Frequently Asked Questions

A “soft credit inquiry” is a financial background check that does not affect your credit score. A “hard credit inquiry” is a more involved investigation of a buyer’s credit and finances. Additionally, hard credit inquiries also can reduce a buyer’s credit score by three to five points or so.

The United States Department of Agriculture (USDA) home loans are intended for rural homebuyers and allow for lower down payment and more liberal credit requirements in an attempt to encourage development in rural areas. In fact, there is no down payment for a USDA home loan. There are however county-based income restrictions that are applicable…

Mortgages are generally referred to as conventional mortgages if they are supported and backed by the credit guidelines of Fannie Mae or Freddie Mac. These are the government sponsored private corporations which set the standards and guidelines for most originated mortgages in the country today. Examples of non-conventional mortgages…

Since the USDA program was designed with rural housing development in mind, the location of the home must be in a USDA eligibility zone. If not, the property will be ineligible for USDA financing. Click here to see if your property qualifies.

In addition, there are maximum income eligibility restrictions with USDA…

A second mortgage (otherwise known as a “junior-lien”) uses property as collateral that already has another loan secured by the same property. The lien takes a subordinate position to the primary lien in the event of foreclosure, resulting in higher risk and consequently less favorable terms and rates. Typical examples of “second mortgages” are

The simple answer is it depends. In 2018 with the change in tax laws and significant increase of the standard deduction, many individuals who would have been able to itemize mortgage interest as a deduction in the past became unable to do so due to the use of the standard deduction. This is definitely a…

The debt-to-income (DTI) ratio is the ratio of your total housing and debt payments (including installment and revolving minimum monthly payments) divided into your monthly gross income. This information is often used by lenders to determine borrowing risks.

While circumstances can vary significantly based upon individual circumstances, most financial planners will tell you to keep your housing payments (including mortgage principal and interest, Property Taxes, Home Owners insurance, Private Mortgage Insurance, and Home Owner’s Association Fees to between 25-35% of your monthly gross income.

Just because you have applied with a mortgage lender, that does not mean you are under any obligation to close with them. In fact, you are able to walk away from a transaction at any time right up to the closing table (and even three days after due to right of rescission laws in the…

Credit scoring is one of the most misunderstood factors of mortgage banking. The algorithms that go into it are complex in nature and to make matters worse, there are actually 49 different FICO (short for Fair Isaac Corporation) modeling scores available. Fannie Mae & Freddie Mac only accept 8 of those scoring models, so many…

Being pre-approved means that a lender has evaluated your finances and concluded that based on the information provided to that point, you are eligible for mortgage financing. Pre-approval gives you an advantage when making an offer on a house, because it shows the seller that your credentials and resources have already been verified with…

Not necessarily, but pre-approvals often require the use of a “hard credit inquiry,” which can reduce the buyer’s credit score by approximately three to five points and will appear on your credit report for up to two years.

Yes, you can have multiple pre-approvals from different lenders. Each pre-approval letter has an expiration date, so be mindful of that as you continue your house hunt.

A conditional mortgage approval means that your mortgage underwriter is generally pleased with your application, and they are willing to approve your request for financing as long as you are able to meet certain conditions that they will list in that approval. Examples of approval conditions may include items such as evidence of homeowner’s insurance,…

Per standard underwriting guidelines, 401K loan payments are not considered when calculating debt to income ratios, therefore have little to no bearing on a mortgage application. For more information on factors that affect qualifying click here.

Technically speaking mortgage pre-approvals are good as long as the circumstances that were used to obtain the pre-approval (income, employment, credit, debts, etc) don’t change. That said, those circumstances are usually evidenced by the collection of documents (bank statements, paystubs, credit report, etc.) each of which have a qualifying usage expiration date of usually…

About 8% of mortgage applications are denied by underwriters on average, although the rate varies depending on location. That percentage will drop if you are working with an educated, experienced loan officer.

Some of the common reasons an underwriter may deny a loan are a low credit score, changes in employment status, lack of seasoned, verifiable assets, property issues, and more.

Ideally, you want to speak with a New Jersey mortgage representative about 3-6 months before starting your home search. This allows enough time for your Loan Officer to run your credit report and vet out any potential issues with your credit. They can also make recommendations about paying down credit balances, gathering assets, and stabilizing…

The rule of thumb is 3-4 weeks from the time you apply for an NJ Mortgage to the time a commitment letter is generated. This timeline however can be improved if your lender is running efficiently and you are able to provide any documents quickly when requested. It also could be improved if there is…

The economy will have an influence on mortgage rates prior to locking and protecting a mortgage interest rate; however, once the rate is protected there is no affect on a fixed-rate mortgages. By law, the terms of the securitized note cannot change once the loan has closed. Conversely, mortgages with adjustable rates can be affected…

A common misconception is that your mortgage rate is protected upon application. This is not necessarily the case. The application for the mortgage and the rate protection are two distinctly separate actions. Depending on your circumstances and advice from your NJ mortgage lender or financial planner, you may choose not to lock (Float) your interest…

The length of rate protection is dynamic in nature and usually can be adjusted by your New Jersey mortgage lender to accommodate your circumstances and your expected closing date. Usually, they come in 15-day increments and most standard rate locks are 30, 45, or 60 days. That said, the shorter the rate protection, the more…

Most New Jersey mortgage lenders will allow for a “Float Down” of your interest rate once the initial rate lock is set. That said, there is usually some kind of cost. Generally, the lender may charge 1/4-3/8 points in fee for the privilege of floating down or may simply float your rate down to the…

A jumbo loan is a type of mortgage that is used for expensive properties that exceed the local conforming or high balance loan limit. These can be riskier loans for the lender as they are not protected against any losses incurred by a defaulting borrower, and as a result generally will carry a higher…

A “conforming loan limit” is the maximum dollar amount of a mortgage that can be purchased or guaranteed by Fannie Mae and Freddie Mac. Those loan limits will vary depending on the county and the number of units (1-4) that the property contains. Click here for…

A “conforming loan” is a low-interest mortgage intended for borrowers with excellent credit that adheres to the limits defined by the FHFA (Federal Housing Finance Agency.)

Standards for underwriting are set by the two government-sponsored agencies of Fannie Mae and Freddie Mac. These two agencies set the guidelines and verification requirements for the mortgage industry. When your New Jersey Mortgage Lender is looking for documents, they are simply adhering to the standards set forth by these two agencies so that the…

Many times after initial documents are reviewed your New Jersey mortgage lender will ask for additional information. This is due to the fact that questions have arrived after the review of the initial documentation that needs clarification. Many times, the documents provided will tell a story that may lead to additional questions. It is also…

Each document (including the credit report) in the mortgage application file has a finite shelf life and will need updating if it has expired by the time of the mortgage closing. Most documents are good for 90 days, however, some may have shorter expiration dates. Expiration dates can vary slightly from lender to lender.

Seller concessions will not affect an appraised value, however they can affect the purchase price of the home if the amount of the concessions exceeds the closing costs of the buyer. Since the lender will calculate their loan to value off the lower of the appraised value or the purchase price, it can have an…

Seller concessions cannot be used for any other purpose than reducing the closing costs of the buyer. As such, they cannot be applied to down payments, home furnishings, or used as a way to receive a concession for a cure to an inspection issue. If the concessions exceed the amount of the closing costs,…

Seller concessions can be applied to certain costs and fees, including property taxes, appraisals, title insurance, attorneys and more. Visit our “Understanding Seller Concessions” page for more in-depth information on seller concessions.

As of 2022, the PMI rate varies between 0.55% and 2.25% of the original loan amount. PMI rates will vary depending on the type of loan, down payment and credit score. For more information on PMI click here.

A cash-out refinance is a mortgage-refinancing option in which an old mortgage is replaced by a new one with a larger amount than owed on the previously existing loan, therefore providing them with the difference in cash at closing. In this way, it allows borrowers to tap into their home equity for things like home…

Seller concessions are an agreement, written into the purchase contract of a Real Estate transaction, which state that the seller will contribute a certain amount toward closing costs normally paid for by the buyer. Visit our “Understanding Seller Concessions” page for more in-depth information on seller concessions.

Since there are many facets to closing on a mortgage and many entities that contribute, such as title, settlement, escrows, etc. it takes time to gather all the information, and consequently the costs, that would be related to your particular home in your particular township for a closing. Because of this, your New Jersey Mortgage…

With any NJ Cash-Out Refinance (or any refinance for that matter) on a primary residence, the loan is funded 3 days (not counting Sunday) after the loan closes. This is to allow for a three-day “Right of Rescission” period that is required by New Jersey state law. This affords the consumer the opportunity to rescind…

Bear in mind that there are 2 parts to every mortgage that can be sold post-closing. They are the securitized note and the servicing. While a large portion of the securitized notes in the country will be sold off to Fannie Mae and Freddie Mac, that sale will generally be transparent to the consumer. What…

With any refinance, there is a loan payoff from your previously held mortgage generated for the closing. This is so the new lender and title company know how much to pay to your current lender in order to satisfy the debt, which allows the current mortgage on the house to be released. When you pay…

As of 2022, manufactured homes that are 20 years old or younger meet the age requirement for VA financing. In addition to meeting the age requirement, it must also be up to local codes and VA property requirements and be located on a permanent foundation.

No, VA loans do not require a down payment. In fact, they will also allow for seller concessions to pay for closing costs thus significantly reducing the costs due at closing compared to other types of loans. Visit our VA Home Loans page for more information.

There is no limit to how many times you can use a VA loan, assuming that you are eligible for the loan and can qualify with a lender. Additionally, it is possible to take out multiple VA loans simultaneously if certain conditions are met. Visit our VA Home Loans page for more information on…

Applying for an FHA mortgage is similar to applying for a conventional loan. With a home purchase their is an FHA addendum required with the contract of sale and there are slightly more stringent requirements with the appraisal such as replacement of lead based paint applied prior to 1973. For more information check out our…

The Federal Housing administration offers expanded guidelines for FHA mortgages vs their conventional counterparts. These include lower down payment requirements, higher allowances for debt-to-income ratios and more liberal credit guidelines. Visit our FHA Home Loans page for more detailed information on FHA qualifying.