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QUESTIONS YOU NEED ANSWERED BEFORE YOU GET A MORTGAGE.

1.  What is the interest rate?

2.  How long is the rate good for?

3.  Do you offer both fixed and variable interest rates?
     (A fixed interest rate is one that does not change for the life of the loan.
       A variable interest rate will go up or down.  It will be based on a rate determined by the financial institution.
       A variable interest rate may change quarterly or semi annually or annually depending on the standard
        chosen by the lender.)

4.  Will you sell my loan? (Many institutions sell mortgage loans to third parties.  The lender received money for your loan from a third party.  That way the lender will have more money to lend to other borrowers.  This may also be away your lender can get you a lower rate from a lender out of the area.)

5.   If you sell my loan to whom will I make my payments?
     (Some lenders will sell your loan, but retain the 'servicing rights.'  In this case, you will continue to make payments to your lender and you may never know some other institution owns your loan. )

6.   Who will make the decision on my application? 
      Your loan officer?   Someone else?   Or some one from another lender in another town?

7.   Will my credit report be pulled locally or from  an out of the state credit reporting agency?

8.   If I have a question, or problem, is there a real person I can talk to regarding my credit report?

9.  Will my lender provide me with a copy of my credit report?
     This question has several answers.
            First.  If you have applied for a job and your prospective employer pulls your credit report, they are required to give you a copy of the report.
            Second.  The Fair credit Reporting Act says the credit bureaus can not tell the lenders not to give you the information in your report.  Some states require the lenders to provide a copy of the report, if the report is used for mortgage purposes.  Illinois does not require the reports be give out.  If your lender has pulled your mortgage report from us, they can provide you with a "consumer copy" of your report at no cost to you or to them. 
            Third.   If you are turned down for a loan or if your loan is approved with terms less favorable then you requested and would normally been given to others with good credit,  the creditor will give you the name, address and toll free number, to call the credit bureau.  You can then get a copy of the report from that credit bureau.  (This free credit report does not count against your free annual credit report)

10.  Will my lender provide me with a copy of my credit score?
     Again this question has several answers.    
              First.  If the loan request is for a mortgage on a single residence or a 1 to 4 unit home, the lender must provide the credit score and a special score notice. 
              Second.  If the lender did not request the score, then they are not required to provide you with the score.  This law applies to any loan using any type of mortgage as security.
              Third.  If the security for  the loan is not a mortgage on residential property,  they are not required to provide you with the score.

11.  Are there any application fees?

12.  What are the closing costs and how are they determined?
         Closing costs vary from Lender to Lender and from loan type to loan type. Typical loans costs include the appraisal fee, credit report, flood determination, title/legal work, document preparation, closing fee, state and county recording fees, inspection fees such as termite, well, septic, and radon, and loan origination (Points, origination (Points) fees.

The lender will provide you with a good faith estimate and truth in lending disclosure that you can use to compare closing costs as disclosed by other lenders and/or loan types.

 Earl Riley,  Pekin Community Bank,   (e-mail:  Earl.Riley@mortonbank.com)

13.   Does my credit score affect my interest rate? (also see question 18)

14.  If so, can you tell me how I can improve my score.
 
15.  What Are Points?
    Point(s) are part of the your closing costs paid to the lender at closing. Each point equals 1% of the mortgage amount. The interest rate you pay on your mortgage is reduced by the number of your points.

That is points in simplistic terms -- below are benefits if you want to expand:

> The total amount of interest paid over the life of the loan will be reduced by paying the upfront point expense at closing
> You can calculate the dollar benefit of the points by the difference in the mortgage payments based upon the interest rates.
> Your "break-even" time frame is determined by the monthly payment difference divided into the dollar amount of the points. For example you save $20 a monthly in payments and your point expense was $750. It would take you 37.5 months to recoup your point expense and then you are $20 ahead every month going forward.
> Points are more beneficial for longer fixed rate terms than shorter ones or adjustable rate mortgages.

If you need further information or I can be of other service, please let me know.

Adam Angst, Better Banks,  (e-mail:  aangst@betterbanks.com)

 
16.   What do I need to bring to the bank the first time I come in?

Current paystubs covering 30 days earnings (handwritten pay stubs are not acceptable).
Last 2 years W2's
Current 2 months' bank statements
Current stock/bond/ retirement statement
Divorce Decree, if applicable
Copy of sales contract (Signed purchase agreement for the home being purchased)

This information is sufficient to get the loan application started. 
Marian Grebner, Herget National Bank (e-mail:  mgrebner@herget.com)


The following items may also be needed at your loan interview and will allow faster processing and approval on your application.

•    Proof of paid charge-offs, copy of Recorded Release of Judgments, receipts for paid off collections.
      (if any, from credit reports you pulled on yourself in Step 1)

•    Non-refundable commitment fee to be applied to the closing costs.

•    Realtor listing sheet on the home (or lot size, tax ID, tax amount, legal description).

•    Signed U.S. Tax Returns, including all schedules, for the last two years if you earned commissions, are self-employed, have significant interest or dividend income, or own rental property.  If self-employed, please bring business tax returns for the last 2 years.  Also bring business balance sheets  for the last two years and a year-to-date profit and loss statement if the business is a partnership, corporation or S-corporation.

•    Name, Address, and phone number, payment amounts and balances for all mortgage loans, installment loans, credit cards and other debts.

•    Statements (originals) for the last three months for all savings, checking certificates, mutual funds, brokerage accounts, 401(k) plans, employee savings plans and other investments.

•    Offer to purchase or listing agreement, if selling present home.

•    If receiving child support, maintenance or alimony, and if using that income to qualify, bring copies of the last 12 months pay record  form the Circuit Clerk’s Office.

17.  What is Flood Determination and Flood Insurance?

Flood Determination is the process of looking at a property on a flood map to see if any part of the property is located in a flood zone. Normally, there is a life of loan tracking charge included in the price that is charged to the borrower.

Flood Insurance is insurance coverage that protects the homeowner from any damages that may occur as a result of a flood. There are certain zones that require flood insurance. Property located in zone A would be required to have flood insurance.

Flood zones are geographic areas that the Federal Emergency Management Agency (FEMA) has defined according to varying levels of flood risk.

These zones are depicted on a community's Flood Hazard Boundary Map or a Flood Insurance Rate Map (FIRM). Each zone reflects the severity or type of flooding in the area.

Below are brief definitions of the FEMA flood zones. For comprehensive flood zone definitions, visit the NFIP Web site. If you'd like additional information, contact your agent or find an agent serving your area.

Moderate to Low Risk Areas In communities that participate in the NFIP, flood insurance is available to all property owners and renters with moderate to low risk.

Zones B, C, and X
Areas with less than a 1% chance of flooding each year; areas that have less than a 1% chance of sheet flow flooding with an average depth of less than 1 foot; areas that have less than a 1% chance of stream flooding where the contributing drainage area is less than 1 square mile; or areas protected from floods by levees. No base flood elevations or depths are shown within these zones.


High Risk Areas
In communities that participate in the NFIP, mandatory flood insurance purchase requirements apply to all A zones.

Zone A
Areas with a 1% annual chance of flooding and a 26% chance of flooding over the life of a 30-year mortgage. Because detailed analyses are not performed for such areas; no depths or base flood elevations are shown within these zones.

Zone AE and A1-A30
Areas with a 1% annual chance of flooding and a 26% chance of flooding over the life of a 30-year mortgage. In most instances, base flood elevations derived from detailed analyses are shown at selected intervals within these zones.

Zone AH
Areas with a 1% annual chance of shallow flooding, usually in the form of a pond, with an average depth ranging from 1 to 3 feet. These areas have a 26% chance of flooding over the life of a 30-year mortgage. Base flood elevations derived from detailed analyses are shown at selected intervals within these zones.

Zone AO
River or stream flood hazard areas, and areas with a 1% or greater chance of shallow flooding each year, usually in the form of sheet flow, with an average depth ranging from 1 to 3 feet. These areas have a 26% chance of flooding over the life of a 30-year mortgage. Average flood depths derived from detailed analyses are shown within these zones.

Zone AR
Areas with a temporarily increased flood risk due to the building or restoration of a flood control system (such as a levee or a dam). Mandatory flood insurance purchase requirements will apply, but rates will not exceed the rates for unnumbered A zones if the structure is built or restored in compliance with Zone AR flood plain management regulations.

Zone A99
Areas with a 1% annual chance of flooding that will be protected by a Federal flood control system where construction has reached specified legal requirements. No depths or base flood elevations are shown within these zones.

Cory Biers,  First  State Bank in Mendota, cbiers@firststatebank.biz



18.  Credit Scores  What are they?
  
 Credit scores are a mathematical representation of how you have paid your bills and they are used to predict how you will pay your bills in the future.

Your Credit Score could affect you in many ways.  Interest rates, down payments, loan points, deposits (on purchases or for apartment rents), insurance premiums may all be determined by your credit score.

There are several different models of credit scores.  Each credit bureau has their own models.

TransUnion uses one called  “Your Personal Score Model.”  It's scores range from 450 to 950.  Experian uses one called “Scorex.”  It’s scores range from 300 to 900.  Experian also sells VantageScore.

The newest model is VantageScore.  It was developed by the three main national credit bureaus, TransUnion, Experian and Equifax.  It’s scores range from a low of 501 to a high of 990.

The following information applies only to Fair Isaac. 
Fair Isaac scores can not be compared to any other model from any other company.

The most widely used model is called:    Fair Isaac or FICO.

The Experian / Fair Isaac Corporation Risk Score produces a score which summarizes the information on the credit bureau file.  It is a single three-digit number ranging from 350–840, which ranks consumers according to future credit risk.

Lenders use credit scores because they are:   A.  consistent-  the same data equals the same decision.  B. Objective.  There is no underwriter bias.  C.  Fast. The results are returned with the credit report.  D.  Accurate.  The look at all relevant data.

Credit scores look only at:  1.  Tradelines (loan and credit information provided by creditors.)  2.  Credit related inquiries (inquiries for employment and inquiries by you to the three national credit bureaus or to the free site set up by the Fair Credit Reporting Act do not count against your score.)  3.  Collections. And 4.  Public Records (Bankruptcies, Tax liens, judgments.)

Multiple inquiries for mortgage purposes in the last 30 days only count as one inquiry.  After 30 days multiple inquiries for mortgage purposes in a 14 day period count as one inquiry.  So, if you are looking at several lenders, and if they check your credit within 14 days of each other, your score will not be affected.  (Auto loan inquiries are treated the same way.)

The Fair Isaac Model has five major parts to their formula.

Payment history:                 35%
Outstanding debt:                30%
Length of credit history:      15%
Recent inquiries:                 10%
Types of credit in use:         10%

The older the paid accounts or inquiries, the less weight they have on your score.

For example,  (the points deducted in this example may not be exactly correct):   Let’s say you have an unpaid collection that is 4 years old.  It will take off at least 24 points from your score.  Any unpaid collection will deduct from your score.  When you pay the collection, your score will not be reduced immediately. ( unless it was a large amount.)  However each month after it is was paid, it will have less impact and less deductions on your score.  A collection paid off 25 months ago has no impact on your score.

•    My score determines whether or not I get credit.
    •    Lenders use a number of facts to make credit decisions, including your FICO Score.  Lenders look at information such as the amount of debt you can reasonably handle, given your income, your employment history, and your credit history.  Based on their perception of this information, as well as their specific underwriting policies, lenders may extend credit to you although your score is low, or decline your request although your score is high.  (myfico.com)

•    A poor score will haunt me forever.
    •    Just the opposite is true.  A score is a “snapshot” of your risk at a particular point in time.  It changes as new information is added to your credit bureau files.  Scores change gradually as you change the way you handle credit.  (myfico.com)

•    My score will drop if I apply for new credit.
    •    If it does it probably won't drop much.  If you apply for several credit cards within a short period of time, multiple requests for your credit report information (called inquiries) will appear on your reports.  Looking for new credit can equate with higher risk, but most credit scores are not affected by multiple inquiries from auto or mortgage lenders within a short period of time.  (myfico.com)

•    Average Credit Scores?
    •    According to Experian, (May 2006)  the average credit score in Illinois for a person with a mortgage is 713. 
The average credit score without a mortgage in Illinois is 658.

    And, according to Fair Isaac, 58% of the population has a 700 to 840  score.  27% have a 600 to 699 score and 15% have a 350 to 599 score.

19.  What are Credit Report Triggers?

Credit  Report Triggers are notices sent to lenders when you apply for a mortgage loan.

Unless you have "opted out" with the credit bureaus, when you apply for a mortgage loan, your lender's credit bureau inquiry will be sent to other lenders who have paid the credit bureaus for information on consumers applying for mortgage loans.  (Click here to see an article in the Peoria Journal Star regarding Triggers.)



If you have any questions that we have not answered, e-mail us. 
We will either post it here or e-mail a response to you.