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Today's Rates

Tuesday, September 19, 2017
Rate
APR
30-Yr Fixed to $424,100
3.750%
3.774%
15-Yr Fixed to $424,100
3.125%
3.156%
5-Yr ARM to $424,100
3.000%
2.909%
30-Yr Fixed to $636,150
3.750%
3.749%
     
* This is not a rate lock or commitment to lend | * APR stands for Annual Percentage Rate
* The interest rate you are viewing may change or not be available at the time of loan commitment or lock-in
 

 

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Frequently Asked Questions


Explore the questions below to find answers to some of the most commonly asked questions about the services Ivy Mortgage, Inc., provides.

Financial Terminology:

1. What is APR?
2. What is ARM?
3. What is DTI?
4. What is LTV?
5. What is a "Title Company"?
6. What is "Title Insurance"?
7. What is an escrow account? Can I waive escrow?
8. What should I look for on a Good Faith Estimate (GFE)?

Refinancing Your Property:

9. What is a "no cost" refinance? How does it differ from a "with cost" refinance?
10. How can I determine if now is a good time to refinance my loan?
11. What are the seasoning requirements for my next refinance?
12. May I know more about Refinance without cost Vs Refinance with cost?
13. How should I read the HUD-1 settlement statement from refinance?

Mortgage and Refinancing Concerns:

14. The General Process of Applying Mortgage Loan in the US
15. Why should I apply for a mortgage through a mortgage broker instead of a bank?
16. What happens if my property value decreases?
17. What is subordination? Why do I need it?
18. Will my credit score affect the rate I receive?
19. Can I appeal my appraisal report? Can I transfer this report from one lender to another?
20. Can I really save money by converting my payment method from monthly to bi-weekly?
21. Brief Analysis of Mortgage Loan for Investment Properties and Rental Income Calculation

Personal Factors:

22. How do I determine if my immigrant status is eligible for loan application?
23. What will my lender want to know about my employment?
24. What is a "super conforming" loan?
25. What is the lender's requirement for my bank statement?
26. What is the difference between the signing date and funding date of my loan? When is my first payment due?
27. How to calculate the value of the house you can afford?

Credit Score:

28. How to Maintain a Good Credit Score?


Answer 1

1. What is APR?

APR stands for annual percentage rate. Your annual percentage rate (APR) is related to your actual mortgage interest rate and various cost associated with obtaining a mortgage. Generally, for fixed rate programs with the same offered rate, a lower APR equates to a lower cost for you as a borrower. However, although APR may help you compare the cost of loans offered by different lenders, you should not evaluate a loan based only upon the APR offered.

Answer 2

2. What is ARM?

An adjustable rate mortgage (ARM) is a mortgage loan in which the interest rate on the note is periodically adjusted based on a variety of indices. The loan is established with a fixed rate for a specified number of years, but the interest rate is changed throughout the remaining term of the loan (normally 30 years).

ARM loans generally have rate caps that are used to limit the frequency of interest rate adjustments, including how high or low your ARM can be adjusted in a given period and over the life of the loan. For example, a 5/1 Year ARM indicates that the loan will have a fixed rate for the first five years and change once each year for the remaining 25 years. This particular loan also has 5/2/5 cap, which means that the rate may be adjusted to a maximum of two percent every year after the first adjustment, with no more than five adjustments throughout the life of the loan.

Answer 3

3. What is DTI?

Debt to Income Ratio (DTI) is a very important concept to consider when applying for a mortgage. The lender will qualify your borrowing capacity based on this data.

Your DTI is determined by dividing your total monthly income by your total monthly liabilities. Liabilities include not only your mortgage payment, car loan, and credit card balances, but also expenditures such as child support, HOA fees, home equity line (even with a zero balance), collection, tax, and insurance. The maximum debt-to-income ratio allowed varies by lenders and loan program, with a general maximum at 45 percent.

Answer 4

4. What is LTV?

Your loan-to-value ratio (LTV) is determined by dividing the appraised value of your property (or sale price of your property, whichever is less) by your mortgage amount. Also consider:

  • A LTV that is less than 60 percent may help to lower your interest rate.
  • For a condominium property, super confirming loan, and investment property, a LTV less than 75 percent will help you obtain a better rate.
  • A LTV greater than 80 percent is required to purchase mortgage insurance.
  • The maximum LTV for a conventional loan can be up to 95 percent.

Answer 5

5. What is a "Title Company"?

A title company provides the title report and title insurance for your property, as well as conducts closing for the purchase/refinance transaction. This company will collect funds from the borrowers and lenders to pay off any existing liens and transaction expenses. It also pays the seller the net proceeds of sale. All fees will be shown on the settlement statement, or "HUD-1", at closing.

Answer 6

6. What is "Title Insurance"?

Title insurance includes two types of policies: the owner's policy and the lender's policy. These policies are designed to protect an owner or lender's financial interest in the property against loss due to title defects, liens, or other matters. An owner's policy is a one-time optional purchase, and will be effective until you sell the property. Every lender requires a lender's policy. The borrower needs to purchase a new policy each time he/she completes a purchase/refinance.

Answer 7

7. What is an escrow account? Can I waive escrow?

An escrow account is an account created by the lender to collect and hold funds to pay your property taxes, homeowners' insurance, and other charges on the borrower's behalf. With an escrow account, your monthly payment includes the principal, interest, and escrow payment (one month's property tax and insurance, generally). Opening an escrow account is optional. However, if you choose to waive the escrow account, lenders will often slightly increase the interest rate offered (generally 0.125 percent higher), because it perceives the transaction to carry additional risk. Most lenders will require an escrow account if your loan-to-value ratio exceeds 80 percent.

Answer 8

8. What should I look for on a Good Faith Estimate (GFE)?

A Good Faith Estimate (GFE) is a lender's proposal regarding what your estimated costs or fees will be associated with your mortgage. The costs listed on the GFE generally include:

  • Loan Origination Fee: Lender's processing fee, including an underwriting fee, tax certification, flood certification, and credit certification.
  • Broker Point/Fee: If your broker charges any additional fees, they will be added to the lender's fee described above.
  • Appraisal Fee: This fee is paid to a third party that conducts the appraisal inspection. The lender will assign the appraiser.
  • Title Fee: This fee includes title processing and title insurance (only lender's policy if refinanced, but owner's policy may be included if the transaction is an original purchase)
  • Transfer Tax: There are three types of transfer tax for purchase. The transfer tax applied to your purchase depends on the county in which you reside. If your agreement stipulates that you are responsible for half of these taxes, while your seller covers the remaining half, the portions you can expect to pay include:
    • County Transfer Tax: 0.5 percent of the house value.
    • State Recordation Stamps: 0.25 percent of the house value.
    • State Transfer Tax: 0.25 percent of the house value (this tax will be waived if you are a first-time home buyer in MD). In Virginia, this tax accounts for 3.333 percent of the house value and loan amount. If refinancing in the state of Maryland, this tax will account for 0.5 percent (depends on county) of the cash out amount when the loan being considered is a "cash out" refinance. If refinancing in the state of Virginia, this tax will account for 3.333 percent of the loan amount.
    All of the items described above are considered closing costs.
  • Reserved Items with Lender: If the loan has an escrow account associated with it, the new lender will require several months of property tax and insurance fees to be reserved in the escrow account. This account holds the funds, which accumulate month by month, to pay property tax and homeowners' insurance. In a refinance transaction, the old lender will return the funds in the original escrow account to the borrowers after the loan has been paid off. These items are not part of the closing costs.
  • One Year Insurance Premium: This applies only for a purchase transaction. The home/flood insurance premium must be paid at closing.

Answer 9

9. What is a "no cost" refinance? How does it differ from a "with cost" refinance?

A "no cost" refinance means that the lender will pay all closing costs associated with the refinance transaction. Ivy Mortgage, Inc., offers no cost refinancing, which means that our borrowers provide only the associated escrow reserves, which they should receive from a previous lender, and several days of interest at closing. Generally, the rate for refinance without cost is 0.125 percent higher than with cost.

Answer 10

10. How do I determine if now is a good time to refinance my loan?

First, you need to focus on the interest that you can save by refinancing your current loan. Here is an example to consider: Let's say we had a 30-year loan with a fixed interest rate at 4.5 percent. The original loan amount was $250,000, and we have already paid for three years on the monthly principle and interest of $1,266.71. The current loan amount is $237,300, and we are thinking about refinancing to an interest rate of 4.0 percent, including $2,000 closing cost.

  • We need to compare both scenarios using the same time frame. The monthly principle and interest for $237,300 at 4.0 percent for 27 years is $1,198.86, which is more than the new principle and interest of $1,132.91. The amount we are saving is approximately $68/month over 27 years.
  • We also need to consider the cost as how much we pay to get this rate. In this example, we pay $2,000. Using standard formulas, we can see that we will begin to benefit from this refinance within 30 months. Therefore, if we are planning to refinance again within 30 months, doing so right now may not be a good idea. This is why many clients opt for a "no cost" refinance. They do not have to pay closing costs, which allows them to save money from the beginning.
  • Also, if we continue to pay the same amount after refinancing, it will shorten the amount of time needed to pay on the loan. Using the example previously discussed, it would take approximately 24.5 years to pay off the new loan if we continue to pay $1,266.71. The new loan's cumulative interest is approximately $2,000 less than the old loan.

* Net Present Value (NPV) of currency is not considered in this case.

Answer 11

11. What is the seasoning requirement for my next refinance?

Generally, you will need to wait approximately six months to refinance again.

Answer 12

12. May I know more about Refinance without cost Vs Refinance with cost?

Many clients asked us about the difference between a refinance with or without cost, and which one is better.

In fact, there is always cost associated with refinance and purchase transactions, you will see title service and lender's title insurance, recording fee and transfer tax, underwriting fee and appraisal fee, and so on. And you can choose to pay these fees by yourself in order to get the lowest rate or have broker/lender covering this part. Generally, the rate for refinance without cost is 0.125% higher than that with cost.

One example, $300,000 loan amount, 30yr fixed,

$300,000; 30YR Fixed Rate Closing Cost P + I Cumulative Interest
Option 1 no cost 3.375% $0 $1,326.29 $177,463.50
Option 2 with cost 3.250% $3,000 $1,305.62 $170,022.30
Difference 0.125% $3,000 ($20.67) ($7,441.20)

The monthly payment difference is $ 20.67, total difference is $7,441.20 over 30yr. Option 2 saves$4441.20 over 30yrs ($7,441.20- $3000).

However, the upfront closing cost $3000 will be recouped in 145 months ($3000/$20.67), and we start saving in the 146th months (more than 12 years). If the rate drops in 145 months, and we refinance again, the upfront cost would be a loss. While refinance without cost saves money from day 1. From this perspective, no cost refinance makes better sense.

In summary, refinance without cost saves interest from the very beginning, while lower rate with cost save money over 30yrs.

Answer 13

13. How should I read the HUD-1 settlement statement from refinance?

People who have purchased houses before must know an important document named HUD-1, also known as closing statement or settlement statement. This legal document contains important information like expenses for title transfer and cost breakdown. The settlement company usually provides the HUD-1 to the borrower the day before settlement.

You can open a blank HUD-1 file by clicking the link below: http://www.hud.gov/offices/adm/hudclips/forms/files/1.pdf

The second page of the settlement charges includes closing cost and prepared items. Closing cost typically means item 800, 1100, 1200, and 1300.

  • A. Item 800 (from 801 to 815) is the lender charge. It varies from different lenders, but they are fixed. Costs covered by item 800 are property appraisal fee and underwriting fee. Some banks will charge tax service fee, flood certification fee, wiring fee, etc. Sometimes you can see P.O.C., which is short for "paid out of closing", next to property appraisal fee, which means the fee has been paid before settlement.
  • B. Item 1100 (from 1101 to 1113) is charged by the title company, includes title service, lender's title insurance, settlement/closing fee, notary fee and so on. This cost varies by company.
  • C. Item 1200 (from 1201 to 1205) is the tax charged by the government, like recording tax and transfer tax;therefore, the amount would be the same no matter who the lender is. Recording fee is collected by the county where the house is located. The recording fee, which usually falls between $100 and $180, is calculated by the number of pages of the recording document.

In the case of no-cost refinance, all the fees mentioned above would be covered by lender's rebate; while borrower is responsible for prepaid items (Item 900, 1000).

  • D. Item 900 (from 901 and 905) is borrower's prepaid item, including interest, private mortgage insurance and hazard insurance, etc. For instance, if the funding date is May 22, and the first mortgage payment starts from June 1, the interest between May 22 and June 1 is calculated by number of days. If the LTV (loan to value) exceeds 80%, the borrower is required to purchase private mortgage insurance and set up escrow account.
  • E. Item 1000 (from 1000 to 1008) is typically the reserve required by lender. The money is deposited into lender's escrow account to pay for the hazard insurance and property tax for next year. Item 1000 would be 0 if there's no escrow account.

After knowing the items on HUD-1, we can calculate the actual out-of –pocket expense from borrower in a no-cost refinance:

Out-of-pocket expense=mortgage payoff amount (item 104)-new loan amount (item 202) +prepaid items (item 900, 1000)-fees already paid (for example, property appraisal fee, item 804)

If the settlement fee (item 303) is greater than the out-of-pocket expense, then the lender will refund the difference to borrower.

If the settlement fee (item 303) is smaller than the out-of-pocket expense, then the lender has given extra credit or rebate to borrower.

HUD-1 is the checklist of borrower's expenses. It's recommended to review HUD-1 the day before the settlement or even earlier and double check the figures. If there are questions, please consult with the mortgage broker or lender as soon as possible.

Answer 14

14. The General Process of Applying Mortgage Loan in the US

When purchasing a property, applying for a mortgage loan is essential if the transaction is not made by cash. Foremost, the lender wants to see if the borrower is able to repay the mortgage loan on time. The lender evaluates various factors including: 1. Borrower's income; 2. Borrower's asset; 3. Value of the property; 4. Borrower's credit report, and others. Here's a basic introduction of the process of applying for a mortgage loan:

  1. Consult with the mortgage loan broker or agent about the mortgage rate and compare the costs. Determine the type of loan product, terms, and the amount of down payment.
  2. Fill up the 1003 application form and provide supporting documents, which include (but may not limited to):
    • The most recent paystub cover to one month
    • Recent two years W-2
    • Federal income tax returns from the past two years
    • Recent one month bank statement with all pages
    • Copy of Driver license for all borrowers
    • Copy of Green card if borrower is applicable
    • Copy of Passport and H1/L1 visa approval noticeis applicable
  3. The mortgage loan broker or agent will obtain the borrower's FICO score through the credit vendor and provide the borrower Good Faith Estimate (GFE) regarding the costs, along with other loan disclosure documents (about 30 pages total). All the documents should be signed and dated by the borrower and returned to the mortgage loan broker or agent.
  4. Schedule appraisal: the lender will assign an appraiser to appraise the value of the subject property. The appraiser will call ahead of time to schedule an appraisal. The appraisal report will be completed in about 2 to 3 days after the appraisal is done.
  5. Lock in the mortgage rate: the mortgage rate fluctuates with the market. Once the rate is locked in, it won't change anymore. And it's guaranteed within the lock period. The general lock periods are 15 days, 30 days, 45 days, and 60 days. The longer the lock period is, the higher the mortgage rate.
  6. Provide conditional approval documents: the lender's underwriter will review all the documents provided by the mortgage loan broker or agent. If the mortgage loan is approved, the lender will require additional documents to clear the conditions. This step usually takes the longest time. Once all conditions are cleared, then settlement can be scheduled.
  7. Sign the mortgage loan documents: the documents signed by the borrower need to be notarized by the attorney.
  8. Funding: once all the conditions are cleared, the lender will fund the mortgage loan.

Not all mortgage loan application processes will follow the steps above. Lender's requirements also vary. The purpose of the article is to briefly introduce the loan application procedures to help people's understanding of a loan processing in general.

Answer 15

15. Why should I apply for a mortgage through a mortgage broker instead of a bank?

There are several reasons that you may want to consider when choosing which organization to apply for a mortgage with, including:

  • Banks offer retail rates, while mortgage brokers offer wholesale rates. Generally, retail rates are higher than wholesale rates.
  • Loan officers from the bank are typically sales people who transfer your documents to the bank without carefully structuring the loan to meet each client's individual needs. However, mortgage brokers are typically more experienced professionals who carefully review each client's documents to ensure the loan can be approved before submitting the paperwork.
  • Banks only offer limited programs, while mortgage brokers can engage with many different lenders to offer a variety of products designed to best fit the interests of their borrowers, especially those with complicated or failed loan applications.

Answer 16

16. What happens if my property value decreases?

Typically, if your current LTV ratio is more than 80 percent, you will have to pay mortgage insurance if you want to refinance. However, if your mortgage lender was Fannie Mae (since March 1, 2009) or Freddie Mac (since May 31, 2009), you might be eligible to refinance without mortgage insurance attached to your loan. These programs can only be used once in accordance with certain other restrictions. Please call our office for details.

Answer 17

17. What is subordination? Why do I need it?

Generally, if you have two existing mortgages on your property, you want to refinance but avoid paying off the second mortgage. Your mortgage broker will help you obtain a subordination agreement from your second lender at a certain cost. According to this agreement, the second lien holder agrees to take a less significant position in the property. The lien position is issued by recording time, with the first lien recorded first. When the first lien is released, the second lien will move to the first position. Without subordination, your second lien (the new first mortgage) would remain in the second position since it was recorded after the previous second mortgage. Your new lender will not allow this.

Answer 18

18. Will my credit score affect my rate?

Every borrower receives credit scores from the three national credit report agencies: TransUnion, Equifax, and Experian. Typically, the lender will use the middle score to determine whether or not you qualify for the mortgage for which you have applied. Other things to consider include:

  • Any score equal to or above 740 is acceptable for all mortgage loans.
  • The 15-year fixed program does not have strict requirements for a borrower's credit score. Typically, if your score is higher than 620, it will be acceptable.
  • The lower your credit score, the higher your interest rate. The lowest score accepted for any mortgage loan is 620, though certain products may require a score of 680 or 720.
  • Credit scores pulled by mortgage lenders may sometimes be lower than those you receive online because the highest score in the lender's system is 850, while it may be 900 for other agencies.

Answer 19

19. Can I appeal my appraisal report? Can I transfer the report from one lender to another?

The appraisal value from the report will not affect your county assessment. It is private information that is only viewed by one lender unless you want to release it to other party. The appraiser generates the value from recent sales of other properties nearby. If you do not agree with the value, you can appeal the report by providing the MLS listings for each recently closed sale. This information may be a bit difficult to obtain, however, and the process will take several weeks. Some lenders may accept appraisal reports from other lenders within three months effective time, but it may take longer to review and approve these reports.

Answer 20

20. Can I really save money by converting my payment method from monthly to bi-weekly?

Many mortgage lenders suggest that converting a payment method from monthly to bi-weekly shortens the loan term and eventually reduces the overall interest payment. Is it true? Let's compare these two payment methods.

Generally, a monthly payment is the most common way to pay mortgage, while a bi-weekly method is the second most common type. A borrower needs to pay 12 times and 26 times a year under a monthly and a bi-weekly payment method, respectively. But most of the banks actually do not offer the true bi-weekly payment method. The way it works is that a bank asks a 3rd party company, which doesn't have any affiliation with the bank, to withdraw half of the monthly payment from the borrower's account every two weeks and deposit the money into the lender's account after collecting two half-monthly withdraws. Since there are 52 weeks in a year and 26 bi-weekly terms, the borrower actually makes the monthly payment 13 times a year. This includes one more monthly principal every year and the loan term will be shortened.

If the bank offers the true bi-weekly method to directly receive payments from the borrower without the 3rd party, the loan term will also be shortened and the principal will be paid off earlier. With the shorter compounding period, the overall interest payment will be lower. This explains that a bi-weekly payment method can reduce the overall interest payment. Then, how much can you save by switching your payment method?

Assume the loan amount is $300,000, the interest rate is 3.375%, and the mortgage loan program is 30 years fixed interest rate. Here are the scenarios of a monthly, a bi-weekly with a 3rd party, and a direct bi-weekly payment method:

  • Monthly Mortgage Payment
    - Monthly payment due is $1,326.28 and total payment amount is $477,463.91. Therefore, the total interest payment would be $477,463.91 - $300,000 = $177,463.91.
  • Bi-weekly Mortgage Payment with a 3rd Party (pay extra 1/12 monthly principal each month)
    - Monthly payment due is $1,436.80 and total payment amount is $452,595.80. Therefore, the total interest payment would be $455,595.80 - $300,000 = $152,595.80.
  • Direct Bi-Weekly Mortgage Payment
    - Bi-weekly payment due is $663.14 and total payment amount is $451,411.35. Therefore, the total interest payment would be $451,411.35 - $300,000 = $151,411.35.
    The total payoff term is shortened from 30 years to 26 years.

According to these scenarios, the borrower has to pay significantly more interest in a monthly payment method than in a bi-weekly payment method. Switching to a bi-weekly payment method will reduce the overall interest payment over the life of the loan; however, it also means that the borrower needs to pay more principal in each year.

The difference in the overall interest payment between Scenario II and III is quite limited; it is only $1,184.45 ($ 152,595.80-$151,411.35) over the entire life of the loan. Due to processing fees in changing payment types, it wouldn't save that much from converting the program from Scenario II to III. If the borrower pays one month extra principal every year, the result will be basically the same as a bi-weekly payment method, and there won't be any processing fee.

Answer 21

21. Brief Analysis of Mortgage Loan for Investment Properties and Rental Income Calculation

Two of the most frequently asked questions about a mortgage loan for an investment property are how much money can be loaned and whether the rate would be same as the one for a primary property. The biggest difference between mortgage loans for a primary and an investment property is that the minimum down payment for a primary property is less than 3%, while the one for an investment property should be at least 20%. As for the mortgage rate, the rebate for an investment property is about 1.75 point lower than the one for a primary property given the same circumstances. Therefore, the mortgage rate for an investment property will be higher than that of a primary property by from 0.25% to 0.5%.

Many people who plan to purchase an investment property usually also wonder about whether lenders consider the rental income eligible for personal income.

Rental income from investment properties may work as a plus in a mortgage loan application, but it can only be used to offset the mortgage loan and expenses for the investment properties. It cannot be added into a borrower's personal income to strengthen the financial ability to repay the mortgage loan. There are generally two ways to calculate rental income:

  1. Based on Federal Tax Return Form: a borrower needs to provide the current lease and Federal Tax Return Forms from last one or two years. Here's an example of the calculation using the Schedule E from 2012 Tax Return Form:

    Rental Income from a subject investment property calculation (both steps must be completed):
    • a) Line 3 (Rent Received) + Line 12 (Mortgage Interest) + Line 9 (Insurance) + Line 16 (Taxes) – Line 19 (Expenses Subtotal) / 12 = Monthly Income or Loss
    • b) Monthly Income or Loss – Monthly Subject PITI = Net Monthly Rental Income or Loss.
    Rent Earned from a Non-Subject Property:
    • a) Line 3 (Rent Received) + Line 12 (Mortgage Interest) – Line 19 (Expenses Subtotal) / 12 = Monthly Income or Loss
    • b) Monthly Income or Loss – Monthly Non-Subject PI = Net Monthly Rental Income or Loss.
    If the rental income from the past two years is used and the second year's income is lower than the first year, then the lower income will be used for calculation. If the second year's income is higher than the one for the first year, then the average of the income will be used.

  2. Based on rent: If the investment property is the subject property of the current purchase, lender will use another way to calculate the net rental income, which is 75% of the rent listed on the lease deduct monthly PITI payment.

    The premise of this calculation is that the tenant will move in right after the settlement, and the following documents are required:
    • Copy of lease agreement
    • Proof of collected rent
    • A rent schedule and an income operating statement (provided by appraiser)
    Note: PITI= Mortgage Principal + Interest + Property Tax + Home Insurance + HOA Fee

    If the figure is positive, then it will be the net rental income. If it's negative, it means that you suffer a loss on the rental property. It becomes your monthly debt, which won't help raise the mortgage loan amount.

Answer 22

22. How do I determine if my visa status is eligible for loan application?

Any non-permanent resident alien (NPRA) who is granted the right to live and work in the United States for a specific purpose and period is eligible to apply for a mortgage loan. Requirements may vary depending on the lender selected, but most lenders require applicants to have a valid social security number, satisfactory Alien Status ID Certification, and to have resided in the U.S during the loan application process. A NPRA is always required to provide a valid Visa I-94 with classifications E-1, E-2, G-4, H-1, H-2, H-3, L-1, P-1, R-1, TC-1, TN, approval or pending notice for I485-Application to Adjust Status, and documentation indicating that you are allowed residence in the U.S for at least 90 days from the date the loan is funded. However, a non-resident alien (NRA) who is granted the right to enter the U.S on a temporary basis, but not authorized to work, including J-1, B-1, F-1 visa holders, are ineligible for most loans.

Answer 23

23. What does the lender want to know about my employment?

According to Fannie Mae and Freddie Mac, borrowers need to provide two years' worth of employment history, even if they are unemployed at the time.

  • If you have been working for more than two years without a gap in employment, and recently changed jobs, you will need to work at your new job for at least one month by the time the loan closes.
  • If you are re-entering the workforce with an employment gap of more than 60 days within the past two years, you will need a minimum of six months at your current job as well as evidence of a previous employment history.
  • If you are self-employed, you must report two years of self-employment on your tax returns for the lender to qualify this income.
  • For students who have recently graduated or interns who have recently become full-time employees, only one month at your current job is required before applying for a mortgage loan.

Answer 24

24. What is a "super conforming" loan?

A super conforming loan is considered a conforming loan, though its interest rate is slightly higher than loans with an amount lower than $417,000. The limit varies for different counties. Here we list some loan limits for your reference:

Maryland:

  • Anne Arundel: $494,500.00
  • Baltimore: $494,500.00
  • Baltimore (city): $494,500.00
  • Carroll: $494,500.00
  • Frederick: $625,500.00
  • Harford: $494,500.00
  • Prince George's: $625,500.00
  • St. Mary's: $417,000.00
  • Washington: $417,000.00

Virginia:

  • Alexandria: $625,500.00
  • Arlington: $625,500.00
  • Carroll: $417,000.00
  • Chesapeake: $458,850.00
  • Fairfax: $625,500.00
  • Fairfax (city): $625,500.00
  • Falls Church: $625,500.00
  • Frederick: $417,000.00
  • Hampton: $458,850.00
  • Hanover: $535,900.00
  • Richmond: $417,000.00
  • York: $458,850.00

Any loan amount that is higher than the limits provided here will be considered as a "jumbo loan." Typically, your local bank will provide a better interest rate for a jumbo loan.

Answer 25

25. What is the lender's requirement for my bank statement?

Typically, a lender will require one month's (30 days) bank statement with all pages provided. Each large deposit (larger than $1,000) must be explained and sourced. For a purchase transaction, the account you use to pay your earnest money deposit (EMD) will need to be provided as well.

Answer 26

26. What is the difference between the signing date and funding date of my loan? When is my first payment due?

For primary refinancing loans in MD and VA, there is a three-day recession period between the signing date and funding date. After you sign the closing documents, the fund will be released to the title company after three days. For all purchase and investment refinancing transactions in MD and VA, the funding date is the same as signing date, which means the title company will receive the fund from the lender on the same date.

Your first payment will be due one month after your closing (e.g., if you closed in December, your first payment will be due February 1. If you closed in January, your first payment will be due March 1). If you close your loan within the first five days of the month, there will be an interest credit back to you, and your payment will be due the following month (e.g., if you close on December 1, the lender will credit one day's interest back to you and your next payment will be due January 1).

Answer 27

27. How to calculate the value of the house you can afford?

Having their own house is one of the main goals for numerous Chinese people in the United States. However, not many people know the price range that they should look for based on their income level. When choosing this range, the amount of the mortgage loan and down payment that a borrower can take are important considerations. Based on the income and the liability of a borrower, a bank determines the highest mortgage loan amount that they can lend.

Banks will use two ratios to determine the maximum amount of monthly payment:

The first ratio is called a front-end-ratio, and is calculated by mortgage monthly payment divided by monthly gross income. Mortgage monthly payment includes the principal, interest, property tax, and hazard insurance each month. In general, the mortgage monthly payment cannot exceed 38% of the household gross income.

The second ratio is called back-end-ratio, and is calculated by all monthly fixed liability over household gross income. The monthly fixed liability consists of monthly mortgage payments and other monthly payments such as auto loans, credit card payments, and personal loans. Generally, back-end-ratio cannot be greater than 45%.

Let's compare the two ratios:

Assume the property value is $500,000, loan amount is $400,000, 30 years fixed rate as 3.250%, monthly mortgage payment is $1740.83, property tax is $390/month, hazard insurance is $50/month, borrower's monthly gross income is $6700, and the total of other liabilities is $700.

Front-end-ratio = (1740.83+390+50) / 6700 = 32.55%

Back-end-ratio = (1740.83+390+50+700) / 6700 = 42.99%

You can calculate the highest amount of mortgage loan available to you using Prequalification Calculator http://www.ivymtg.com/pub/calculator.aspx

The amount of mortgage loan that one should apply also depends on his/her consumption habit and other expenses.

Answer 28

28. How to Maintain a Good Credit Score?

Our clients come to us with questions about credit scores on a regular basis. While we don't provide credit counseling, we would like to share some credit score information with you, based on our experience in the loan industry.

Typically, a lender will use the middle score from the three major credit bureaus, Equifax, Experian and TransUnion, when evaluating you for a loan. These three companies collect information about your credit history over time, including mortgage, car or student loan payments, and credit card payments. Each bureau assembles this information into a credit report and assigns you a score based on your overall use of credit. Below, we've listed some factors that can influence your score:

1. Balance-to-Limit Ratio

Generally, you will find three types of accounts on your credit report: mortgage, installment and revolving accounts. Installment accounts are paid off over time, usually on a monthly basis. Student and auto loans are examples of installment accounts, while credit card activity is separated into revolving accounts.

If you have a credit card, you have a Balance-to-Limit ratio. This ratio applies only to revolving accounts, and it can have a significant impact on your credit score. The three credit bureaus calculate the Balance-to-Limit ratio by taking the amount of your outstanding debt and dividing it by the amount of your available credit. Keeping this ratio at or below 40% is one way to maintain an excellent credit score. This ratio is especially important when you are applying for a loan.

2. Late Payments

Having any late payments on your credit report will be detrimental to your score. Once a payment is 30 days late, a creditor can send that information to the credit bureaus. Late payments are displayed in increments of 30 (i.e., past due 30 days, 60 days, 90 days, and so on). The foreclosure process starts when your payment is 90-120 days past due, similar to the repossession of a car or the collection process for a credit card. Generally, late mortgage payments are more detrimental to your report than a late installment payment, and a late installment payment is more detrimental than a late credit card payment. However, it's important to take all payments seriously, as late payments can significantly lower your score, and will remain on your credit report for up to 7 years. Even if your credit report already contains late payments, your score will improve with time as long as no new late payments are reported by a creditor. For example, a late payment dated April 2010 will impact your score less significantly than a more recent late payment which is dated April 2012.

3. Collections

If you have neglected to make payments on one of your accounts for a long period of time (normally at least three months), the transaction could be submitted to a collection agency. The agency will then send you a letter to confirm that the debt belongs to you. Unless you provide evidence which proves that you are not responsible for the debt, the collection process will begin. Collection activity has a hugely adverse impact on a credit score. If your collection activity is very recent, it could lower your credit score by hundreds of points. In this case, you might think that paying off your debt would solve the problem. Unfortunately, a paid collection is still a collection. If an unpaid collection lowers your score by 100 points, a paid collection may still lower your score by 70.

In order to maintain a good credit score, you will need to respond to any collection letter you receive as soon as possible. If you are able to solve the problem within 30 days after you receive the letter, that particular collection activity will not be allowed on your credit report.

4. Public Records

Public records may include judgments, tax liens and any bankruptcy history. Judgments stay on your credit report for up to 7 years, while tax liens and bankruptcy information can stay on your report for up to 10 years. Sometimes, a federal tax lien may be permanent. Any of these records will have a seriously adverse impact on your credit score, and you should take all measures to avoid them.

5. Inquiries

Every time a party pulls your credit report, it counts as one "inquiry." In other words, the credit system will see it as a sign of you applying for a new account. While applying for credit can be a good idea, too many inquiries within a short period of time can adversely impact your score. To maintain a strong credit score, you should avoid applying for credit unless it is absolutely necessary. However, if you request a copy of your credit report for personal use, or if it's pulled for a promotion by a credit card company, your credit score will not be affected.

6. Payment History

From the moment your first credit card is approved, you begin building your credit history. Your social security number may have existed long before you got your first credit card, but without any trade line (credit card, car loan or mortgage), you will not have a credit score. A long history of payments is beneficial to your score. However, don't be worried if you're just starting to build credit. Some of our clients only have a one or two year payment history, and still have good credit scores. When applying for your first credit card, it might be easier to get a student card or a "secured" credit card. Another option is to get a card through the bank where you have your checking or savings accounts.

As a side note, we would like to debunk a common misconception that keeping a balance on your credit card is better for your score. This is untrue – it's always better to pay your credit card balance in full, whenever possible.

It's rare that a person will be able to reach the maximum credit score of 850. In theory, a person would be able to reach this number by making payments on one or two credit cards with large limits on a monthly basis, having few or no inquiries in recent years, no public records, and by having a long payment history. Luckily, having a score that high isn't important or necessary. Normally, any score above 740 will be considered excellent, and you can easily reach this score by making your payments on time and by following the other guidelines we've listed above.

Everyone in the states have the right to get a free copy of your credit file disclosure, once every 12 months, from each of the nationwide consumer credit reporting companies, Equifax, Experian and TransUnion. Unfortunately this report won't have credit score and you have to pay extra dollar to get your score. But based on the information above, you could estimate your score by using the credit report.

To order your free annual credit report