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Rayne Building and Loan

FAQs

General


Mortgage Lending

  • How does my credit score work? I want to understand my credit better.

    Your credit, your credit scores, and how wisely you shop for a loan that best fits your needs have a significant impact on your mortgage interest rate and the fees you pay. To improve your credit and your chances of getting a better mortgage, get current on your payments and stay current. A large portion of your credit scores are based on whether or not you pay your bills on time. Much of your credit scores are based on how much debt you owe, too. That's why you may want to consider paying down some of your debts.

    Tip 1

    Be careful making any big purchases on credit before you close on your home. Even financing a new refrigerator or a new car could make it harder for you to get a mortgage in some cases.

    Tip 2

    An average consumer who adopts healthy credit habits, such as paying bills on time and paying down credit cards, could see a credit score improvement in three months or more.

    Tip 3

    Correcting errors on your credit report may raise your score in just 30 days. It’s a good idea to correct errors before you apply for a mortgage NOW rather than later. Get your credit report at annualcreditreport.com to check it for errors. If you find mistakes, submit a request to each of the credit bureaus asking them to fix the mistake. For more information about correcting errors on your credit report, visit consumerfinance.gov/askcfpb.

    Check out interest rates and make sure you’re getting the credit you’ve earned.

    For more on home loans and credit, visit consumerfinance.gov/owning-a-home.

  • How do I get and keep a good credit score?

    There is no secret formula to building a strong credit score, but there are a few guidelines that can help. Some things that affect your credit score include your payment history, your outstanding obligations, the length of time you have had outstanding credit, the types of credit you use, and the number of inquiries that have been made about your credit history in recent past. Credit scores used for mortgage loan decision range from approximately 300 to 900. Generally, the higher your credit score, the lower the risk that your payments won’t be paid as agreed.

    • Pay your loans on time, every time. One way to make sure your payments are on time is to set up automatic payments, or set up electronic reminders. If you’ve missed payments, get current and stay current.
    • Don’t get close to your credit limit. Credit scoring models look at how close you are to being “maxed out,” so try to keep your balances low compared to your total credit limit. If you close some credit card accounts and put most or all of your credit card balances onto one card, it may hurt your credit score if this means that you are using a high percentage of your total credit limit. Experts advise keeping your use of credit at no more than 30 percent of your total credit limit. You don’t need to revolve on credit cards to get a good score. Paying off the balance each month helps get you the best scores.
    • A long credit history will help your score. Credit scores are based on experience over time. The more experience your credit report shows with paying your loans on time, the more information there is to determine whether you are a good credit recipient.
    • Only apply for credit that you need. Credit scoring formulas look at your recent credit activity as a signal of your need for credit. If you apply for a lot of credit over a short period of time, it may appear to lenders that your economic circumstances have changed negatively.
    • Fact-check your credit reports. If you spot suspected errors, dispute them. If you have old credit card accounts you are not using, keep an eye on them to make sure that an identity thief is not using them.

  • How do I get started with a home loan? What do I need to pre-qualify?

    After speaking with your loan officer, the initial pre-qualification process gets started in any of these three ways: 1) We start with a few quick pre-qualification questions. Whether purchasing a new home or refinancing your existing home loan, the pre-qualification process will provide you some ideas of what your payments might be and what options could be available to you. This preliminary information will give you direction on what you could possibly afford. It’s like turning on a light and being able to follow the path. It is important to know that a pre-qualification is not an application for a mortgage loan, and the approval of any subsequent mortgage loan you may apply for is not guaranteed. 2) To jump-start the process, we request certain documentation from you. This is a more in-depth option that gives you a better understanding of which loan types may be available for your home purchase or refinance. We will review:

    • 2 years of your most recent tax information including your 1040, W-2s, 1099s and K-1s
    • 2 months of your most recent asset statements including checking, savings. We may also ask for retirement and/or investment accounts
    • 1-month statement of your most recent pay stubs showing year to date income
    3) If you have already found the home you want to purchase, you can make a formal mortgage loan application. A formal mortgage loan application also requires the financial information listed above.

  • How do I know how much house I can afford?

    Generally speaking, you can purchase a home with a value of two or three times your annual household income. However, 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. Give us a call, and we can help you determine exactly how much you can afford.

  • How much cash will I need to purchase a home?

    The amount of cash that is necessary depends on a number of items. Generally speaking, though, you will need to supply:

    • Earnest Money: The deposit that is supplied when you make an offer on the house
    • Down Payment: A percentage of the cost of the home that is due at settlement
    • Closing Costs: Costs associated with processing paperwork to purchase or refinance a house

  • I’m self employed. How will you verify my income?

    Generally, the income of self-employed borrowers is verified by obtaining copies of personal (and business, if applicable) federal tax returns for the most recent 2 year period. We will review and average the net income from the self-employment that is reported on your tax returns to determine the income that can be used to qualify. We do not consider any income that has not been reported as such on your tax returns, Typically, we will need at least one, and sometimes two years history of self-employment to verify that your self-employment income is stable.

  • Is it better to put a higher or lower down payment for my home loan?

    Loan programs vary with some requiring as much as 20% down and some that do not require a down payment at all. Here are some considerations.

    20% or more down

    • Pro: The larger your down payment, the lower your monthly mortgage payment
    • Pro: Your lender will not require mortgage insurance — that’s one less expense each month
    • Con: It may take you longer to save up your down payment
    • Con: By the time you’ve saved up for a down payment, the home you want to buy may not be on the market or its price may have increased

    So, for example, a 20% down payment on a home priced at $150,000 would be $30,000.

    Less than 20% down

    • Pro: Your savings goal will be smaller, so you’ll need less time to reach it
    • Pro: You’ll be able to buy sooner than later
    • Con: The smaller your down payment, the larger your monthly mortgage payment
    • Con: Your lender will require mortgage insurance — an additional expense included with your mortgage payment. (If you finance with private mortgage insurance, typically, you can cancel it once you have enough equity in your home.)

    So, for example, a 10% down payment on a home priced at $200,000 would be $20,000; a 5% down payment would be $10,000.

  • What does it mean to pre-qualify for a home loan?

    Prequalifying shows you how much you can afford to spend on a home based on where you stand financially, taking into account your income, debt and savings. Lenders also consider current interest rates. Pre-qualification is often seen as the first step in the mortgage process, and pre-approval is the next step. With pre-qualification, you'll verbally supply an overview of your financial history to the lender, including income, assets, debts, and credit score. Prequalifying can determine:

    • An estimate of the home purchase price and monthly mortgage payment you can afford and qualify for
    • How much money you’ll need for a down payment (the difference between the purchase price and the amount of your mortgage)
    • Saving goals you need to set and achieve

  • What does my mortgage payment include?

    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, in which case the fees will be paid by you directly to the Parish Tax Assessor and property insurance company.

  • What is Loan-to-Value?

    The loan-to-value (LTV) is your loan amount divided by your property value. For example, the loan-to-value on a $100,000 house with a $75,000 loan amount is 75%.