Our Learning Center is designed to provide you, the borrower, with tools and information to help you better understand the loan process.

 HOME MORTGAGE OVERVIEWS
These overviews will provide you with a better understanding of how mortgages work. They will help you learn or review basic financial concepts and terminology associated with the loan process.
   

STARTING OUT
What should I do to help financially prepare for a home 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.
• Manage all outstanding accounts carefully, and avoid skipping any payments.
• 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.

Can I get prequalified for a home purchase loan before I find my property?
Absolutely. In fact, we recommend you do this before you even start looking for a home. A loan prequalification will provide you with an approximation of the size of loan you qualify for and help you determine how much of a home you can afford. It can be done by providing your income, expense, and asset information to your mortgage broker. Generally, a credit report is not run.

Can I get preapproved for a home purchase loan before I find my property?
Yes. A loan preapproval takes the prequalification process several steps further. A residential loan application will need to be completed, and you may be asked to provide documentation on your finances. This documentation includes, but is not limited to, current paycheck stubs, tax returns, bank statements, and stock and bond account statements. A credit report is also required for loan preapproval.

Getting pre-approved for a loan can give you an advantage in buying a house. It sends a signal to the seller and the agents involved that not only are you serious about your offer, you have the finances to back it up.

How do I choose a real estate agent?
You should select your real estate agent as you would a doctor. Interview at least two or three. Inquire about their background, experience, and how familiar they are with the area(s) your are interested in. Most importantly, make sure you are comfortable with the person. Remember, you might be with that realtor for quite a while.

To start the selection process, ask friends, relatives or your mortgage broker for names of realtors they've used and would recommend. Part of the interviewing process should include what type of property the agent specializes in selling. Can the realtor explain termite inspections, home inspections, and home protection warranties?

Consider using the Internet to preview properties that are specific to your needs and in the areas you desire. These property profiles generally give you an overview of the property square footage, bedrooms, bathrooms, and other amenities. Some profiles will also include information on local schools, shopping, and accessibility.

CREDIT INFORMATION
What if I have little or no credit?
Use your good payment history on rent and utilities, as well as credit obtained through a family member. 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.

How do I increase and protect my credit rating?
Here are a few general tips to assist you in raising and maintaining your 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.
• Pay your bills on time, or within 30 days from the date they are due.
• Don't apply for multiple credit lines: that triggers an inquiry of your credit, which lowers your credit score.
• Never co-sign a loan for someone else.

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 of an unusual or temporary situation, write a detailed letter explaining the circumstances. Also provide supporting documentation to your explanation, such as a doctor's letter that will add credence to your case. This information will become part of your loan application. Your lender may be able to overlook a credit problem if you can provide a good reason for neglecting your obligation.

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 non-profit 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.

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.

SHOPPING FOR A LOAN
How do I find the right mortgage?
Our advanced loan search and transaction engine matches the loan requirements and preferences you provide to a database of more than 50,000 loans and instantly delivers loan recommendations. It also allows you to do your own analysis of all the loan products you qualify for so you can make the right decision.

How do I know that I am getting the best rates available?
Our rates reflect the most reputable lender programs in the country and are continually updated. Because of the vast number of programs available, we offer the most extensive choice of rates on the Web site, giving our clients the edge in finding the right loan. And because we offer a combination of professional expertise and Web technology, you are assured the best deal.

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.

How does an adjustable-rate mortgage (ARM) work?
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 your LoanCity.com member broker so they can help you make an assessment of the best ARM to meet your specific needs.

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 your 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 is a "point"?
A "point" is essentially 1% of the loan amount. For instance, one point on a $100,000 loan is equal to $1,000.

When should I pay points on a loan?
The decision to pay points on a loan depends heavily on a borrower's circumstances. In certain situations, it can be very advantageous for a borrower to pay points on their 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.

APPLYING FOR A LOAN

Are there any up-front costs involved when I apply?
Yes. The approval process requires a thorough credit report, which usually costs about $55. A property appraisal is also required and can range between $175 and $695, depending on value, size, location, and occupancy status of the home.

How does the credit report process work?
The approval process requires a credit report. We use a three-bureau credit check to gather information regarding your credit history. Once this information has been positively evaluated, the loan process begins.

How does the appraisal process work?
Once a credit check is completed, a licensed appraiser is assigned to appraise your property. Appraisals usually range between $175 and $695, depending on value, size, location, and occupancy status of the home.

LOAN IN PROCESS
How long does the loan process take?
Depending on the circumstances, the whole loan process usually takes 2—4 weeks. The more complex your financial and property situation is, the longer the process takes.

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