How Does All This Work?
We want to help you understand the process you will go through while purchasing and selling your home with us. We have provided these FAQs to help answer any mortgage questions you have and make your experience a little easier. If your question wasn’t answered, please contact us and ask!
Three types of mortgage and homeowner’s costs may be tax-deductible: discount points, interest paid on a home loan or home equity loan, and property taxes. After the year of sale, your mortgage interest and annual property taxes are the only deductible costs. For a refinanced loan, points must be deducted over time. Consult your tax advisor for advice about your situation.
Generally, 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, based on your entire financial situation, we may not need full copies of your tax returns. 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.
If I have had a few employers in the last few years, does this affect my ability to get a new mortgage?
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.
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.
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. So, don’t limit your mortgage shopping for fear of the effect on your credit score.
Points/origination is considered a form of interest. Each point is equal to one percent of the loan amount. You pay them upfront 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/origination, you should compare the cost of the points/origination to the monthly payments savings created by the lower interest rate. Divide the total cost of the points/origination 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/origination. If the number of months it takes to recoup the points/origination is longer than you plan to have the mortgage, you should consider the loan program option that does not require points/origination 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 BB&T 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.
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.
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 2-3 years to pass after the bankruptcy or foreclosure. It is also important that you have re-established an acceptable credit history with new loans or credit cards.
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 verification that the other person responsible for the debt has made the required payments, by obtaining copies of their cancelled checks for the last 6-12 months
Any student loan that goes into repayment within the next six months will be considered when evaluating your loan. If you are not sure exactly what the monthly payment is, enter an estimated amount. If other student loans are reflected on your final credit report, which are not scheduled to go into repayment in the next six months, we may need to ask you for verification that repayment is required during this time period.
If you plan to be in your home for more than seven years, you may want to consider a fixed rate mortgage, which offers predictable payments and long-term protection against rising mortgage interest rates. If you plan to be in your home for seven years or less, an adjustable rate mortgage could be attractive. Keep in mind that with an adjustable rate mortgage, your monthly payments have the potential to go up each time your interest rate adjusts.
Interest rates are influenced by the financial markets and can change daily – or multiple times within the same day. The changes are based on many different economic indicators in the financial markets.
A rate lock gives you protection from financial market fluctuations that could affect your interest rate range. You can choose to lock or not lock your interest rate range. On the date and time you lock, that interest rate range remains available to you for a set period of time. If there are no subsequent changes to your loan and your interest rate range is locked, the interest rate range on your application generally remains the same. If there are changes to your loan, your final interest rate at closing may be different.
A homeowners insurance (or hazard insurance) policy covers damages to your home, your belongings and accidents as outlined in your policy. Mortgage insurance is required if you have less than 20% equity (or downpayment) in your home and protects the mortgage lender if a customer is unable to make loan payments and defaults on the loan.
If you obtained your loan after July 29, 1999, you can request cancellation of PMI when your loan-to-value (LTV) reaches 80%. Cancellation requires that you have a good payment history, the property value has not decreased, and you can certify that there are no liens against your property. Lenders are required (by the Homeowner’s Protection Act of 1998) to terminate PMI at 78% LTV (based on the amortization schedule) if the loan is current or has reached the midpoint of the payoff.
An insurance policy protects a lender and/or homebuyer (only if homebuyer purchases a separate policy, called owner’s coverage) against any loss resulting from a title error or dispute. All mortgage lenders require lender’s coverage for an amount equal to the loan. It lasts until the loan is repaid. As with mortgage insurance, it protects the lender but the borrower pays the premium at closing.
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.
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.
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 meets program 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. Lastly the HOA fee collection and delinquency percentage is another piece of information that is crucial and telling of the financial health of the HOA. In most cases more than 15% delinquency of owners in the association will be seen as a non-approvable HOA and condo project. 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.