Our Frequently Asked Questions may help guide you through the beginning stages of the home buying processes.
How can I improve my credit score?
Be aware. To improve your credit score it is important to be aware of what’s on your credit history. There are three major credit bureaus, Experian, Equifax and TransUnion. Each has its own credit report and score for you based on your credit history. Even if you believe your report doesn’t have any problems, it’s a good idea to check it regularly.
The Fair Credit Reporting Act gives consumers the right to obtain a free copy of all three credit reports once each year. These free reports can be accessed on the government-mandated site operated by the big three credit bureaus, www.AnnualCreditReport.com. If you find an error, you’ll have to file a separate dispute with each credit bureau since they’re run separately from one another. If there are multiple errors on your credit reports, you’ll need to dispute each of those individually.
Be educated. By understanding what factors contribute to your credit score you can pinpoint where you need to improve. Things like overdue payments, amount of debt, age of accounts, history of credit inquires, and both revolving and installment credit can all affect your credit.
Be dedicated. It can take time to increase your credit score to where you need it to be. Improving on your weaknesses and paying off debt or collections accounts can be a process.
Should I talk with a bank before looking at a home?
Yes!!! While there are many reasons why you should talk with a bank, the first and foremost reason is to help you understand exactly how much you can afford.
You also know how much you’ve saved for a down payment, which in turn will determine the type of loan you should pursue. The lenders at Wilmington Savings Bank, can pre-qualify you for an amount that will fit your budget and need without having a specific house in mind. This process let’s you look at homes within your price range. While this does not guaranty loan approval, it gives you a place to begin the shopping process.
What documents do I need to bring when applying for a loan?
- Most Recent Pay Stub with YTD info
- Most Recent 2 Yrs. W2’s
- Most Recent 2 Yrs. Tax Returns (All Schedules/K1’s) If Self-Employed (Signed & Dated)
- Entitlement Awards Letters (Social Security, Disability)
- Retirement /Pension Statements
- Most Recent 2 Months Bank Statements ALL PAGES (Include Name & Account #)
- Letter of Explanation for All Large Deposits over $3000
- Most Recent Investment Statements ALL PAGES (If Included as an Asset)
- Letter of Explanation on any Credit Issues
- Copy of Homeowner’s Insurance Policy (If Refinance)
- Divorce Decree / Dissolution (Child Support & Alimony Described) (If Applicable)
- Copy of Rental Agreements for all Investment Properties Owned (If Applicable)
- Copy of Purchase Contract or Listing if Current Home is being Sold (If Applicable)
- Contract to Purchase (If Purchasing a New Home) (If Applicable)
Are there costs associated with buying a home?
Yes!!! There are costs associated with the initial purchase of the home such as pre-paid items and the on-going costs of owning the home such as homeowner’s insurance and real estate taxes.
The closing costs on a mortgage loan can be quite alarming. There are several costs that are necessary for home loans. While some of these fees are the same no matter what the amount of the loan is, others are based on the amount of money you are borrowing.
- Credit report for the borrowers
- Appraisal report of the property
- Closing agent costs for preparing the loan documents and facilitating the loan closing
- Title searches and the possibility of title insurance
The costs of owning the home also work into your budget allowance. There is the on-going homeowner’s insurance that protects you and the bank from losses of the home due to fire, wind, and potential weather damage. The real estate tax is also another item that is an on-going expense. This money is what is owed to the county, city and or township in which the property resides. These payments can be added to your monthly mortgage payment, commonly referred to as an escrow payment. This amount is calculated from the last payment made on the account or an estimate of what the payment will be and divide it by 12 monthly payments and add that amount to your monthly mortgage payment. The bank would then be responsible for making those payments on your behalf. See the example below:
- Annual Homeowner’s Insurance Policy: $ 600.00 Monthly: $ 50.00
- Annual Real Estate Taxes: $1250.00 Monthly: $104.17
- Monthly Escrow Payment added to your Mortgage Payment: $154.17
While other costs may be involved such as private mortgage insurance or flood insurance, the ones listed above are costs that every home with a mortgage is required to pay.
Should I refinance my mortgage?
Many homeowners ask this question. There’s not always a simple answer to that question. It depends on a variety of factors and the circumstances of the homeowner.
Refinancing a mortgage means to pay off an existing loan and replace it with a new one. Homeowners look at refinancing for several reasons, including opportunities to:
- Obtain a lower interest rate
- Shorten the term of their mortgage
- Take advantage of a home’s equity to finance a large purchase
There is a cost to refinancing and how long will it take you to recoup that cost. If you do not plan on staying in the home for a long period of time, then it may not be worth it to refinance. As a rule, if you can recoup the cost in two to three years, and you plan on staying in the home for several years beyond that time, refinancing is probably a good move.
How much savings is a good incentive to refinance? If you can lower your interest rate by at least ½ %, then it’s worth looking into refinancing.
If you can shorten the terms of your mortgage in addition to lowering our rate, you can potentially cut years off your mortgage and save thousands of dollars in interest over the life of the loan.
Refinancing can be a great financial move if it reduces your mortgage payment, shortens the term of your loan or helps you build equity in your home more quickly. The lending service providers at Wilmington Savings can discuss the ins and outs of refinancing and help you decide if it’s the right move for you.