What do I need to be pre-qualified?

A loan originator will review your income, assets and liabilities to be pre-qualified. Here's a list of items that will be needed:

  • Previous two years of W2s, and last month of pay stubs
  • Most recent two months of bank statements
  • Photo ID
  • And a credit report will be pulled

What is a credit score?

Past delinquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and number of inquiries are all considered in credit scores. Your score considers both positive and negative information in your credit report. Different portions of your credit history are given different weights.

Your credit report must contain at least one account which has been open for six months or more, and at least one account that has been updated in the past six months for you to get a credit score. If you do not meet the minimum criteria for getting a score, you may need to establish a credit history prior to applying for a mortgage.

What are the advantages of fixed-rate versus adjustable-rate loans?

With a fixed-rate mortgage, the interest rate stays the same throughout the duration of the loan. With an adjustable-rate mortgage (ARM), the interest rate will change periodically, most typically in relation to an index. While the monthly payments that you make with a fixed-rate mortgage are relatively stable, payments on an ARM loan will likely change.

During the early amortization period of a fixed-rate loan, a large percentage of your monthly payment goes toward interest, and a much smaller part toward principal. That gradually reverses itself as the loan ages. You might choose a fixed-rate loan if you want to lock in a low rate. If you have an Adjustable Rate Mortgage (ARM) now, refinancing with a fixed-rate loan can give you more monthly payment stability.

You might choose an ARM to take advantage of a lower introductory rate and count on either moving, refinancing again or simply absorbing the higher rate after the introductory rate goes up. With ARMs, you do risk your rate going up, but you also take advantage when rates go down by pocketing more money each month that would otherwise have gone toward your mortgage payment.

What is the difference between the interest rate and the A.P.R.?

The A.P.R. is a tool for comparing different loans, which will include different interest rates but also different points and other terms. The A.P.R. is designed to represent the "true cost of a loan" to the borrower. This prevents lenders from "hiding" fees and upfront costs behind low advertised rates. While it's designed to make it easier to compare loans, it's sometimes confusing because the A.P.R. includes some, but not all, of the various fees and insurance premiums that accompany a mortgage. You can use the A.P.R. as a guide, but you need a mortgage professional to help you find the truly best loan for you.

How do I know which type of mortgage is best for me?

There is no simple formula to determine the type of mortgage that is best for you. This choice depends on a number of factors, including your current financial picture and how long you intend to keep your house. Mortgage Source PA can help you evaluate your choices and make the most appropriate decision.