An appraisal inspection is different than a home inspection. An appraisal report is used by a lender to determine the fair market value of a property and the percentage of the value it will lend. While you pay for the appraisal and are entitled to a copy, the lender is the intended user of the report and the legal client of the appraisal company.

Sales prices and appraised values are tracked and logged into various databases used by lending institutions every day. In some cases, lenders will accept the estimated value of a property based on recent sales and appraised values within the property’s geographic area, eliminating the need for an appraisal report and saving the buyer hundreds of dollars.

The loan amount is calculated as a percentage of the sales price or appraised value, whichever is less. If the value comes in below the sales price, the buyer can bring additional funds to closing, attempt to renegotiate, or in certain cases, cancel the contract. For more information on this topic and possible scenarios, please click here to check out our blog.

An appraisal made “as-is” is based upon the current condition of the property and requires no repairs to be made. An appraisal made “subject to repairs” provides a value on the assumption the specified repairs will be completed. Lenders typically require any assumed repairs to be completed prior to closing.

The lender always orders the appraisal. One of the most misunderstood aspects of an appraisal in the mortgage process that it is performed at the request of the lender, not the buyer or homeowner. While the borrower typically pays for the appraisal, the client of the appraiser and the intended user of the appraisal report is the lender.

No. Since the appraisal is used by the lender to determine how much to lend, the lender does not allow the borrower to choose who performs the appraisal.

The cost of an appraisal varies based on property type and location and must be reasonable and customary for the area. The fee for a single-family, primary residence on a typical suburban lot will be less than a 3-unit multi-family investment property with rental income, or a large property with several outbuildings on acreage. Since the appraisal is provided by a third party that the borrower cannot select, the appraisal fee is considered a “zero tolerance” fee that cannot change after an official Loan Estimate (LE) is issued. For this reason, and since the exact and final amount of the fee can change throughout the process, many lenders overestimate the amount of the appraisal fee on the initial Loan Estimate. Under no circumstance can the lender collect more than the actual fee at closing.

Prior to the financial crisis in the early 2000s, lenders could place an appraisal order directly with any licensed appraiser. The Dodd-Frank Act of 2008 instituted Appraisal Independence Requirements (AIRs) and created more separation between lenders and appraisers. The AIRs were designed to prevent undue influence and conflicts of interest, or underhandedly inflate appraisal values. AIRs also instituted a requirement for “reasonable and customary” fees and allowed violators to be prosecuted and fined. Since lenders were not regulating fees being charged by appraisers, they faced the risk of violating the new regulations and facing prosecution. As a result, lenders turned to third parties called Appraisal Management Companies who collect and process appraisal orders, assign the orders to a larger panel of appraisers, and regulate the fees they charge. While the AIRs were intended to protect the consumer, their implementation introduced another hand in the cookie jar and added cost to the appraisal process. These added costs were ultimately passed on to the consumer and resulted in increased appraisal costs.

An appraisal is typically valid for 120 days. Beyond 120 days, the lender can order a Recertification of Value to ensure the property value has not decreased.

Yes, there are zero % down payment loan options available through the VA and the USDA. There are also 100% forgivable grant programs available for FHA loans.

Minimum down payments vary by loan program:

• FHA requires 3.5%
• Conventional requires 3% for first-time home buyers, 5% for all others
• USDA & VA require 0%
• Forgiveable grants and down payment assistance programs are also availabe

A typical purchase or refinance transaction takes between 30-45 days. Many variables dictate the length of a transaction, many of which are out of a lender’s control such as attorney review, title searches, appraisal inspections, seller requirements, etc. While every effort is made to meet the contractual closing dates in a purchase contract, the date is merely an estimated target and not set in stone; it can be and often is changed as the transaction progresses.

A home inspection is a safety and quality assessment of a property that is going to be sold. It is performed by a licensed home inspector and provides information on the various systems and structures within a home. While not required by the lender, it is strongly advisable to obtain a home inspection on any property you plan to purchase.

An appraisal inspection is different than a home inspection. An appraisal report is used by a lender to determine the fair market value of a property and the percentage of the value it will lend. While you pay for the appraisal and are entitled to a copy, the lender is the intended user of the report and the legal client of the appraisal company.

The validity of a bonafide, underwritten preapproval is determined by the age of documentation in the loan file. Income, asset and credit documentation will expire at varying times, but as long as the documentation is updated timely, and your overall income, asset and credit profile remains stable, your preapproval can be extended indefinitely. 

FHA mortgages are insured by the Federal Housing Administration and protect the lender from default. If you fail to pay your mortgage, the FHA will reimburse the lender for the balance owed. This added protection allows lenders to take more risk and lend to borrowers with lower credit scores and/or higher debt ratios. A conventional mortgage often conforms to Fannie Mae or Freddie Mac underwriting guidelines and is better suited for borrowers with higher credit scores.

A down payment assistance (DPA) program helps eligible homebuyers cover the cost of their down payment and closing costs. DPAs can be grants, loans, or tax credits. DPAs are usually funded by state and federal housing agencies, banks, and neighborhood nonprofit housing authorities. Some programs also offer forgivable loans or grants that don’t need to be repaid.

No, and many homebuyers put down much less. The minimum down payment required varies by loan amount. VA and USDA loans allow for 100% financing and no down payment. FHA loans require 3.5% down and Conventional loans require only 3% down.

Once you are pre-approved, you can begin shopping for a home! Your mortgage loan originator will provide estimated payments and cash-to-close figures on properties you are interested in. Be sure to send us any properties of interest to ensure you are comfortable with the payments before you invest time to see them!

When you are ready to make an offer your loan officer will prepare an offer-specific preapproval letter that includes the property address, the amount of your initial offer, and any other information that your real estate agent may need to help you secure a contract on the property.

A mortgage contingency clause in a sales contract stipulates that the buyer’s offer to purchase the property is contingent upon the buyer’s ability to obtain mortgage approval. If the buyer is not approved for the mortgage, the buyer can terminate the contract without penalty and recover their initial deposit.

A typical purchase or refinance transaction takes between 30-45 days. Many variables dictate the length of a transaction, many of which are out of a lender’s control such as attorney review, title searches, appraisal inspections, seller requirements, etc. While every effort is made to meet the contractual closing dates in a purchase contract, the date is merely an estimated target and not set in stone; it can be and often is changed as the transaction progresses.

Closing costs can vary greatly but are typically between 3% and 6% of the purchase price. On a $300,000 purchase, closing costs can range between $9,000 and $18,000.

Technically called Discount Points, they represent prepaid interest at closing in return for a lower (discounted) interest rate and payment over time. Points are charged as a percentage of the loan amount and are paid as a closing cost (i.e., 1 point or 1% of a $300,000 loan amount is $3,000.00).

It depends upon how long you remain in the mortgage. For example, let’s say your rate on a $300,000 mortgage is 7% and your payment is $1,995/month. Paying 1 point (1% of the loan amount) costs $3,000 at closing but lowers the rate to 6.5% and delivers a payment of $1,896 per month. You pay $3,000 today to save $98.80 per month. This can be a good investment if you remain in the mortgage long enough to recover the costs ($3000 / $98.80 = 31 months to break even).

Prepaid items include any property-related expenses that are required by the lender to be prepaid at closing. Common prepaid items include property taxes, homeowner insurance premiums, association dues, and mortgage interest.

A down payment assistance (DPA) program helps eligible homebuyers cover the cost of their down payment and closing costs. DPAs can be grants, loans, or tax credits. DPAs are usually funded by state and federal housing agencies, banks, and neighborhood nonprofit housing authorities. Some programs also offer forgivable loans or grants that don’t need to be repaid.

No, and many homebuyers put down much less. The minimum down payment required varies by loan amount. VA and USDA loans allow for 100% financing and no down payment. FHA loans require 3.5% down and Conventional loans require only 3% down.

You can on a refinance. On a purchase, the costs cannot be rolled in however, they can be paid by the seller, the lender, the builder, the realtor, or any other interested party to the transaction. The use of seller credits is a very common approach to effectively financing your closing costs into the mortgage.

Yes, however including property taxes and homeowner insurance premiums in your mortgage payment is a popular and common practice. The lender sets up an escrow account and collects 1/12th of your annual property expenses each month. The funds are held in a non-interest-bearing account and used to pay the tax bills and insurance premiums when they become due, so you don’t have to. If the loan is paid off, the lender must refund any excess money in the account within 30 days.

Hard inquiries are a necessary part of applying for a mortgage. Multiple hard inquiries can hurt your score, particularly for unsecured credit such as credit cards. Credit bureaus recognize similar inquiries for secured mortgage financing and treat them as a single inquiry, so you generally will not be penalized for inquiries for one loan type made within a 14-45 day period depending upon the scoring model. Click Here for a link to our credit blog post with more information on this commonly asked question.

Credit card balances are the largest influencing factor of your score on any given day and time. Your FICO score changes daily with fluctuations in your active daily balances.

Credit is like a muscle; it needs to be used repeatedly to stay strong. Using your credit cards and paying them off in full every month is the fastest way to increase your FICO score.

Opening secured credit cards is the fastest way to generate credit activity that will be reported to the credit bureaus and result in a FICO score.

No, and many homebuyers put down much less. The minimum down payment required varies by loan amount. VA and USDA loans allow for 100% financing and no down payment. FHA loans require 3.5% down and Conventional loans require only 3% down.

Minimum down payments vary by loan program:

• FHA requires 3.5%
• Conventional requires 3% for first-time home buyers, 5% for all others
• USDA & VA require 0%
• Forgiveable grants and down payment assistance programs are also availabe

Yes, however including property taxes and homeowner insurance premiums in your mortgage payment is a popular and common practice. The lender sets up an escrow account and collects 1/12th of your annual property expenses each month. The funds are held in a non-interest-bearing account and used to pay the tax bills and insurance premiums when they become due, so you don’t have to. If the loan is paid off, the lender must refund any excess money in the account within 30 days.

This all boils down to the math and what you intend to do with the funds. A HELOC is great if you need repeated access to funds and plan to pay the balance off quickly. If you are consolidating other debt or plan to carry a larger balance for an extended period, it is often smarter to refinance your existing mortgage. Even if the rate is higher, the overall payment is often lower.

A home inspection is a safety and quality assessment of a property that is going to be sold. It is performed by a licensed home inspector and provides information on the various systems and structures within a home. While not required by the lender, it is strongly advisable to obtain a home inspection on any property you plan to purchase.

An appraisal inspection is different than a home inspection. An appraisal report is used by a lender to determine the fair market value of a property and the percentage of the value it will lend. While you pay for the appraisal and are entitled to a copy, the lender is the intended user of the report and the legal client of the appraisal company.

Technically called Discount Points, they represent prepaid interest at closing in return for a lower (discounted) interest rate and payment over time. Points are charged as a percentage of the loan amount and are paid as a closing cost (i.e., 1 point or 1% of a $300,000 loan amount is $3,000.00).

It depends upon how long you remain in the mortgage. For example, let’s say your rate on a $300,000 mortgage is 7% and your payment is $1,995/month. Paying 1 point (1% of the loan amount) costs $3,000 at closing but lowers the rate to 6.5% and delivers a payment of $1,896 per month. You pay $3,000 today to save $98.80 per month. This can be a good investment if you remain in the mortgage long enough to recover the costs ($3000 / $98.80 = 31 months to break even).

All lenders, including Informed Mortgage, offer competitive interest rates. Interest rates are controlled by the price of mortgage-backed securities, also referred to as mortgage bonds, or MBS for short. Interest rates and their associated costs fluctuate daily as the price of mortgage bonds changes. Several other factors go into determining your interest rate, and for these reasons, it is impossible to advertise an interest rate that applies to everyone. We believe Mortgage News Daily to be one the most accurate and reliable sources for average daily interest rates.

A temporary buydown provides payment relief from higher interest rates by allowing a buyer to make a reduced payment based upon a lower interest rate during the first few years of a mortgage term. Click Here for more information on Temporary buydowns and how they work.

FHA mortgages are insured by the Federal Housing Administration and protect the lender from default. If you fail to pay your mortgage, the FHA will reimburse the lender for the balance owed. This added protection allows lenders to take more risk and lend to borrowers with lower credit scores and/or higher debt ratios. A conventional mortgage often conforms to Fannie Mae or Freddie Mac underwriting guidelines and is better suited for borrowers with higher credit scores.

A down payment assistance (DPA) program helps eligible homebuyers cover the cost of their down payment and closing costs. DPAs can be grants, loans, or tax credits. DPAs are usually funded by state and federal housing agencies, banks, and neighborhood nonprofit housing authorities. Some programs also offer forgivable loans or grants that don’t need to be repaid.

Private mortgage insurance (PMI) insures a percentage of the loan balance on a conventional loan with a down payment of less than 20 percent. PMI protects the lender—not you—if you stop making payments on your loan. PMI can be paid monthly with your mortgage payment, or it can be paid as a single premium at closing or a combination of both.

Private mortgage insurance (PMI) will cancel automatically when your loan balance reaches 78% of the home’s original value. You can ask your lender to remove it when you believe the value has reached 80% however, this may require an appraisal to prove the value.

The length of FHA mortgage insurance is based on the loan to value (LTV) at the time of closing. For 30-year mortgages, the MI will cancel after 132 months (11 years) if the LTV at closing is 90% or less. If the LTV is greater than 90%, the MI will remain on the loan for life. FHA MI is a declining renewal, meaning that it gets recalculated on the loan anniversary each year and will slowly decline as the balance gets smaller.

The validity of a bonafide, underwritten preapproval is determined by the age of documentation in the loan file. Income, asset and credit documentation will expire at varying times, but as long as the documentation is updated timely, and your overall income, asset and credit profile remains stable, your preapproval can be extended indefinitely. 

Once you are pre-approved, you can begin shopping for a home! Your mortgage loan originator will provide estimated payments and cash-to-close figures on properties you are interested in. Be sure to send us any properties of interest to ensure you are comfortable with the payments before you invest time to see them!

When you are ready to make an offer your loan officer will prepare an offer-specific preapproval letter that includes the property address, the amount of your initial offer, and any other information that your real estate agent may need to help you secure a contract on the property.

A mortgage contingency clause in a sales contract stipulates that the buyer’s offer to purchase the property is contingent upon the buyer’s ability to obtain mortgage approval. If the buyer is not approved for the mortgage, the buyer can terminate the contract without penalty and recover their initial deposit.

A renovation loan provides funds to purchase or refinance and renovate the property with a single mortgage. The loan amount for a renovation loan is based upon the after-improved value of the property, allowing for larger loan amounts needed to cover the cost of renovations. You can find more information about renovation loans on our website here.

Most mortgages are sold to either Fannie Mae or Freddie Mac after closing, this enables the lender to recycle their money and make more loans. The right to collect the mortgage payments remains with the original lender. These “servicing rights” are valuable. Sometimes the lender may sell the servicing rights immediately after closing, or possibly years after, for many reasons. Regardless of who collects your payment, rest assured that the original terms can never change, just the address you send the payment to.

Since mortgages are paid in arrears, meaning you always pay for interest that accrued during the prior month, the first payment is typically due after you have held the mortgage for one full calendar month. For example, if you close on the 25th of January, your closing costs include prepaid interest for January 25th – January 31st. Interest then accrues during February which is paid with the first payment due on March 1st. Payments are not considered late until the 16th of the month.

Only full mortgage payments can be credited to your account, so many servicers will not accept partial payments. Those that do will hold the funds in a “suspense” account and wait until the balance of the payment is received before posting the payment to the account. Click Here for our blog post and more information on partial payments.

Bi-weekly payments require half a mortgage payment to be made every two weeks resulting in 26 half-payments, or 13 full payments, over the calendar year. The prepayment of one extra principal and interest payment results in paying down the mortgage balance faster and provides interest savings by shortening the term of the loan. Click Here for more information on bi-weekly payments.