The Stanford Funding Blog

Adjustable-rate mortgage (ARM): The mortgage-payment rate and loan payments vary. With these mortgages, interest rates start lower than with a fixed-rate mortgage, but then become variable. At specific intervals (typically every year), a lender adjusts the rate up or down as interest rates fluctuate.

Annual percentage rate (APR): The annual cost of a mortgage. APR is the base interest rate plus points, fees, and other loan costs.

Closing cost: Charges a home buyer pays in addition to a down payment. Fees may include points and charges for credit reports, appraisals, prorated property taxes, and homeowner’s insurance.

Finance charge: Interest borrowers pay over the life of a loan.

Fixed-rate mortgage: The mortgage-payment rate and loan payments remain fixed for the life of a loan. Interest rates do not vary.

Lock-in: Borrowers get a guaranteed interest rate (in effect at the time of the loan application) for a specific period of time.

Mortgage: A legal contract that pledges a property as security for a loan.

Mortgage broker: Companies that work with a number of banks and lenders to negotiate lower interest rates than available to individuals. They are usually paid a commission by the lender and charge the borrower a broker’s fee.

Mortgage payment: The loan payments for a mortgage are composed of interest (what the lender charges for borrowing money) and principal (amount borrowed).

Private mortgage insurance (PMI): Buyers pay this insurance if their down payments are less than 20% of a home’s purchase price (on a conventional mortgage loan).

Points: Fees borrowers pay to reduce interest rates. A point is 1% of a loan amount.

Stanford Funding offers a complete line of mortgage loan programs. We pride ourselves on finding the right one to meet your specific needs. Talk to one of our loan specialists today for the best programs, rates and services.

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Understanding Your Homeowner’s Insurance… before it may be too late.

For nearly all consumers, owning a home represents a large investment. But suppose your home is vandalized or damaged by a storm? Having insurance can protect you from such unpredictable losses.

When purchasing insurance, it is important to READ YOUR POLICY. Your policy is the contract between you (the insured) and your insurance company. The time to learn about your coverage and conditions is not after you have suffered a loss but before, while you have the opportunity to discuss the policy with your agent. If you do not understand the policy or want to modify it, contact the insurance agent or company for additional infor- mation. Also important is the written application for insurance that usually becomes part of the policy. Carefully examine the application before signing it to make sure the information is accurate and complete.

Choosing A Policy

When insurance policies are sold, they are issued on either a monoline basis or as a package policy. A monoline policy contains only one type of coverage, such as liability insur- ance, while a package policy includes several different types of coverage, such as property insurance and liability insur- ance. A package policy is generally less expensive than insurance coverages purchased separately. Homeowners policies are package policies that include property, liability, injury to someone on your property due to your negligence or that of a member of your family; or somebody else’s property is damaged as a result of your negligence.

It is important to be aware of the different perils that you are insured against. It is up to you to determine whether you need the most extensive type of coverage or whether your insurance needs can be met with a basic policy. Some of the coverages excluded under a policy, such as earthquake damage and power interrup- tion, can be “bought back” for an additional premium. Correspondingly, some coverages listed under a policy can be excluded, such as offpremises theft, resulting in a reduction in premium. However, some coverages, such as flood insurance, are always excluded and the only way to obtain them is through Federal insurance programs.

Most Common Types of Homeowner’s Insurance

Homeowners - 1 (HO-1) policy or Basic Policy, insures your home and contents against listed perils. Most insurers sell more comprehensive policies, such as the Homeowners-3, which includes these and other perils: Fire, Lightning and Smoke Damage, Windstorm and Hail, Glass Breakage, Vehicle or Aircraft Damage, Bodily Injury Liability, Damage to Property of Others, Personal Property (at Home), Personal Property (away), Burglary and Theft, Riot and Civil Commotion, Cost of Legal Defense, Explosion, Vandalism and Malicious Mischief, Medical Payments, Additional Living Expenses (If forced to live away from home temporarily).

Homeowners - 2 (HO-2) policy or Broad Form Policy, insures your home and contents against the perils in the HO-1 policy, plus other additional listed perils: Falling Objects, Water From Plumbing Systems, Electrical Damage to Appliances, Weight of Ice or Snow, Freezing of Plumbing Systems, Rupture of Water Heaters and Heating Systems.

Homeowners - 3 (HO-3) or Special Form Policy is the most widely used policy by homeowners. This policy covers your home for all risks of physical loss, except those that are specifically excluded, such as flood, earthquake, war, nuclear accident, etc. Check your policy for a complete listing of perils excluded. Coverage for loss of your home’s contents is also covered for many of the same perils for which your home is covered.

Tips on Evaluating Your Home and Personal Property

The first step in determining how much insurance you will need is to make an analysis of the value of your home and your personal property within it. In determining the value of your home, you must calculate how much it will cost to replace it if your home were totally destroyed. You can enlist the help of your insurance agent in determining this figure. In fact, most insurance companies make a physical inspection of your home when they first insure it. Using formulas that take into account whether your home is of brick or wood frame construction, total area, number of floors, number of rooms, etc., the company will be able to give you an accurate replacement cost value.

Determining the value of your personal property will require an extensive analysis on your part. You should go through each room of your house and list every piece of furniture and fixture within it. As you compile your inventory, you should supplement it with receipts indicating the purchase price and date of purchase and photographs of major items. Your inventory should be updated on an annual basis or, at the very least, whenever you purchase a large appliance or piece of furniture.

Some people periodically videotape all their possessions. If you videotape, make sure all the drawers and/or doors of your furniture are open so you have a record of what is stored. When complete, you should store your inventory or videotape in a safe place away from your home, such as your safe deposit box. You might also store this information in the home of a friend or relative.

For more detailed information, be sure to contact a reputable insurance agent or sales representative.

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Before deciding on what terms they will offer you a loan (which they base on their “risk”), lenders want to know two things about you: your ability to pay back the loan, and your willingness to pay back the loan. For the first, they look at your income-to-debt obligation ratio. For your willingness to pay back the loan, they consult your credit score.

The most widely used credit scores are FICO scores, which were developed by Fair Isaac & Company, Inc. (and they’re named after their inventor!). Your FICO score is between 350 (high risk) and 850 (low risk).

Credit scores only consider the information contained in your credit profile. They do not consider your income, savings, down payment amount, or demographic factors like gender, race, nationality or marital status. In fact, the fact they don’t consider demographic factors is why they were invented in the first place. “Profiling” was as dirty a word when FICO scores were invented as it is now. Credit scoring was developed as a way to consider only what was relevant to somebody’s willingness to repay a loan.

Past delinquencies, derogatory payment behavior, current debt level, length of credit history, types of credit and number of inquiries are all considered in credit scores. Your score considers both positive and negative information in your credit report. Late payments will lower your score, but establishing or reestablishing a good track record of making payments on time will raise your score.

Different portions of your credit history are given different weights. Thirty-five percent of your FICO score is based on your specific payment history. Thirty percent is your current level of indebtedness. Fifteen percent each is the time your open credit has been in use (ten year old accounts are good, six month old ones aren’t as good) and types of credit available to you (installment loans such as student loans, car loans, etc. versus revolving and debit accounts like credit cards). Finally, five percent is pursuit of new credit — credit scores requested.

Your credit report must contain at least one account which has been open for six months or more, and at least one account that has been updated in the past six months for you to get a credit score. This ensures that there is enough information in your report to generate an accurate score. If you do not meet the minimum criteria for getting a score, you may need to establish a credit history prior to applying for a mortgage.

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If you search for “bi-weekly mortgage” with an Internet search engine, you will be overwhelmed by the number of companies offering “Bi-weekly Mortgage Reduction Services” or “Bi-weekly Savings Programs.” Beware, you are entering dangerous waters.

Beware of Bi-Weekly Mortgage Reduction Services and Savings Programs

These “Reduction Services” and “Savings Programs” are charging you fees to “make a bi-weekly mortgage payment” for you. The enticement is that they will save you an impressive amount of money on your mortgage and reduce the number of years you pay on your mortgage.

The enticement is that they will make bi-weekly mortgage payments for you.

The real story is that they are not actually making bi-weekly payments on your mortgage. They are making bi-weekly deductions from your bank account. These funds are placed into an account from which your monthly mortgage payment is made (which only takes 24 deductions - but during the course of a year 26 deductions will be made from your account). With the extra 2 deductions, the “Service” makes an additional mortgage payment. In other words rather than making 12 mortgage payments, 13 payments are made.

The enticement is that they are providing a special service to you that would either not be possible for you to get on your own or that you won’t have the time or discipline to make it happen.

The real story is that you can easily make an additional mortgage payment each year. An easy way to do this is to have your mortgage payment automatically deducted from your account each month with an additional 1/12 payment to be applied to the principal amount. At the end of 12 months, you will have made an additional payment. And you won’t have to pay any fees to a “Service”.

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Your Role in the Home Buying Process

1. Get to know your Stanford Home Mortgage Loan Officer.

How do I choose a Loan Officer?

The Loan Officer has a very important role in this transaction and should be able to rise to the occasion to get you a loan. You want to find a Loan Officer who is knowledgeable and hard working. Again, you will want someone who will answer all of your questions, and who will be available for your special needs and schedule.

2. Get pre-qualified or pre-approved for a loan.

How do I get pre-qualified or pre-approved? What is the difference?
At this point you need to know what your buying power is. One of our trained loan officers can have a pre-qualification for you in less than 20 minutes. Pre-qualification is simply a credit approval without verifying income or assets, and lets you know what purchase price you can afford to buy after asking you a few questions. If you actually fill out a loan application and provide proof of income and assets we will be able to give you a pre-approval. A Pre-approval will give you buying leverage when there are multiple offers on a property.

3. Choose a Realtor.

How do I choose a Real Estate Agent?

Keep in mind this is a person who will represent your rights in this transaction. You will want to find a Realtor who will answer all of your questions, and be available to your individual needs and schedule. Don’t be afraid to ask them for references of the last three clients they worked with or what they feel might fit your criteria for a home. Communication is key in this relationship.

4. Choose a home to Purchase.

How do I choose a Home?

This is where the fun begins. You should have a list of features and criteria that the new home should have. From your list you should rate which features and criteria are the most important to you. Your Buyers Agent will then be able to filter out the housing market and narrow down a few good prospects to look at. When you find a house that appeals to you, have your agent schedule a viewing. Happy house hunting!!

5. Sign a Purchase Contract.

How do I make an offer?

An offer is made submitting a purchase contract to the seller’s agent, preferably through your buyer’s agent.

What do you offer?
Your realtor will advise you on how much you should offer. Things to consider when determining what price to offer include: how long the house has been on the market, how many homes similar to this one are for sale in the same area, will you be asking the seller to pay any of your closing costs, has the seller already lowered the purchase price, and probably most important, how bad do you want this house.

What if they reject my offer?

Depending on what you offer, the seller may choose to reject your offer, so it is important to make a reasonable offer to begin with. But if for some reason the seller rejects your offer, you can always put in a new offer. It is rare that the seller flat out rejects an offer because your realtor and the seller’s realtor will be talking to each other before the formal offer is made. It is much more common that the seller will counteroffer if he does not like the original offer.

What if they counter offer?

Now you have a decision to make. You can accept the counteroffer presented by the seller and proceed, or you can counteroffer his counteroffer. Remember, this is a negotiation process and you should not be afraid to ask for what you want.

6. Apply for a Mortgage Loan.

What do I need for the application and why?

You could expect to provide documentation of your income and assets. Typically the underwriter will need 2 years of W-2’s or 1040 tax returns along with 30 days worth of pay stubs. To document your assets the underwriter will need 60 days worth of bank statements and quarterly statements for any investment or retirement account. The reason you need to provide income and asset documentation is that Mortgage Loans are approved based on your ability to pay them back. The underwriter will weigh your monthly debts vs. your monthly income, your loan amount vs. the purchase price, your assets will represent your ability to pay back the loan if you loose your job, and of course your credit represents your history of paying debts back. Now if you are like most people your blood pressure just went up. Don’t worry, our Loan Officers are trained professionals and want to see that you get the right loan for your needs.

7. Choose a Home Owners Insurance Agent.

What does this Insurance Cover and why do I need it?

Hazard Insurance is what is going to cover your home and your belongings if any disaster were to occur. The lender is going to enforce that you insure the home from disaster, that way the home will continue to be collateral for the Mortgage Loan even if the house were to burn to the ground. Since you have many valuable items that are in the home, you will want to insure those as well. You won’t need to ask for this personal property insurance unless you are buying a condo or town home. A single family detached property will automatically cover personal property, whereas a condo / town home will have a master insurance policy that you pay to your Home Owners Association.

How do I choose an Insurance Agent?

Like any other business professional that you plan on working with you will want someone who will answer your questions, and is available to your individual needs and schedule. Your auto insurance agent may be a good place to start.

8. Sign Closing Documents.

What Do I bring with me to Closing?
Please bring proof of identification, State I.D., or Visa. Any money that you bring to close will have to be in the form of verifiable funds (i.e. certified check, cashiers check.)

What if you don’t know how much money to cut a check for?

Easy, just have a check made out for an anticipated higher amount and the title company will cut you a check for any overage. Also, you could bring a series of checks.

So whom do you make the check out to?
This may sound funny, but the check can be made payable to you. At the closing you will be able to write the check over to the title company.

9. Move in and Celebrate!

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Which refinancing option is best for you?

There aren’t quite as many loan programs as there are borrowers, but it seems like it sometimes! We’ll work with you to qualify you for the best loan program to fit your needs. But there are some general considerations you can have in mind in advance.

Are you refinancing primarily to lower your rate and monthly payments? Then your best option might be a low fixed-rate loan. Maybe you have a fixed-rate mortgage now with a higher rate, or maybe you have an ARM — adjustable rate mortgage — where the interest rate varies. Even if it’s low now, unlike your ARM, when you qualify for a fixed-rate mortgage you lock that low rate in for the life of your loan. This is especially a good idea if you don’t think you’ll be moving within the next five years or so. On the other hand, if you do see yourself moving within the next few years, an ARM with a low initial rate might be the best way to lower your monthly payment.

Are you refinancing primarily to cash out some home equity? Maybe you want to pay for home improvements, pay your child’s college tuition bill, take your dream vacation, whatever. Then you’ll want to qualify for a loan for more than the balance remaining on your current mortgage. If you’ve had your current mortgage for a number of years and/or have a mortgage whose interest rate is higher, you may be able to do this without increasing your monthly payment.

You want to cash out some equity to consolidate other debt? Good idea! If you have the equity in your home to make it work, paying off other debt with higher interest rates than the interest rate on your mortgage — for example, credit cards, home equity loans, car loans, some student loans — means you can save possibly hundreds of dollars a month.

Do you want to build up home equity more quickly, and pay off your mortgage sooner? Consider refinancing with a shorter-term loan, such as a 15-year mortgage. Your payments will be higher than with a longer-term loan, but in exchange, you will pay substantially less interest and will build up equity more quickly. If you have had your current 30-year mortgage for a number of years and the loan balance is relatively low, you may be able to do this without increasing your monthly payment — you may even be able to save! For example, let’s say years ago you took out a $150,000 30-year mortgage at eight percent. Your payment is about $1,100, exclusive of taxes, insurance and so on. If your balance today is down to $130,000, you might take out a 15-year mortgage at six percent and have an almost identical monthly payment. This is a great option for people whose main goal is not to save money on their monthly payment but rather want to build up equity and pay off their home more quickly.

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It’s a big step when you decide to buy a home or refinance a mortgage. At Stanford Funding, you can count on us to find the mortgage loan program that’s right for you.

Buying a new home can be a source of anxiety and frustration as well as a huge sense of accomplishment. You didn’t buy the house that was best for someone else, you selected the one that’s right for you! Trust our mortgage professionals to find the mortgage loan that best fits your needs, too. With Stanford Funding you’ll get less paperwork and more personal attention from the beginning to the end of the loan process. Getting the right mortgage loan is like getting the keys to your new house! We can help you get there.

Refinancing your current mortgage has never been easier. If you thought refinancing meant getting buried under mountains of paperwork, think again! We make it easy and worry-free to reduce your interest rate and monthly payment. We can even help you pay down your balance more quickly for comparable monthly payment. Let our mortgage professionals guide you to the very best refinanced loan!

Tapping into your home equity is easier than ever before. You’ve been paying down your balance, and property values have gone up! Tap into that wealth and reward yourself. We’ll help with the best program to fit your goals.

Our mortgage professionals give you the personal attention you deserve and treat you with the respect due a valued customer. We understand you’re making a commitment in buying a new home, refinancing and mortgage or cashing out your home equity. So we make a commitment to you. We will help you qualify, apply and be approved for the right mortgage loan for you. Not anybody else!

Please navigate our website to learn more about us, what we do for you, and how easy it is to get started. Or go ahead and contact us right now at 303-458-8200 or apply for a mortgage loan online.

1. Who should I contact regarding loan status questions?
Please contact your loan officer for all questions and updates. If he/she is unavailable, please leave a message and somebody will get back to you as soon as possible.

2. How long will it take to be approved?
Normally, your loan will be approved within two weeks of your loan application. It is important that we receive all items requested on your checklist in a timely manner.

3. When will I be notified of my approval?
You will be notified immediately upon your loan approval. In addition, all appropriate parties will be contacted (Realtors, builders, attorneys, etc.)

4. May I fax additional documentation to you?
Any additional documentation, which does not require an original signature, may be faxed to (303) 477-1315. For example bank statements and paycheck stubs may be faxed.

5. Who schedules the closing?
For a Purchase, the seller’s Realtor will schedule (in conjunction with all parties) the closing with the Title Company and Stanford Funding, Inc. For a Refinance, we will do our best to schedule a time and location that is convenient for you.

6. When will I know how much money I will need for closing?
For a Purchase, there are times when you will not have your exact closing figures until the day before closing. This is very normal. The title company has to receive figures from three different sources. Once all three sources submit their figures, they compile your numbers. If need be, we can give you a close estimate of the final figures 2-3 days prior to your closing. For a Refinance, if any cash is needed at closing, we usually will have your figures 2-3 days in advance.

7. What form of money is acceptable as payment at closing?
A cashier’s check made payable to you is acceptable to the title company. If you are using a sale proceeds from your current home, have that title company issue your proceeds as a cashier’s check payable to you. As a reminder, if you are liquidating any funds, be sure to contact that institution to learn their liquidation policy and time frame. Some accounts may take up to two weeks to liquidate.

8. What should I do with the print out I receive from First Check Credit?
Nothing! In most cases, we have already asked you for any explanations regarding any derogatory credit marks or credit inquires.

9. What is the 3-day right of rescission on refinances?
When you refinance, the title company cannot disburse your new loan until three business days have expired. This will also give you time to review all of your documents.

10. May I increase or decrease my loan amount?
In most cases, yes, provided we have enough time. Of course you still need to qualify at the new loan amount. Please contact your loan officer as soon as possible to see if you may change your loan amount.

11. When do I get my homeowner’s insurance agent involved?
The simplest way to handle this is to give us your insurance agent’s name and number after you select one as soon as possible. Your agents will then mail or fax us a copy of your policy and your first year’s premium. You will pay the premium at closing, which will be included in your final closing figures.

12. When is my first payment due?
As a general rule, your first payment is due on the first day of the month, two months after you close. This means that your first payment could be from 31-60 days after you close. Examples Close April 1, your first payment is June 1. Close April 30, your first payment is still June 1. Close May 1, and your first payment is July 1. Some exceptions may apply ask your loan officer.

Thank you again for your business and feel free to call me or email me at our Mortgage Company Contact Page with any questions or concerns.

-Willie Dann
Stanford Funding, Inc

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