Common Mortgage and Loan Questions
First, you'll complete our on-line application.
The application will ask you questions about the home and your finances and takes less than 20 minutes to complete. As soon as you've finished the application we'll review your request.
After completing your application, a Loan Officer will contact you to introduce himself or herself and to answer any questions you may have. Your Loan Officer is a mortgage expert and will provide help and guidance along the way. He or she will ask you for any information required to make a decision about your loan.
If you are purchasing a new home, the Loan Officer will also contact the Real Estate Broker or the seller so that they'll know whom to contact with questions.
We'll send you an application kit and prepare your loan for closing.
The application kit will be sent using a secure e-mail delivery method and will contain documents for you to sign and a list of items we'll need to verify the information you provided about your finances during the on-line application.
We'll order the appraisal from a licensed appraiser who is familiar with home values in your area. Depending on your finances and the loan amount requested, different types of appraisals are used. The appraiser will need to view the home.
Title insurance will be necessary. If you're purchasing a home, we'll work with the real estate broker or seller’s attorney to ensure the title work is ordered as soon as possible. If you are refinancing we'll take care of ordering the title work for you. We'll use the title insurance to confirm the legal status of your property and to prepare the closing documents.
Your Loan Officer will keep you informed every step of the way.
We'll contact you to coordinate your closing date.
After we received the application kit back from you and the appraisal and title work, we'll contact you to schedule your loan closing. The closing will take place at a Heartland Bank branch office or the office of a title company in your area. A few days before closing, your Loan Officer will contact you to walk through the final information so that there won't be any surprises at closing.
That's all there is to it! You're on your way to the most convenient home loan ever!
Ideally, you should begin planning for your first home purchase far in advance (when possible) of your projected purchase date. Here is some sound advice for anyone buying their first home or looking to buy "up" into a larger home:
- Start saving money. Some loan products require down payments, some do not. They all, however, have other fees and costs that you will need ready cash to cover (e.g., closing costs, escrow account deposits, other cash reserves). The more money that you are able to save before you apply, the better off you will be.
- Review your credit. As a lender, we are going to review your credit report as part of the normal underwriting process of the loan. Therefore, it’s a good idea for you to take an advanced look at what is currently reported by the major credit bureaus. If you need to correct any erroneously reported data, or satisfy (pay) any old judgment liens in order to improve your credit rating, you're looking at a possibly lengthy process. Start early.
- (Totally) free credit reports are available at AnnualCreditReport.com, or
- You can purchase a credit report, to include your credit score, directly from the credit bureaus (TransUnion, Equifax, & Experian) or at MyFico.com.
Determine your budget. Although your lender may be able to pre-approve you for a larger loan based upon your income, make sure that payment doesn’t exceed what you can comfortably afford. Take a look at your budget, determine what payment you are comfortable with, and your lender can back into the loan amount that payment will cover. Your comfort level may change, but this is a good place to start. Round up your financial documents. This is a general list of documents that you will want to bring to your loan application: W-2s from the last two (2) years tax returns; last two (2) years tax returns for the self-employed, farmers, and landlords; most recent YTD pay stubs; copies of your most recent banking and investment accounts; Real Estate Contract; and Divorce Decree (if applicable). Get Pre-Approved (prior to finding a home/signing a contract). This step is optional, but encouraged. Sellers and Real Estate agents are more inclined to work with buyers who are pre-approved. This process can also help you identify any problems that might need to be addressed prior to signing a contract. Submit your loan application.
Interest rates fluctuate based on a variety of factors, including inflation, the pace of economic growth, and Federal Reserve policy. Inflation rates are regarded as having the greatest influence. These are national economic factors that your local bank has no influence over.
Mortgage interest rate movements are as hard to predict as the stock market and no one can really know for certain whether they'll go up or down. If you think rates might drop while your loan is being processed, take a risk and let your rate "float" instead of locking. After you apply, you can lock in by contacting your Loan Officer by telephone. But understand, once the rate is locked, you are (most often) obligated to the lender to close at that rate—even if rates drop.
There's no cost at all for completing our application. After your loan is reviewed by a Loan Officer to meet our underwriting guidelines, your Loan Officer will explain the next steps of the application process.
You can lock in your interest rate and after a Loan Officer has had an opportunity to review your application and has determined that your application meets our fixed-rate mortgage guidelines. At that point, you will be contacted for additional instructions, to include how to lock in your rate.
None of the loan programs we offer have penalties for prepayment. You can pay off your mortgage any time with no additional charges.
A home loan often involves many fees, such as the appraisal fee, title charges, closing fees, and state or local taxes. Many of these fees are typical and constant for all borrowers, while some are directly related to the borrower’s credit profile and the loan type requested.
To assist you in evaluating our fees, we've grouped them as follows:
Third Party Fees
Fees that we consider third party fees include the appraisal fee, the credit report fee, the settlement or closing fee, the survey fee, tax service fees, title insurance fees, flood certification fees, and courier/mailing fees.
Taxes and other unavoidables
Fees that we consider to be taxes and other unavoidables include: State/Local Taxes and recording fees. These fees will most likely have to be paid regardless of the lender you choose.
Delivery fees are fees imposed by the final investor on your loan such as Fannie Mae or Freddie Mac and are passed along to the borrower. Your credit score, the amount you are borrowing in relation to the value or purchase price and other factors can increase or decrease these fees. Your lender can give you an estimate of closing costs.
- Fees such as points, document preparation fees, and loan processing fees are retained by the lender and are used to provide you with the lowest rates possible.
- This is the category of fees that you should compare very closely from lender to lender before making a decision.
You may be asked to prepay some items at closing that will actually be due in the future. These fees are sometimes referred to as prepaid items: per-diem interest, escrow account deposits, and mortgage insurance premiums are typical examples of prepaids.
The function of a title insurance company is to make sure your rights and interests to the property are clear, that transfer of title takes place efficiently and correctly, and that your interests as a homebuyer are fully protected. Specifically, a Title Insurance Policy protects a lender/homeowner from the "hidden" title hazards such as unlawful transfer of ownership, unknown heirs to real property, and mistakes in the public record. A Lender’s Policy is required of most fixed-rate mortgage loans; whereas, an Owner’s Policy is highly encouraged, but not required.
Title companies typically issue two types of title policies:
- Owner's Policy. This policy covers you, the homebuyer.
- Lender's Policy. This policy covers the lending institution over the life of the loan.
Also known as private mortgage insurance, or PMI, shouldn’t be confused with homeowner’s or hazard insurance, or with mortgage life/disability insurance. Private mortgage insurance is a financial guaranty business in which an insurer assumes a portion of a lender's risk in making a mortgage loan. Generally, PMI is required when there is less than a 20% down payment or equity present in the home. A mortgage insurance policy insures the fixed-rate mortgage investor for the top 20% of the loan balance.
It may be possible to cancel private mortgage insurance at some point, such as when your loan balance is reduced to a certain amount - below 78% to 80% of the property value.
Yes. After submitting your application online, one of our mortgage professionals will review your application and credit report. This review will confirm your target purchase price range and eligibility, giving you the knowledge to shop more confidently for that perfect home. Once you have settled on the house you want, give your loan officer a call to begin processing the full application.
Your credit score is only one of the many factors that go into approving your loan. A credit score is simply a number that reflects a multitude of credit-related factors such as loan balances, number of open accounts, past and current repayment history, public records (judgments, bankruptcies, liens), etc. This number simply quantifies the probability of default. Credit scores range from approximately 300 to 850. For most of our loan products, successful applicants must have a credit score 640 or higher.
Yes, if that loan is secured by an asset that you own. This source of down payment funds should be carefully considered. Not only will it be an additional debt to repay, but it will also lessen the amount of income available to service your house payment. If you choose to borrow funds for a down payment, you must fully disclose this new loan on your application.
Thanks to automated underwriting, the amount of documentation required for processing a mortgage loan is diminished. In general, W-2s, YTD pay stubs, and statements from any bank/investment account are all that is required.
If you own more that 25% of any business, you are considered self-employed and must be underwritten as such. Verification of income for self-employed borrowers requires a review of the current and previous years individual tax returns to include all schedules (Schedule C, Schedule E, and Schedule F are typical) plus any K-1s associated with a Corporation or LLC. The most recent two years corporate business tax returns are also required.
Generally, only income that is reported on your tax return can be considered when applying for a mortgage. Unless, of course, the income is legally tax-free and isn't required to be reported.
Information about child support, alimony, or separate maintenance income does not need to be provided unless you wish to have it considered for repaying this mortgage loan.
If you were in school before your current job, enter the name of the school you attended and the length of time you were in school in the "length of employment" fields. You can enter a position of "student" and income of "0."
If the house that I’m buying appraises for more, can I use the difference (equity) towards my payment?
Unfortunately, on any purchase transaction, we are limited to using the lower of the purchase price or appraised value. Later, should you refinance, we can then base your home’s equity solely on the appraised value.
Yes, but the gift must come from a relative of yours or the co-borrowers. Additionally, for our conventional loan products, if the gift is for less than a full 20% down payment, you must still contribute 5% of your own funds. (Some of our other loan products have different underwriting criteria. Please contact your loan professional for more information.)
What documentation will you need from me? You will need to provide us with a copy of the HUD Settlement Statement from the loan closing on the sale of your home. This shows that the loan for your previous home is considered paid in full and that you have sufficient funds to close on your purchase. If the sale of your home happens to fall on the same day as your purchase, simply bring the HUD Settlement Statement with you to your purchase closing.
Any student loan payment, whether in repayment or not must be included in the final loan approval. Student loans not yet in repayment will require the borrower to obtain a letter from the servicer on the anticipated terms of the loan. The credit report is used for loan terms for student loans already in repayment.
If you've had a bankruptcy or foreclosure in the past, it may affect your ability to get a new mortgage. In general, most companies that we use require that two to four years have passed since the bankruptcy or foreclosure. It is also important that you've re-established an acceptable credit history with new loans or credit cards.
An appraisal report is a written description and estimate of the value of the property. The estimated value is determined by two methods: sales approach and cost approach, with the sales approach usually given the most weight. The Sales Approach compares the subject property (your current/prospective home) with three other previous homes similar to yours that have sold within the last 12 months.
National standards govern not only the format for the appraisal; they also specify the appraiser's qualifications and credentials. In addition, most states now have licensing requirements for appraisers evaluating properties located within their states.
In addition to verifying that your home's value supports your loan request, we'll also verify that your home is as marketable as others in the area. We'll want to be confident that if you decide to sell your home, it will be as easy to market as other homes in the area. We'll also make sure that the value of your home is in the same range as other homes in the area. If the value of your home is substantially more than other homes in the neighborhood, it could affect the market acceptance of the home if you decide to sell.
Yes. Once we receive the appraisal report, we will update the property value in your loan application. Given that we have your e-mail address, we will send you a copy of the report as an Adobe Acrobat (.pdf) attachment. If not, we can mail a copy or provide one at the closing table.
We order the appraisal as soon possible. Generally, once the field visit to the property is complete, it takes 10-14 days before the written report is sent to us. We follow up with the appraiser to insure that it is completed as soon as possible. If you are refinancing, and an interior inspection of the home is necessary, the appraiser should contact you to schedule a viewing appointment. If you don't hear from the appraiser within seven days of the order date, please inform your Loan Officer. If you are purchasing a new home, the appraiser will contact the real estate agent, if you are using one, or the seller to schedule an appointment to view the home.
The closing may take place in one of our branch offices or at the office of a title company or attorney in your area who will act as our agent. If you are purchasing a new home, the seller may also be at the closing to transfer ownership to you.
During the closing you will be reviewing and signing several loan papers. The closing agent (often your loan officer) or attorney conducting the closing should be able to answer any questions you have.
Just to make sure there are no surprises at closing, your Loan Officer will contact you a few days before closing to review your final fees, loan amount, first payment date, etc. Typical documents to be signed include the HUD Settlement Statement, Truth-in-Lending Statement, Note, and Mortgage/Deed of Trust.
In some areas of the country it is very customary, and sometimes required by law, to have an attorney represent you at the closing. In other areas, attorneys are not as common at a real estate closing. Please contact the closing agent if you have questions about attorney representation. By all means, we recommend that you have an attorney at the closing if it would make you more comfortable. If your attorney has any questions about your new mortgage, please refer them to your Loan Officer. We'd be happy to provide any information necessary.
Most documents aren’t prepared for the closing until a day or two prior. The HUD Settlement Statement must be prepared and available at least 24 hours prior to your closing. They are often provided for any real estate agents in a sales transaction, but are also available upon request for any party (including homeowners refinancing).
The Settlement or Closing Agent: Your lender may act as the Settlement Agent, or we may choose another trusted individual to act as the closing agent on our behalf.
Real Estate Agents: Both the Listing and Selling Agents might attend the closing.
Sellers: Sellers are often present at closings in most states. Some states, however, dictate that buyers and sellers sign their paperwork separately.
If you won't be able to attend the loan closing, contact your Loan Officer to discuss other options. If someone you trust is able to attend on your behalf, you can execute a Power of Attorney so that this person can sign documents on your behalf. In other cases, we're able to mail you the documents in advance so that you can sign them and forward them to the closing agent. We're sure to have a solution that will work in your circumstances.