Friendly Frequently Asked Questions

HOW MUCH HOUSE CAN I AFFORD?
This is one of the most important questions when beginning the home buying process.  Knowing and understanding your financial status and goals will impact your decision.  Depending on your individual situation, your budget can affect everything from the neighborhoods where you look, to the size of the house, and even what type of financing you choose.

WHAT IS LOAN PRE-APPROVAL PROCESS?
A pre-approval is an early assurance from a mortgage lender. It states that you meet the necessary credit requirements for a home mortgage for a specific loan amount, subject to verification. Erik, your Friendly Maryland Realtor can get you pre-approved!!!  ( EXIT SPIVEY FINANCIAL SHEET)

It is a good idea to get a pre-approval even before you've found a house. The pre-approval process provides a good idea of the amount of money you are eligible to borrow.  It allows you to focus your search on homes that are within your price range.
Once you find a house, a pre-approval letter strengthens the offer you make to the seller. It demonstrates your financial strength and shows the seller that you have the ability to buy the house. Although a pre-approval letter is not a final loan commitment, it can be used as leverage when submitting an offer on a home. Home sellers prefer to accept offers from pre-approved buyers.

WHAT DOCUMENTS ARE REQUIRED FOR THE LOAN APPLICATION?
When applying for a mortgage loan, there are many documents required by the lender. Make sure you bring everything with you when you apply to avoid any delays in obtaining the pre-approval from your lender. Being pre-approved prior to making an offer on a home may give you bargaining power if there is more than one offer presented on a home.

Items Needed at Loan Application include:

• Most recent consecutive paycheck stubs for the past 30 days
• All W-2s for prior 2 year period
• A legible copy of your driver's license (to comply with the Patriot Act)
• Complete personal federal tax returns for the most recent year
• Statements for the most recent month on all asset accounts (checking, savings, mutual funds, retirement, etc.)
• 2 year employment history complete with company name, address, telephone number and contact name (If you were a student, a copy of your transcripts is required)
• 2 year history for personal residence. (If you were a renter, the name, address and telephone number for each landlord is required)
• Check for the appraisal and credit report

WHAT DOES YOUR CREDIT HISTORY MEAN?
Credit Report
A lender that is selected as part of the loan application process will pull and review your credit report as a snapshot of your purchasing history.   The report will list all your long-term debts (cell phone, credit cards, mortgage payments, automobile and student loans, etc), as well as your payment history. 

HOW TO IMPROVE MY CREDIT SCORE?
Credit History
Your credit score can have a enormous impact on your buying power.  It is imperative to monitor your credit to ensure items on your credit report are, in fact, yours.  Several ways you can increase your credit score.

Friendly thoughts to improve your credit score? 

• Contact the credit agencies and request your credit  report at least per year from each agency.  The credit agencies are - Equifax, Experian and TransUnion.

Equifax Information Services - P.O. Box 105873, Atlanta, GA 30348 - 1.800.685.1111
Experian Information Services - P.O. Box 9601, Allen, TX 75013-2104 - 1.888.397.3742
Trans Union Corporation - P.O. Box 1000 (or 2 Baldwin Place), Chester, PA 19022 - 1.800.916.8800

• Consider closing accounts that you don't use or haven't used.
• Pay your bills on time!
• Keep your credit usage to a minimum. 
• Limit the number of credit cards you have and/or use.

WHAT IS THE DOWN PAYMENT?
The Down Payment
Saving funds for a down payment prior to shopping for a home is very important. Often times lenders will review bank statements to verify that funds have been saved to account for the down payment.

How much is required?
The down payment is usually expressed as a percentage of the overall purchase price of the home.  The down payment percentage can vary from 3% - 20% depending on the lender, the type of financing and amount of money being lent.

Earnest Money Deposit
Buyers are usually required to deposit earnest money with the seller when they make an offer. If the offer is accepted, the earnest money is then credited towards the down payment. The amount varies depending on the seller and any specific contract stipulations.

Closing Costs
In addition to the down payment, you will also need to have funds available for fees related with the loan which are closing costs.  The charges in your closing costs include items such as title insurance, documentary stamps, loan origination fees, the survey, attorney's fees, etc. When you submit your loan application, lenders are required to supply you with a good faith estimate of your closing costs.