First Time Homebuyers

Appraisals are an estimate of a property’s fair market value. It’s a document generally required (depending on the loan program) by a lender before loan approval to ensure that the mortgage loan amount is not more than the value of the property. The appraisal is 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.

Obtaining a loan is the most common reason for ordering an appraisal, however there are other reasons to get one:

• Contesting high property taxes
• Establishing the replacement cost for insurance purposes
• Divorce settlement
• Estate settlement
• Negotiating tool in real estate transactions
• Determining a reasonable price when selling real estate
• Protecting your rights in an eminent domain case
• A government agency requirement
• A lawsuit

What Are Appraisal Methods?

There are three common approaches, or Appraisal Methods, used by Appraisers to establish property value. After thorough exercise of all three, a final value estimate is determined.

• Cost Approach – A formula is used to obtain the property value: Land value (vacant) added to the cost to reconstruct the appraised building as new on the date of value, less accrued depreciation the building suffers in comparison with a new building.
• Sales Comparison Approach – The Appraiser identifies 3 to 4 comparable comps, recently sold properties in the neighborhood, ideally sold in the previous 6 months and within ½ mile of the subject property. A comparison is done between the recently sold properties and the subject property including square footage, number of bedrooms and bathrooms, property age, lot size, view, and property condition. When evaluating single-family, owner-occupied properties, the Sales Comparison Approach is heavily weighted by an Appraiser.
• Income Approach – The potential net income of the property is capitalized to arrive at a property value. Capitalization is the process of converting a future income stream into a present value. This approach is suited to income-providing properties and is used in conjunction with other valuation methods.

Who owns the Appraisal?

The mortgage company owns the appraisal even though the consumer paid for it. This is because the mortgage company orders the appraisal on the consumer’s behalf, and the Appraiser lists that mortgage company on the report. The consumer does have the right to receive a copy; however it’s the mortgage company’s discretion to give the consumer the original appraisal report.

Yes. In most cases, you will not have to pay for another appraisal if you change your mortgage company, and depending on the loan program typed, the first lender can transfer it to the new lender. Some appraisal firms may charge a small fee because additional clerical work is required to reflect the new mortgage company; this is called an “Appraisal Retype Fee”. The original mortgage company has the right to refuse to transfer the appraisal to another lender. In this case, a new appraisal is needed.

The property seller sets the price, especially for residential property, not the Appraiser. Sellers usually don’t order an appraisal because they want to obtain the highest price for their home and therefore don’t want to be bound by the Appraiser’s assessment.

The Realtor® receives a percentage of the price as compensation and often represents the seller in the transaction and assists them in setting the sale price. They perform a Comparative Market Analysis (CMA), which Realtors® in most states are allowed to perform without an Appraiser’s License or Certification. The CMA is vital to the agent’s preparation for a listing examining recent property sales in the neighborhood to arrive at a listing price. Typically the agent will suggest a price to the seller based on the CMA however the seller may choose to list their property for a higher price.

It’s to your advantage to help the Appraiser perform the assessment by providing additional information:

• What is the purpose for the appraisal?
• Is the property listed for sale, and if so, for what price and with whom?
• Is there a mortgage? And if so, with whom, when placed, for how much and what type (FHA, VA, etc.), at what interest rate, or other type of financing?
• Are any personal properties or appliances included in the property?
• With an income-producing property, what is the income breakdown and expenses for the last year or two? A copy of the lease may be required.
• Provide a copy of the deed, survey, purchase agreement, or additional property papers.
• Provide a copy of the current real estate tax bill, statement of special assessments or balance owed on anything, i.e. sewer, water, etc.

Your credit payment history is recorded in a file or report. It also indicates whether you have been sued, arrested, or have filed for bankruptcy. These files or reports are maintained and sold by Consumer Reporting Agencies (CRAs). One type of CRA is commonly known as a credit bureau. You have a credit record on file at a credit bureau if you have ever applied for a credit or charge account, a personal loan, insurance, or a job. Your credit record contains information about your income, debts, and credit payment history.

Yes, if you ask for it. The CRA must tell you everything in your report, including medical information, and in most cases, the sources of the information. The CRA also must give you a list of everyone who has requested your report within the past year-two years for employment-related requests. To get copies of your report, contact the three major credit reporting agencies:

Equifax: (800) 685-1111
Experian (formerly TRW): (888) EXPERIAN (397-3742)
Trans Union: (800) 916-8800
(These agencies may charge you up to $9.00 for your credit report.)

You are entitled to receive one free credit report every 12 months from each of the nationwide consumer credit reporting companies – Equifax, Experian and TransUnion. This free credit report may not contain your credit score and can be requested here.

Credit bureaus collect and sell four basic types of information:

Identification and employment information
Your name, birth date, Social Security number, employer, and spouse’s name are routinely noted. The CRA also may provide information about your employment history, homeownership, income, and previous address, if a creditor requests this type of information.

Payment history
Your accounts with different creditors are listed, showing how much credit has been extended and whether you’ve paid on time.

Related events, such as referral of an overdue account to a collection agency, may also be noted.

Inquiries
CRAs must maintain a record of all creditors who have asked for your credit history within the past year, and a record of those persons or businesses requesting your credit history for employment purposes for the past two years.

Public record information
Events that are a matter of public record, such as bankruptcies, foreclosures, or tax liens, may appear in your report.

Credit scoring is system creditors use to help determine whether to give you credit. Information about you and your credit experiences, such as your bill-paying history, the number and type of accounts you have, late payments, collection actions, outstanding debt, and the age of your accounts, is collected from your credit application and your credit report. Using a statistical program, creditors compare this information to the credit performance of consumers with similar profiles. A credit scoring system awards points for each factor that helps predict who is most likely to repay a debt. A total number of points — a credit score — helps predict how creditworthy you are, that is, how likely it is that you will repay a loan and make the payments when due.
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).

Because your credit report is an important part of many credit scoring systems, it is very important to make sure it’s accurate before you submit a credit application.

Credit scoring is based on real data and statistics, so it usually is more reliable than subjective or judgmental methods. It treats all applicants objectively. Judgmental methods typically rely on criteria that are not systematically tested and can vary when applied by different individuals.

Credit scoring models are complex and often vary among creditors and for different types of credit. If one-factor changes, your score may change — but improvement generally depends on how that factor relates to other factors considered by the model. Only the creditor can explain what might improve your score under the particular model used to evaluate your credit application.
Nevertheless, scoring models generally evaluate the following types of information in your credit report:

• Have you paid your bills on time? Payment history typically is a significant factor. It is likely that your score will be affected negatively if you have paid bills late, had an account referred to collections, or declared bankruptcy, if that history is reflected on your credit report.
• What is your outstanding debt? Many scoring models evaluate the amount of debt you have compared to your credit limits. If the amount you owe is close to your credit limit, it is likely to have a negative effect on your score.
• How long is your credit history? Generally, models consider the length of your credit track record. Insufficient credit history may have an effect on your score, but that can be offset by other factors, such as timely payments and low balances.
• Have you applied for new credit recently? Many scoring models consider whether you have applied for credit recently by looking at “inquiries” on your credit report when you apply for credit. If you have applied for too many new accounts recently, that may negatively affect your score. However, not all inquiries are counted. Inquiries by creditors who are monitoring your account or looking at credit reports to make “prescreened” credit offers are not counted.
• How many and what types of credit accounts do you have? Although it is generally good to have established credit accounts, too many credit card accounts may have a negative effect on your score. In addition, many models consider the type of credit accounts you have. For example, under some scoring models, loans from finance companies may negatively affect your credit score.

Scoring models may be based on more than just information in your credit report. For example, the model may consider information from your credit application as well: your job or occupation, length of employment, or whether you own a home.

To improve your credit score under most models, concentrate on paying your bills on time, paying down outstanding balances, and not taking on new debt. It will take time to improve your credit score.

If you’ve been denied credit or didn’t get the rate or credit terms you want, ask the creditor if a credit scoring system was used. If so, ask what characteristics or factors were used in that system, and the best ways to improve your application. If you get credit, ask the creditor whether you are getting the best rate and terms available and, if not, why. If you are not offered the best rate available because of inaccuracies in your credit report, be sure to dispute the inaccurate information.

If you are denied credit, the Equal Credit Opportunity Act requires that the creditor give you a notice that tells you the specific reasons your application was rejected or the fact that you have the right to learn the reasons if you ask within 60 days. Indefinite and vague reasons for the denial are illegal, so ask the creditor to be specific. Acceptable reasons include: “Your income was low” or “You haven’t been employed long enough.” Unacceptable reasons include: “You didn’t meet our minimum standards” or “You didn’t receive enough points on our credit scoring system.”

If a creditor says you were denied credit because you are too near your credit limits on your credit cards or you have too many credit card accounts, you may want to reapply after paying down your balances or closing some accounts. Credit scoring systems consider updated information and change over time.

Sometimes you can be denied credit because of information from a credit report. If so, the Fair Credit Reporting Act requires the creditor to give you the name, address, and phone number of the credit reporting agency that supplied the information. You should contact that agency to find out what your report said. This information is free if you request it within 60 days of being turned down for credit. The credit reporting agency can tell you what’s in your report, but only the creditor can tell you why your application was denied.

The Fair Credit Reporting Act (FCRA) is designed to help ensure that CRAs furnish correct and complete information to businesses to use when evaluating your application.

Your rights under the Fair Credit Reporting Act:

• You have the right to receive a copy of your credit report. A copy of your report must contain all of the information in your file at the time of your request.
• You have the right to know the name of anyone who received your credit report in the last year for most purposes or in the last two years for employment purposes.
• Any company that denies your application must supply the name and address of the CRA they contacted, provided the denial was based on the information given by the CRA.
• You have the right to a free copy of your credit report when your application is denied because of information supplied by the CRA. Your request must be made within 60 days of receiving your denial notice.
• If you contest the completeness or accuracy of the information in your report, you should file a dispute with the CRA and with the company that furnished the information to the CRA. Both the CRA and the furnisher of information are legally obligated to reinvestigate your dispute.
• You have a right to add a summary explanation to your credit report if your dispute is not resolved to your satisfaction.

Getting pre-qualified is great for two reasons:

First, it will improve your purchasing power. Sellers and Realtors® feel more comfortable negotiating a contract with people who are already pre-qualified because it increases the chance that the buyer can quickly get financed (some will ONLY work with people that have been pre-qualified). This means that the real estate transaction can go a lot smoother than with someone who is not pre-qualified.

Second, getting pre-qualified is recommended because it gives you a clear idea of how much you can afford. This makes the home buying process easier because it allows you to know exactly what houses are in your price range.

Work with a Realtor® to find the home of your dreams. They are knowledgeable and have housing-market insights that can be more beneficial than doing the search on your own.

Selecting the right loan product for you is very important in the mortgage process. You may be choosing between a fixed or adjustable-rate mortgage, and you may consider a conventional or government mortgage loan programs like FHA, VA, or USDA. We have a variety of loan products to meet your needs.

Please click here to learn more about the Home Loans we offer.

To apply, you must submit the names, social security numbers, and the monthly income of all applicants, the subject property address, and the estimated value of the property being purchased. During the application process, the amount of the loan and the down payment are determined by you.

After you submit all of the documents, your Mortgage Loan Originator submits them to Processing. The Loan Processor puts all these items together, orders a title search, helps schedule an appraiser to determine the value of the property, and then sends the application to Underwriting

In the underwriting process, the lender determines whether the consumer qualifies for the loan based on all of the documents submitted in processing. The factors used to establish eligibility include the consumer’s credit report, their capacity to make payments on the loan based on their debt-to-income ratio, the value of the property in comparison to the amount being borrowed, and their capital.

Once the Underwriter grants approval, a clear-to-close is processed and the settlement date can be scheduled.

The closing on a loan is where all the necessary paperwork is presented and signed by both the sellers and the buyers.

Selecting the right loan product for you is very important in the mortgage process. You may be choosing between a fixed or adjustable-rate mortgage, and you may consider a conventional or government mortgage loan programs like FHA, VA, or USDA. We have a variety of loan products to meet your needs.

To apply, you must submit the names, social security numbers, and the monthly income of all applicants, the subject property address, and the estimated value of the property being purchased. During the application process, the amount of the loan and the down payment are determined by you.

After you submit all of the documents, your Mortgage Loan Originator submits them to Processing. The Loan Processor puts all these items together, orders a title search, helps schedule an appraiser to determine the value of the property, and then sends the application to Underwriting

In the underwriting process, the lender determines whether the consumer qualifies for the loan based on all of the documents submitted in processing. The factors used to establish eligibility include the consumer’s credit report, their capacity to make payments on the loan based on their debt-to-income ratio, the value of the property in comparison to the amount being borrowed, and their capital.

Once the Underwriter grants approval, a clear-to-close is processed and the settlement date can be scheduled.

The closing on a loan is where all the necessary paperwork is presented and signed by the person(s) refinancing the property.

Whether you are a first-time homebuyer, looking to refinance your home, or looking for financial solutions, we offer a wide variety of loans to fit your own unique needs. We offer loan types that have different interest rates, terms, down payments, and more. Here you will learn everything about mortgages from the type of rates you can have, to the type of loans you can choose.

In general, there are two main types of mortgages: Fixed-Rate (FRM) and Adjustable-Rate (ARM) Mortgages.

Once you choose the type of rate that is most beneficial for you, you can choose which loan type best suits your needs. Here are some of our most popular loan programs:

A conventional mortgage refers to a loan that is not insured or guaranteed by the federal government. Conventional loans are designed for good-to-great credit and income consumers, who have money saved up for a down payment.

For loans with 20% equity/down payment, there is no mortgage insurance required. For loans with LTV’s higher than 80%, the mortgage insurance premium is cheaper than FHA loans. “Cash-out” loans up to 80% of the home’s value.

FHA mortgages are loans that are insured by the Federal Housing Administration. Popular among first-time homebuyers, FHA loans are designed for low-to-moderate-income consumers.

FHA loans typically have a more relaxed credit requirement than conforming loans. The down payment requirement is as little as 3.5%. “Cash-out” loans up to 85% of the home’s value.

VA loans are guaranteed by the United States Department of Veterans Affairs. They offer long-term financing to eligible American veterans or a surviving spouse of a veteran.

No down payment is required, and up to 100% of the purchase or refinance of a home can be offered.

The HARP program allows people who have loans that have been guaranteed by Fannie Mae or Freddie Mac on or before May 31, 2009, with little or negative equity to refinance and take advantage of the current low-interest rates.

Available for homeowners that owe up to 150% or more than their home is worth (LTV ratio). HARP loans are available for primary residences, second homes, and investment properties.

USDA loans are guaranteed by the United States Department of Agriculture. These loans (also known as Rural Development loans) are designed to help low-to-moderate income consumers purchase homes in rural areas.

USDA loans often don’t require a down payment and provide up to 100% for a home purchase or refinance (rate and term only if the existing home is insured by USDA, and no-cash outs).

Loans that exceed the conforming loan limits set by Fannie Mae and Freddie Mac are known as Jumbo loans.

Fixed and adjustable-rate terms available. Loans available up to $3 million.

These are first mortgage loans that can be made on a consumer’s primary residence, second home, or investment property. LTV is based on the after completion value of the home.