Crosstate Mortgage Corp. FAQ - Mortgage Questions

We have put together the following helpful information about the mortgage loan application process.  If you have any additional questions, do not hesitate to contact one of our mortgage bankers.

Is there a fee or any obligation if I apply?


There's no cost for completing an online application and obtaining an online loan approval. Upon receiving your online loan approval, you will be given an opportunity to lock your rate. If you wish to lock your rate, you will be asked to provide a credit card number to pay for an appraisal fee. You will be informed of the actual cost for your appraisal, a service performed by an independent third party.

What happens after I apply?


Upon submission of your application, our mortgage banker will run programs and pricing to find you the best rate and loan program.  The mortgage banker will also run our automated underwriting system along with your credit and determine whether your application meets our guidelines for approval. If you wish to lock your rate, you will be asked to submit a $405-$445 appraisal fee by credit card.

You will receive an email and call from your Relationship Manager no later than the end of the next business day. The email will list the supporting documentation required to close your loan (paystubs, bank statements, etc.). Attached to the email will be a fax coversheet to be used to send the documentation.

You will also receive a call from an appraiser within a day or two of submitting your application. It is important that you schedule the appraisal inspection as quickly as possible to keep the process moving forward.

On purchase transactions, your loan documents will be sent to your closing agent for signing. On refinance transactions, your loan documents will be sent to a title company who will contact you to arrange a convenient time to come to your home for signing.

We are confident we will close your loan in a timely manner as long as you fax your supporting documentation within 1-2 days of request and schedule your appraisal inspection in a timely manner.

What supporting documentation is required?


You will be asked to support your income with a recent paystub and the prior year's W-2 form. Self-employed borrowers will be asked to support their income with the prior one or two years' tax returns (depending on the loan program selected.) Funds needed to close the transaction will typically be supported with a copy of a recent bank statement. If proceeds from the sale of another property are being used for the down payment, an estimated closing statement on that transaction will be required prior to closing.

How quickly can you close my loan?


Our standard lock period is 45 or 60 days depending on market conditions. We are confident we will close your loan in this timeframe as long as you fax your supporting documentation within 1-2 days of request and schedule your appraisal inspection in a timely manner.

What are included in your closing costs and prepaids?


Closing Costs are "one time costs to obtain a mortgage, paid at closing" and include the following:

Lender Fee: We charge one all-inclusive Lender Fee, which includes processing, and underwriting.
Discount Points OR Rebate: You may elect to pay discount points to buy down your interest rate. Or you may choose a slightly higher rate and obtain a rebate to offset some or all of your closing costs.

Appraisal Fee: Your appraisal fee is collected in advance via your credit card.

Closing Agent and Title Insurance: Closing agent (or attorney) and title insurance fees are guaranteed if you use the national service provider we contract with to provide these services in your state. You will notice that these fees are extremely competitive due to the high volume of business that we provide to these service providers.

Government Recording Charges:
The county recorder's office will charge a recording fee to record your new mortgage or deed of trust.

Government Transfer Taxes: Some states, counties and cities charge a transfer tax (also known as a Mortgage Tax or Tax Stamps) when you purchase a property or refinance a mortgage.
Prepaids are "recurring costs of homeownership, partially prepaid at closing" and include the following:

Initial Escrow/Impound Account Deposit: If an escrow/impound account is to be established for the ongoing payment of your property taxes and homeowner's insurance, funds will be collected at close to make an initial deposit into the account so that sufficient funds will be available to pay these recurring expenses as they become due.

Prepaid Interest: Your mortgage payment due date will be the first of each month. If your loan is closed on any day other than the first of the month, prepaid interest will be collected at closing, calculated from the date of closing through the end of the month.

First Year Homeowner's Insurance Premium: If your loan is a purchase transaction, your first year's homeowner's insurance premium will be collected at closing and paid to your insurance company.

Should I pay discount points?


Each discount point is equal to one percent of the loan amount. Discount points are paid to obtain a lower rate. Whether you should pay discount points depends on your tax situation and how long you expect to be in the property. To calculate how many years it takes to "break even" on the amount paid for points, divide the difference in points by the difference in rate.

There may also be tax advantages to paying points. For most taxpayers, points paid on purchase loan transactions are tax deductible in the year the home is purchased and points paid on refinance transactions are tax deductible over the life of the loan. Tax consequences vary so we encourage you to consult your tax advisor.

What is a rebate?


A rebate is a credit to the borrower by the lender for taking an interest rate higher than the zero point rate. The lender hopes to recapture the amount paid by collecting a higher interest rate over the life of the loan. Rebates may be used to offset any non-recurring closing costs, including the lender fee, appraisal, closing agent, title insurance, recording and/or transfer taxes. Rebates may not be used to offset prepaid expenses, such as prepaid interest, initial escrow/impound account deposit or homeowner's insurance premium.

Can I prepay the loan without a penalty?


You can pay off your mortgage any time with no additional charges.

Should I consider a loan with private mortgage insurance (PMI)?


Private Mortgage Insurance (PMI) 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. The PMI insurance premium is based on the loan-to-value ratio and is included in your monthly payment.

On a 1-unit primary residence or second home, federal regulations require that PMI be automatically cancelled when your loan balance reaches 78% of the original property value at the time the loan was secured. Depending on the loan program, you may be able to request in writing that PMI be removed sooner, based on an increase in the property value as determined by a new appraisal to be ordered by the servicer. Generally, PMI must have been in place for at least two years and you must have a good payment history for PMI to be cancelled under this scenario.

Is paying off an existing second mortgage or home equity line considered cash out?


If your existing second mortgage or home equity line was not obtained in conjunction with purchasing your home, then paying it off with a new mortgage is considered cash out.

What is a subordination agreement?


A subordination agreement is a document prepared by a second mortgage lender agreeing to remain in second position when a first mortgage is refinanced. Without such an agreement, the second mortgage holder would move into a first lien position when the existing first mortgage was paid off. The second mortgage lender usually charges a fee to process the subordination agreement, which is incurred by the borrower. Additionally, this process often increases the amount of time necessary to process a first mortgage refinance transaction, so an applicant wishing to subordinate a second mortgage may want to take down a 45 day lock to ensure sufficient time to obtain the subordination agreement.

What is a three day right to cancel?


On refinance transactions, Federal law mandates that you have three days, after signing your loan documents, in which to cancel your loan. This three day period includes Saturdays, but excludes Sundays and holidays. Your loan will not be funded until this period has expired.

What is title insurance and why do I need it?


The function of title insurance is to make sure your rights and interests to the property, and those of your lender, are fully protected. Title companies issue two types of title policies: an Owner's Policy which covers the homeowner and a Lender's Policy which covers the lending institution. If the loan is for a home purchase, both types of policies are issued at the time of closing. If the loan is a refinance, you already have an owner's policy that was issued when you purchased the property, so only a lender's policy will be issued.

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 to cover losses arising from a valid claim. This protection remains in effect as long as you or your heirs own the property.

What is prepaid interest?


Prepaid interest is paid at the time of closing of your loan to cover the interest that will accrue on your new loan for the remaining days of the month in which it is funded. You will make no payments in the month immediately following the month in which your loan funds. You will then begin making payments on the first of each month for the prior month's interest.

What is the difference between a Rate and an APR?


The note rate is used to calculate your interest payment each month. The APR (Annual Percentage Rate) is a calculation based on standardized federal regulations. In addition to the interest rate, it factors in points and loan-related fees in an attempt to better show the total cost of the financing over the scheduled life of the loan. The APR is designed to help borrowers fairly compare different lenders and loan options.

What if I'm not sure about the property value, sales price or amount I want to borrow?


If you're not sure about exact amounts, please make an educated best guess. Websites such as Zillow.com and Eppraisal.com may be helpful. The appraisal (and sales contract, if purchase) will ultimately be used to determine the value of the property. Prior to drawing your loan documents, your processor will send you an estimated closing statement and you will have an opportunity to adjust your loan amount as you deem appropriate.

Will my overtime, commission, or bonus income be considered when evaluating my application?


In order for bonus, overtime, or commission income to be considered, you must have a history of receiving it and it must be likely to continue. We'll usually need to obtain copies of W-2 statements for the previous two years and a recent pay stub to verify this type of income. If a major part of your income is commission earnings, we may need to obtain copies of recent tax returns to verify the amount of business-related expenses, if any. We'll average the amounts you have received over the past two years to calculate the amount that can be considered as a regular part of your income.
If you haven't been receiving bonus, overtime, or commission income for at least one year, it probably can't be given full value when your loan is reviewed for approval.

We will always attempt to approve you for the loan without using these sources of additional income to reduce the amount of documentation you need to provide.

Will my second job income be considered?


Typically, income from a second job will be considered if a two-year history of secondary employment can be verified.

How will you verify income on a self-employed applicant?


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 one, and sometimes a full two-year history of self-employment to verify that your self-employment income is stable.

I am retired and my income is from pension or social security. What will I need to provide?


We will ask for copies of your recent pension check stubs, or bank statement if your pension or retirement income is deposited directly in your bank account. Sometimes it will also be necessary to verify that this income will continue for at least three years since some pension or retirement plans do not provide income for life. This can usually be verified with a copy of your award letter. If you don't have an award letter, we can contact the source of this income directly for verification.

If you're receiving tax-free income, such as social security earnings, in some cases we'll consider the fact that taxes will not be deducted from this income when reviewing your request.

Do I have to provide information about my child support, alimony or separate maintenance income?


Information about child support, alimony, or separate maintenance income does not need to be provided unless you wish to have it considered for repaying this mortgage loan.

I have income from dividends and/or interest. What documents will I need to provide?


Generally, two years personal tax returns are required to verify the amount of your dividend and/or interest income so that an average of the amounts you receive can be calculated. In addition, we will need to verify your ownership of the assets that generate the income using copies of statements from your financial institution, brokerage statements, stock certificates or Promissory Notes.
Typically, income from dividends and/or interest must be expected to continue for at least three years to be considered for repayment.

We will always attempt to approve you for the loan without using these sources of additional income to reduce the amount of documentation you need to provide.

How will rental income be verified?


If you own rental properties, we'll generally ask for the most recent year's federal tax return to verify your rental income. We'll review the Schedule E of the tax return to verify your rental income, after all expenses except depreciation. Since depreciation is only a paper loss, it won't be counted against your rental income.

If you haven't owned the rental property for a complete tax year, we'll ask for a copy of any leases you've executed and we'll estimate the expenses of ownership.

What is a credit score and how does it affect my application?


Credit scores (FICO scores) are based on information collected by credit bureaus and information reported each month by your creditors about the balances you owe and the timing of your payments. A credit score is a compilation of all this information converted into a number that helps a lender to determine the likelihood that you will repay the loan on schedule. The credit score is calculated by the credit bureau, not by the lender. Credit scores are calculated by comparing your credit history with millions of other consumers. They have proven to be a very effective way of determining credit worthiness.

Some of the things that affect your credit score include your payment history, your outstanding obligations, the length of time you have had outstanding credit, the types of credit you use, and the number of inquiries that have been made about your credit history in the recent past.
Credit scores used for mortgage loan decisions range from approximately 300 to 900. Generally, the higher your credit score, the lower the risk that your payments won't be paid as agreed.

Will the inquiry about my credit affect my credit score?


An abundance of credit inquiries can sometimes affect your credit scores since it may indicate that your use of credit is increasing. But don't overreact. The data used to calculate your credit score doesn't include any mortgage or auto loan credit inquiries that are made within the 30 days prior to the score being calculated. In addition, all mortgage inquiries made in any 14-day period are always considered one inquiry. Don't limit your mortgage shopping for fear of the effect on your credit score. If a lender gives you this advice, it is probably because they do not offer competitive rates and are afraid you will discover this by shopping for a mortgage with other lenders.

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