Mortgage FAQ

Looking for answers?

If this is your first time buying a home – or maybe your first time in a while – chances are you have questions about finding the mortgage that works for you. We have answers. That's because at Monte Hewett Homes, we want to help you find, design, purchase and live in the home of your dreams.

Working with our preferred lenders, we have compiled a quick list of important terms, descriptions of different loans and a list of supporting documentation you will need to secure a mortgage.

Mortgage terms:

• APR (annual percentage rate). This is a standard formula developed by the Federal government to show your actual total yearly cost of a mortgage. This formula includes items such as interest rate, points and other banking fees that are part of your loan.
• PMI (Private Mortgage Insurance). If you request more than 80% of the sales price of your home, lenders typically require insurance to protect them in case you default on your loan.
• Preapproved. For serious homebuyers, this is an important status. You achieve it by completing a loan application, which is then reviewed and approved by an underwriter. This can help you determine the amount you can spend on your new home.
• Prequalified. To “prequalify” you, your lender considers your debt, income, savings and other factors then issues an opinion on your ability to repay a specified amount.
• Truth in Lending. Federal law requires lenders to fully disclose their fees, terms and conditions of the loan. This should include the APR mentioned above.

Types of mortgage loans:

• Fixed Rate Mortgage. Lenders charge a steady interest rate for the term of the loan, usually 15, 20 or 30 years. Shorter loans have a lower total cost due to reduced overall interest charges, but monthly payments are higher. This may be the best type of mortgage when you're planning to stay in your home for a long time.
• Adjustable Rate Mortgage (ARM). With an adjustable rate mortgage, the interest rate paid by the borrower changes at certain times to bring it in line with changing market rates. Some loan rates are fixed for three, five or seven years, then become adjustable for the remaining term. These loans generally start with a slightly lower interest rate, so they are good to consider when you know you'll be moving again after a short time or when you plan to refinance within a couple of years.
• Interest Only Loans. To lower their monthly payments, some borrowers choose an interest-only loan where they pay only on the interest of the loan for a specified period of time. Generally, interest only loans are best for buyers who want to conserve cash and will use them for the short term.

Documentation:
Before securing your loan, you will need to provide supporting documentation to your lender. The following is a list of typical requirements, but you will need to check with your lender to see if additional information is needed.

• Executed purchase and sale contract for the property you wish to purchase.
• A copy of your cancelled earnest money check.
• Pay stubs dating back at least one month and W-2 Forms from the past two years.
• Bank statements for checking, savings and investment accounts for the last two months.
• Income tax returns from the past two years (Federal and State).
• Corporate tax returns, profit/loss statements, balance sheets for any business that you own.
• Gift fund documents, such as a copy of the gift letter and gift check, if you receive gift money to purchase your home.
• Divorce documents, including your divorce decree and settlement agreement if applicable.
• Bankruptcy documents, including petition/discharge papers if applicable.
• DD214 and Original Certificate of Eligibility if you served in the military. You may also need your discharge documentation.
• Landlord contact information, relocation agreement, buyout agreement and/or HUD-1 Settlement Statement as applicable to document your prior residence.
• Our preferred lenders are ready to answer all of your questions on financing a home.