Q:What factors do lending companies generally consider when applying for a home loan?

Legally, there is no legal requirement for a loan company to consider anything, but in general, loan companies will consider the following factors:

1. Proof of work history, salary history, and current employment, which usually requires the submission of a federal tax return and W-2 form. If your income is from other sources, such as real estate investments, child support or other investments, you will also need to submit supporting documentation.

2. Credit history. The lending company will usually obtain your credit status, such as credit score and amount of credit card debt.

3. Amount of debt. For example, car loans, alimony, support, etc.

4. Assets. Such as cars, rental properties, stocks, bonds, cash, savings, IRS, retirement accounts, mutual funds, etc.

5. Sources of out-of-pocket payments. Note that if you have a gift from a relative, the loan company will require proof of the gift.

Q:What loan information is the lender legally required to let the lender know?

Federal law requires lenders to disclose all loan fees, such as appraisal fees, lender's attorney fees, escrow fees, lender servicing fees, loan interest rates, etc.

Under the Federal Good Faith Lending Act, all lenders or institutions must use a consistent calculation method to disclose loan fees for consumer comparison. And loan rates must be communicated to lenders in the form of APRs.

In addition, the federal Equal Credit Opportunity Act, prohibits discrimination on the basis of race, religion, color, national origin, sex, marital status, and receipt of public financing.

Q:What is a fixed rate loan?

A fixed rate loan is one in which the interest rate is fixed for the life of the loan, usually 15, 20 or 30 years. However, the monthly repayment of the principal and interest on the loan varies. Usually at the beginning of the loan, more interest is repaid, so more is deductible at the end of the year on your tax return.

Q:What is a variable rate loan?

There are several types of variable rate loans, depending on the lender's changing interest rate, or the amount or timing of repayment:

1. Variable Rate Loans: These loans usually offer a low, fixed interest rate for the first few years, and then the interest rate changes with an index, but at the same time the lender limits the maximum amount of change. Some loans are also limited to a minimum amount.

2. Convertible ARM: This type of loan usually allows the lender to convert a variable rate loan to a fixed rate loan within a certain period of time. For example, the interest rate is fixed each year for the first five years.

3. Renegotiable Rate Loan: This type of loan usually fixes the interest rate and monthly payments for the first few years and then allows the lender to renegotiate the interest rate.

4. Graduated Payment Loan: Payments on this type of loan are lower in the first two years, but will gradually increase in years 5-10.

5. Shared Appreciation Loan: This type of loan offers a lower interest rate than the market, but at the same time the lender shares in the appreciation of the home. The borrower must pay the lender the shared portion of the appreciation when the home is sold or for the duration of the agreement.

Q:What is a balloon loan?

A balloon loan requires the lender to pay off the entire balance of the loan within a certain period of time, usually 3, 5 or 7 years. The interest rate on this type of loan can be fixed or variable.

Q:What is an over-loan?

An excess loan is a loan that exceeds the amount allowed by Fannie Mac and Freddie Mac. The interest rate on an excess loan is usually higher than other loans.

Q:What is an assignable loan?

An assignable loan allows the borrower to transfer the loan to the next buyer. Most loans are usually pay-off-on-sale loans, and only a few lenders offer assignable loans. It is important to note that the interest rate on an assignable loan is usually not the original loan rate, and the lender will charge an assignment fee.

Q:What is an early payoff penalty?

Early payment penalties are very restricted and even illegal in most states, but it is entirely possible for a lender to pay off a penalty early in the first few years of a loan. Usually the penalty is 1-2% of the loan.

Q:Who will the deed to the house go to when I close on it?

In so-called Title States, such as New York State, the deed is held by the lending bank until the loan is paid off. But in what is called a Lien State, such as New Jersey, the deed is given to the buyer.

Q:What happened when the loan company said the loan was sold to another bank at the time of closing?

Most loans are resold to mutual funds or insurance companies after closing, and the loan company simply acts as an intermediary loan servicer, handling monthly payments, real estate taxes, etc. Under the National Affordable Housing Act of 1990, the lender must:

1. notify the lender at least 15 days before the effective date of the loan resale.

2. The notice must include the name and address of the newly acquired lender, the effective date, the date of change of the first payment, and a toll-free number.

3. The terms of the loan cannot be changed.

4. Provide the borrower with a 60-day contingency period. During this period, no late payment penalties may be added.