Frequently Asked Questions
Buying a Home
How do I qualify for a mortgage?
Different mortgage types have different specific qualification requirements, but the general process of qualifying for a mortgage is the same.
- You submit an application.
- You provide the necessary documentation, which includes paycheck stubs, tax statements, bank and asset statements, and identification.
- We review your information. We look at your income, how much debt you have, and they also pull a credit report.
- Based on this information, we determine how much money you can afford for a mortgage and a payment you are comfortable with.
What is the required minimum credit score?
An important element of qualifying for a mortgage is your credit score. We pull a credit report to look at your credit score. Different loan types have different qualifying scores, but generally a minimum score of 580 is needed.
Which loan type is best for me?
We offer a wide variety of loans designed to meet your needs. The most common types of loans obtained by first-time buyers are:
- Conventional loans. This is the most common type of mortgage loan. Conventional loans can be for as long as 30 years or as short as five years, with options in between. They can be fixed-rate or adjustable rate. When most people think about home loans, the conventional loan is the one they are thinking of.
- FHA loans. A Federal Housing Administration (FHA) loan is a mortgage that is insured by the Federal Housing Administration (FHA) and issued by an FHA-approved lender such as Mortgage 1. FHA loans are designed for lower minimum down payment and lower credit scores than many conventional loans.
- VA loans. VA loans are offered through the Department of Veterans Affairs. They are available to active and veteran service personnel and their families. VA loans are backed by the federal government and issued through private lenders like Mortgage 1. VA loans have favorable terms, such as no down payment, no mortgage insurance and limited closing costs.
- USDA loans. Rural Development home loans are fixed-rate loans provided by the United State Department of Agriculture. The loans do not require a down payment. The loans are financed by the USDA and obtained through private lenders, such as Mortgage 1, and are meant to promote and support home ownership in underserved, rural areas.
- MSHDA loans. The Michigan State Housing Development Authority (MSHDA) offers $10,000 down payment assistance.
How much house can I afford?
Talk with your Loan Officer about your monthly income, expenses, savings, and future financial goals. We use your expense-to-income ratio to determine affordability, but it’s essential to choose a payment you’re comfortable with.
What will my interest rate be?
Interest rates are calculated based on roughly 23 different factors that are unique to you. Your interest rate will depend on your credit score, the loan amount, term length, loan type, down payment amount and more.
What are closing costs?
You pay closing costs to cover the fees charged by the various entities involved in the purchase of your new home. These costs may include: application fees, escrow payments, underwriting fees, title fees, appraisal fees, homeowners insurance among others. Closing costs typically amount to 2 – 5 percent of the purchase price. In a competitive market, closing costs are usually paid for by the buyer, but buyers can request that the closing costs be covered by the seller.
What is an escrow account?
An escrow account holds funds for property taxes and homeowner’s insurance. We collect these payments monthly as part of your mortgage payment and pay them on your behalf, simplifying your financial management.
What is PMI?
Private Mortgage Insurance (PMI) is a monthly insurance policy included in your mortgage payment that protects a mortgage lender or title holder if a borrower defaults on payments, passes away, or is otherwise unable to meet the contractual obligations of the mortgage. If you pay 20 percent or more as a down payment on a conventional loan, you do not need PMI. Once you start paying PMI, it goes away once your mortgage balance reaches 78 percent of the original purchase price.
Refinancing Your Mortgage
When is the right time to refinance?
Refinancing can be a great financial move for you and your family. But how will you know that it’s the right time? Here are five reasons why you should consider refinancing.
- Your credit score has improved since the original mortgage closing. Normally just adding a mortgage account that has been paid on time for a year or more can have a significant positive impact on your credit score. Mortgage rates are discounted for every 20-point increase in borrowers credit score up to 740. Depending on how much your credit score has improved, the potential savings could be substantial, especially if combined with reason number two.
- Your originally purchased with less than 20 percent down and you are paying Private Mortgage Insurance (PMI). Refinancing can be a great way to remove those extra premiums from your monthly payments. Since 1991, home values have increased an average of 3.3 percent each year, according to the Federal Housing Finance Agency’s (FHFA) House Price Index (HPI). Just in the past year, home prices went up an average of 4 percent across the country.
- You want to reduce the terms of the loan. When combined with number one and two on this list, you could actually get a similar payment with a big reduction in years left to pay your mortgage. Going from a 30-year to a 15-year mortgage can result in thousands of dollars of interest savings over the life of the loan.
- You want to combine high-interest loans to a lower, tax-deductible payment. Student loans, personal loans and auto loans traditionally are secured with higher interest rates than mortgage loans. Refinancing and paying off higher-interest loans can be a great way to simplify the number of payments made each month and reduce overall monthly payments.
- You want a low-cost source of cash for home improvements or investments. Home improvements can improve the value of the home and many investments that pay higher than the after-tax cost of can provide a source of income over the cost of a mortgage.
What will Michigan Mortgage need from me to refinance?
Your refinance will be started in one of three ways: complete an online questionnaire, start your application on our mobile app or call our office and speak to a Loan Officer.
After we receive your application, we will be in touch and request a copy of your most recent mortgage statement.
How much will a refinance cost?
Often times, you are able to refinance their current mortgage with little-to-no money out of pocket. We include the refinance costs in the loan itself so you can complete the process without having to pay out-of-pocket for closing costs.
