What is earnest money? How much should I set aside?

Earnest money is money put down, through your Realtor, to demonstrate your seriousness about buying a home. It must be substantial enough to demonstrate good faith and is usually between 1-5% of the purchase price (though the amount can vary with local customs and conditions).

Are there special mortgages for first-time homebuyers?

Yes. Blue Water Mortgage has several affordable mortgage options that can help first-time homebuyers overcome obstacles that made purchasing a home difficult in the past. We are now able to help borrowers who don't have a lot of money saved for the down payment and closing costs, have no/a poor credit history, have quite a bit of long-term debt, or have experienced income irregularities.

What is loan-to-value (LTV)?

This is a ratio of the amount of money you wish to borrow compared to the sales price or value of the home you want to purchase. A 75% LTV on a $100,000 home would equal a $75,000 loan. The property value is determined by the appraised value or purchase price, whichever is less.

How large of a down payment do I need?

There are conventional mortgage options now available that require as little as 3% of the purchase price down. But the larger the down payment, the less you have to borrow, and the more equity you'll have. Mortgages with less than a 20% down payment generally require a mortgage insurance policy to secure the loan. When considering the size of your down payment, consider that you'll also need money for closing costs, moving expenses and possibly repairs and decorating.

For those who don’t have money for a down payment but have good credit upon complete verification, 100% financing is available through Blue Water Mortgage.

How do I know what I can afford?

It's simple. Ask your Blue Water Mortgage Loan Officer to pre-approve you. No application fee is required to get pre-approved before a property has been selected.

What is a good faith estimate and how does it help me?

It's an estimate that lists all fees paid before closing, all closing costs, and any escrow costs you will encounter when purchasing a home. Blue Water Mortgage will supply it within three days of your application so that you can make accurate judgments when shopping for a loan.

What is included in a monthly mortgage payment?

The monthly mortgage payment mainly pays off principal and interest. Local real estate taxes, homeowner's insurance and mortgage insurance (if applicable) are typically included as well.

How much will I pay in property taxes?

Generally, you can expect to pay 1-3% of the market value of the home in annual property taxes. For example, if your home has a market value of $100,000, it's likely that you might pay between $1,000 and $3,000 per year in property taxes, depending on where you live. Ask your Blue Water Mortgage Loan Officer about property taxes in the area you'd like to buy a home.

How does the interest rate factor in securing a mortgage loan?

A lower interest rate allows you to borrow more money than a high rate with the same monthly payment. Interest rates can fluctuate as you shop for a loan so be sure to ask us about a rate "lock-in" which guarantees a specific interest rate for a certain period of time. Blue Water Mortgage will disclose the Annual Percentage Rate (APR) of a loan to you. The APR shows the cost of a mortgage loan by expressing it in terms of a yearly interest rate. It is generally higher than the interest rate because it also includes the cost of points, mortgage insurance and other fees included in the loan.

What is an escrow account?

An escrow account is a place to set aside a portion of your monthly mortgage payment to cover annual charges for homeowner's insurance, mortgage insurance (if applicable) and property taxes. Escrow accounts are a good idea because they assure money will always be available for these payments.

What is RESPA?

RESPA stands for Real Estate Settlement Procedures Act. It requires lenders to disclose information to potential customers throughout the mortgage process. By doing so, it protects borrowers from abuses by lending institutions. RESPA mandates that lenders fully inform borrowers about all closing costs, lender servicing and escrow account practices, and business relationships between closing service providers and other parties to the transaction.

What is an origination fee?

A fee collected by Blue Water Mortgage to offset the cost of processing and funding your loan. The fee, calculated as a percentage of your total loan amount, is often referred to as "points."

What are points?

Discount points allow you to lower your interest rate. They are essentially prepaid interest, with each point equaling 1% of the total loan amount. Generally, for each point paid on a 30-year mortgage, the interest rate is reduced by 1/4 (or.25) of a percentage point. As you’re shopping for loans, ask us for an interest rate with 0 points and then see how much the rate decreases with each point paid. Discount points are smart if you plan to stay in a home for some time since they can lower the monthly loan payment. Points are tax deductible and you may be able to negotiate for the seller to pay for some of them.

What is PMI?

PMI stands for Private Mortgage Insurance. This insurance is required if you make less than a 20% down payment or have less than 20% equity in your home. It is additional insurance designed to protect lenders from individuals who default on their loans. If you have less than 20% to put down, there are still options for avoiding PMI. Please inquire with your Blue Water Mortgage Loan Officer.

What are closing costs?

Closing costs (or settlement costs) are the miscellaneous expenses involved in the transfer of real estate from one owner to another. They are paid when the homebuyer and the seller meet to exchange the necessary papers for the house to be legally transferred.

What does a title company do?

A title company acts as a neutral third party to handle the legal documents and funds on behalf of a seller and a buyer, or a lender and a borrower.

What is an insurance binder? Do I need one for the closing?

A homeowner’s insurance policy for the property must be in force at the time of the closing. An insurance binder is a homeowner insurance company’s written commitment to insure title to the property, subject to the conditions and exclusions shown on the binder.

Prior to closing, you will need to obtain a Homeowner’s Insurance Policy. Your mortgage loan commitment letter will detail exactly how the binder should be worded and what coverage is required. You should try to take care of this as early as possible to ensure a smooth transaction. Please bring the binder and paid receipt to closing evidencing one year of Homeowner’s Insurance coverage.

What can I expect to happen on closing day?

You'll present your paid homeowner's insurance policy or a binder and receipt showing that the premium has been paid. The closing agent will then list the money you owe the seller (remainder of down payment, prepaid taxes, etc.) and then the money the seller owes you (unpaid taxes and prepaid rent, if applicable). The seller will provide proof of any inspection, warranties, etc.

Once you're sure you understand all the documentation, you'll sign the mortgage, agreeing that if you don't make payments the lender is entitled to sell your property and apply the sale price against the amount you owe plus expenses. You'll also sign a mortgage note, promising to repay the loan. The seller will give you the title to the house in the form of a signed deed.

You'll pay the closing agent all closing costs and, in turn, the closing agent will provide you with a settlement statement of all the items for which you have paid. The deed and mortgage will then be recorded in the state Registry of Deeds, and you will be a homeowner.

How can I get a copy of my appraisal or credit report?

Please feel free to contact our office to obtain copies. We’d be happy to help!

More Questions?

There is a lot to consider when financing a home. And you may have many more questions. Please feel free to contact one of our Loan Officers at 1.800.668.9695 or e-mail your questions to us. Let Blue Water Mortgage help you understand the steps involved in financing your home!