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FAQ
What is the difference between pre-qualification and pre-approval?
Pre-qualification is a lender's opinion of your ability to purchase a home and is based on your verbal statement of income, employment history and available down payment.
Pre-approval is a lender's underwriting decision that you are conditionally qualified and is subject to the lender's review of your completed application, credit check, appraisal and home inspection.
When it comes to writing an offer for a home, a pre-approval letter contains stronger language to the seller and the listing agent than a pre-qualification. You, the buyer, have the increased negotiating leverage of cash buyer status because the mortgage is already in place.
A pre-approval can often be a determining factor in winning the contract in a competitive bid situation.
What is the difference between APR and Interest Rate?
The APR, or Annual Percentage Rate, is often higher than the quoted interest rate, or note rate. This is because the APR includes, in addition to interest, some of the additional costs of obtaining your financing. Simply stated, if there were no costs in obtaining financing, your note rate and your APR would be the same. Your APR will be noted on your Truth-in-Lending disclosure that you receive after application.
What are discount points?
A point equals one percent of the loan and is usually paid at closing.
For example, if your loan amount is $100,000…then one point would equal $1,000 OR one percent.
Discount Points are fees paid by the buyer to the lender to reduce the loan's interest rate. If you plan to keep your residence for five or more years, it may be worthwhile to pay discount points to reduce your monthly payment and achieve greater savings over the life of the mortgage.
The number of discount points required to buy down your interest rate will vary based on the loan type. Ask your HomeBanc Mortgage Consultant for details on your specific transaction.
Generally speaking, points are tax deductible when you are buying a primary residence. Consult your tax advisor for more information on tax deductibility.
What are appraisals and surveys?
An appraisal is the estimate of the value of the home you are purchasing and is provided by a professional appraiser, trained in estimating the value of real or personal property.
A copy of the appraisal will be provided to you at closing.
Surveys determine whether there has been an encroachment on the property lines, building lines or easements. If your home is new construction, the builder may order the survey just after completion or just before closing. Although we recommend that all buyers purchase a survey, they are not required on most mortgage products in Georgia. In Florida & North Carolina, they are required on all mortgage products.
When am I committed to borrow?
Some people feel like once they have signed the application, they are obligated to borrow. That is absolutely not the case. In fact, none of the documents you have received are contractual until you are actually at closing and sign your note. All you are doing is getting your financing approved so you are in a position to make an offer, purchase a home and close the home loan. You are not obligated for the loan transaction until you sign your closing documents.
What should I do between contract and closing?
Once you have a finalized contract, forward a copy to your mortgage broker to inform him or her of the property address, list price and realtor's name.
Next, obtain Homeowners Insurance (or Hazard Insurance), It compensates you for physical damage to your property by fire, wind or other natural causes. It is very important for you to obtain your Homeowners Insurance at the earliest possible date so that there are no delays in your closing.
The Declaration Page of your Homeowners Insurance policy with proof of payment must be sent to your HomeBanc Customer Service Specialist (CSS) at least 5 days prior to your closing date.
Depending on the terms in your contract, you may have to order a clear Termite Certification. Additionally, ask your CSS if Flood Insurance is required for your property.
Your mortgage broker may request additional documentation prior to your closing.
All requested original documents must be received by HomeBanc before closing. These documents will be sent to the closing attorney or agent to prepare for your closing.
Prior to closing, you will receive a HUD-1 Settlement Statement which lists all settlement charges associated with your loan. These usually include taxes, which are charged in most states, and title insurance. The HUD-1 also specifies the amount of certified funds you will need to bring to closing.
You will be notified of the date and time of your closing and what to bring with you. Although we don't anticipate any variation from charges in the HUD-1, you should bring your personal checkbook to closing in case there are last minute adjustments. If you are due a refund at closing, the attorney or title agent will issue you a check.
What is the closing?
Closing will typically take place at an attorney or title agent's office. The attorney or title agent represents the lender - not the seller, real estate agent or you - the buyer.
Your Realtor will give you instructions on where the closing will be conducted, along with a phone number and a fax number for the closing attorney or agent in case you have any questions for him.
All borrowers associated with the loan transaction will be required to bring a government issued photo ID such as a driver's license or passport to closing.
Here's what you can expect to happen at the closing table:
1. The closing agent reviews the HUD-1 Settlement Statement with both you and the seller.
2. Evidence of required insurance and inspections are presented.
3. Signatures are collected for loan documents including the HUD-1, mortgage or deed note and the Truth-in-Lending statement.
4. You submit a certified or cashier's check to cover your down payment and closing costs. Or, in some proceedings, money is drawn from an escrow account established for your home purchase.
5. The Lender provides a check to the closing agent to cover the home loan amount. If your monthly payments are to include property taxes and insurance, a new escrow account (or reserve) is established.
6. Finally, you receive the keys to your new home.
What does the term "locking the interest rate" mean and how and when should you lock your rate?
When a lender "locks" the interest rate, you are guaranteed a specific interest rate for a specific period of time. That period of time is called the lock period.
The lock guarantees your rate as long as your loan closes and funds prior to the expiration date of your lock period. If your closing is delayed beyond your lock expiration date, you might have to pay higher market rates.
It is good advice to lock for a period longer than you need. In other words, lock for a period beyond your actual closing date. This will protect you against any unforeseen circumstances that could delay your closing.
Typical lock periods are 15, 30, 45 and 60 days. In a stable rate environment, shorter lock periods generally provide you a better interest rate.
However, the market can be volatile and rates move with market activity, both up and down.
Let's look quickly at the three possibilities for rates:
• Rates could go up
• Rates could go down
• Rates could stay the same
If you believe rates may go up, especially by a significant amount, lock as soon as possible.
If you believe rates will go down, you would definitely benefit by waiting to lock.
If you believe rates will stay the same, you may also do better to wait.
Of the three scenarios, you benefit from a longer lock only when rates go way up after you lock.
If you have not locked in when you receive your application, you may notice that the rate on the application is somewhat higher than the market interest rate. You are not committed to that interest rate. Your Mortgage Consultant has intentionally used a higher rate with which to qualify you in the event that rates do go up prior to locking in. You are still approved, and will not have to get re-approved or do any more paperwork.
Once you have a property under contract, you can lock your rate by simply requesting a lock term. HomeBanc will fax or e-mail a confirmation to you and request you sign and return the document within 24 hours. It's that simple.
What are the bank statement guidelines? Is it okay to use Internet statements, instead of hard copy bank statements, to verify my bank and investment accounts?
Currently, Internet statements can't be used to verify bank and investment accounts. They have not proven to be a reliable source of unalterable financial documentation.
When submitting statements, please include all pages, even if there's nothing on the last page or the first page is an advertisement. When printed on, we need back portions of statements, too. Standard mortgage guidelines require all pages of a statement to verify accounts. Missing pages can cause unnecessary frustrations and delays in processing your loan.
If you've applied for an FHA or VA loan, we will need original bank statements. Copies are not acceptable. Ask your HomeBanc Mortgage Consultant for guidelines on your specific loan program.
(Important: Bank and investment statements always count their total number of pages. ie. Page 1 of 3)
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