Working with a Lender

Working With a Lender Obtaining financial pre-approved for your loan

One of the first things a buyer should do is meet with a lender or mortgage broker to get pre-approved for a loan. Pre-approval is different from pre-qualified. Pre-qualification is a rough estimate of how much you can borrow. Getting pre-approved before shopping for a home saves you time from developing an interest in homes outside of your qualification range, and allows you time to select the best loan package available without the pressure of a deadline.

Pre-approval involves an application process and provides you with a formal commitment from a lender stating how much you can borrow and at what rate. Then the lender will provide you with a pre-approval letter. For an offer to be seriously considered by a seller in today’s market, a pre-approval letter must accompany an offer. It’s an assurance to the seller that you are a serious buyer.

The pre-approval process is relatively easy, and the lender will obtain information about income, employment, credit score, and assets.

There are a variety of loan options, and your lender will work closely with you to determine which one is the best one for you.

Loan Process

Once the loan process has begun, it’s best to keep a rein on your finances. Don’t apply for new credit, make a large purchase such as furniture or a car or close credit accounts. Also, best to stay current on any existing accounts.

Comparison of Common Loan Programs

Our teams at Academy Mortgage are often asked to explain the differences between the most common loan programs. To help answer your questions, the following grid outlines a few general features of three popular loan types: Conventional Loans, FHA Loans, and USDA Loans. It is important to note that all homebuyers have unique home financing needs. Academy will make every effort to find the right loan program and pricing for each situation and to provide superior value.

Minimum Down Payment

Maximum Seller Assist

Mortgage Insurance (MI)

Potential Advantages

Potential Disadvantages Conventional

3% (can be homebuyer’s own funds, gift funds, or employer-assistance programs)

3% (<10% down payment) 6% (>10% down payment)

Private Mortgage Insurance (PMI): Required with <20% down payment. Premium dependent on loan parameters. Payment options available.

• MI can be canceled once 20% equity is achieved. • Can use gift funds for down payment. • Less money out of pocket.

• May have higher MI costs. • Higher credit score requirements. • More stringent income requirements.

FHA

3.5% (can be homebuyer’s own funds, gift funds, employerassistance programs, or government-assistance 2nd mortgages)

6% Two forms of insurance required: 1. Upfront Mortgage Insurance

Premium (UFMIP): Factored at 1.75% of the base loan amount (can be financed in the loan); AND 2. Monthly Mortgage

Insurance Premium (MIP):

Usually factored at 0.85% of the base loan amount. • Lower credit score requirements. • Less stringent income requirements. • Can use other sources of funds for down payment. • Non-occupant co-borrowers allowed for income qualifying. • Higher MI costs than USDA

Loans but may be lower than

Conventional Loans. • MI included for life of the loan and cannot be canceled.

USDA

0%

6% Two fees required: 1. One-time, upfront guarantee fee: Factored at 1% of the base loan amount (can be financed in the loan); AND 2. Monthly USDA fee: Factored at 0.35% of the base loan amount.

• Less expensive MI costs. • Little to no money out of pocket. • Can use gift funds to lower the monthly payment.

• Monthly guarantee fee included for life of the loan. • More stringent income requirements. • Only allowed in designated rural areas.

VA

0% (as long as the sales price doesn’t exceed the appraised value)

6%

Funding Fee: One-time, upfront charge that must be paid at closing but may be financed in the loan. Factored as a percentage of the loan amount and varies based on the type of loan, the borrower’s military category, etc. Some Veterans may be exempt from this fee.

No monthly MI required. Little to no money out of pocket. The seller can pay for some closing costs. VA rules limit the amount charged for closing costs.

Upfront funding fee. Veteran must be incomeand credit-qualified. Eligibility depends on service and prior usage of VA Loans.

Josh Dalglish NMLS #569991 Loan Officer Academy Mortgage Corp NMLS #3113 | Equal Housing Lender 29100 SW Town Center Loop W, Suites #160 and #170 Wilsonville, OR 97070 (503) 998-4016 josh.dalglish@academymortgage.com academymortgage.com/joshdalglish

Corp NMLS #3113 | Corp State Lic AZ #LO-0942614 | State Lic AZ #BK-0904081

Conventional sample loan scenario: $200,000 purchase price; $194,000 loan amount; 3% down payment; $1,503/month (PITI); 30-year fixed 5.49% interest rate; 6.321% APR. FHA sample loan scenario: $200,000 loan amount, 3.5% down payment, $1,363.50/month (PITI), 30-year fixed 4.750% interest rate, 4.937% APR. The MI requirements may change if the homebuyer is putting down more than 3.5% or desires a term less than 30 years. USDA sample loan scenario: $200,000 loan amount, 0% down payment, $1,301.80/month (PITI), 30-year fixed 4.750% interest rate, 4.785% APR. VA sample loan scenario: $204,300 loan amount, 0% down payment, $1,265.73/month (PITI), 30-year fixed 4.750% interest rate, 5.072% APR. All mortgage products are subject to credit and property approval. Rates, program terms, and conditions are subject to change without notice. Not all products are available in all states or for all amounts. Additional conditions, qualifications, and restrictions may apply. This is not an offer for extension of credit or a commitment to lend. Please contact Academy Mortgage for more information. MAC221-1468328