amounts of any mortgages that paid in full with your new loan. Most items on the statement are numbered according to a standardized system used by all lenders. These numbers correspond to the numbers listed on the Loan Estimate that is provided in your application.
The note is the document you sign to agree to repay your mortgage. The note provides you with all of the details of your loan including the interest rate and length of time to repay the loan. It also explains the penalties that you may incur if you fall behind in making your payments.
Mortgage/Deed of Trust:
The mortgage/deed of trust document pledges a property to the lender as security for repayment of a debt. Essentially this means that you give your property up to the lender in the event that you cannot make the mortgage payments. The mortgage restates the basic information contained in the note, as well as details the responsibilities of the borrower. In some states, the document is called a deed of trust instead of a mortgage.
If your loan is a refinance, federal law requires that you have three days to decide positively that you want a new mortgage after you sign the documents. This means that the loan funds won't be disbursed until three business days have passed. The closing agent provides more details at the closing.
If you are selling your current home to purchase a new home, you need to provide a copy of the settlement or closing statement you receive at the closing on your current home to verify that your current mortgage has been paid in full and that you have sufficient funds for the closing on your new home. Often the closing of your current home is scheduled for the same day as the closing of your new home. If that is the case, just bring your settlement statement with you to your new mortgage closing.
A home loan often involves many fees, such as the appraisal fee, title charges, closing fees and state or local taxes. These fees vary from state to state and also from program to program. Clear Lending takes quotes very seriously and thus provides an estimate of fees after we have received all income, asset documents and have been able to verify credit.
To assist you in evaluating our fees, we've grouped them as follows:
Fees that we consider third-party fees include the processing fee, appraisal fee, the credit report fee, the settlement or closing fee, the survey fee, tax service fees, title insurance fees, flood certification fees and courier/mailing fees.
Third-party fees are fees that we collect and pass on to the person who actually performed the service. For example, an appraiser is paid the appraisal fee, a credit bureau is paid the credit report fee, and a title company or an attorney is paid the title insurance fees.
Typically, you see some minor variances in third-party fees from program to program since fees may have been negotiated a special charge from a provider often used, or choose a provider that offers nationwide coverage at a flat rate. You may also see that some lenders absorb minor third-party fees such as the flood certification fee, the tax service fee, or courier/mailing fees.
Taxes and Other Unavoidable Fees
Fees that we consider to be taxes or unavoidable include state and local taxes and recording fees.
Fees such as points/origination, document preparation fees are retained by the lender and are used to provide you with the lowest rates possible.
You may be asked to prepay some items at closing that are actually due in the future. These fees are sometimes referred to as prepaid items. One of the more common required advances is called per diem interest or interest due at closing.
If your loan is closed on any day other than the first of the month, you pay interest, from the date of closing through the end of the month at closing. For example, if the loan is closed on June 15, we have to collect interest from June 15 through June 30 at closing. This also means that you won't make your first mortgage payment until August 1. This type of charge should not vary regardless whay loan program you chose. All lenders will charge you interest beginning on the day the loan funds are disbursed.
If an escrow or account is to be established, you make an initial deposit into the escrow account at closing so that sufficient funds are available to pay the bills when they become due. If your loan requires mortgage insurance, up to two months of the mortgage insurance is collected at closing. Whether or not you must purchase mortgage insurance depends on the size of the down payment you make. If your loan is a purchase, you also need to pay for your first year's homeowner's insurance premium prior to closing. We consider this to be a required advance.
In some areas of the country it is very customary and sometimes required by law to have an attorney represent you at the closing. In other areas, attorneys are not as common at a real estate closing. Please contact the closing agent if you have questions about attorney representation. By all means, we recommend that you have an attorney at the closing if it would make you more comfortable. If your attorney has any questions about your new mortgage, please refer him/her to your Clear Lending Professional.
The most important documents you sign at closing are the note and mortgage, sometimes called the deed of trust. Unless there are special circumstances, these documents are usually ordered 48 hours and prepared 24 hours before your closing. Other documents are prepared by the closing agent the day before or the day of your closing.
The closing agent acts as our agent and will represent Clear Lendinge at the closing. However, your personal mortgage professional will contact you prior to closing to talk about your final documents and to provide a final breakdown of your closing fees. If you have any questions that the closing agent can't answer during the closing, ask them to contact your mortgage professional by phone and we will get you the answers you need before the closing is over.
If you won't be able to attend the loan closing, contact your loan officer to discuss other options. If someone you trust is able to attend on your behalf you can execute a Power of Attorney so that this person can sign documents on your behalf. In other cases, we are able to mail you the documents in advance so that you can sign them and forward them to the closing agent.
We use a network of closing agents available nationwide and attorneys to conduct our loan closings. We can schedule your closing to take place near your home for your convenience if you cannot be at the Title Company. We deliver our loan documents and wire transfer your loan funds to the closing agent or attorney prior to closing so that s/he has plenty of time to prepare for your closing.
An escrow account requires borrowers to make monthly payments toward real estate taxes and/or home-related insurance as part of the regular monthly mortgage payment. Bills for the taxes and/or insurance are sent directly to the lender who makes the required payments.