Homebuyer FAQ

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How large a down payment will I need?

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Does my credit have to be perfect?

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How do I make an offer?

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What kind of mortgage should I apply for?

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How do I lock in a rate, what is the cost, and how soon can I do it?

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What is a qualifying ratio?

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What exactly are points?

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How long does the entire process take pre-approval to closing?

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What are closing costs?

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What happens at the closing?

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Do I need my own representative at the closing?

How large a downpayment will I need?
In most loan programs, at least a portion of the down payment must come from your own funds. This demonstrates to the lender that your home is an investment that is important to you. For example, if the loan program you select requires a 5% down payment, and the purchase price on your home is $100,000, your down payment will be $5,000. However, you may only have to provide a 3% down payment from your own funds, totaling $3,000. The remaining 2%, or $2,000, can be a gift or grant. Some people contribute to their down payment by borrowing against the equity in their profit-sharing or 401(k) plans.

Federal Housing Administration (FHA) loans are an exception since the entire down payment may be a gift, and the Department of Veterans Affairs (VA) loans require no down payment for qualified members and veterans of the armed forces or their widows. Some local down payment loans may be available as well as 0% down programs to qualified borrowers.

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Does my credit have to be perfect?
Your ability to purchase a home will depend, in part, on your credit history as profiled in a "credit report". The information on the credit report is used to determine how responsible you are in meeting your obligations. You do not have to have perfect credit to be approved for a mortgage, but if you have a number of late payments, you will need to provide a letter explaining why those payments were late. It is useful to check your credit standing several months before you apply for a home loan. When you think you are ready to purchase, your mortgage loan officer will help you complete the form authorizing them to obtain your credit report for you. Getting Your Application Approved is an article that will help you understand what lenders look for when approving a mortgage application. Prior bankruptcies may not prevent a customer from obtaining a home loan but at least 2 years should have lapsed since the filing with no past due items after the filing.

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How do I make an offer?
Once you have found the house you want and can afford, be sure to determine the home's true value by comparing it's price to that of other houses in the same neighborhood. Your Realtor can help you with this, or you might want to hire an independent appraiser to help guide you. Once you and the seller have reached an agreement on the price of the home, you may be asked for a deposit or binder to hold the house while the purchase contract is being prepared.

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What kind of mortgage should I apply for?
Once you're ready to buy a home, you need a mortgage that fits your budget and your financial objectives. Some people prefer the predictability of a fixed interest rate. Others need low initial monthly payments that adjustable-rate mortgages offer so they can afford more house for the money. Still others like the idea of paying off the mortgage sooner and saving thousands of dollars in interest and thus, opt for a shorter term.

Selecting the best mortgage loan for your needs can be confusing. It is best to consult with a mortgage loan officer prior to selecting a loan program. A loan officer can discuss your financial goals, income and expenses and help you determine the appropriate home financing option based on your needs.

How do I lock in a rate, what is the cost, and how soon can I do it?
Locking in a rate on our secondary market loans is made easy at ProGrowth Bank. Your lender will advise you as to what the current rate provided by our investors is. (It is important to know that this may change daily or even many times within the same day.) You may lock in at anytime from the time we receive your loan to just prior to closing your loan. Simply sign a lock in agreement and we take care of the rest of the process for you. At this time we do not charge to lock in a rate but there may be a cost to cancel it depending on the circumstances.

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What is a qualifying ratio?
A "qualifying ratio" is a formula used to determine your maximum principal+interest payment, (+ property tax + hazard insurance, and mortgage insurance, if applicable) mortgage amount and the purchase price of the home you can be approved to buy. It is important to remember that ratios may be stretched to a slightly higher amount depending upon your loan product and your other financial circumstances, referred to by some lenders as "compensating factors". Each loan product has a different qualifying ratio. There are two parts to each ratio: the front and the back.

Front Ratio: This is also known as total housing debt or PITI (Principal, Interest, Taxes, Insurance). For example, the front qualifying ratio on a Federal Housing Administration (FHA) loan is 29%. (If only one number is listed, as with Department of Veteran Affairs (VA) loans only the back ratio is used to qualify.) This means that to qualify for an FHA loan, your total monthly housing payment (PITI) should not exceed 29% of your total gross (before taxes are taken out) monthly household income.

Back Ratio: The back-qualifying ratio on the FHA loan is 41%. (some programs allow higher front and back ratios) This means that to qualify for an FHA loan, your total monthly housing payment (PITI) and all other debts should not exceed 41% of your total gross (before taxes are taken out) monthly household income.

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What exactly are points?
Discount or Buy down points are prepaid interest on your mortgage, charged by the lender at the time of closing. Each point is one percent of the loan amount. For example, two points on a $100,000 mortgage is $2,000. The more points you pay, the lower your interest rate will be, thus lowering your monthly payment. The points you pay are tax deductible.

How long does the entire process take pre-approval to closing? 
Processing your loan involves many parties performing a variety of services. Therefore, depending on how quickly those that are outside the control of the lender perform their role, getting to the closing table on your loan may take anywhere from a few days to 5 6 weeks.  A realistic rule of thumb is about 30 days on a purchase of an existing dwelling or a fully completed new construction.

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What are closing costs?
Closing costs cover all the charges associated with the transaction, including points, origination fee, appraisal fee, title search fee, title insurance, survey, taxes, deed recording fee, charges for credit reports, escrowing for taxes and insurance, etc. etc. Closing costs range between two and six percent of the mortgage amount, depending upon the loan product and fees that are customary in your region.

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What happens at the closing?
Before closing, you may need to arrange for a home inspection, choose a settlement service or attorney, make arrangements with the utility company, and obtain hazard and (if necessary) mortgage insurance. Your loan officer can be a big help in assisting you with these details.

At closing (ah, the final step) your mortgage is signed and sealed, and your check is delivered. Your first mortgage payment will usually be due approximately 30 days after closing. Now you can settle into your new home.

Do I need my own representative at the closing?
Due to increasing banking compliance laws and state and federal regulations, residential real estate loans may at times appear complicated and lengthy. While there is no requirement that you have an agent at the closing you may, at your own discretion and cost, have someone with you to help you better understand the documents the closing agent is asking you to sign.