Homebuyer FAQ
Currently licensed to do loans in Pennsylvania and Florida, with offices in both Pittsburgh, PA and Sarasota, FL.
Why do I need to be preapproved before shopping for a home?
There are several reasons why your first step in the home buying process should always be to get pre-approved for your mortgage. First, you'll find out how much you can comfortably afford. Second, it gives you and your lender time to go over payments and funds needed to close so you have a good understanding of how it all fits into your budget. Third, having a preapproval before making an offer may give you an edge over other buyers because you can confidently place an offer much quicker.
Pro Tip: Take it a step further and obtain a "Guaranteed Approval" from Stockton Mortgage. Ask me how!
Do I need a 20% Down Payment?
Contrary to what you may have heard, there is no requirement for a minimum down payment of 20% when purchasing a home. With a 20% down payment, lenders won't require mortgage insurance on a conventional loan. If you put less than 20% down, mortgage insurance will be required.
It is possible to put as little as 3% down on a Conventional loan, 3.5% down on an FHA (Federal Housing Administration), and 0% down on a VA and USDA loan. Contact me for more details!
What is PMI - Private Mortgage Insurance?
Private mortgage insurance (PMI) is a type of mortgage insurance you will be required to have if you take a conventional loan with less than a 20% down payment. PMI protects the lender - not you - if you stop making payments on your loan. PMI is also required on a refinance of a conventional loan when your equity is less than 20% of the value of your home. PMI is arranged by the lender and provided by private insurance companies. It insures the lender against loss caused by borrowers failing to make loan payments.
Can I finance my closing costs?
Yes and no. Sellers assist is the only real way to "finance" your closing costs. Sellers assist is a financial concession paid by the seller of the property as a credit to the buyer at closing. Buyers can use these funds to cover closing costs as well as cover the cost to buy down their interest rate if they choose to. The amount a seller gives you as a seller assist cannot exceed the actual closing costs. So, seller assist cannot be applied toward your down payment. It can only be used toward the closing costs and prepaid costs associated with your loan.
What exactly is a Re-Cast?
Mortgage recasting is a form of prepaying your mortgage. To recast your loan, you'll simply make a lump-sum payment towards the balance. Your lender will then re-amortize the loan over the remaining term, using the smaller balance, which will reduce the monthly payment. Although your loan has been recast, you'll retain the same interest rate and loan term. Most lenders will only allow you to re-cast your loan one time during the life of the loan.
What makes up my credit score?
Your credit score can range from 300 to 850. There are five factors that make up your credit score.
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Payment history - this accounts for about 35% of your score. This shows whether you are making payments on time, how often you miss payments and if you pay 30 days late or more. It even takes into consideration how many days past the due date you pay your bills.
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How much you owe - this is about 30% of our score. It looks at your balance versus your credit limit on a given account. High balances can negatively affect your score, while low balances can actually improve your score. Newly opened loans with little payment history may drop your score temporarily but loans that are closed to being paid off may bump your credit score up a bit.
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Length of credit history - this accounts for 15% of your score. The longer your history of making payments on time will result in a higher credit score.
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The types of accounts you have - makes up 10% of your score. Having a good mix of accounts including home loans, installment loans (i.e. auto or personal loans), and revolving accounts (credit cards) help to improve your score.
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Recent activity - makes up the other 10% of the score. Opening multiple new accounts or credit inquiries in a short period of time is a red flag and can negatively affect your score.
How much seller assist can we ask for?
Seller concessions cannot exceed actual closing costs.
Conventional Loans - Owner Occupied:
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Down Payment < 10% = 3% Maximum
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Down Payment 10% or more = 6% Maximum
Conventional Loans - Investment Property:
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2% Maximum
Government Loans:
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6% Maximum