So you want to buy a house? Purchasing real estate is the largest financial transaction most of us will make in our lifetimes. There are many questions, and here are some answers to a few of them. As with anything, this list is not comprehensive, but the knowledge base of the professionals at Red Oak Mortgage is available to you. Contact us here if you have questions that aren’t listed here so we can update our site to include them.
Q: Why should I use a local lender like Red Oak Mortgage instead of a large bank or online mortgage broker?
If you have done some research into other mortgage companies, you probably found the 30-60 day answer to this question. At Red Oak Mortgage, our high-level of technology and amazing team of mortgage professionals can close your purchase in as little as 10 business days. However, just because Red Oak Mortgage can do it in 10 days doesn’t mean that’s realistic. There’s a lot that goes into a purchase including the collection of documentation from the buyer, the appraisal of the home, obtaining and reviewing the home’s title history, and coordinating inspections. Realistically, 3 weeks is the quickest turn-around for a purchase from contract to close in New Jersey.
Q: How much can I qualify for?
When it comes to qualifying for a particular loan amount and purchase price, there are many factors involved. The three main factors we review are your income, your expenses, and your assets. Understanding your mortgage-qualifying income is no easy task, but the team at Red Oak Mortgage has years of experience reviewing income documentation. Through constant training, we always stay up to date on new guidelines and opportunities to take advantage of every option available. We then compare your qualifying income with your monthly expenses as reported on your credit report, as well as the carrying costs on your potential new house. This gives us your debt-to-income ratio which is a key component of your mortgage approval. To get some estimates of what your potential mortgage payment will be, take a look at our industry-leading calculators here. Finally, we will review your available assets and help guide you to what assets you can use to purchase a house. With the availability of gifts, 401k loans, and down-payment assistance programs, our team will help you realize your maximum down payment potential. With your income, expenses, and assets in place, we will help you determine what loan program is best for you. Every program is different and has different requirements, and we look forward to helping you find the best fit. You can start the pre-qualification process here.
Q: How much money do I need to purchase a home?
This is a great question, and (like everything in the mortgage world) it has a very complicated answer. Red Oak Mortgage offers an array of loan programs that start with 0% down (like VA loans, for example) and go all the way through 25% down. There are conventional loans for certain buyers that allow for 3% down and FHA loans that allow for as little as 3.5% down. There are also advantages to putting 5%, 10%, and then 20% down. Your pre-qualification includes an analysis of the available options and some recommendations on how best to take advantage of the available programs. In addition to the down payment, there are many other costs associated with buying a new home. Before closing, you’ll likely be responsible for things like a home inspection and an appraisal. At closing, settlement charges include closing costs like title insurance and attorney fees, as well as prepaid items for interest, taxes, and insurance. Red Oak Mortgage will provide a complete estimate of these fees for you with your pre-qualification which you can do here.
Q: How does a Pre-Qualification differ from a Pre-Approval?
The purpose of pre-qualification is to give potential buyers an idea of their affordability range. Pre-qualification involves a preliminary review of your credit, income, expenses, and assets. We rely on your stated information (so generally no documentation is collected). Our pre-qualification process is simple and can be started here. After we receive your information, a determination of qualification and affordability will be made; with this, you can begin shopping for a house and making offers on potential properties. A pre-approval requires preliminary underwriting of your credit report and your income and asset documentation. A commitment, subject to finding a property (TBD), will be issued by one of our mortgage underwriters. From there, all we need to do is ‘plug in’ a property (with purchase contract and appraisal) and you are ready to go. The full application to begin the pre-approval process is located here. In almost all cases, a pre-qualification is sufficient to get us through the home shopping and contract phase of your purchase. Once you have a contract in place and through attorney review, we move to the approval. Please contact us here if you have more questions about pre-qualification vs. pre-approval.
Q: How do I make an offer on a house?
Once you’ve been pre-qualified for a mortgage, it’s time to make an offer. In most cases, you’ll want to work with a Realtor who knows your market well and can guide you. Red Oak Mortgage has worked with hundreds of Realtors and you can find contact information for some of them here on our Business Partners page. Whether you work with a Realtor or not, Red Oak Mortgage will provide you with a ‘transaction-specific’ pre-qualification letter when you are ready to make an offer. This letter will be dated the day of your offer and be for the exact amount and purchase price you are offering. In our experience, this puts your best foot forward to the seller. In many instances, there will be some negotiation back and forth with the seller. Once you have agreed upon a price, we will revise your pre-qualification letter and send it back to you. Once you have an accepted offer your contract will generally enter the attorney review phase which can take anywhere from 1 day to a week or more. After attorney review is completed, your purchase is considered ‘under contract’ and it’s time to get started on your Home Inspection and mortgage application.
Q: Is a Home Inspection necessary?
Home inspections are not specifically required for most mortgage programs, however it is always a good idea to hire a professional, qualified inspector to inspect the home you’re planning to buy. Professional inspectors look for any mechanical issues and structural problems that may exist in the home and that can lead to a number of problems for you and your family in the near future. In addition, the inspector also checks appliances and all other items in the home to make sure that everything is in working order. Using that information, your Realtor and/or attorney can make requests for repairs to the seller. Red Oak Mortgage has worked with many qualified inspectors over the years. Find some of them here on our Business Partners page.
Q: What documents will I need to provide when I apply for a mortgage?
A great question, and again a very complicated answer. Since every transaction is different, the list of what is needed to process a loan will vary from borrower to borrower. In general, you can expect to document your income (W2s, paystubs), document your assets (bank statements, deposit checks), and document your identity (driver's license, social security card). Depending on the nature of your income, we may ask for tax returns (specifically for self-employed income or rental income). If you own any other properties, we’ll ask for property profiles (mortgage statements, tax bills, insurance, HOA). We’ve compiled a list of required documents for a mortgage here. You can trust the professionals at Red Oak Mortgage to give you a clear, comprehensive list of what will be required to process your loan when your application is taken. After you’ve completed the online application, you can log-in here to securely upload documents to us. Q: How long does the purchase process take? If you have done some research into other mortgage companies, you probably found the 30-60 day answer to this question. At Red Oak Mortgage, our high-level of technology and amazing team of mortgage professionals can close your purchase in as little as 10 business days. However, just because Red Oak Mortgage can do it in 10 days doesn’t mean that’s realistic. There’s a lot that goes into a purchase including the collection of documentation from the buyer, the appraisal of the home, obtaining and reviewing the title history of the home, and coordinating inspections. Realistically, 3 weeks is the quickest turn-around for a purchase from contract to close in New Jersey or North Carolina.
What takes place at loan closing?
On the date of loan closing, you will have to sign your loan documents at any designated place (such as our office or your attorney’s office). On the same date, and in the presence of a signing authority, you will have to carefully review and sign the agreement and prepare a certified or a cashier’s check to pay off any remaining down payment, closing fees and any other amount required to close the funds. In some cases, you will be required to wire your funds directly to the title company. Our loan processors will guide you throughout the entire closing process and advise you on the best possible course of action. As soon as the loan-related documents are signed, you become the proud owner of your new home.
Q: How can Red Oak Mortgage continue to help me after I’ve closed?
Just because you’ve closed on your house doesn’t mean you’re done with the professionals at Red Oak Mortgage. Every six months, our clients receive a complimentary financial review. If there are loan opportunities available to save money, we’ll reach out. In many cases, refinances of your existing loan takes only 10 days and comes with very limited (if any) closing costs.
Q: Mortgage insurance - What is it and when is it required?
Mortgage insurance, also called PMI, is a form of insurance designed to protect mortgage lenders against financial losses. It allows you to purchase a home with less than 20% down, and is generally required on any conventional loan that meets that loan to value. The two main types of mortgage insurance are Borrower Paid and Lender Paid, and the consultants at Red Oak Mortgage can help guide you towards the best option.
Q: What factors are considered when quoting interest rates?
Quoting interest rates is one of the trickiest part of the mortgage process. Be vary wary of lenders who post rates online, as there are many factors that go into the interest rate for a loan that can’t possibly be known. To accurately quote an interest rate, a lender must know the loan amount, estimated/appraised value, credit score of the borrower, loan program desired, and estimated closing date. Our industry is flooded with ‘fake’ companies who will advertise very low rates online, and many clients come to find they don’t qualify for those rates for some reason. It’s important to be very careful about shopping for an interest rate and to always make sure the source of the rate quote is both reputable and has all of the necessary information to quote accurately.
Q: What factors could delay the approval or closing of my loan?
There are many factors that could delay an approval or a closing. It is very important to work with a Lender who is on top of your loan file and offers constant communication and online access to your loan status to keep the ball moving. However, even when you and your lender are attentive, things can always come up at the last minute. Issues with the Seller, the Certificate of Occupancy, or the Settlement Agents do happen from time to time. For that reason, it’s important to work with a versatile lender who can roll with the changes and make sure everything is handled with these issues as the come up. At Red Oak Mortgage, we work to clear a loan to close weeks before the scheduled closing date (not at the last minute like some of those other guys), and that allows us to offer flexibility for closing rarely available.
Q: When can I lock an interest rate, and are there fees to do so?
Every lender will give you a different answer here, but this is ours. Generally speaking, we look to lock an interest rate for a purchase once the contract is out of attorney review, an inspection has been completed, and the appraisal is back and accepted. However, many loans are locked before this, and many loans aren’t locked until a few days before closing. Work with your mortgage consultant to find a lock-in time that works best for you. At Red Oak Mortgage, there are never fees to lock a loan for up to 90 days (and for new construction we offer locks up to 365 days that do come with fees).
Q: Why do interest rates change daily?
Mortgage rates are tied to mortgage-backed securities that fluctuate on the open market. The supply and demand for these securities is what drives interest rates, and just like stocks these trade throughout the day. Interest rates should be considered a moving target until one is locked and a written Loan Estimate is provided showing a rate lock.
Q: How can I improve my credit score?
Your credit score is one of the 4 important factors in your mortgage approval. There are some strategies you do make sure your credit score is as high as it can be, including verifying all information is correct (and disputing what’s not), and keeping balances on credit cards as low as possible. At Red Oak Mortgage, we work with credit repair experts that can help guide you towards a better credit score. Contact us for details.