Frequently Asked Questions

When you work with any lender, they refer to credit report, credit score, assets, current debt, income, and investments which make up your “credit package”.  So yes, your credit score will impact the amount of money you can borrow as well as what rate you’ll pay for your mortgage loan.

Your credit score is based on all the information in your credit report.  The higher your score, the better your interest rate on your mortgage loan.  Most lenders compare your scores from the three major credit reporting agencies– Equifax, Experian, and TransUnion – and use the middle score for deciding what rate to offer you.

Short answer is – it depends.  There are multiple factors to carefully consider if you have a foreclosure in your past. For example, how far back in your history was your foreclosure?  Most credit reports drop a foreclosure after seven years from the reporting.   Talk to our Bay Mountain Mortgage team before you rule out the possibility of being able to buy a home again.

Bay Mountain will make sure you’re ready for each step.  The Consumer Financial Protection Bureau (CFPB) provides the below closing checklist.

Before the closing:

• Do not make any big financial transactions during the closing of your loan (such as buying a car or opening a new credit card) – continue paying your monthly bills as always but keep your financial picture stable.
• Make sure you receive your closing documents in advance (either electronic or paper copies) so that you can review them. Your lender is required to send you your Closing Disclosure (CD) at least three business days before closing. It’s especially important for you to review the Closing Disclosure, the promissory note, mortgage, most recent escrow estimate, and the notice of right to cancel for refinances.
• Ask Bay Mountain about any fees you do not understand.
• You should also review the Closing Disclosure to ensure that the payments are what you expected.
• Make any arrangements to transition from your current home to your new home. This includes signing up for essential services like gas, electric, or water connections. You should contact the utility companies a few days prior to closing.

During the closing:

• Review the documents for accuracy and ask any questions you have.
• Do not make any big financial transactions during the closing of your loan (such as buying a car or opening a new credit card) – continue paying your monthly bills as always but keep your financial picture stable.

After the closing:

• Understand when your first payment is due and whether you’ll be paying it online or with a check.
• Make sure to file your change of address with all your financial institutions where you do business.
• If you’re not paying your property taxes and homeowner’s insurance monthly through an escrow arrangement, start setting aside money to pay these bills when they arrive.
• Understand that your property taxes may increase over time

Understand that your property taxes may increase over time.

The Loan Estimate is a new form that goes into effect on October 3, 2015.

Beginning October 3, 2015, loan officers are required to provide you with a Loan Estimate once you have provided:

• your name,
• your income,
• your Social Security number (so the lender can pull a credit report),
• the property address,
• an estimate of the value of the property, and
• the desired loan amount.​​​​​​

You can choose to give more information. The more information you can provide the loan officer about your financial situation, such as debts and income sources, the more accurate the information on your Loan Estimate is likely to be.

A lender can consider the amount of such income and likelihood that it will continue, as a form of income.  A lender may consider factors such as whether there is a written agreement or court decree, how long and how regularly you have been receiving payments, and the creditworthiness of the payor when that information is available.

These are the fees associated with closing the loan and include items such as appraisal fees, taxes, and title insurance.  You, as the borrower, generally pay all the closing costs.  Depending on the contract or State law, the seller may pay for some of these costs. In some cases, you can negotiate with the seller for a “credit” towards your closing costs, but the seller will usually require you to pay a higher price for the home in order to cover the costs of this credit. The lender may also offer to give you a credit to help with your closing costs. This credit isn’t free either. You can discuss loan pricing to get a lender credit in exchange for a higher interest rate.​​​​​​​

The principal and interest payment on a mortgage is typically the main components of your monthly mortgage payment. The principal is the amount you borrowed and have to pay back, and interest is what the lender charges for lending you the money.

Your total monthly payment you send to your mortgage company may include other items such as homeowners insurance and taxes that may be held in an escrow account.

If you have an impound account (commonly referred to as an escrow account), you pay a set amount with every monthly mortgage payment for these expenses. Your mortgage company typically holds the money in the impound account until those insurance and tax bills are due, and then pays them on your behalf. If your loan requires other types of insurance like private mortgage insurance, these premiums may also be included in your total mortgage payment as well.

When making a lower downpayment, mortgage insurance lowers the risk to the lender of making a loan to you, so you can qualify for a loan that you might not otherwise be able to get without the insurance. Mortgage insurance protects the lender.

Most common are borrowers making a down payment of less than 20 percent of the purchase price of the home will need to pay for mortgage insurance. Mortgage insurance also is commonly required on FHA and USDA loans.

Adjustable rate mortgages can be very complicated. There are many parts to an adjustable rate mortgage that can affect how much the mortgage will cost you. If you are considering an ARM, make sure to read the terms carefully and ask lots of questions until you understand exactly how each of these features of the mortgage works.  The biggest question being when and how often will the interest rate and your monthly mortgage payments be adjusted and are there rate caps on the loan? 

Fannie Mae (FNMA) and Freddie Mac (FHLMC) are government-sponsored enterprises (GSEs) created by Congress to provide liquidity, stability, and affordability to the U.S. housing market. They purchase mortgages from lenders, freeing up capital for new loans, and package them into mortgage-backed securities (MBS). They do not lend directly to homebuyers but operate in the secondary mortgage market, supporting about 70% of the U.S. mortgage market. While they were private companies historically, the U.S. government took control of them in 2008 following the financial crisis. Fannie Mae traditionally purchases loans from the larger, commercial banks.  Freddie Mac historically works with small thrift banks.

According to the National Association of Realtors, 25% of first-time homebuyers use a gift from a relative as some or all of their down payment.  So yes, you can use a gift as a down payment, but it must be used correctly.  Every mortgage loan program has specific rules and regulations around where gift money can come from and how it must be documented.  Before accepting any money that you intend to use as your down payment, you should speak to your Bay Mountain Mortgage professional.