Loan Types and Terms

Prequalification is an estimate of what you might be able to borrow based on self-reported financial information. Pre-approval is a more thorough review of your finances by a lender and is a stronger indicator of your borrowing power.

PITI stands for Principal, Interest, Taxes, and Insurance—the four components of a monthly mortgage payment.

An adjustable rate mortgage (ARM) is a loan with an interest rate that can change periodically, based on an index. Payments may go up or down over time.

A fixed-rate mortgage is a home loan with a set interest rate that remains the same throughout the loan term, resulting in consistent monthly payments.

A down payment is an upfront payment made when purchasing a home, usually expressed as a percentage of the home’s purchase price.

A credit report is a detailed analysis of your credit history prepared by a credit bureau.

An application fee is a one-time fee charged by lenders to cover the initial costs of processing your loan application.

An appraisal is an estimate of a property’s value, conducted by a licensed appraiser, which helps determine the loan amount a lender can approve.

Closing costs are fees and expenses associated with finalizing a real estate transaction, including loan origination fees, appraisal fees, and title insurance.

An origination fee is a charge by the lender for processing the loan, usually a percentage of the loan amount.

Points are fees paid directly to the lender at closing in exchange for a reduced interest rate. Each point is typically 1% of the loan amount.

Equity is the difference between a property’s fair market value and the amount still owed on the mortgage.

The annual percentage rate (APR) includes both the interest rate and any fees or costs associated with the loan, giving you the total yearly cost of borrowing.

A rate lock is an agreement between you and your lender that secures a specific interest rate for a set period, protecting you from potential rate increases during the mortgage process.

Refinancing involves replacing your existing mortgage with a new one, typically to lower your interest rate, change the loan term, or tap into home equity.

Principal is the amount of money borrowed on a loan, excluding interest. It’s the base amount on which interest is calculated and gradually paid off over the term of the loan.

Fannie Mae and Freddie Mac are government-sponsored enterprises (GSEs) that help provide liquidity, stability, and affordability to the mortgage market by buying mortgages from lenders and selling them as securities.

Underwriting means evaluating a loan application to determine the risk involved to the lender.

• 2 years’ tax returns (business and personal).
• 2 years W-2’s.
• 30 days paycheck stubs (must be 30 consecutive days).
• 2 months’ bank statements (for all asset accounts).
• Retirement statements.
• Divorce decree (if within last 7 years).
• Child support documentation (if obligated to pay).
• Proof of sale (current or previous home).

• A 2 year continuous employment history required to qualify (please inquire for exceptions).
• If you’re self-employed or a commissioned employee, a 2 year history as evidenced by 2 years’ tax returns – average income.
• Bonus income requires a 2 year history – average bonus
• Interest, dividends, and retirement income require a 2 year history – average income as reported to IRS.

• We will need 2 months’ bank statements for all asset accounts.
• All large deposits must be sourced
• If you are receiving gift funds (from a parent, for example) to help toward closing costs, we require a gift letter, documentation in the donor’s account, documented transfer confirmation and the documented amount in your account.