FAQ’s

As a first time home buyer and/or future homeowner, we are sure you have many questions about the home purchasing process. We’ve created this FAQ page to make your home buying experience more pleasant and answer your questions regarding mortgage types, mortgage payments, closing costs, mortgage lenders, credit history, down payment, PMI, interest rates, refinancing, and more.

Purchasing a home

I really want to own my own home, but I’m not sure I can afford it.
Where do I start?
Lots of people don’t even consider buying a home because they’re afraid they can’t afford it. But for most people, home ownership is within reach – especially with some of the special programs for a first time home buyer. In fact, for many, home ownership is as affordable as renting – in some cases even more affordable. You can easily start by applying online now.

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How do I know how much house I can afford?
Before you start looking at homes, you need to have some idea of what you can afford. As a general guide, you can purchase a home with a value of two or three times your annual household income, depending on your savings and debts. However, you may be able to take advantage of special loan programs for first time buyers to purchase a home with a higher value. If you’d like to know exactly how much you can afford, talk to one of our mortgage consultants.

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Should I get pre-qualified for a mortgage before I shop for a home?
Getting pre-qualified for your mortgage is an important step before you shop for a home. It tells you how much home you can buy and makes applying for your mortgage easier. A mortgage prequalification can also give you additional leverage with a seller in negotiating the best possible terms of the sale and you will get some suggestions on how to structure your purchase offer agreement.

Do they really need to know everything about me for the application?
It may seem that way — but actually all your mortgage lender needs to know about you is your employment and finances, and information about the home you are buying.

However, you will need to provide quite a few details about these topics, and your application process will go much more smoothly if you’re prepared. Be sure to ask your mortgage lender what information you’ll need to complete your application.

What documents are required to process my loan

Year-to-date pay stub
Last two years Tax Returns and W2s
Most recent monthly statement for all bank or brokerage accounts
Divorce decree or separation agreement, if applicable
Sales contract
Other items may be required based on your specific loan program

How much cash will I need for closing costs?
Closing costs generally range from 2% to 3% of your loan amount. Closing costs can be divided into three main categories:

Lender fees. Fees can include origination, points, application, credit report, and appraisal.
Third-party fees. These fees vary by state and the company you select to close your loan. They can include fees for closing, title exam, title insurance and recording.
Pre-paid items. These are items collected at the time of closing but are not really considered costs (for example, interest, taxes, and hazard insurance).

You’ll be provided with an estimate of your closing costs soon after your application has been received. These estimates will change if you change the product type or loan amount. If this should occur, be sure to ask how the changes will impact your closing costs.

Can the seller pay for my closing costs and pre-paid items?
Yes. The amount of seller contributions does vary between loan programs. For instance, FHA loan – seller can pay up to 6%. VA loans– seller can pay up to 4%. Investment home – seller can pay up to 2%. And on Conventional loans it depends on your down payment. With 5% down, seller can pay up to 3%, with 10% down, seller can pay up to 6% and with 15% or more down, the seller can pay up to 9%.

Are there any special programs for first-time homebuyers?
Cunningham & Company offers special mortgage programs for individuals who meet certain income requirements, who are financing property in certain census tracts, or who meet other special requirements.

Lower down payments than most other financing options so you won’t need as much cash to buy a home.
Competitive interest rates.
Manageable payments for every budget.
Reduced closing costs and mortgage loan fees. Other restrictions may apply.

How do I choose a mortgage lender?
When most people think about choosing a mortgagelender, they think about finding the lowest rate. Of course, financial considerations are important to every home buyer, and you certainly should consider the different rates lenders in your area offer on comparable loans. But you also want a lender you can trust, and someone you can work with effectively. So don’t let rates be your only criterion.

Aren’t there really just two kinds of mortgages: fixed & adjustable rate?
You could say that, because all mortgages fall into one of these two categories — that is, the interest rate you pay is either the same (fixed) for the life of the mortgage, or it can change (adjust) over the life of the mortgage.

Fixed-Rate Mortgages
With this type of mortgage your monthly payments for interest and principal never change. Property taxes and homeowners insurance may increase, but generally your monthly payments will be very stable.

Fixed-rate mortgages are available for 30 years, 20 years, 15 years and even 10 years. There are also “bi-weekly” mortgages, which shorten the loan by calling for half the monthly payment every two weeks. (Since there are 52 weeks in a year, you make 26 payments, or 13 “months” worth, every year.)

Adjustable-Rate Mortgages (ARMS)

These loans generally have an initial interest rate that is lower than a comparable fixed rate mortgage, and could allow you to buy a more expensive home.

However, the interest rate changes at specified intervals ( for example, every year) depending on changing market conditions; if interest rates go up, your monthly mortgage payment will go up, too. However, if rates go down, your mortgage payment will drop also.

There are also mortgages that combine aspects of fixed and adjustable rate mortgages – starting at a low fixed-rate for seven to ten years, for example, then adjusting to market conditions. Ask your mortgage lender about these and other special kinds of mortgages that fit your specific financial situation.

How do I know which type of mortgage is best for me?
There isn’t a single, simple answer to this question. The right type of mortgage for you depends on many different factors:

Your current financial picture;
How you expect your finances to change;
How long you intend to keep your house;
How comfortable you are with your mortgage payment changing from time to time.

For example, a 15-year fixed-rate mortgage can save you many thousands of dollars in interest payments over the life of the loan, but your monthly payments will be higher. And an adjustable rate mortgage may get you started with a lower monthly payment than a fixed-rate mortgage — but your payments could get higher when the interest rate changes.

The best way to find the “right” answer is to discuss your finances, your plans and financial prospects, and your preferences frankly with one of our mortgage consultants.

How much will my credit history affect my ability to get a mortgage?
Many home buyers are very worried about this issue. You can be better prepared if you get a copy of your credit report to review before you apply for your mortgage. You can obtain a free copy of your credit report once a year from the following website: www.annualcreditreport.com . This free report does not include credit scores, however they can be requested for an additional charge. If there are any errors you can take steps to correct them before you make your application by contacting each credit bureau and disputing the item in error.

If you have had credit problems, be prepared to discuss them honestly with your mortgagelender and come to your application meeting with a written explanation. Responsible mortgagelenders know there can be legitimate reasons for credit problems, such as unemployment, illness or other financial difficulties. If you had a problem that’s been corrected, and your payments have been on time for a year or more, your credit will probably be considered satisfactory.

How much will I need for the down payment?
It’s probably less than you think. Many firsttime buyers are surprised to learn there’s no set answer to this question. Generally, though, your down payment can be anywhere from three and half to twenty percent of the home’s value. Down payments can be lower for some special, afirsttime buyer loan, and veterans or those on active military service can obtain loans with no down payment at all.

What does my mortgage payment include?
For most homeowners, the monthly mortgage payments include three separate parts: a payment on the principal of the loan (that is, the amount borrowed); a payment on the interest; and payments into a special account (called an escrow account) that your lender maintains to pay for things like hazard insurance and property taxes. These elements are called P.I.T.I. (Principal-Interest-Taxes-Insurance).

What happens after I’ve applied – and how long will it take?
Your lender will begin the work of verifying all the information you’ve provided. This process can take anywhere from one to four weeks, depending on the type of mortgage you choose, whether you’re buying a home outside your local community, and how responsive you are to our request for information and other factors.

Within three business days after your application, the lender must give you an estimate of your closing costs. (The closing is the actual settlement of your loan.) You’ll also get a statement that shows your estimated monthly payment, the cost of your finance charges, and other facts about your mortgage.

For many home buyers, this waiting period can be nerve-wracking. So stay in touch with your mortgage lender, be prepared to answer any questions that might come up — and remember that mortgage lenders are in the business of making loans, not denying them.

Some homebuyers find the closing process to be one of the most intimidating aspects of buying a home because it’s so unfamiliar. Ask your mortgage lender what to expect at your closing.

What is PMI?

Private mortgage insurance, or PMI, insures the lender against a default. It is required when the borrower is making a cash down payment of less than 20 percent of the purchase price.

Can I make extra principal payments so I can pay off the loan more quickly?
Depending on the loan, and what your state permits, it is feasible for you to make extra payments on the loan. Extra payments will have an effect on the amortization schedule over the remaining term of your loan.

Do I get a tax advantage from having a mortgage?
You should consult a tax attorney or accountant for specific details, but interest on a mortgage is usually tax deductible. Interest on credit cards or automobile loans is not normally tax deductible.

How do I know how much equity I have in my property?
Equity is the value of a homeowner’s interest in real estate. Equity is computed by subtracting the total of the unpaid mortgage balance and any outstanding liens or other debts against the property from the property’s fair market value. A homeowner’s equity increases as he or she pays off his or her mortgage or as the property appreciates in value. When a mortgage and all other debts against the property are paid in full, the homeowner has 100% equity in his or her property.

What determines my interest rate?
Rates vary primarily based on the type and purpose of the loan, your credit history and income, loan amount, value of the property, and the number of points you are willing to pay.

What are points and how many do I have to pay?
Generally speaking, points are fees added on to loans. One point is equal to 1% of your loan amount. Points are paid when the loan closes, not at the time you apply for the loan.

What is the difference between an Equity Line of Credit and another type of second mortgage?
An Equity Line of Credit is money in an account that can be used as you need it. You can use any portion of it at any time and pay it back at any time. The interest rate is usually variable and is tied to the prime rate. Other types of second mortgages, such as the

Home Equity Loans are simple interest products. You borrow a lump sum and pay it back over a period of years with interest. The interest rate for these products is fixed.

REFINANCING :

Should I refinance my mortgage?
There are generally three reasons to refinance:

Lower your monthly payments.
Pay off your mortgage faster.
Take cash out of your property. Interest rates and the term of your mortgage can affect your decision.

Can I refinance if my home is currently for sale?
You can refinance as long as your home has been taken off the market.

Can I combine my first and second mortgages (equity line or loan) when I refinance?
If it has been at least 12 months since you secured the second mortgage (or had a withdrawal on an equity line) and sufficient equity in the home, you may be able to consolidate it with the first mortgage.