FAQ

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Mortgage

How will a past bankruptcy or foreclosure affect my ability to obtain a new mortgage?

Depending on the chapter of bankruptcy you declared, a bankruptcy record is deleted either seven or 10 years from the date you filed it. If you’ve had a bankruptcy or foreclosure in the past, it may affect your ability to get a new mortgage. Please contact your Loan Officer for specific information based on your individual situation.

I’m getting a financial gift from someone else. Is this an acceptable source for my down payment?

Gifts are an acceptable source of down payment, if the gift giver is related to you or your co-borrower. We’ll ask you for the name, address, and phone number of the gift giver, proof of receipt as well as the donor’s relationship to you.

I’ve had a few employers in the last couple years. Will that affect my ability to get a new mortgage?

Having changed employers frequently is typically not a hindrance to obtaining a new mortgage loan. This is particularly true if you made employment changes without having periods of time in between without employment. We’ll also look at your income advancements as you have changed employment. However, if you’re paid on a commission basis, a recent job change may be an issue since we’ll have a difficult time of predicting your earnings without a history with your new employer.

I’m self-employed. How will you verify my income?

Generally, the income of self-employed borrowers is verified by obtaining copies of personal (and business, if applicable) federal tax returns for the most recent two-year period. However, based on your entire financial situation, we may not need full copies of your tax returns.

We’ll review and average the net income from self-employment that’s reported on your tax returns to determine the income that can be used to qualify. We won’t be able to consider any income that hasn’t been reported as such on your tax returns. Typically, we’ll need at least a full two-year history of self-employment to verify that your self-employment income is stable.

Do you require flood insurance?

Federal Law requires all lenders to investigate whether each home they finance is in a special flood hazard area as defined by FEMA, the Federal Emergency Management Agency. The law can’t stop floods. Floods happen anytime, anywhere. But the Flood Disaster Protection Act of 1973 and the National Flood Insurance Reform Act of 1994 help to ensure that you will be protected from financial losses caused by flooding.

We use a third party company who specializes in reviewing flood maps that have been prepared by FEMA to determine if your home is located in a flood area. If it is, then flood insurance coverage will be required, since standard homeowner’s insurance doesn’t protect you against damages from flooding.

I’m purchasing a home. Do I need a home inspection AND an appraisal?

Both a home inspection and an appraisal are designed to protect you against potential issues with your new home. Although they have totally different purposes, it makes the most sense to rely on each to help confirm that you’ve found the perfect home.

The appraiser will make note of obvious construction problems such as termite damage, dry rot or leaking roofs or basements. Other obvious interior or exterior damage that could affect the salability of the property will also be reported. However, appraisers are not construction experts and won’t find or report items that are not obvious. They won’t turn on every light switch, run every faucet or inspect the attic or mechanicals.

That’s where the home inspector comes in. Inspectors generally perform a detailed review of the entire house and can educate you about possible concerns or defects with the home. Accompany the inspector during the home inspection. This is your opportunity to gain knowledge of major systems, appliances and fixtures, learn maintenance schedules and tips, and to ask questions about the condition of the home.

I’m currently renting and haven’t told my landlord that I might be moving. Will you need to contact my landlord?

In most cases, we won’t need to contact your landlord at all. However, if you have a limited credit history, obtaining information about your rental payment history may help us to approve your loan. Please let us know if you would prefer that we not contact your landlord.

What is mortgage insurance and when is it required?

First, let’s make sure that we mean the same thing when we discuss mortgage insurance. Mortgage insurance should not be confused with mortgage life insurance, which is designed to pay off a mortgage in the event of a borrower’s death. Mortgage insurance makes it possible for you to buy a home with less than a 20% down payment by protecting the lender against the additional risk associated with low down payment lending.

Low down-payment mortgages are becoming more and more popular, and by purchasing mortgage insurance, lenders are comfortable with down payments as low as 3-5% of the home’s value. It also provides you with the ability to buy a more expensive home than might be possible if a 20% down payment were required.

The mortgage insurance premium is based on loan to value ratio, type of loan, and amount of coverage required by the lender. Usually, the premium is included in your monthly payment and one to two months of the premium is collected as a required advance at closing. It may be possible to cancel private mortgage insurance at some point, such as when your loan balance is reduced to a certain amount — at or below 80% of the property value. Federal Legislation requires automatic termination of mortgage insurance for many borrowers when the loan balance has been amortized down to 78% of the original property value. If you have any questions about when your mortgage insurance could be cancelled, please contact your First Internet Bank Loan Officer.

What is title insurance and why do I need it?

If you’ve purchased a home before, you may already be familiar with the benefits and terms of title insurance. But if this is your first home loan or you are refinancing, you may be wondering why you need another insurance policy. The answer is simple: The purchase of a home is most likely one of the most expensive and important purchases you will ever make. You, and especially your mortgage lender, want to make sure the property is indeed yours — that no individual or government entity has any right, lien, claim, or encumbrance on your property. A title insurance company makes sure your rights and interests to the property are clear, that transfer of title takes place efficiently and correctly, and that your interests as a homebuyer are fully protected.

Title insurance companies provide services to buyers, sellers, real estate developers, builders, mortgage lenders, and others who have an interest in real estate transfer. These companies typically issue two types of title policies: An owner’s policy that covers you, the homebuyer, and a lender’s policy that covers the lending institution over the life of the loan. Both types of policies are issued at the time of closing for a one-time premium, if the loan is a purchase.

If you are refinancing your home, you probably already have an owner’s policy that was issued when you purchased the property, so we’ll only require that a lender’s policy be issued.

Before issuing a policy, the title company performs an in-depth search of the public records to determine if anyone other than you has an interest in the property. The search may be performed using either public records or, more likely, the information contained in the company’s own title plant. After a thorough examination of the records, any title problems are usually found and can be cleared up prior to your purchase of the property.

Once a title policy is issued, if any claim covered under your policy is ever filed against your property, the title company will pay the legal fees involved in the defense of your rights. They are also responsible for losses arising from a valid claim. This protection remains in effect as long as you or your heirs own the property. The purpose of title insurance is to eliminate risks and prevent losses caused by defects in title that may have happened in the past. This risk elimination has benefits to both the homebuyer and the title company. It minimizes the chances that adverse claims might be raised, thereby reducing the number of claims that have to be defended or satisfied. This keeps costs down for the title company and the premiums low for you, the homebuyer.

Buying a home is a big step emotionally and financially. With title insurance, you are assured that any valid claim against your property will be borne by the title company, and that the odds of a claim being filed are slim.

Should I pay discount points in exchange for a lower interest rate on my mortgage?

Discount points are considered a form of interest. Each point is equal to one percent of the loan amount. You pay them up front at your loan closing in exchange for a lower interest rate over the life of your loan. This means more money will be required at closing, however, you will have lower monthly payments over the term of your loan.

To determine whether it makes sense for you to pay discount points, you should compare the cost of the discount points to the monthly payments savings created by the lower interest rate. Divide the total cost of the discount points by the savings in each monthly payment. This calculation provides the number of payments you’ll make before you actually begin to save money by paying discount points. If the number of months it will take to recoup the discount points is longer than you plan on having this mortgage, you should consider the loan program option that doesn’t require discount points to be paid.

If you’d prefer not to make this calculation the “old-fashioned way,” contact one of our Loan Officers at 1-866-742-5158 for assistance.