Home Mortgage FAQ
The mortgage application process is stressful and overwhelming for just about everybody, from first-time to seasoned home buyers alike. Our learning center provides a wealth of information to help you move through the process with confidence and ease.
After reading through our resources, you may still have questions or concerns. We’re here to help. When you call radius, you’ll be connected with one of our loan officers, who can talk with you to learn more about your individual needs and circumstances, and help you begin moving forward.
What loan programs are available to me?
Residential mortgage loans fall into three basic categories:
Within each of these categories are specific loan programs that match the needs and circumstances of qualified borrowers.
Conventional, fixed rate loans feature one set interest rate over the life of the loan.
Conventional or “conforming” loans meet loan limits and other qualifications required by Fannie Mae and Freddie Mac, including:
- loan amounts of up to $417,000 for a single-family home (this amount changes periodically)
- somewhere generally between 5 % and 20% down
- strong credit scores, with a minimum score of 620
Non-conforming loans don’t meet loan limits and other qualifications required by Fannie Mae and Freddie Mac. Adjustable rate mortgages (ARMs) and blended mortgages fall within this category.
Government loans provide financing for borrowers who meet specific housing requirements, income limits and other requirements.
The Federal Housing Administration (FHA), the Department of Veteran Affairs (VA) and the U.S. Department of Agriculture (USDA) provide loan programs for qualified borrowers.
For more detailed information about these programs, visit our loan programs section.
Is it better to buy or rent?
For most people, buying a home is the biggest investment they’ll ever make; generally, it should not be considered a short-term one. If you plan to move frequently, it may be better to rent.
However, home buyers who can hold onto a property and not have to sell at a given time are typically rewarded, building equity over time as their home values rise and mortgage balances shrink. They also don’t have to worry about rising annual costs, since lenders can’t boost borrowers’ rates and payments like landlords can (unless the borrower has an adjustable rate mortgage.) There are also tax advantages associated with buying a new home.
For cases where home values decline, it’s important to consider what someone would have paid for rent during that time period. In most cases, even with a modest decline, the homeowner fares better than the renter, who won’t recapture any money upon moving.
So while it does make more sense to rent in some cases, buying a home remains a wise option for many people.
Interest rates: Where are they going?
While industry experts often make educated guesses about whether interest rates will go up or down, they’re no more than that: guesses.
In the most simplistic terms, there are many economic factors that affect mortgage rates, but economic conditions and the rate of inflation play a big role.
While we’ve seen interest rates rise over the past several months, it’s important to put those increases in perspective. Today’s rates still remain quite low, which continue to make it a great time to buy a new home or refinance.
Will today’s rates continue to rise? No one knows for sure. But by listening to the news and staying apprised of the nation’s economic conditions, you’ll likely be able to make some smart decisions and educated guesses of your own.
Can I afford to buy a home?
When a lender reviews a mortgage application, they consider two basic factors: your ability and your willingness to repay the loan.
Ability to repay is determined by verifying your current employment and analyzing your total income. Lenders prefer that you’ve been employed at the same place for at least two years, or at least be in the same line of work for a few years. Also, your proposed monthly payment will be compared to your monthly income and debt.
Willingness to repay is influenced by how you’ve paid previous loans and by examining how the property will be used. Willingness is typically gauged by your credit report NEW URL FOR THIS LINK? and history paying rent and/or utility bills. (There’s a greater tendency for people who live in a house to consistently make these payments, as opposed to those who live in a rental property or vacation home.)
When it comes to loan approvals, there are no set rules and each applicant is handled on a case-by-case basis. Many applicants come up a little short in one area, but make up for it with other strong points. These compensating factors may include a large down payment, solid employment, extensive educational background or overall financial health.
For applicants who need to make a lower down payment, mortgage insurance is added as protection for the lender in case you stop making payments. Meanwhile, this allows low and moderate income families to become homeowners through low down payment programs. NEW URL FOR THIS LINK?
Since each person’s circumstances are unique, it’s best to talk with an experienced loan officer NEW URL FOR THIS LINK? who can learn the specifics of your situation to help determine if and when you’re truly ready to buy a home. From there, he or she can identify which available loan programs may be best for you.
What’s the difference between a pre-approval and pre-qualification?
Pre-approvals and pre-qualifications are not the same. A pre-approval from a reputable lender establishes how much a borrower can reasonably spend on a mortgage and confirms that he/she is qualified to apply for a loan up to that amount.
A pre-approval documents:
- the details of a potential borrower’s investment, including the down payment and closing costs
- a close estimate of monthly principal, interest, taxes and insurance (PITI) fees
- loan options that the borrower qualifies for and fits his/her specific needs
Pre-qualifications don’t require a thorough credit check and have virtually no impact on true borrowing ability.
How can I find out my credit score?
A credit report shows your debts and payment history with creditors (i.e., banks, credit card companies and department stores) who have loaned you money.
Lenders judge how you’ve paid bills as an indication of how you’ll continue to pay in the future. They also use credit scores to determine if you’re qualified to obtain a mortgage.
There are three credit reporting agencies (see below) you can contact to review your credit. If you find any errors on your report, it’s best to get them corrected before you apply for a loan.
What the difference between a mortgage lender and broker?
A mortgage lender handles the entire underwriting process, from the moment an application is submitted to the time the loan actually closes.
A mortgage broker works as the middleman between the borrower and the bank that underwrites the loan.
radius is a full-service, private mortgage lender with in-house underwriting. We have the resources and expertise to move borrowers through lending process with efficiency and ease. If issues come up along the way, we’re able to swiftly mitigate them, ensuring that clients get to the closing table on time, without confusion or delay.
What’s an escrow account?
Mortgage escrow accounts are special accounts in which money is held to pay property taxes, fire and hazard insurance premiums, mortgage insurance premiums, and other escrow items.
Escrow accounts guarantee that there’s always enough money to pay these bills on time, helping avoid the risk of lapsed insurance coverage or delinquent taxes. Meanwhile, homeowners don’t have to worry about coming up with several large, lump sum payments, each with different due dates, throughout the year.
Unexpected tax increases and insurance premiums are also managed through escrow accounts. In fact, it’s the responsibility of the mortgage company to allow for possible increases. Iit’s quite common for them to pay taxes and insurance premiums when they’re due, even if all the money has not yet been collected from the homeowner.
Escrow accounts also protect the interest of mortgage loan investors by making them more attractive and secure. As a result, mortgages with escrow accounts have lower rates and down payments. Lastly, escrows benefit local governments by providing a more efficient, less expensive way for them to collect taxes.
How long does the loan application process take?
Once your loan application is submitted, we begin to carefully review all the information you’ve provided.. This process can take anywhere from one to four weeks (and sometimes even longer), depending on the type of mortgage you choose and whether you’re buying a home outside your local community, along with a host of other factors.
Your loan officer will be able to give you a more accurate timeline based on the specifics of your application.
What happens after I submit my application?
Within three business days after submitting your signed application, we’ll give you a good faith estimate of your closing costs. You’ll also receive a statement that shows your estimated monthly payment, the cost of your finance charges and other facts about your mortgage.
For a more detailed of the loan application process, review our borrower’s guide, which provides a step-by-step overview of what will occur.
What can I do to secure a final loan commitment?
Although you may have received an initial approval on your loan, there are still several steps to be completed before a final loan commitment is offered. Here are some important reminders to carefully consider:
- The mortgage process has changed quite a bit in recent years, requiring more financial, employment and credit documentation than ever before. Don’t take it personally or worry that your application is in jeopardy. It’s simply part of today’s process.
- As our underwriters continue to review your loan, it’s quite typical for one of them to contact you and request additional information. Make sure to respond as quickly as possible to avoid confusion and delays.
- While you’re waiting to close on the sale of the home, don’t go on a shopping spree! A second credit report will be pulled just before closing, so we strongly recommend that you not open any new credit cards or loans before then. If that’s not possible, you’ll need to provide documentation on any new accounts and a conference call with the credit bureau will most likely be required.
- If you do acquire new debt during this time, you may alter your debt-to-income ratio, which can negatively impact your borrowing ability.