Mortgage F.A.Q's

Can I get pre-qualified or pre-approved for a home purchase loan before I’ve found my property?
Absolutely. However, you should not confuse a pre-approval with a pre-qualification. During the pre-qualification process, our Mortgage Consultant will ask you a few questions and hand you a pre-qualification letter. The pre-approval process is much more complete.

During a pre-approval, our Mortgage Consultant does all the work of a full-approval, except for appraisal and title search. When you are pre-approved, you become like a CASH BUYER and have more negotiating leverage with the seller. In some cases (especially in multiple-offer situations), having a pre-approval can make the difference between buying a home and not buying a home. In other instances, home buyers have been able to save thousands of dollars as a result of being in a better negotiating situation.

Most good Realtors will not show you homes before being pre-approved because they do not want to waste your time, the seller’s time, and their time. Diamond Consulting Group will pre-approve you at minimal or no cost. We will typically need to check your credit and verify your income and assets.

Once your loan has been approved you can change any of these variables to match the specifics of your purchase transaction. Please note that we cannot lock in a loan until a property address has been specified.

Can I make changes to my application?
Yes, you can make changes anytime before you lock in your rate. Keep in mind that any changes you make may extend the time that it takes to close your loan, may increase the cost of closing and may effect your interest rate. We recommend that you complete your original loan application accurately and completely prior to submitting. Once you receive confirmation of your rate lock, you should review the terms carefully and contact your mortgage consultant immediately if any corrections are needed.

Do I have to finish filling out my application at one time?
No. Diamond Consulting Group gives you the convenience of changing or finishing your application at any time before final submission to lender. Simply call 1-866-724-3863 or e-mail your Mortgage Consultant to have confidential changes made to your existing application.

How do I increase and protect my credit rating?
Here are a few general tips to assist you in raising and maintaining your credit score:

• Maintain two to three revolving charge accounts (such as Visa or MasterCard) in good standing.
• Have a couple of other credit card accounts, such as department stores or gas cards, in good standing.
• Avoid “finance” company credit card offers.
• Avoid credit inquiries-they lower your credit score.
• Don’t max out your credit cards-the ratio of available credit to your total credit balances is very important.
• Don’t apply for multiple credit lines; this triggers an inquiry of your credit, which lowers your credit score.
• Never co-sign a loan for someone else

How long will it be before we will know if the loan is approved or not?
If your application is received online, we can give you a preliminary pre-approval within 8 business hours. In other instances between 24-48 hours from the time we receive your application. However, this is dependent on your credit scores and overall file. In some cases it could take a little longer, such as 5-8 business days.

How long will it take to close the loan?
If everything goes smoothly, we should be able to close in as little as 10 days.

How will my credit score affect my loan application?
Credit scoring plays a significant role when you apply for a loan. Higher credit scores help you to be eligible for more loan options. If you've had credit difficulties in the past, there are still mortgage programs available, but they will usually cost more and will vary depending on the severity of your credit problems.

Should I refinance?
The significant and most common reason for refinancing is to save you money. You can save a lot of money every month by lowering the interest rate on your current loan. How much you can save depends on a lot of factors. You have to consider how much it will cost in fees in order to realize the savings in your payment. Saving money through refinancing can be achieved by obtaining a lower interest rate, which causes your monthly mortgage payment to be reduced or by reducing the term of the loan, which saves money over the life of the loan. Even if the fees get added on to the loan balance, they're still there. A good option for a lot of people is to get a loan with no points or fees. But those loans come with higher interest rates.

You may also consider refinancing in order to convert your adjustable loan to a fixed loan. The main reason for this is to obtain stability and security offered by a fixed loan rate over the term of the loan. Adjustable rates are popular when rates are higher whereas when rates are low most people tend to lock in for a fixed loan rate.

If your intentions are to consolidate debts and replace high interest loans with one low rate mortgage than you may want to consider refinancing. The loans being consolidated may include second mortgages, credit lines, student loans, credit cards, consumer charge cards, or other debt you may have. In many cases, debt consolidation saves you money by saving on taxes and avoiding paying high interest rates. Mortgage loan interest is tax deductible whereas interest on consumer loans is not tax deductible.

What are points?
An amount equal to 1% of the principal amount of a mortgage loan. Discount points are a one-time charge assessed at closing by lender to increase the yield on the mortgage loan to a competitive position with other types of investments. For instance, one percent of a $100,000 loan is equal to $1,000.

What does it mean to “lock a rate”?
“Rate locks” are a way of protecting from a possible rise in interest rates during the processing of your loan. With some lenders, you can lock a rate up to 90 days. Generally speaking, if you choose to lock for an extended period of time, the cost of the loan goes up. Furthermore, if rates improve during the processing of your loan, you will still get the rate you locked. Some lenders may require a home purchase contract before they will allow you to lock an interest rate.

What if I have little or no credit?
Use your good payment history on rent and utilities, as well as credit obtained through family members or friends. Provide a year’s worth of canceled checks to validate consistent monthly payments. This information will become part of your application for the mortgage loan.

What if I have a credit problem because of an unusual situation?
If you normally pay your bills on time but failed to pay because unusual or temporary situation, write a detailed letter explaining your circumstances. Also provide supporting documentation with your letter such as a doctor’s letter that will add credence to your case. The information will become part of your loan application. Your lender will be able to overlook a credit problem if you can provide a good reason for neglecting your obligation.

What is Annual Percentage Rate (APR)?
The total finance charges for a loan that is expressed as a percentage. APR takes into account the total cost of a mortgage, including interest, closing fees, lender points, and other charges over the life of a loan.

What is a Conventional Loan?
A mortgage or deed of trust that is not insured or guaranteed under a government insured program.

What is a Convertible ARM?
The Convertible ARM has traits similar to the ARM loan, but offers an option for the borrower to change the mortgage to a fixed-rate loan during an early interest rate adjustment period.

What is a Balloon Loan?
A note calling for periodic payments which are insufficient to fully amortize the face amount of the note prior to maturity, so that a principal sum known as a “balloon” is due at maturity.

What is a Buydown Loan?
A mortgage with a starting interest rate below the interest rate stated on the Promissory Note. The lender lowers the starting rate in return for an interest rate subsidy paid by the seller, buyer, builder, or lender.

What is a FHA Loan?
The Federal Housing Administration provides mortgage insurance for residential mortgages and sets underwriting standards. The loan is partially guaranteed by the Department of Housing and Urban Development and a private lender.

What is a FICO score?
A FICO score is a credit score developed by Fair Isaac & Company. It is a credit scoring method to determine the likelihood of credit users paying their bills. Since the 1950s, Fair Issac & Co were pioneers in setting credit scoring standards and even today their method has become the most widely accepted and reliable scoring method used by lenders in credit evaluation.

A credit score attempts to condense your credit history into a single number. Credit scores analyze your credit history by considering numerous factors such as:

• Late payments
• The amount of time credit has been established
• The amount of credit used versus the amount of credit available
• Length of time at present residence
• Employment history
• Negative credit information such as bankruptcies, charge-offs, collections, liens, etc.

What is a Good Faith Estimate?
When you file your application for a loan, the lender must, under the terms of RESPA, provide you with a Good Faith Estimate of settlement services that will likely incur. The estimate may be stated as either a dollar amount or a range for each charge. What is an Adjustable Rate Mortgage (ARM) and how does an ARM work?
An Adjustable Rate Mortgage (ARM) is a mortgage or deed of trust, which allows the lender to adjust the interest rate periodically as agreed to at the inception of the loan. The interest rate on an ARM is tied to a market index and is fixed for a specific period of time. Once that period of time is over, the interest rate is adjusted periodically (every 6 to 12 months) following the changes in the interest rate of index that is associated with the loan. Examples of market indexes include, but are not limited to, LIBOR, Constant Maturity Treasury, and 11th District Cost of Funds. If you are interested in an adjustable-rate mortgage, it is important to discuss all of the features and options of an ARM with our Mortgage Consultant so they can help you make an assessment of the best ARM to meet your specific needs.

What is Hazard Insurance?
Hazard insurance is an insurance policy to protect homeowners against property damage. This premium prepayment is for insurance protection for you and the lender against loss due to fire, windstorm and natural hazards. If a catastrophe does happen, hazard insurance should cover the costs to rebuild your home. Most Lenders often require you to get a policy before you buy or refinance a home and usually require you to pay the first year’s premium at settlement.

What is an Origination Fee?
A fee or charge for work involved in evaluating, preparing and submitting a proposed mortgage loan. For FHA and VA loans this fee is limited to 1% of the loan amount.

What is P.I.T.I?
Principal, Interest, Taxes, and Insurance. The four components of a monthly mortgage payment. Principal refers to the part of the monthly payment that reduces the remaining balance of the mortgage. Interest is the fee charged for borrowing money. Taxes and insurance refer to the amounts that are paid into an escrow account each month for property taxes and mortgage and hazard insurance.

What is Prepaid Interest?
This amount represents the interest that accrues between the close of your loan and the last day of the month in which the loan closes. Interest on your loan after that date is included in your regular monthly payments.

What is Private Mortgage Insurance (PMI)?
Insurance written by a private company that protects the lender against loss if you default on the mortgage.

What is Title Insurance?
Insurance policy that is issued by a company regarding title to real property.

What is a Truth In Lending Disclosure?
The disclosure is designed to give you information about the cost of your loan.

What is a VA Loan?
An independent agency of the federal government that offers benefit programs to veterans. These programs encourage mortgage lenders to offer long-term, no down payment financing to eligible veterans by guaranteeing the lender against any loss.

What kind of documentation will I need to provide the lender for verification?

As each loan has different variables, there is no single list of documents needed for all applicants. You should be prepared to provide copies of the following documents to your lender.

Employment & Income Data

• W-2 tax forms, past two years
• 1099's
• Pay stub showing current year-to-date earnings (two most recent stubs)
• Your job history and any explanation of a job change within the past two years
• If self employed (defined as owning 25% of a business or more), you need business and personal federal tax returns (two years, including schedules), a current year-to-date profit or loss statement and a K-1 on all partnerships

Assets

• Bank account statements, past two months
• Investment account statements
• Retirement account statements
• Signed gift letter and transfer of funds verification

Liabilities

• Credit Cards - include account numbers and balances
• Auto loans and leases - account numbers and value of car
• Explanation and paperwork of any derogatory credit in the past seven years
• Explanation letter of any derogatory credit (bankruptcy, collection, foreclosure or default)
• Student and personal loans - include account numbers, monthly payments and balances
• Landlord address(s) for past two years and rental amounts

Property & Realtor Information

• Name and contact information of your Realtor (business card)
• Homeowners insurance information
• Rental or lease agreements
• Residence & address for past two years

What kind of things do I need to be aware of as a 1st time home buyer?
Buying a home can be your largest purchase in your life. Remember that you are in control of purchasing your home; so don’t allow anyone to pressure you into making a purchase you are not comfortable with. Take your time and evaluate all your options before committing to a contract or a loan.

• Here are some tips and questions to ask yourself as you start on your first steps to home ownership!
• Know how much you can afford first.
• Yourself, as well as the Realtor and Seller need to know if your can obtain financing.
• You need to know about available financing and special programs
• Is FHA right for you?
• Are you eligible for Federal VA financing?
• What about No Money Down financing?
• Are there any state sponsored programs available?
• What about Zero Down Rural Housing Programs?
• Can I borrow the down payment?
• Are Gifts allowed?
• Can the Seller pay my down payment and closing costs?

What are closing costs? If you require more information to these questions or need help, call and speak to one of our Mortgage Consultants at 1-866-724-3863. There is no cost or obligation whatsoever to you. Service makes us different and financing is made easy.

What loan programs are available to me as a 1st time home buyer?
Depending on your personal circumstances, you may have several different loan programs available to you as a 1st time home buyer Diamond Consulting Group can offer you loans from No Money Down or loans up to ONLY 3% Down. We even have programs that can finance up to 103% of your purchase price. So, call and speak to one of our mortgage consultants at 1-866-724-3863 to find out which program is best for you.

When should I choose a fixed-rate loan?
A fixed-rate loan offers a borrower the comfort of knowing exactly what their payments will be, month after month, for the life of the loan. Loan terms can range from 15, 20, 25, and up to 30 years. In a low-rate environment, borrowers tend to prefer a fixed-rate product that can protect them from possible interest-rate increases.

When should I choose an Adjustable Rate Mortgage or ARM?
Generally speaking, an ARM enables borrowers to secure a loan at an initially lower interest than a fixed-rate loan. This means a borrower has lower monthly payments for a specific period of time when compared to other loan options. Lower monthly payments may allow you to qualify for a higher loan amount.

What should I do if I continually struggle to pay my bills?
The best thing to do is seek professional counseling to help you with your credit situation. Consumer Credit Counseling Services is a nationwide nonprofit organization that provides credit counseling free or for a reasonable fee. They can help you develop a solid plan for regaining control of your finances.

What should I do to help financially prepare for a home loan?
Here are a few tips to assist you when it comes to applying for a loan:

• Use cash instead of credit for your purchases.
• Avoid making any large credit purchases—the added debt could impact your ability to qualify for a loan.
• Contact creditors immediately if you have a problem or concern about your ability to make payments on time.
• Put money aside into savings so you'll have a financial cushion in case of an emergency.

When should I pay points on a loan?
The decision to pay points on a loan depends heavily on your circumstances. In certain situations, it can be very advantageous for you to pay points on your loan. Generally speaking, the longer you plan to keep a loan the more sense it makes to pay points to get a lower interest rate. One way to determine this is to calculate the break-even point of how long you would have to keep the loan in order to save over the cost of paying points up front. If you are comparing two loans with the same interest rate, and one of them doesn't require you to pay points, then there is no reason to pay points. Another consideration may be tax purposes. Points paid on a new home loan are immediately deductible as interest.