- Are points tax-deductible?
- Generally, points can be considered tax-deductible for the year in which they are purchased. Refinance loan points are only tax-deductible over the term of the loan. Contact your tax adviser for specific tax rules regarding points.
- Can I finance a vacation home with a loan from OneWest Bank?
- Yes. We have programs to help borrowers purchase or refinance a second home. Apply online or call us toll-free at 1.888.321.FUND to speak with an experienced loan consultant.
- Can I finance an investment property with a loan from OneWest Bank?
- Yes. We provide several ways to help you purchase or refinance an investment property. Apply online or call us toll-free at 1.888.321.FUND to speak with an experienced loan consultant.
- Can I get a loan if I’m not a U.S. citizen or if I live outside the country?
- Yes. As long as the property you are buying or refinancing is in the United States, you can apply for a loan either on the phone or online. We offer special programs for foreign nationals and resident aliens from Canada and Mexico working under NAFTA for FHA, fixed rate and adjustable-rate loans.
- Do I have to buy points?
- Many mortgages are available without points. Buying points allows you to buy down the interest rate on a mortgage.
- How does the closing process work?
- Soon after your loan is approved, your loan consultant will send you a list of documents to bring to the closing meeting. You will also receive an Estimated Settlement Statement of the closing costs, required in the form of a cashier’s check, to be paid at the meeting. Before the closing meeting, you should conduct a final walk-through of the property to make sure all repairs and construction work have been completed, that there’s no new damage, and anything meant to be sold with the home is still in place. At the closing meeting, the legal purchase of your home will be completed by signing final documents and providing a cashier’s check for closing costs. Depending on where you live, the closing meeting may involve all related parties or simply be a transaction conducted by a closing agent.
- How many points should I buy?
- The amount of points you should buy usually depends on how long you plan to stay in your home. The longer your mortgage term, the more you'll benefit from having a lower rate. If you don't plan on owning your home for very long, buying points may not be your best option. A break-even analysis may be useful in determining your decision about purchasing points. Calculate the number of months it will take for the amount you save each month to equal (break even) the up-front cost of the points.
- How much are closing costs?
- Closing costs generally add 1% to 2% to the final bill. You’ll be asked to provide the down payment and closing costs in the form of a cashier’s check at closing. Speak to one of our experienced loan consultants to learn about ways to lower these costs.
- How much financial documentation will I need?
- When you apply for a loan, you will receive a list of the required documentation. Typical documentation includes pay stubs, W2 forms, tax returns and bank statements. Other documentation may be required.
- How much is a down payment?
- Your down payment amount will depend on your credit and the type of loan you choose. The higher your down payment, the lower your monthly payment will be, and vice versa. If you can afford a 20% down payment, you can avoid the extra monthly cost of PMI (Private Mortgage Insurance).
- What are points?
- Also known as discount points, a point is calculated as a percentage of the loan amount. For example, 1 point charged for a $100,000 loan would be $1000, and ½ point for the same loan would be $500. While points are part of closing costs, they are not considered loan fees.
- What are the components of a monthly payment?
Your monthly payment is the sum of four factors, commonly referred to as PITI (Principal, Interest, Taxes, Insurance). You may also be required to pay PMI (Private Mortgage Insurance) on a monthly basis.
- Principal - The amount applied to the loan balance.
- Interest - The charge paid for borrowing money.
- Taxes - Property taxes, which may also be paid separately to your local government.
- Insurance – The insurance required by lenders to protect your home, which may also be paid separately to your insurance company.
- PMI – Insurance that protects your lender against some or most of the losses that would occur if you default on your loan.
- What criteria do lenders use when approving a loan?
- Lenders look at three criteria: Capacity, Credit and Collateral.
The lender will weigh your housing expenses and total debt against your monthly income to determine your ability to repay a loan. The lender will also need proof that you have cash available for a down payment and closing costs by verifying funds from sources such as bank accounts, stocks, bonds, mutual funds, sale of an existing home or gifts from family members.
To determine your credit risk, the lender will look at previous mortgage payment history, rent payment history, credit card use and installment debt payment history. A history of regular, on-time payments will demonstrate integrity and creditworthiness to a lender.
Collateral refers to the borrower’s pledge of property to the lender to secure repayment of the loan. Thus, the lender will need to know the value of the property.
- What do points do?
- Points allow a borrower to buy the loan interest rate up or down. Generally, the lower the interest rate, the more points will need to be purchased. Buying points is an optional loan feature and can be considered a “discount” since they reduce the rate over the entire term of the loan. Points are paid at closing, and the incurring lower interest rate reduces the monthly loan payment.
- What if I can’t supply the necessary documentation for a loan?
- Speak to your personal loan consultant for more information about options that allow you to provide supplementary documentation.
- What is an impound or escrow account?
- Instead of paying large, lump sums to cover the costs of homeowner’s insurance and property taxes, these payments are divided into installments, which are paid to the lender monthly along with the loan principal and interest. The lender holds the money in an impound/escrow account and pays the insurance and taxes from the account when they are due. Impound/escrow accounts may be optional, or they may be required by the lender, depending on the property’s location, the size of the loan in relation to the property’s value, and the type of loan.
- What is homeowner’s insurance?
- Homeowner’s insurance is designed to protect your home. It may be referred to as hazard insurance or fire insurance. While the lender requires this coverage, you determine which insurance company will carry the policy. Homeowner’s insurance premiums are either paid directly to the insurance agency or by your lender through an impound/escrow account.
- What is Private Mortgage Insurance (PMI), and why would I need it?
- Generally, lenders will require you to purchase PMI if your loan is greater than 80% of the property’s value to insure its investment in the property against the possibility of default. An estimate of the amount of PMI you will owe is sent to you within three days of submitting your loan application.
PMI premium is paid monthly along with the mortgage payment. As your equity increases, you may qualify to have PMI removed. Loans can be financed such that PMI is not required, for example, providing a down payment of at least 20%.
- What questions should I ask?
Asking the right questions is crucial to preparing yourself for smart financial decisions. The following is a sample of what to ask any lender before considering a home loan:
- How big of a loan can I afford?
You loan consultant can help you determine (based on credit rating, income, etc.) how much you can borrow.
- What type of loan is best for me?
A good lender can help you compare and contrast loan features, many of which you may not be aware.
- What will my closing costs be?
Be prepared for the sum of fees and commissions that go along with financing a home loan.
- Will I be charged points?
Some loans are only available if you pay points, but it’s important to understand how they’re used.
- What items must be prepaid?
Some items, such as property taxes and insurance, must be paid in advance.
- How long will I be guaranteed the quoted interest rate?
“Locking in” a rate may help protect you from rising rates, but it may require a fee.
- What should I do before choosing a home loan?
The following tips may save you a lot of time, money and trouble.
- Plan ahead. Establish good credit and save money for the down payment and closing costs.
- Get prequalified online. Real estate agents prefer working with prequalified buyers. Getting prequalified also allows you more negotiation power than those who are not prequalified.
- Set a budget and stick to it. Our online calculators can help you determine a comfortable price range.
- Consider all angles of life at your new home. This may include the duration of your stay, commute distances, family growth, etc.
- Make a reasonable offer. Ask your real estate agent for a comparative market analysis listing all the sales prices of other houses in the neighborhood to determine a fair value on the home.
- Keep your debt where it is. If you increase your debt by financing a new car, boat, furniture or other large purchase, it could prevent you from qualifying.
- Do I need a home inspection?
- A home inspection is highly recommended. Buying a home "as is" is a risky proposition. Major repairs on homes can amount to thousands of dollars. Plumbing, electrical and roof problems represent significant and complex systems that are expensive to fix.
- How do I find a home inspector?
Seek out a qualified home inspector via referrals or business directories. Inquiring at a real estate office may grant you some leads, as well. Qualified home inspectors should have a contractor’s license or engineering certificate, and a list of good references.
Generally, you have the right to choose your own inspector. In addition to an overall inspection for structural soundness, you can request a satisfactory pest control inspection report, roof inspection report and/or contingency for no potential environmental hazards such as asbestos or radon gas.
- How much is a home inspector?
- Rates for inspection services vary, and many start at around $400. This cost may increase significantly depending on the scope of the inspection.
- Should I include an inspection contingency in my offer?
- Contingency clauses should satisfy the concerns of both the buyer and seller. Buyers also can protect themselves by inserting additional necessary contingencies, such as which items (curtains, appliances, etc.) are to remain with the house. A buyer may also assert the right to personally inspect the home 24 hours before closing to make sure all is in order.
- What are closing costs?
- Closing costs are the fees for services, taxes or special interest charges that come with the purchase of a home. They include points, title insurance, escrow or closing day charges, document fees, prepaid interest and property taxes. Unless these charges are rolled into the loan, they must be paid when the home is closed.
- What is an inspection contingency in my offer?
- An inspection contingency protects you in a purchase offer by allowing you to cancel closing on the deal if an inspector finds problems with the property.
- Who pays closing costs?
- Closing costs are either paid by the seller or buyer, which often depends on local custom and what the two parties negotiate. Closing costs generally add 1% to 2% to the final bill.
- Why do I need a title report?
A preliminary title report allows you to review any possible impediment that would prevent a clear title from passing on to you, such as liens placed against the prior owners or any documents that will restrict your use of the property.
A preliminary report shows you the extent of your ownership rights or interest. The most common form of interest is "fee simple" or "fee," which is the highest type of interest an owner can have in land. Liens, restrictions and interests of others excluded from title coverage will be listed numerically as exceptions in the report. The interests of any third parties, such as easements granted by prior owners, can limit use of the property. You may want to clear these unwanted items prior to purchase.
Additionally, a list of standard exceptions and exclusions not covered by the title insurance policy may be attached to the preliminary report. This section includes items the buyer may want to investigate further, such as potential building and zoning laws.