• Gloven Capital 3369 W Vine St, Suite 206, Kissimmee, FL 34741
  • Call Us: 1-305-890-9000
  • E-mail: info@glovencapital.com
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APPLY FOR COMMERCIAL REAL ESTATE LOAN

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If you have any questions about applying for a mortgage, feel free to contact us at info@glovencapital.com. We're here to help!

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Easily order an appraisal through one of our approved partners. Whether or not you proceed with Gloven Capital, the appraisal is yours to keep. Once we receive it, your loan moves to processing.

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Mortgage Basics

Application Checklist
Application Checklist

Below is a list of documents required when applying for a mortgage. Since each situation is unique, additional documentation may be needed. If you are asked for more information, please cooperate and provide the requested documents as soon as possible to expedite the application process.

Your Property
  • Copy of signed sales contract (including all riders)
  • Verification of the deposit placed on the home
  • Names, addresses, and phone numbers of all realtors, builders, insurance agents, and attorneys involved
  • Copy of the listing sheet and legal description (if applicable)
    • For condominiums: Provide the condominium declaration, by-laws, and most recent budget.
Your Income
  • Copies of your pay stubs for the most recent 30-day period and year-to-date
  • Copies of your W-2 forms for the past two years
  • Names and addresses of all employers for the last two years
  • Letter explaining any employment gaps in the past 2 years
  • Work visa or green card (copy front & back)

If you are self-employed, receive commission or bonus income, or earn interest/dividends or rental income, please provide:

  • Full tax returns for the last two years + year-to-date Profit and Loss statement (include all attached schedules and statements. If you’ve filed an extension, provide a copy.)
  • K-1’s for all partnerships and S-Corporations for the last two years (double-check your return as most K-1’s are not attached to the 1040.)
  • Completed and signed Federal Partnership (1065) and/or Corporate Income Tax Returns (1120) for the last two years, including all schedules, statements, and addenda (required only if your ownership position is 25% or greater).

If you will use Alimony or Child Support to qualify:

  • Provide divorce decree/court order stating the amount and proof of receipt of funds for the last year.
Source of Funds and Down Payment

  • Sale of your existing home:
    Provide a copy of the signed sales contract and statement or listing agreement if unsold. At closing, you must provide a settlement/Closing Statement.

  • Savings, checking, or money market funds:
    Provide bank statements for the last 3 months.

  • Stocks and bonds:
    Provide statements from your broker or copies of certificates.

  • Gifts:
    If part of your cash to close, provide a Gift Affidavit and proof of receipt of funds.

Debt or Obligations
  • Prepare a list of all debts, including:
    • Names, addresses, account numbers, balances, and monthly payments for all current debts (provide copies of the last three monthly statements).
    • Names, addresses, account numbers, balances, and monthly payments for mortgage holders and/or landlords for the last two years.
    • If you are paying alimony or child support, include the marital settlement/court order stating the terms of the obligation.
Other
  • Check to cover Application Fee(s)

Note: Based on the information on your application and/or credit report, you may be required to submit additional documentation.

What is an Appraisal?

An Appraisal is an estimate of a property’s fair market value. It is generally required by a lender (depending on the loan program) before loan approval to ensure that the mortgage loan amount does not exceed the property’s value.

The appraisal is performed by a state-licensed professional Appraiser, who is trained to provide expert opinions on property values, location, amenities, and physical condition.

Why Get an Appraisal?

Obtaining a loan is the most common reason for ordering an appraisal, but there are several other scenarios where you may need one:

  • Contesting high property taxes
  • Establishing the replacement cost for insurance purposes
  • Divorce settlement
  • Estate settlement
  • Negotiating tool in real estate transactions
  • Determining a reasonable price when selling real estate
  • Protecting your rights in an eminent domain case
  • Government agency requirement
  • A lawsuit
What are Appraisal Methods?

There are three common Appraisal Methods used to establish property value. After thoroughly applying all three approaches, the appraiser will correlate a final value estimate. For single-family, owner-occupied properties, the Sales Comparison Approach is most heavily weighted.

1. Cost Approach

This method uses a formula to determine property value:

  • Land value (vacant) is added to the cost to reconstruct the building as new on the date of value.
  • The total value is then reduced by accrued depreciation to account for wear and tear on the building.
2. Sales Comparison Approach

In this method, the appraiser compares the subject property to 3 to 4 comparable properties (comps) recently sold in the neighborhood. Ideally, these sales occurred in the past 6 months and are within ½ mile of the subject property. The comparison is based on factors such as:

  • Square footage
  • Number of bedrooms and bathrooms
  • Property age
  • Lot size
  • View
  • Property condition
3. Income Approach

This method is primarily used for income-producing properties. It involves capitalizing the potential net income of the property to determine its value. Capitalization converts future income into present value. This approach is typically used alongside other valuation methods.

Can Another Mortgage Company be Used After the Completed Appraisal?

Yes, in most cases, you won’t need to pay for another appraisal if you switch mortgage companies. Depending on the loan program, the original lender can transfer the appraisal to the new lender. However, some appraisal firms may charge a small Appraisal Retype Fee to reflect the new mortgage company due to additional clerical work required.

The original mortgage company has the right to refuse to transfer the appraisal to another lender. In this case, a new appraisal would be necessary.

Who Determines the Market Value of a Property?

The property seller sets the price, particularly for residential properties—not the appraiser. Sellers typically don’t order an appraisal because they want to achieve the highest price for their home and may not want to be bound by the appraiser’s assessment.

The real estate agent typically receives a percentage of the sale price and often represents the seller. The agent assists in setting the sale price by performing a Comparative Market Analysis (CMA). The CMA examines recent property sales in the neighborhood to help determine a reasonable listing price. While the agent suggests a price based on the CMA, the seller can choose to list their property at a higher price.

How Can I Assist My Appraiser?

It’s beneficial to provide the appraiser with additional information to help them assess the property more accurately. Consider providing the following:

  • What is the purpose of the appraisal?
  • Is the property listed for sale? If so, what price and with which agent?
  • Is there a mortgage on the property? If so:
    • With whom is the mortgage?
    • When was it placed, for how much, and what type (e.g., FHA, VA)?
    • What is the interest rate or other details about the financing?
  • Are any personal properties or appliances included in the property?
  • For income-producing properties, provide:
    • A breakdown of the income and expenses for the last year or two (a copy of the lease may be required).
  • Provide:
    • A copy of the deed, survey, purchase agreement, or additional property documents.
    • A copy of the current real estate tax bill, statement of special assessments, or balance owed on any additional charges (e.g., sewer, water).
What Happens at Closing?

At Closing (or Funding), the property is officially transferred from the seller to you. The ownership changes hands, and you complete the process of purchasing the property. Closing can involve various parties, including:

  • You (the buyer)
  • The seller
  • Real estate agents
  • Attorneys (yours and the lender’s)
  • Title or escrow firm representatives
  • Clerks, secretaries, and other staff

Attorney Representation:
If you’re unable to attend the closing meeting (for example, if you’re out of state), you can have an attorney represent you.

Length of Closing:
Closing can take anywhere from 1 hour to several hours, depending on factors such as contingency clauses in the purchase offer or escrow accounts that need to be set up. Most paperwork is handled by attorneys and real estate professionals, though your involvement in some activities depends on the parties you’re working with.

Final Walk-Through:
Before closing, you should have a final inspection or walk-through to ensure that requested repairs were completed and that items agreed to remain with the house (such as drapes, lighting fixtures, etc.) are still there.

Settlement by Title/Escrow Firm:
In most states, a title or escrow firm handles the settlement. You will forward all necessary materials and information, along with the appropriate cashier’s checks, so the firm can make the necessary disbursements. The representative will deliver the check to the seller and then hand you the keys to the property.

What Are Statutory Costs?

These are expenses that you must pay to state and local agencies, regardless of whether you paid cash for the home or needed a mortgage.

  • Transfer Taxes: Required by some localities to transfer the title and deed from the seller to the buyer.
  • Deed Recording Fees: Paid to the County Clerk to record the deed and mortgage, and to update property tax billing information.
  • Pro-Rated Taxes: Taxes (e.g., school taxes, municipal taxes) may need to be split between the buyer and seller, depending on the time of year. For example, if taxes are due in October and you close in August, you’ll pay for 2 months of taxes, and the seller will cover the remaining 10 months. Pro-rated taxes are usually based on the number of days, not months, of ownership. Some lenders may require you to set up an escrow account to cover these taxes.
  • State & Local Fees: Other state and local mortgage taxes and fees may apply.
What Are Third-Party Costs?

These are expenses paid to other parties, such as inspectors or insurance firms, even if you paid cash for the property.

  • Attorney Fees: If you hire an attorney, they typically charge a percentage (up to 1%) of the selling price or an hourly fee or flat fee.
  • Title Search Costs: Your attorney or a title company will verify the property title to ensure there are no issues such as liens or lawsuits.
  • Homeowner’s Insurance: Lenders usually require you to prepay the first year’s premium for homeowner’s insurance (also called hazard insurance). You must show proof of payment at closing to secure your investment.
  • Real Estate Agent’s Sales Commission: The seller usually pays the real estate agent’s commission. If one agent lists and another sells the property, the commission is typically split. The commission percentage is negotiable between the seller and the agent.
What Are Finance and Lender Charges?

These charges are associated with the financing of your property and vary among lenders. Shopping around for the best combination of mortgage terms and closing costs is a good idea.

  • Origination Fee: A fee charged for processing the mortgage application, either as a flat fee or a percentage of the loan amount.
  • Credit Report: Most lenders require a credit report on you and any co-applicants. This fee is often included in the origination fee.
  • Points: One point is equal to 1% of the loan amount. Points can be paid upfront (usually at closing) and may be shared with the seller. Paying points upfront can make you eligible for a tax deduction. Some lenders allow you to finance the points, but that will increase the mortgage cost.
  • Lender’s Attorney Fees: The lender may charge for their attorney to prepare documents, ensure the title is clear, and represent them at closing.
  • Document Preparation Fees: These fees cover the preparation of various documents and papers related to the home-buying process.
  • Amortization Schedule Preparation: Some lenders prepare an amortization schedule for the full term of your mortgage, especially for fixed or adjustable-rate mortgages.
  • Land Survey: Lenders may require a property survey to confirm boundaries and verify buildings or improvements on the property.
  • Appraisals: Appraisers determine the property’s value by comparing it to similar properties that have recently sold in the area. This ensures the property is worth the mortgage loan amount.
  • Lender’s Mortgage Insurance (PMI): If your down payment is less than 20%, many lenders require you to purchase PMI. This insurance protects the lender in case of default and is often added to your monthly mortgage payment until your equity reaches 20%.

Lender’s Title Insurance

Even after a thorough title search to identify obstacles such as liens or lawsuits, many lenders still require Lender’s Title Insurance. This insurance protects the lender’s mortgage investment and is a one-time premium, typically paid at closing. It only protects the lender, not the homebuyer.

Release Fees

If the seller has a lien on the property (such as from a contractor), there may be Release Fees to discharge that lien before the sale proceeds. These fees are typically paid by the seller but can be negotiated as part of the purchase offer.

Inspections Required by Lenders

Lenders may require specific inspections, such as:

  • Termite Inspection: Required for FHA or VA loans.
  • Water Test: In rural areas, lenders may require a test to ensure an adequate water supply (quantity, not quality).
  • Other Inspections: Depending on the sales contract and property type, additional inspections (e.g., structural, septic, radon, roof) may be required.

These inspections may incur costs, and you and the seller can negotiate who pays for them.

Prepaid Interest

While your first mortgage payment is typically due 6-8 weeks after closing, interest begins accruing at the time of closing. The lender will calculate the interest owed for that period, and this fraction of interest may be due at closing.

Escrow Account

Lenders may require you to set up an Escrow Account, where you will make monthly payments for:

  • Property taxes
  • Homeowner’s insurance
  • Private Mortgage Insurance (PMI), if applicable

The amount placed in the escrow account at closing depends on when taxes are due and the timing of the settlement. The lender can provide an approximation during the mortgage application process.

Are There Any Other Up-Front Expenses?

Other significant upfront expenses could include:

  • Deposit or Binder: Made when submitting the purchase offer.
  • Down Payment: Paid at closing.
  • Inspections: Costs for inspections, such as structural, water quality, termite, and radon tests, may be required by the lender or negotiated with the seller.
  • Owner’s Title Insurance: Optional but recommended to protect against unforeseen issues.
  • Appraisal Fees: If you choose to hire an appraiser before or after the lender’s appraisal.
  • Money to the Seller: For items left in the home, such as appliances, lighting fixtures, and fuel oil in tanks.
  • Moving Expenses: If your new employer doesn’t cover relocation costs, you’ll need to budget for truck rentals, professional movers, and utility deposits (e.g., telephone, cable, electricity).
  • Escrow Account Funds: If agreed in the purchase contract, the seller may set up an escrow account to cover costs for repairs or cleanup.
Example of Negotiation for Repairs

If the purchase offer includes a contingency for a satisfactory structural inspection, and it’s found that the house needs a new roof, you have several options:

  • Negotiate for the seller to arrange the repairs before closing (this may delay closing).
  • Agree to a higher purchase price to cover the cost of repairs.
  • Split the repair costs with the seller, putting funds into an escrow account.
  • Reduce the sale price and use the funds to pay for the repairs yourself.
Time Investment

One often overlooked cost is the time investment:

  • House-hunting can take up to 4 months.
  • Time spent searching for the best mortgage, real estate agent, attorney, etc., is significant and should be factored into your overall home-buying expenses.
What is RESPA?

The Real Estate Settlement Procedures Act (RESPA) provides important information about settlement or closing costs. Within 3 days of your mortgage application, the lender must provide a Good Faith Estimate (GFE) of settlement costs, including:

  • Prorated taxes
  • First month’s interest
  • Other closing costs

RESPA also requires the lender to give you a booklet about settlement costs, your rights as a homebuyer, and a Uniform Settlement Statement (used at closing). You must receive a copy of the final statement 1 business day prior to closing.

What is “Truth in Lending” (TIL)?

The Truth in Lending (TIL) Statement provides detailed information about your loan, including:

  • Annual Percentage Rate (APR)
  • Finance charges
  • Amount financed
  • Total payments required

It may also include details on late fees, prepayment provisions, and whether the mortgage is assumable. For adjustable-rate loans, the TIL will outline the limits on interest rate adjustments, including annual and lifetime caps, and give an example of what your payment could be under worst-case scenarios (if the interest rates reach the maximum allowed).

What is a Credit Report?

A credit report is a detailed record of your credit history. This information is maintained by consumer reporting agencies (CRAs), commonly known as credit bureaus. Your credit report contains information about:

  • Credit Accounts: Accounts you have with credit or charge cards, personal loans, insurance, or jobs.
  • Income and Debts: Details about your income, debts, and overall credit payment history.
  • Public Records: Information about any legal actions, such as lawsuits, arrests, or bankruptcy filings.

If you’ve ever applied for credit or a loan, or have insurance or employment records, you will have a credit report.

Do I Have the Right to Know What’s in My Report?

Yes, you have the right to access your credit report. You can request a copy from the CRA, and they are required to share all the details, including medical information, and in most cases, sources of the data.

The CRA must also provide a list of anyone who has requested your report, including employment-related requests, within the past 1-2 years.

What Types of Information Do Credit Bureaus Collect and Sell?

Credit bureaus collect and sell four primary types of information:

  1. Identification and Employment Information

    • Your name, birth date, Social Security number, employer, spouse’s name, employment history, homeownership, income, and previous addresses.

  2. Payment History

    • Records of accounts with creditors, the amount of credit extended, payment history (whether payments were on time), and any collections activity.

  3. Inquiries

    • A record of all creditors who have requested your credit history in the past year (for most purposes) or two years (for employment purposes).

  4. Public Record Information

    • Events such as bankruptcies, foreclosures, or tax liens that are a matter of public record.
What is Credit Scoring?

Credit scoring is a system used by creditors to help determine your creditworthiness—whether or not to extend credit to you. The score is based on:

  • Bill-Paying History
  • Number of Accounts
  • Late Payments
  • Collection Actions
  • Outstanding Debt
  • Age of Accounts

The most commonly used credit score is the FICO score, developed by Fair Isaac Company, Inc. FICO scores range from 350 (high risk) to 850 (low risk). The higher your score, the more likely you are to repay debts on time.

A credit score helps predict how likely you are to repay a loan and make timely payments.

How to Get Your Credit Report

To check your credit report, you can contact the three major credit reporting agencies:

  • Equifax: (800) 685-1111
  • Experian (formerly TRW): (888) EXPERIAN (397-3742)
  • TransUnion: (800) 916-8800

These agencies may charge up to $9.00 for a credit report.

Why is Credit Scoring Used?

Credit scoring is utilized because it relies on real data and statistical models, making it a more objective and reliable method compared to subjective or judgmental approaches. Unlike judgmental methods, which can vary from person to person and rely on untested criteria, credit scoring treats all applicants equally and ensures fairness in the evaluation process.

What Happens if You Are Denied Credit or Don’t Get the Terms You Want?

If you are denied credit or don’t get the terms you were hoping for, you have the right to:

  1. Ask if a credit scoring system was used.
    • If so, inquire about the factors that influenced your score and how you can improve your application.
  2. Request specific reasons for denial.
    • Under the Equal Credit Opportunity Act, creditors must provide a notice with the reasons your application was rejected. You can ask for these reasons within 60 days of denial.
    • Vague reasons, like “You didn’t meet our minimum standards,” are illegal. Acceptable reasons would be things like “Your income was low” or “You’ve been employed for a short time.”
  3. Dispute inaccuracies in your credit report.
    • If your application was denied due to incorrect information in your credit report, you are entitled to dispute these errors with the credit reporting agency.
  4. Credit scoring systems change over time.
    • If you were denied due to factors like high credit card balances or too many accounts, you may want to pay down balances or close accounts before reapplying.

If your application was denied because of information from a credit report, the Fair Credit Reporting Act requires that the creditor provide the name, address, and phone number of the credit reporting agency (CRA) that supplied the information.

Fair Credit Reporting Act (FCRA)

The Fair Credit Reporting Act (FCRA) is designed to ensure that consumer reporting agencies (CRAs) provide accurate and complete information for evaluating your credit applications. Here’s what the FCRA guarantees you:

  1. Right to a Copy of Your Credit Report:

    • You are entitled to a copy of your credit report, which should include all the information in your file at the time of your request.

  2. Right to Know Who Viewed Your Credit Report:

    • You have the right to know who has accessed your credit report within the past 1 year for most purposes or 2 years for employment-related requests.

  3. Right to Free Credit Report After Denial:

    • If your application is denied based on your credit report, you can request a free copy from the credit reporting agency that supplied the information, as long as the request is made within 60 days of the denial.

  4. Right to Dispute Inaccurate Information:

    • If you notice discrepancies or incomplete information, you can file a dispute with both the CRA and the company that provided the information. They are obligated to reinvestigate the issue.

  5. Right to Add an Explanation:

    • If your dispute isn’t resolved to your satisfaction, you have the right to add a summary explanation to your credit report, detailing your side of the issue.
What is Foreclosure?

Foreclosure occurs when a homeowner fails to make their mortgage payments, which includes both the principal and interest. As a result, the lender—usually a bank or building society—can take legal action to seize and sell the property to recover the outstanding loan amount. This process is stipulated in the mortgage contract.

What Happens When a Mortgage Payment is Missed?

If a mortgage payment is missed:

  1. Foreclosure may occur if the homeowner continues to miss payments. The lender has the right to repossess the home and evict the homeowner.
  2. If the sale of the property does not cover the full mortgage balance, a Deficiency Judgment can be pursued. This means the borrower could still owe the difference between the home’s sale price and the loan balance.

Both foreclosure and deficiency judgments can severely affect your credit score and ability to qualify for future credit, so it’s crucial to avoid them if possible.

How Can Foreclosure Be Avoided?

If you’re struggling to make payments, here’s what you should do:

  1. Contact your lender immediately if you anticipate missing a payment. Do not wait until it’s too late.
  2. Respond to communication: Never ignore the lender’s letters or phone calls.
  3. Stay hopeful: Don’t assume that your situation is beyond repair—there are often options available.

Lenders generally want to work with homeowners to find a solution before proceeding with foreclosure.

Other Solutions for Long-Term Problems to Avoid Foreclosure

There are several options your lender might offer to help avoid foreclosure. You can also reach out to a housing counseling agency to explore these solutions:

  1. Mortgage Modification:

    • If you’re unable to make the regular mortgage payments but still can make some payment, your lender may agree to modify your mortgage terms.
    • Options include:
      • Adding overdue payments to the principal and extending the loan term.
      • Reducing the loan’s monthly payment by lengthening the loan period.

  2. Pre-Foreclosure Sale:

    • A pre-foreclosure sale allows you to sell the property for less than the amount owed on the mortgage, preventing foreclosure.
    • You may qualify if:
      • The loan is at least 2 months delinquent.
      • The property sells within 3-5 months.
      • A new appraisal confirms the home’s value fits the lender’s program guidelines.

By understanding and exploring these options, you can potentially avoid the devastating effects of foreclosure.

Deed in Lieu of Foreclosure

A Deed in Lieu of Foreclosure is an option where the homeowner voluntarily transfers ownership of the property to the lender in exchange for the forgiveness of the remaining mortgage debt. While this option does have a negative impact on your credit report, it can be a better alternative to foreclosure.

Key Points:

  • The lender may require that the property be listed for sale for a specific period before accepting the deed.
  • This option may not be available if there are other liens on the property.
  • If you have an FHA Loan, you may qualify for assistance through the FHA Insurance Fund to receive a one-time payment to help manage the debt.

For FHA Loans:

  • The mortgage must be at least 4 months past due, but not more than 12 months.
  • Homeowners must prove their ability to resume making full payments.
  • A promissory note is required, allowing HUD to place a lien on the property for the amount received.
  • The note is interest-free but must be repaid when the property is sold or the loan is paid off.

For VA Loans:

  • Veteran’s Administration offers services to help veterans avoid foreclosure and provides tailored solutions for your specific circumstances.
Temporary Solutions to Avoid Foreclosure

If you’re facing a temporary financial issue that causes missed payments but expect to recover, several options may help you avoid foreclosure:

1. Reinstatement

  • If you’re behind on payments but can afford to pay a lump sum to bring the mortgage current, reinstatement allows you to make the full payment by a specified date and catch up on missed payments.

2. Forbearance

  • Forbearance allows you to delay payments for a set period. This is usually an option if you’re going through temporary hardship, with the expectation that another plan will be put in place to bring the account current later.

3. Repayment Plan

  • If you’re behind but are able to resume regular payments, a repayment plan can allow you to catch up by spreading the overdue payments over several months.

4. Partial Claim

  • If you have an FHA Loan and your loan is 4 to 12 months delinquent, you may qualify for a Partial Claim. This involves receiving a one-time payment from the FHA Insurance Fund to bring the mortgage current. The homeowner must sign a promissory note and a lien will be placed on the property until the note is fully repaid.
  • The note is interest-free, but must be paid when the home is sold or the first mortgage is paid off.
What is an FHA Loan?

An FHA Loan (Federal Housing Administration Loan) is a government-backed mortgage designed to help families, particularly first-time homebuyers, purchase homes with a lower down payment and more flexible credit requirements. FHA was established in 1934 to improve housing standards and provide a financing system that could make homeownership accessible to a larger group of people.

  • Down Payment: With an FHA loan, you can purchase a home with as little as 3.5% down, making it ideal for those who may struggle with larger down payments.
  • Mortgage Insurance: FHA does not provide loans directly but insures loans made by approved lenders. If the borrower defaults, the lender is compensated through the insurance fund.
  • Accessible to Many Buyers: FHA loans are particularly helpful for first-time homebuyers, those with minor credit issues, or individuals who may not qualify for a conventional mortgage.
FHA Loans vs. Conventional Home Loans

The key differences between an FHA loan and a conventional loan are:

  1. Down Payment: FHA loans typically require a lower down payment (as low as 3.5%) compared to conventional loans, which may require 5-20% down.
  2. Credit Requirements: FHA loans have more lenient credit requirements, making it easier for individuals with limited credit history or minor credit issues to qualify. Conventional loans, on the other hand, typically require a higher credit score for approval.
  3. Qualification Flexibility: FHA loans are more flexible with applicants who have bankruptcies or past credit problems. For instance, a borrower may qualify for an FHA loan after a Chapter 7 bankruptcy if at least two years have passed since the discharge, and they’ve re-established their credit.
Can I Get an FHA Loan After Bankruptcy?

Yes, it’s possible to get an FHA loan after filing for bankruptcy, provided the following conditions are met:

  • Chapter 7 Bankruptcy: You can apply for an FHA loan two years after the discharge of the bankruptcy.
  • Chapter 13 Bankruptcy: You may qualify after one year of repayment, with the court’s approval.
  • Credit Rebuilding: It’s important to have re-established credit, which means having at least two credit accounts (e.g., a car loan or credit card) and maintaining good payment history post-bankruptcy.
  • Extenuating Circumstances: Special exceptions may be made for borrowers who have faced extenuating circumstances (e.g., a serious medical condition) that led to the bankruptcy.
How Much of an FHA Loan Can I Afford?

FHA guidelines have specific rules regarding how much you can afford, ensuring that monthly payments remain manageable:

  1. Housing Costs (PITI): Your total monthly housing costs should not exceed 29% of your gross monthly income.

    • Example: For a monthly income of $3,000, the maximum housing cost (PITI) should be $870 (calculated as $3,000 x 0.29).

  2. Total Debt-to-Income Ratio (DTI): Your total monthly debt, including housing costs and other long-term debt (e.g., car loans, credit card payments), should not exceed 41% of your gross monthly income.

    • Example: For a monthly income of $3,000, the maximum total debt (including housing and long-term debt) should be $1,230 (calculated as $3,000 x 0.41). This means that if your PITI is $870, you can have $360 for other monthly debts.

FHA loan guidelines offer more flexibility compared to conventional loans, allowing for higher debt-to-income ratios.

What is Private Mortgage Insurance (PMI)?

Private Mortgage Insurance (PMI) is a type of insurance that lenders require borrowers to purchase when they are unable to make a 20% down payment on a conventional mortgage. PMI protects the lender in case the borrower defaults on the mortgage. It’s typically required for loans with a loan-to-value ratio (LTV) greater than 80%, meaning you have less than 20% equity in the home.

How Does PMI Work?

PMI protects the lender for the top 20% of the mortgage in case of default. If the borrower fails to repay the mortgage, the lender sells the property to recover the loan balance. However, if the sale doesn’t cover the total amount owed, the PMI company compensates the lender for the difference, up to the insured value.

Could PMI Help You Qualify for a Larger Loan?

Yes, PMI can increase the amount you can borrow because it lowers the lender’s risk. For example:

  • Without PMI: You can afford a $44,600 home.
  • With PMI: You can afford a $62,300 home, a 39% increase in home price.

By insuring the lender for the portion of the loan you don’t cover with a down payment, PMI enables you to qualify for a larger loan.

How is PMI Paid?

PMI can be paid in several ways:

  1. Upfront Premium: Pay for one year’s worth of PMI premiums at closing, and then pay monthly premiums going forward.
  2. Monthly Premiums: No upfront payment, but PMI is added to your monthly mortgage payment.
  3. Financed Premium: Pay no upfront premium or monthly payments, but PMI is rolled into the loan amount as a lump sum.

In cases where PMI is canceled early (through refinancing, paying off the loan, or lender removal), the borrower may receive a rebate for the premium.

How Does the Buyer Apply for PMI?

Typically, the borrower pays for PMI, but the lender shops for PMI on behalf of the borrower. The lender usually works with a few specific PMI companies, and if one company rejects the loan, the lender may deny the application without considering other PMI options. This is one of the challenges lenders face while trying to find an appropriate insurance solution for their clients.

Cancellation of PMI

The Homeowners Protection Act of 1998 sets rules for PMI cancellation. These rules apply to mortgages signed on or after July 29, 1999, and typically allow PMI to be canceled under two conditions:

  1. Automatic Termination: PMI must be terminated once the homeowner reaches 22% equity in the home, based on the original property value, if payments are current.

  2. Borrower-Initiated Cancellation: Borrowers can request PMI cancellation when they reach 20% equity in the home, based on the original property value, if payments are current.

Exceptions to PMI Cancellation
  • High-Risk Loans: If the loan is considered high-risk, or if the borrower has missed payments in the prior year, PMI might not be canceled.
  • Other Liens: If there are additional liens on the property, PMI may not be canceled.

For mortgages signed before July 29, 1999, PMI can be canceled once the borrower reaches 20% equity, but federal law doesn’t require the lender to cancel it.

If you’re nearing 20% equity and want to cancel PMI, it’s essential to check with your lender about the specific requirements, as certain conditions may apply.

What is a VA Loan?

A VA Loan is a type of home loan provided by private lenders, such as banks or mortgage companies, and guaranteed by the U.S. Department of Veterans Affairs (VA). It was originally created through the Servicemen’s Readjustment Act (GI Bill) in 1944 under President Franklin D. Roosevelt to help veterans purchase homes with little to no down payment.

VA loans are made available to eligible veterans, active-duty military personnel, and their families, and the loan is guaranteed by the government, meaning the lender is protected in the event of default.

Who is Eligible for a VA Loan?

Eligibility depends on various service criteria, including the length of service, discharge status, and specific service periods:

1. Wartime/Conflict Veterans
  • World War II: September 16, 1940 – July 25, 1947
  • Korean Conflict: June 27, 1950 – January 31, 1955
  • Vietnam Era: August 5, 1964 – May 7, 1975
  • Persian Gulf War: Check with the VA Office
  • Afghanistan & Iraq: Check with the VA Office

Veterans must have honorable discharges and at least 90 days of service during these periods.

2. Peacetime Service
  • At least 181 days of continuous active duty with no dishonorable discharge. Service members discharged earlier due to service-related disability may be eligible.
  • Post-1980 Service: Those who began service after September 7, 1980, (enlisted) or October 16, 1981 (officers), need to complete 24 months of continuous active duty and be honorably discharged.
3. Reserves and National Guard
  • Certain U.S. citizens who served in the armed forces of a country allied with the U.S. during WWII.
  • Surviving spouses of deceased veterans who died due to service-related causes, provided they haven’t remarried.
What Type of Home Can Be Purchased with a VA Loan?

A VA loan can be used to finance a variety of residential properties, including:

  • Existing Single-Family Homes
  • Townhouses or Condominiums in VA-approved projects
  • New Construction Residences
  • Manufactured Homes or Lots
  • Home Refinances and certain Home Improvements
How Do I Apply for a VA Guaranteed Loan?

To apply, you’ll need to work with a mortgage lender that participates in the VA loan program. The application process requires the following:

  1. Certificate of Eligibility (COE): Obtain this from the VA by submitting VA Form 26-1880.
  2. Proof of Military Service: Submit documentation to a VA Eligibility Center.
Can I Get Another VA Loan?

Yes, you can reuse your VA loan eligibility under certain circumstances. If you’ve paid off a previous VA loan and sold the property, you may have your eligibility restored. Additionally, if the prior loan has been paid off but the property is still owned, you may restore eligibility on a one-time basis. You’ll need to submit VA Form 26-1880 and proof of the loan payoff (e.g., HUD-1 settlement statement).

What Are the Benefits of a VA Loan?
  1. 100% Financing & No Down Payment: You don’t need a down payment, which makes it easier to afford a home.
  2. No Private Mortgage Insurance (PMI): Unlike other loans, you don’t have to pay PMI, which can save you money.
  3. No Prepayment Penalties: You can pay off the loan early without any penalties.
  4. Competitive Interest Rates: VA loans typically offer better rates than conventional loans.
  5. Easier Qualification: The requirements for a VA loan are generally more flexible than those for a conventional loan.
  6. Sellers May Pay Some of the Closing Costs: Sellers can contribute towards the closing costs, reducing the financial burden on the borrower.
  7. Down Payment Assistance: VA loans can be combined with other assistance programs to further reduce closing costs.
What Are the Disadvantages of a VA Loan?
  1. Assumability Issues: VA loans made prior to March 1, 1988, can be assumed by others without qualifying the new buyer. However, if the new buyer defaults, the original veteran homeowner may still be liable for the remaining loan balance.
  2. Longer Processing Time: VA loans often take longer to process than conventional loans, which can be a drawback in competitive housing markets.
  3. Seller Resistance: Sellers may be hesitant to work with VA buyers because they might need to pay a portion of the closing costs, and the sale might take longer to close.
Summary

A VA loan provides eligible veterans and service members an opportunity to purchase homes with no down payment and no PMI, making homeownership more accessible. While there are benefits, such as competitive rates and flexible qualification requirements, there are also some challenges, including potential seller hesitations and longer processing times. It’s essential to understand these factors when considering a VA loan for your next home purchase.

What Are the Requirements to Qualify for a Hard Money Loan?

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Closing Costs

Total closing costs vary by lender. The home you buy, where it’s located and the type of loan you receive will determine what your costs are – which can range from 2% to 6% of the home’s purchase price. Most of these costs are fees charged by the lender and third parties for the services and work involved with processing and completing your loan. In most cases, closing costs are paid by the borrower.

Typical closing costs.

Because no two homes, or loans, are the same, it’s almost impossible to provide a complete and accurate list of what might be included in your closing costs. The most common costs for a buyer include:

  • Home inspection
  • Appraisal
  • Attorney fee (if required)
  • Title search
  • Recording the property deed
  • Tax services
  • Credit report
  • Survey
  • Courier

What are Discount Points?

Paying discount points is like pre-paying interest on your loan to get a lower interest rate. It’s a way to reduce how much interest you’ll pay with each monthly payment. One discount point typically costs 1% of the total loan amount, and lowers the rate from 1/8 to 1/4 percent

For example,* on a $200,000 loan, each point would cost $2,000. Assuming the interest rate on the mortgage is 5% and each point lowers the interest rate by 0.25%. Buying 2 points will cost $4,000 and will result in an interest rate of 4.50%.*
*See Investopedia.com

Paying for discount points is only a good idea if you plan to stay in your home well after you earn back the initial cost. A Gloven Capital Home Loan Expert can help you decide if this makes sense in your case.

Who attends closing?

This depends on the laws in the state where your property is located, the type of home, property and more. In addition to yourself, people who attend the closing might include:

  • Your attorney, if you have one.
  • The seller’s attorney, if they have one.
  • The buyer’s and seller’s real estate professionals.
  • The builder’s representative, if a brand-new home is involved.
  • The closing agent, who could be a title company representative or a real estate attorney.
  • A notary public.
  • The seller(s), but it’s not very common.

Steps in the Closing Process

The closing might be held at the title company’s office, your lender’s office, a real estate attorney’s office or other location depending on the situation.

Here’s what you can expect to happen:

  • You’ll review and sign all of your loan documents. Take your time. Make sure each document is explained clearly, and you understand the terms you’re agreeing to. If something is different than what you expected or agreed to, don’t sign until the issue is resolved to your satisfaction.
  • Your lender will distribute (wire) the funds covering your home loan amount to the closing agent.
  • Depending on your loan terms, you may be required to set up a new escrow account with your lender that will be used to pay your property taxes and homeowners insurance as part of your monthly mortgage payment.

Closing Paperwork

Be prepared for your writing hand to get a lot of exercise because you’ll be signing a lot of paperwork! Here are the three most important documents you’ll sign:

  • HUD-1 Settlement Statement: An itemized list of the final credits and charges for you and the seller based on the terms of the contract. You should receive a copy of the HUD-1 at least one day prior to the closing for your review.
  • Deed of Trust or Mortgage: The documents in which you agree to a lien on your property as security for repayment of your home loan.
  • The Promissory Note: The mortgage promissory note is a legal “IOU” that represents your promise to pay the lender according to the agreed terms, including the dates on which you must make your mortgage payments and where they must be sent.

What to Bring to Closing

Show up at closing prepared to provide a certified, or cashier’s, check made out to the title company to cover your down payment (if applicable), closing costs, prepaid interest, taxes and insurance or other costs. Your Gloven Capital Home Loan Expert will make sure you know the exact amount to bring. You can also prearrange to have the money wired from your bank.

And don’t forget your ID! A government-issued identification card with photo will also be required.

Questions? Concerns? Don’t worry. Contact us online or call 1-305-890-9000. We’ll explain everything.

HAVE ANY QUESTIONS?

We’re here to help. Send us an email or call our experts at 1-305-890-9000

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Where To Find Us

Gloven Capital offers business owners alternative working capital solutions through our various funding programs for business loans.

  • Gloven Capital 3369 W Vine St, Suite 206, Kissimmee, FL 34741
  • info@glovencapital.com
  • 1-305-890-9000
  • NMLS ID: 2565540

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