It goes without saying that buying or refinancing a home comes with a lot of questions. After all, a home is likely the largest purchase you will make in your lifetime. Our mortgage bankers at Compass compiled a list of questions their borrowers ask on a regular basis. Here are the answers.
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How much are closing costs? When will I know the final amount?
Typically, closing costs range from 2 to 5 percent of a home's purchase price.
After October 1, 2015, all loan applications will abide by a new set of loan disclosure rules, called the TILA RESPA Integrated Disclosure (TRID). Under TRID, your lender is required to send you a loan estimate within 3 business days, which includes an Estimated Cash-to-Close sheet with fee details related to your loan.
Your lender is also required to provide you with a closing disclosure 3 business days prior to closing (business days do include Saturdays but exclude federal holidays). This closing disclosure will contain all final closing costs.
Why do you need so much documentation?
During the housing collapse of 2008, numerous lending practices were exposed that led to new standards and regulations for mortgage lenders in an effort to protect consumers from entering into loans they simply could not afford to repay. The government now demands that underwriting guidelines require lenders to determine more stringently that borrowers can afford the mortgage.
This is where the documentation you are asked to provide comes in to play. Here is a checklist of common documents necessary for completing your loan application.
How long does a mortgage approval take?
Full mortgage approval is a multi-step process, including compilation of your loan application, loan processing, appraisal, and underwriting. The timeliness of your loan approval is dependent on various factors, including how quickly you provide the necessary documentation your mortgage banker and processor ask of you, timeliness and results of the appraisal, and possible conditions brought back from underwriting, if applicable.
To help keep the process of your mortgage approval on schedule, it is important to provide required paperwork in a timely manner and avoid taking any of these actions while waiting for full approval.
Can I pay off my mortgage early?
Simply put, yes, you can pay off your mortgage early. Some loans, though, are subject to prepayment penalties which would amount to fines if you sold the home and paid off the mortgage or refinanced in a set period of time. If your loan has a prepayment penalty, you will be made aware and provided with a disclosure (required under TRID) stating the maximum amount of the prepayment penalty and the date when the period during which the penalty may be imposed terminates.
For more information about financing your first home, download our free Mortgage 101 Handbook, a great resource for first-time homebuyers.