Our Loanwise specialists have pooled their experience to create this list of straightforward answers to the most common customer questions.
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I haven’t heard of you before. Are you new to the business?
Our loan originators and executives have decades of combined industry-leading experience. After working for the largest players in the mortgage industry and learning the hard lessons of the Great Recession, the founders of Loanwise envisioned a better way of doing business and built this company from the ground up to transform the way people get home loans.
We are already licensed in 27 states, and our team is growing rapidly as more and more talented professionals are drawn to our innovative and people-focused business model.
I saw a lower interest rate advertised somewhere else. Do you really offer the best rates?
Advertised rates are based on situations that assume high income, good credit, substantial savings or equity, and usually a couple discount points. Even if you meet these criteria, various other factors affect the final interest rate of a mortgage, such as the length of the loan’s term, whether and how the interest rate will be adjusted in the future, and the intended usage of the residence.
Our Loanwise specialists will gladly explain all these details to you and prove that our rates are indeed competitive.
Why do you need to pull my credit?
All lenders refer to credit scores and credit history when determining what interest rate to set for loans, and at Loanwise we ask for this up front so we can give you accurate information about your options from the very beginning. Without your credit report, it is impossible to give you a meaningful estimate of what interest rate and loan amount you can be qualified for.
Getting preapproved for a mortgage will not significantly affect your credit score. The credit-reporting companies realize that smart borrowers shop around at different lenders in order to find the best rate, and so multiple credit pulls within a short period of time are usually counted as a single credit check.
All the personal information you submit is secured and your privacy is protected at all times.
Why are there so many steps to the mortgage process? Why should buying a home take longer than buying a car?
There are many more regulations and guidelines for purchasing real estate than there are for other forms of property, especially since the subprime mortgage crisis of 2007-2009 and the Great Recession. For many people, their home is their most valuable asset, and the health of the real-estate market is vital to the national economy overall. Home ownership also has greater ramifications when it comes to filing taxes and establishing legal residency.
While this means that there is no way for buying a house to be as quick as buying a car, at Loanwise we have streamlined the process to make it as fast and simple as possible. We will make sure you close your loan on time.
Why do I need to provide so much documentation? Why does it matter where my money comes from?
Ever since the subprime mortgage crisis of 2007–2009 that helped cause the Great Recession, federal regulations and guidelines have been put in place to help prevent another financial catastrophe in the real estate industry.
In years past, when the housing market was booming, many borrowers reported more income than they actually had, and many lenders were willing to approve mortgages without making sure borrowers could really afford them. Some joke that the motto of this time was, “Have a pulse? Here’s your mortgage.”
This carefree attitude backfired once the housing market began to decline. The high rate of default on all the high-risk, “subprime” loans on the market triggered a banking crisis that set the whole national economy back by years. The government and the mortgage industry have responded by enforcing more thorough requirements for qualification.
This does not mean that every home loan has to be a headache, however. Here at Loanwise, our streamlined process and superior customer service means that we can comply with regulations and guidelines and still make getting a mortgage fast and simple for our customers.
What if I’m in the process of selling my current home?
It’s a good idea to begin the preapproval process even while you’re still selling your current home, because once that sale is finished, you’ll be poised to quickly move ahead with the purchase of your new home.
We know that closing on time is essential to a smooth and successful move, and at Loanwise we pride ourselves on working with customers to make the process as fast and simple as possible.
What do I need to qualify for a mortgage?
There are three main considerations:
What if I’ve had a foreclosure or bankruptcy?
If you have a foreclosure on your credit history, you will generally not be able to get approved for a conventional mortgage until seven years after the property transfer date. For VA loans and FHA loans, the minimum waiting period is three years.
If you have filed for bankruptcy, you will have to wait a certain number of years before you can get approved for a mortgage. The length of time depends on the type of bankruptcy and whether property was included in it, and the time period is shorter if you are applying for a loan through a government-backed program such as HARP. Short sales have similar implications. Consult one of our Loanwise specialists to get advice tailored to your specific situation.
Why wouldn’t I qualify for a mortgage even if my credit score was good?
Federal regulations and guidelines cannot be bent, and it takes more than just a good credit score to qualify. You must also have an acceptable level of income and ratio of debt to income (DTI), as well enough cash saved up to pay for a down payment and closing costs.
The specific items on your credit history also matter. Even if your overall credit score is a high number, certain things such as late mortgage payments, liens, and judgments weigh more heavily with mortgage lenders.
Why wouldn’t I qualify for a mortgage even if I had plenty of income?
There are federal regulations and guidelines that lenders must follow, and income is only one factor in the equation. You also need cash saved up for a down payment and closing costs, as well as an acceptable credit score and credit history.
When you calculate your monthly income, you must also calculate your monthly recurring debt. That means adding up all the monthly bills that are impossible for you to cancel, such as car payments, credit card payments, and student loan payments. Your ratio of debt to income (DTI) is very important: If your income is very high, but your debt is also very high, then you will qualify for less.
Your income must also be well documented. Generally, you must show two years of income from the same employer or employers in the same industry. If you are self-employed, bear in mind that only the taxable income you report to the IRS will count.
Why wouldn’t I qualify for a mortgage even if I had a lot of money saved up?
Federal regulations and guidelines set the standards that lenders must follow, and your cash on hand is only one piece of the puzzle. You also need an acceptable credit score and credit history, as well as a sufficiently high level of income and a sufficiently low ratio of debt to income (DTI).
In addition, if the money for your down payment has been in your bank account for less than two months, then you will need to provide extra documentation of its source.
Why wouldn’t I qualify for refinancing even if I had high equity?
As with getting a mortgage for a new house, there are federal regulations and guidelines for refinancing, and equity is only one requirement. Lenders must also look at your credit score and credit history, as well as your level of income and ratio of debt to income (DTI).
Also keep in mind that a new appraisal may have to be done to determine the value of your home. Your equity may be higher or lower than you think, depending on how your home’s value has changed since you got your original mortgage.
What does APR mean? How is that different from the interest rate?
The interest rate is what determines the actual monthly payment, and the APR is an adjusted version of the interest rate that takes some of the upfront costs of the loan into account. Two loans may have the same interest rate, but if one of them requires the borrower to pay more fees, that extra expense will be reflected as a higher APR.
APRs are meant to make it easier for borrowers to shop around for loans. In theory, a lower APR means a cheaper loan overall, but the reality is usually not so simple. You must always research the terms of a loan carefully before making a decision.
Does Loanwise charge lender fees?
No! Loanwise prides itself on offering both competitive rates and low closing costs.
Why would the closing costs be higher than I expected?
Remember that in addition to the third-party fees that must be paid at closing, there are usually prepaid items to cover as well, such as the interim interest that accrues between the closing date and the first mortgage payment, as well as the deposit to set up an escrow account for your property taxes and insurance.
Why is my payoff amount higher than my remaining balance?
Each month’s mortgage payment covers the previous month’s interest, which means you are always one payment behind on interest. When your payoff amount is calculated, it includes all the money you need to pay in order to completely pay off a mortgage by a certain date.
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