Frequently Asked Questions (FAQ)
Q: How can I increase my score?
Q: Will my score drop if I order my credit report?
Q: Will a low score haunt me forever?
Q: Does my income affect my credit score?
Q: Do I pay any fees up front?
Q: What is the difference between pre-approval and pre-qualification?
Q: What is a good faith estimate?
Q: When does it make sense to refinance?
Q: Do I need equity in my home to get a debt consolidation loan?
Q: How do I know how much I can afford to purchase a home?
Q: How do I know which type of mortgage is best for me?
Q: Will my credit history prevent me from getting a mortgage?
Q: Why Do Mortgage Rates Change?
Q: What are the types of loans?
Q: What is a pre-qualification?
Q: What does my mortgage payment include?
Q: How much money will I need to purchase a home?
Q: Can I get rid of the PMI on my loan?
Q: Can I pay off loans to qualify for the new loan?
Q: Are these loans tax deductible?
Q: How long does my approval take?
Q: Do I have to close the accounts that are being paid off or can I keep them open?
Q: What if I need help after regular business hours?
A: A FICO score is a credit score developed by Fair Isaac & Co. Credit scoring is a method of determining the likelihood that credit users will pay their bills. Fair, Isaac began its pioneering work with credit scoring in the late 1950s and, since then, scoring has become widely accepted by lenders as a reliable means of credit evaluation. A credit score attempts to condense a borrowers credit history into a single number. Fair, Isaac & Co. and the credit bureaus do not reveal how these scores are computed. The Federal Trade Commission has ruled this to be acceptable.
Q: How can I increase my score?
A: Credit scores are calculated by using scoring models and mathematical tables that assign points for different pieces of information which best predict future credit performance. Developing these models involves studying how thousands, even millions, of people have used credit. Score-model developers find predictive factors in the data that have proven to indicate future credit performance. Models can be developed from different sources of data. Credit-bureau models are developed from information in consumer credit-bureau reports.
Credit scores analyze a borrower's credit history considering numerous factors such as:
Late payments The amount of time credit has been established The amount of credit used versus the amount of credit available Length of time at present residence Employment history Negative credit information such as bankruptcies, charge-offs, collections, etc.
A: When a lender receives your FICO score, up to four "score reason codes" are also delivered. These score reasons are more useful than the score itself in helping you determine whether your credit report might contain errors, and how you might improve your score over time.
These are the top most frequently given score reasons. Note that the specific wording given by your lender may be different from this.
Serious delinquency, and public record or collection filed.
Derogatory public record or collection filed.
Time since delinquency is too recent or unknown.
Level of delinquency on accounts.
Number of accounts with delinquency.
Amount owed on accounts.
Proportion of balances to credit limits on revolving accounts is too high.
Length of time accounts have been established.
Too many accounts with balances.
Q: How can I increase my score?
A: While it is difficult to increase your score over the short run, here are some tips to increase your score over a period of time. Pay your bills on time. Late payments and collections can have a serious impact on your score.
Do not apply for credit frequently. Having a large number of inquiries on your credit report can worsen your score. Reduce your credit-card balances. If you are "maxed" out on your credit cards, this will affect your credit score negatively. If you have limited credit, obtain additional credit. Not having sufficient credit can negatively impact your score.Q: Will my score drop if I order my credit report?
A: Self-inquiries do not affect your score, as long as you order your credit report directly from the credit reporting agencies, or through an organization authorized to provide credit reports to consumers. It's a good idea to check your credit report once a year.
Q: Does my income affect my credit score?
A: Income might affect your ability to get a loan, but it does not affect your credit score. Only your credit history — such as timely payments and how much you owe — affects your score. Regardless of income, if you manage your debt responsibly, you can have a high score.
Q: Do I pay any fees up front?
A: None! No! Not with 1800MyMoney.com -- We never ask for any money up front. Never pay any company money up front!
Q: What is the difference between pre-approval and pre-qualification?
A: The pre-approval process is much more complete than pre-qualification. For pre-qualification, the loan officer asks you a few questions and provides you with a pre-qual letter. Pre-approval includes all the steps of a full approval, except for the appraisal and title search. Pre-approval can put you in a better negotiating position, much like a cash buyer.
A: A rate lock is a contractual agreement between the lender and buyer. There are four components to a rate lock: loan program, interest rate, points, and the length of the lock.
Q: What is a good faith estimate?
A: It is the list of settlement charges that the lender is obliged to provide the borrower within three business days of receiving the loan application. Here at 1-800MyMoney.com we make sure our applicants receive a GFE via password-protected email within three hours - not three days.
Q: When does it make sense to refinance?
A: Usually people refinance to save money, either by obtaining a lower interest rate or by reducing the term of the loan. Refinancing is also a way to convert an adjustable loan to a fixed loan or to consolidate debts. The decision to refinance can be difficult, since there are a number of reasons to refinance.
Q: Do I need equity in my home to get a debt consolidation loan?
A: No . In many cases a homeowner can borrow up to 125% of their property's value to pay off almost any type of debt. The loan amount is determined by multiplying the property's value by 125% then reducing it by the outstanding mortgage or mortgages against the property. The difference is the new loan amount.
Q: How do I know how much I can afford to purchase a home?
A:You can purchase a home with a value of two or three times your annual household income. But, the amount that you can borrow will also depend upon your employment history, credit history, current savings and debts, and the amount of down payment you are willing to make. You may also be able to take advantage of special loan programs for first time buyers to purchase a home with a higher value.
Q: How do I know which type of mortgage is best for me?
A: There is no simple formula to determine the type of mortgage that is best for you. This choice depends on a number of factors, including your current financial picture -your credit, your income, amount of monthly bills ( only count credit cards, auto loans, student loans, personal loans ), plus how long you intend to live in and keep your house.
Q: Will my credit history prevent me from getting a mortgage?
A: 1-800MyMoney.com offers a variety of programs that are designed to help people who have experienced financial difficulties to get the financing they need to buy or refinance a home.
Q: Why Do Mortgage Rates Change?
A: Interest-rate movements are based on the simple concept of supply and demand. If the demand for credit (loans) increases, so do interest rates. This is because there are more buyers, so sellers can command a better price, i.e. higher rates. If the demand for credit reduces, then so do interest rates. This is because there are more sellers than buyers, so buyers can command a lower better price, i.e. lower rates. When the economy is expanding there is a higher demand for credit, so rates move higher, whereas when the economy is slowing the demand for credit decreases and so do interest rates.
This leads to a fundamental concept:
Bad news (i.e. a slowing economy) is good news for interest rates (i.e. lower rates). Good news (i.e. a growing economy) is bad news for interest rates (i.e. higher rates).A major factor driving interest rates is inflation. Higher inflation is associated with a growing economy. When the economy grows too strongly, the Federal Reserve increases interest rates to slow the economy down and reduce inflation. Inflation results from prices of goods and services increasing. When the economy is strong, there is more demand for goods and services, so the producers of those goods and services can increase prices. A strong economy therefore results in higher real-estate prices, higher rents on apartments and higher mortgage rates. Mortgage rates tend to move in the same direction as interest rates. However, actual mortgage rates are also based on supply and demand for mortgages. The supply/demand equation for mortgage rates may be different from the supply/demand equation for interest rates. This might sometimes result in mortgage rates moving differently from other rates. For example, one lender may be forced to close additional mortgages to meet a commitment they have made. This results in them offering lower rates even though interest rates may have moved up!
Q: What are the types of loans?
A:Most common types:
1. Stated income/verified assets: Income is disclosed and the source of the income is verified, but the amount is not verified. Assets are verified, and must meet an adequacy standard such as, for example, six months of stated income and two months of expected monthly housing expense.
2. Stated income/stated assets: Both income and assets are disclosed but not verified. However, the source of the borrower's income is verified.
3. No ratio: Income is disclosed and verified but not used in qualifying the borrower. The standard rule that the borrower's housing expense cannot exceed some specified percent of income, is ignored. Assets are disclosed and verified.
4. No income: Income is not disclosed, but assets are disclosed and verified, and must meet an adequacy standard.
5. Stated Assets or No asset verification: Assets are disclosed but not verified, income is disclosed, verified and used to qualify the applicant.
6. No asset: Assets are not disclosed, but income is disclosed, verified and used to qualify the applicant.
7. No income/no assets: Neither income nor assets are disclosed.
8. Full document: Both income and assets are disclosed and verified, and income is used in determining the applicant's ability to repay the mortgage. Formal verification requires the borrower's employer to verify employment and the borrower's bank to verify deposits. Alternative documentation, designed to save time, accepts copies of the borrower's original bank statements, W-2s and paycheck stubs.
Q: What is a pre-qualification?
A: This is the process of determining whether a customer has enough cash and sufficient income to meet the qualification requirements set by the lender on a requested loan. A pre-qualification is subject to verification of the information provided by the applicant. A pre-qualification is short of approval because it does not take account of the credit history of the borrower.
Q: What does my mortgage payment include?
A: For most homeowners, the monthly mortgage payments include three separate parts:
Principal: Repayment on the amount borrowed
Interest: Payment to the lender for the amount borrowed
Taxes & Insurance: Monthly payments are normally made into a special escrow account for items like hazard insurance and property taxes. This feature is sometimes optional (when the total amount borrowed on the first mortgage is equal to or less than 80% of the home values, it is a totally optional choice whether or not to have the taxes and insurance impounded), in which case the fees will be paid by you directly to the County Tax Assessor and property insurance company.
Q: How much money will I need to purchase a home?
A: The amount of money that you need depends on a number of factors:The selling price of the home, your credit scores, your employment history. You will need to have:
1. Earnest Money: The deposit that is supplied when you make an offer on the house
2. Down Payment: A percentage of the cost of the home that is due at settlement.
3. Closing Costs: Costs associated with processing paperwork to purchase or refinance a house.
Q: Will a low score haunt me forever?
A: No. In fact, just the opposite is true. Since a credit score is a mathematical calculation, it changes as new information is added to your credit history. Scores change gradually as you change the way you handle credit. For example, past credit problems impact your score less as time passes.
A: PMI or Private Mortgage Insurance is normally required when you buy a house with less than 20% down. Mortgage insurance is a type of guarantee that helps protect lenders against the costs of foreclosure. This insurance protection is provided by private mortgage-insurance companies. It enables lenders to accept lower down payments than they would normally accept. In effect, mortgage insurance provides what the equity of a higher down payment would provide to cover a lender's losses in the unfortunate event of foreclosure. Therefore, without mortgage insurance, you might not be able to buy a home without a 20% down payment.
The cost of PMI increases as your down payment decreases. Example: The cost of PMI on a 10% down payment is less than the cost of PMI on a 5% down payment. Your PMI premium is normally added to your monthly mortgage payment.
Q: Can I get rid of the PMI on my loan?
A: The decision on when to cancel the private insurance coverage does not depend solely on the degree of your equity in the home. The final say on terminating a private mortgage-insurance policy is reserved jointly for the lender and any investor who may have purchased an interest in the mortgage. However, in most cases, the lender will allow cancellation of mortgage insurance when the loan is paid down to 80% of the original property value. Some lenders may require that you pay PMI for one or two years before you may apply to remove it. To cancel the PMI on your loan, contact your lender. In most cases, an appraisal will be required to determine the value of your property. You will probably also be required to pay for the cost of this appraisal. Another way of canceling the PMI on your loan is to refinance and to get a new loan without PMI.
Q: Can I pay off loans to qualify for the new loan?
A: Yes. Keep in mind that your monthly bills drop significantly by consolidating them into a single payment versus all your current payments you now make.
Q: How much additional money can I get when I either refinance my first mortgage or take out a second mortgage?
A: Depends on income, credit and property value. Once established you can get money ( cash out ) up to 90% on your home's current value on a first mortgage and up to 125% of your home's current value on a second mortgage.
Q: Are these loans tax deductible?
A: There have been many debates about deducting debt consolidation loan interest payments on personal tax returns. The prevailing tax ruling is yes, depending on a number of factors, so please contact your tax advisor.
Q: How long does my approval take?
A: An approval subject to conditions and you meeting those conditions can be done in 10 minutes ( called a pre-approval ). The final approval is normally between 11 and 15 business days due to waiting on the appraisal, the escrow, and the volume of loans currently being underwritten. NOTE: There are brokers and lenders who state it can be done faster, and may even have your loan documents delivered to your home for you to sign, but your loan isn't actually approved yet. They want to make you think it is approved, but it still requires the appraisal, the escrow and your conditions.
A: Title insurance protects the lender against loss due to problems or defects related to the title on the property being mortgaged. These problems would typically involve ownership claims against the property which were not identified by the title search. It is paid for with a one-time premium at the time of settlement.
Q: Do I have to close the accounts that are being paid off or can I keep them open?
A: In most cases accounts do not have to be closed. However, there are some instances when this is a requirement of the loan approval.
Q: What if I need help after regular business hours?
A: Our sales office regular hours of business are Monday - Friday 8 A.M. - 7 P.M., Saturday 10 A.M. - 2 P.M. If you need help after regular business hours, please send us an e-mail to:loaninfo@1-800mymoney.com and you will be contacted by a mortgage professional the next business day.
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