Dos & Don’ts when applying for a mortgage

During the processing stage of the mortgage application Done Deal Mortgage Corp. will require certain documents and/or information from you to obtain a mortgage commitment.  Your obligation is to comply with our requests so that we may give you the best possible service.  It is essential to have your cooperation.

DO…

• Cooperate fully with Done Deal Mortgage Corp. and with all its requests.
• Sign and return all documents as soon as you get them, since time is of the essence
• Give accurate information
• Make sure to give us the most current information/documents for all paystubs, bank statements, 401K plans, etc…
• If you have a current mortgage please continue to pay on time

 

DO NOT…

• Deposit or withdraw large amounts of money into or out of your accounts.
 
• For any large deposit, the total deposit amount may not be higher than the earned monthly income.
 
• If there are any large deposits on the bank statement, we will need an explanation letter stating the reason for the large deposit and proof of the source of the funds.
• Open or close accounts prior to notifying your loan representative.
• Change jobs or job status prior to notifying your loan representative.
• Change your residence prior to notifying your loan representative.
• Issue checks with insufficient funds.
• Provide any fraudulent information
• Use your funds set aside for closing your loan for any other purpose.
• Buy or lease anything that changes your credit score and/or debt ratios
• Co-sign or endorse a note/loan
• Give or receive a money gift unless properly documented and prior notification is given to your loan representative

Items needed at time of application for a purchase

• W-2 forms for the last 2 years
• Most recent paystubs (1 month worth)
• All bank statements for all accounts (Most current 2 months)
• Proof of down payment
• Copy of legible sales contract
• State issued photo identification
• Appraisal fee which ranges from $300 to $450 contingent on property type

 

Items needed at time of application for a refinance, equity line, and 2nd mortgage

• W-2 forms for the last 2 years
• Most recent paystubs (1 month worth)
• All bank statements for all accounts (Most current 2 months)
• Copy of Homeowner’s Insurance statement (Most recent)
• Copy of most recent mortgage statement
• State issued photo identification
• Appraisal fee which ranges from $300-$450 contingent on property type

Adjustable Rate Mortgages (ARM)

A general term for any mortgage in which the interest rate and generally the payments change over the life of the loan. Your interest rate will be adjusted to match the rise or fall of a pre-selected interest rate index and your regular payments will increase or decrease accordingly.
Different types of ARM’s have different frequencies for these adjustments. Some ARM’s have limits on payment and interest rate changes and the maximum interest rate over the life of your loan. These types of loan programs usually have limits on how much the interest rate can change (either up or down) at each adjustment date, compared with the interest rate being charged before the new adjustment is made. Typically, this limit is 1% and is referred to as an "adjustment cap". There is also a limit as to how much the interest rate can change (either up or down) from the initial interest rate over the entire life of the loan (typically 6%) and this is referred to as a "lifetime cap".

6 Month Adjustable Rate Mortgage (ARM)

This type of loan has monthly payments that are based on a 30 year repayment schedule but unlike a Fixed Rate the interest rate may change every 6 months (referred to as the "adjustment period"). The new rate is based upon a financial index (typically the One Year Treasury Security). The new interest rate is calculated by adding a specified amount “the margin” to the index. the adjustment cap on a 1 year ARM is typically 2% as opposed to 1%. The lifetime cap is typically 6%. The index is typically the One Year Treasury Security index and the margin is typically 2.50% - 3.00%.
For example, if the index (One Year Treasury Security) changes from 4.00% to 4.25% before the adjustment period and your margin equals 2.00%, your current interest rate of 6.00% ( 4.00% (index) plus 2.00% (margin) changes to 6.25% (4.25% (index) plus 2.00% Margin) till the next adjustment period.

1 Year Adjustable Rate Mortgage (ARM)

This type of loan is similar to the 6 month ARM except for the fact that the adjustment period is every 12 months (one year) as opposed to every 6 months. In addition, the adjustment cap on a 1 year ARM is typically 2% as opposed to 1%. The lifetime cap is typically 6%. The index is typically the One Year Treasury Security index and the margin is typically 2.50% - 3.00%.

2 Year Adjustable Rate Mortgage (ARM)

This type of loan has an adjustment period every 24 months (two years). As with a 1 year ARM, the index is typically the One Year Treasury Security index and the margin is typically 2.50% - 3.00%. Also, the adjustment cap is typically 6%.

3 Year Adjustable Rate Mortgage (ARM)

This type of loan has an adjustment period every 36 months (three years). The index is typically the Three Year Treasury Security index. The margin is typically 2.50% - 3.00%, the adjustment cap is typically 2% and the lifetime cap is typically 6%.

5 Year Adjustable Rate Mortgage (ARM)

This type of loan has an adjustment period every 60 months (five years). The index is typically the Five Year Treasury Security index. The margin is typically 2.50% - 3.00%, the adjustment cap is typically 2% and the lifetime cap is typically 6%.

3/1 Year Adjustable Rate Mortgage (ARM)

This type of loan has monthly payments based on a 30 year repayment schedule and the interest rate remains fixed for the first 36 months (three years). After that time the interest rate may change every 12 months (one year). The new rate is based upon fluctuations in an index (typically the One Year Treasury Security).

5/1 Year Adjustable Rate Mortgage (ARM)

This type of loan is similar to the 3/1 ARM except for the fact that the interest rate remains fixed for the first 60 months (five years). After that time the interest rate may change every 12 months (one year). Like the 3/1 ARM, the index is typically the One Year Treasury Security index, the margin is typically 2.50% - 3.00%, the adjustment cap is typically 2% and the lifetime cap is typically 6%.

7/1 Year Adjustable Rate Mortgage (ARM)

This type of loan is similar to the 3/1 ARM except for the fact that the interest rate remains fixed for the first 84 months (seven years). After that time the interest rate may change every 12 months (one year). The index is typically the One Year Treasury Security index, the margin is typically 2.50% - 3.00%, the adjustment cap is typically 2% and the lifetime cap is typically 6%.

10/1 Year Adjustable Rate Mortgage (ARM)

This type of loan is similar to the 3/1 ARM except for the fact that the interest rate remains fixed for the first 120 months (ten years). After that time the interest rate may change every 12 months (one year). The index is typically the One Year Treasury Security index, the margin is typically 2.50% - 3.00%, the adjustment cap is typically 2% and the lifetime cap is typically 6%.

Fixed Rate Mortgages

The general rule regarding fixed rates and terms (length of loan) is the longer the lender agrees to a fixed rate, the greater the risk to the lender, therefore, interest rates for shorter term loans generally tend to be lower.

40-Year Fixed Rate Loan

This type of loan has 480 monthly payments that can either remain the same for the entire 40-year period or adjust depending on how the loan is structured.  40-year mortgages have lower monthly payments than 30-year mortgages; although they cost more over the life of the loan because the borrower pays interest for 10 years longer. With the lower monthly payments, they are seen as a tool to allow people to buy homes that are unaffordable with 30-year mortgages.

30-Year Fixed Rate Loan

This type of loan has 360 monthly payments that remain the same for the entire 30-year period after which time the loan is paid in full. The monthly payment is based on an interest rate that does not change over the term of the loan (hence the term "fixed rate").

20-Year Fixed Rate Loan

This type of loan has 240 monthly payments as opposed to 360 months (30 year fixed). Since the loan is being paid slightly faster than the 30-year fixed rate loan, monthly payments for this type loan are higher than the 30-year fixed rate loan but the interest rate usually is slightly lower

15-Year Fixed Rate Loan

This type of loan has 180 monthly payments. Since the loan is being paid faster than the 30-year fixed rate loan or the 20-year fixed rate loan, monthly payments for this type loan are higher than the other two loans while the interest rate is generally lower.