The entire process of getting a loan whether it's for your home or business can be confusing for some and frustrating and nerve wrecking for others. We, at Grant Financial Services have attempted to explain the process and define the terminology and pinpoint some of the obstacles to help prepare the applicant. This section is designed to explain and provide answers to many of your questions.

Decision Tools   Credit Basics Factors Affecting Lending Decisions   How Credit Affects Rates Closing Costs Guide   About Credit Scores Credit Issues   How Credit Scoring Works Factors Affecting Rates   How to Improve Your Credit Application Checklist       Mortgage Term Glossary

Decision Tools
How much will your monthly payment be? How much would you save if you paid a loan off early or consolidated debt? Find these answers and more.

• If I refinance, will the amount I save in interest over the length of stay exceed the cost of refinancing? See Refinance Calculator
• What will my payments be if I get a fixed rate mortgage? See Fixed Rate Mortgage Calculator
• What will my payments look like if I get an adjustable rate mortgage? See Adjustable Rate Mortgage Calculator
• Find out how much it will cost you to payoff a mortgage loan with a balloon payment at the end. See Balloon Payment Calculator
• Find out if you should keep on renting or its better to buy a house. See Rent vs Buy
• If you had the option, should you put down 5% or 10%? Is it better to get a combination rate mortgage or adjustable? Compare up to three different loan scenarios and find out which is better for you. See Compare loan programs
• What happens to your loan balance when you make additional payments towards your mortgage balance. See Making additional payment
• Given your income, household expenses, your credit standing, the available cash for down payment and a given interest rate, you can find out what the maximum home value you should be looking for. Please note that this is meant to give you an idea and is not the absolute limit. Most lenders have variety of loan programs which offer alternatives to these limits. See What is maximum home value I can qualify for?
• If you are on a fixed budget, find out what the maximum home value you can afford. See What is the maximum home value if my monthly payment can not be more than .
• A versatile calculator for all real estate computations. See Advanced Loan Calculator
• You have many credit cards and wonder if you would save money if you obtained a 2nd loan and paid off all your credit cards. Find out. See Loan Consolidation Calculator

Mortgage Term Glossary

Confused by some loan terms you have heard or read? Don't know how to choose a home loan? Learn the differences between fixed and adjustable rate mortgages and other kinds of loans. Need to understand what the Closing Costs are? Find out what expenses you can expect. How about Factors Affecting Loan Decisions? Let us explain what lenders consider when approving loans. And finally issues with Credit! Discover why credit is important and how it can affect the interest rate or fees you pay. Find out what you can do to improve your own credit and ability to obtain a loan.
Click here

Fixed vs. Adjustable: How to Choose

Choosing a loan - Fixed Rate, Adjustable Rate or somewhere in between. Home loans come in many shapes and sizes. Deciding which loan makes the most sense for your financial situation and goals means understanding the benefits of each.

Whether you are buying a home or refinancing, there are 3 basic types of home loans. Each has different reasons you'd choose them.
Click any loan for more detailed information.

Fixed Rate Mortgage
Plan to live in home more than 5 years Like the stability of a fixed principal/interest payment Don't want to run the risk of future monthly payment increases Think your income and spending will stay the same

Adjustable Rate Mortgage
Plan to stay in your home less than 5 years Don't mind having your monthly payment periodically change (up or down) Comfortable with the risk of possible payment increases in future. Think your income will probably increase in the future

Combination Rate Mortgage
Want the stability of a fixed principal/interest payment in the short term. Want to repair your credit by demonstrating your ability to make regular payments, then refinance for a lower interest rate

Have a lot of consumer debt (these loans typically allow more) Want to borrow more and get a lower monthly payment than a standard fixed rate loan.

Closing Costs Guide

A Quick Look at Charges and Fees. Money for a down payment is not the only cash involved in getting a home loan.

What are closing costs ?
Closing costs are charges, fees and pre-paid items for processing your loan and mortgage. Closing costs can even include an optional expense you pay to reduce your interest rate.
These expenses vary from state to state but often add up to between 3 and 6 percent of the amount of money borrowed.

Fees paid when you apply for a loan : (Paid when you submit your application)

Fees for closing and services : (Paid on the day your purchase or refinance is final)

Pre-paid amounts required by Lenders : (Paid on the day your purchase or refinance is final)

Fees Paid When You Apply for a Loan

Appraisal Fee - The amount charged by an appraiser who determines the value of a home.

Credit Report Fee - The fee for receiving your credit report from a credit-reporting agency. Grant Financial Services charges this fee at your closing.

How Much Will I Pay?
By law, lenders must give you a document called a "Good Faith Estimate" within 3 days after you apply for a loan. This paper tells you how much you should expect to pay for closing costs. It is a lender's best estimate of how much all the fees cost. The actual amount you pay may be different. Amounts and types of fees and charges vary based on your geographic location, the loan and other considerations.

Fees for Closing and Services

Real Estate Agent Commission - The amount you've negotiated to pay a real estate agent or broker when you buy a house - usually, a percentage of a home's price.

Origination Fee - The fee charged by the lender for processing your loan.

Loan Discount or "Points" - You can sometimes receive a lower interest rate, by "paying points". A point is equal to 1% of the amount of money you are borrowing.

Settlement or Closing Fee - The fee paid to the closing agent to act as a disinterested third party who handles the finalizing of your loan and the purchase of a home.

Title Insurance Costs - To issue title insurance, government and other records must be searched to make sure no one else has a legal claim to the home. A title insurance binder and an insurance policy are also required. You are charged separate fees or an all-in-one amount for these costs. The title insurance policy you are required to purchase protects the lender. It is a very good idea to pay a little bit extra and take out a separate title insurance policy that protects you.

Attorney's Fees - If you live in an area where an attorney works on title or other parts of a home purchase, there is a fee for legal services.

Property Taxes - Any local property tax must be paid annually. If you purchase a home in the middle of the year, you may be asked to share some of the year's taxes with the home seller. The closing agent prorates the amount you owe.

City, County and State Charges - The local governments where you live may charge taxes and fees to record and stamp documents such as deeds and loan paperwork.

Survey - The cost of surveying the property to determine the size of the lot your home is on. Or, for example, whether a public utility company has a right to have access to the property.

Pest Inspection - If an appraiser notices signs your home may have termites or other pests, or if the laws in your area require it, a pest inspection and report must be done. Fees for these services are included in closing costs.

Flood Check Fee - Lenders must check Federal Flood Maps to find out if your home requires flood insurance. This fee covers the map search and issuing a certificate.

Pre-Paid Amounts Required by Lenders

Interest - If your loan is finalized before the last day of the month, at closing you must pre-pay interest on the loan for the time between the day the loan funds and the first day of the next month.

Homeowners' Insurance Premium - One year of this insurance coverage that protects the lender and you if the property is damaged is paid at the loan closing.

Private Mortgage Insurance - Typically, if you make a down payment of less than 20 %, lenders require Private Mortgage Insurance (PMI) to protect them in the unfortunate event that a borrower does not repay the loan. (Full Spectrum Lending loans do not require PMI.)

Reserve or Escrow or Impound Account - This account is set up and held in trust for you by the lender. It is used to pay for property taxes, homeowners' insurance, flood insurance and PMI. Usually, at loan closing enough money to pay for at least 2 month's worth of these items is deposited in the account. Your lender pays these bills for you when they are due. Your monthly mortgage payment includes money that is deposited into this account. Not all loans require a reserve account.

Factors Affecting Lending Decisions

Thinking about a home loan, but concerned you may not be approved by a lender? Wondering whether you can do anything about it? The more you know about lending decisions, the more confidence you gain.

These are the 4 major elements that affect how a lender decides whether or not to loan you money.

1. Your financial situation
   Lenders like to know you can repay the loan without going broke and that you're a good credit risk.
2. The Home you are Buying or Refinancing
   Is the home worth the money you're paying for it? Lenders have to know this in case they end up with the property.
3. The Type of Loan
   Each type of loan has its own rules for qualification. Where one loan might not work for you, another might.
4. The Lender

A. Your Financial Situation

Your finances play a large part in a lender's decision to approve a home loan. At Grant Financial Services we have ways to help you meet a loan's financial requirements.

Here are the 3 areas lenders look at and some questions they ask themselves when reviewing your application and paperwork.

Cash on Hand - Does this customer have money available for closing costs and a down payment (if purchasing)?

Ability to Repay the Loan - Will this customer earn enough money now and in the future to make home loan payments? Is there so much other debt, like credit card balances, that a mortgage payment will be difficult to pay?

Credit History - Has this customer paid bills on time in the past ?

Things You Can Do

If your bank accounts are slim , consider this: most lenders allow down payment or closing cost money to come from gifts. At Grant Financial Services , you can find low down payment and/or zero-down loan programs that offer you many options.

Have a lot of debt? Reduce debts by paying off your credit cards and other debts if you can. If you can't, you might want to consider a home refinance loan that allows you to consolidate your debts.

Need to improve your credit? There are many steps you can take to improve your credit. Debt counseling may help. Planning and financial management skills are easier to learn than you may think

B. The Home You're Buying or Refinancing

When a lender makes a loan the value of the property is very important. If the borrower meets with misfortune and cannot repay, the loan may be foreclosed and the lender becomes the owner of the property. Lenders then sell the property to recover their losses.

In other words, your home is used as collateral on the loan.

Estimating the value of a home is the job of an appraiser. Here are some things an appraiser may do before submitting a report - an appraisal - giving his or her opinion on the value of a home to a lender:

Things an appraiser does to appraise a home:

• Visits the property and evaluates the inside, outside and surroundings
• Checks the location to make sure things like water and utilities are available
• Finds out about local property taxes, building codes and zoning restrictions
• Compares the sales prices of similar homes nearby

Lenders use appraisals when they decide how much money you can borrow. It is part of the underwriting process. They look at an appraisal to see if:

• For a home purchase the estimated value of the home matches the purchase price
• For a refinance loan the home's estimated value equals or exceeds the amount being borrowed.
• A property appraised at a lower value than expected can result in the lender asking for a larger down payment or offering to lend you a lower amount.

When Buying:
Ask your real estate agent for sales prices of homes similar to the one you are thinking about buying.

When Refinancing:
Make sure additions and other remodeling meet local building codes.

C. The Type of Loan

Lenders are good at numbers. They calculate the risk that a loan might not be paid back. They also know which kinds of loans they can be more flexible with, giving borrowers options that may make it easier to get a loan.

An adjustable rate mortgage (ARM) is a good example. It is easier to get approved for an ARM than it is to get approved for a Fixed Rate loan. Because the initial interest rate and monthly payments are both typically lower on an ARM, your ability to repay the loan is easier to determine.

Learn About Loans. Each type of loan has advantages and disadvantages. Loans that are easier to qualify for may not always the best deal. You need to weigh their different benefits based on your financial situation.

Call Grant Financial Services (1-800-976-0444). We can help you find the right loan for your needs.

D. The Lender

Not all lenders are alike. Some have more flexible guidelines than others and different lending philosophies

Credit Issues

Having good credit makes it easier to get a loan. Good credit also helps you take advantage of lower interest rates and reduce your monthly loan payments.

Use the links below to get fast facts on credit. Discover why your credit history is important and how to improve your credit rating.

• Credit Basics : Find out what exactly credit is and why it's important to you.
• How Credit Affects Rates : See how your credit affects the rates you're offered on loans.
• About Credit Scores: Learn about credit bureaus and how you can get a copy of your credit report.
• How Credit Scoring Works : See what affects your credit score and why.
• How to Improve Your Credit: Discover things you can do right now to start improving your credit rating.

Credit Basics

Generally speaking, "good credit" means paying your bills on time and maintaining a personal financial profile that helps to make lenders confident that you will make mortgage payments on time. Good credit also means that you are not "overextended" or borrowing so much that you are putting yourself at risk for financial problems.

Good credit makes it easier to get a loan when you need it, and helps you get lower interest rates when you borrow.

Why is credit important?
Good credit makes it easier to get loans, credit cards, and better interest rates when you borrow. Credit problems, on the other hand, make it harder to get a loan or lower interest rate.

Unfortunately, credit problems don't go away overnight. Late payments a year or more ago can affect your credit history today. Major problems, like bankruptcy or a loan default , appear on your credit record for years.

Lenders evaluate credit risk, the likelihood that a borrower will make payments on time and pay off the loan. Some lenders have very strict guidelines and evaluate borrowers "by the book". At Grant Financial Services , we're dedicated to getting the whole story so we can work with you to find a loan solution that's right for you.

To judge credit risk, lenders typically look at:

Income: Regular and documentable income from earnings, commissions, investments, rental payments and other sources. Lenders look for a steady income from month to month and a stable work history.

Assets: Savings, investments, retirement funds, cars and other valuables that are "liquid" or easily converted into cash.

Liabilities: Debts such as mortgage loans, home equity loans, credit card balances, car loans, student loans and other consumer debt.

Other Financial Information: Situations that could affect payments, such as lawsuits, collection activity, recent bankruptcy or property foreclosure, obligation to pay alimony or child support, or being a co-signer on another loan.

Payment History: Making timely mortgage or rent payments is very important. Paying late just once by 30 days or more can affect both the loan and the interest rate offered you. Late payments on credit cards, car payments and other bills are also factors.

Credit Reports: National credit bureaus collect information and provide reports to home lenders and other creditors. Credit reports include details on credit accounts and information on your payment history.

Debt-to-Income: Monthly debt expenses and income get converted to a debt-to-income ratio. While there isn't a standard, lenders often have a maximum number that they will allow a borrower to have.

All the factors listed above work together to affect a person's credit. That's why people with good income and prompt payment histories but a lot of debt might have trouble getting loans. And why individuals with plenty of income and few debts could also have problems if they're often late paying bills or have not established credit.

But here's the good news. Anyone can improve his or her credit rating over time.

So as you review the steps that follow to improve your credit, remember you can always contact Grant Financial Services for additional information and assistance.

How Credit Affects Rates

Borrowers with good credit histories, high credit scores, steady income and relatively few debts present a low risk of loss for lenders. So these borrowers often qualify for loans or credit lines with lower interest rates.

A borrower who has had credit problems, whose income varies substantially from month to month, or who already owes a lot of money in relation to income poses a higher risk for the lender. In order to offset the potential loss of money if the borrower can't make payments, the lender must charge a higher interest rate on the loan. But over time, a borrower can rebuild a good credit rating in order to take advantage of lower interest rates.

About Credit Scores

Credit scores are numeric values that rank the risk of default by an individual according to their credit history at a given point in time. Your score is based on your past payment history, the amount of credit you have outstanding, the amount of credit you have available, and other factors. According to Fannie Mae and Freddie Mac , two of the largest purchasers of home loans from mortgage lenders, credit scores have proven to be very good predictors of whether a borrower will repay his or her loan.

Many lenders use credit scores to help evaluate loan applications. A credit score, however, is just one of many factors considered in the underwriting process. Lenders look at the entire picture. Even when a credit score is low, lenders often try to find other factors that could overcome the negative credit issues and satisfy their lending requirements.

Three national credit bureaus ( Equifax , Experian and Trans Union ) collect credit information and provide reports and credit scores to lenders. Lenders often use a "merged" credit report, considering the information and scores provided by all 3 of the credit bureaus.

Different lenders may have different standards for loan approval, based on credit scores and other factors. Because credit bureaus don't currently provide credit scores to consumers, it's important to talk with lenders about how your credit profile fits with their requirements and loan programs. Have you checked your credit report? Many people who think they have good credit are surprised to find issues in their credit reports.

Sometimes that's because they don't understand how borrowing and bill-paying habits affect their credit rating. And sometimes it's because the credit bureau has outdated or incorrect information, or because another consumer's information is mixed with their reports due to similar names or other errors.

It's a good idea to check your credit report every year or so. It's especially important if you plan to apply for a mortgage or another major loan to do so before you apply, in order to improve your ability to obtain a loan or appropriate terms.

If you find mistakes in your credit report, you can take steps to correct them. And if you find issues you didn't know about, you can learn how to avoid those kinds of issues in the future.

You Have the Right to Receive Your Credit Reports
You have the right to get a copy of your personal credit report at any time.

By law, if you have been turned down for a loan or credit card within
the last 60 days based on the information in a credit report, you are entitled to a free report from the credit bureau(s) that provided the report to the lender. You're also entitled to 1 free report per year if you're on welfare, are unemployed and plan to look for a job within 60 days, or your report is inaccurate because of fraud.

If you are entitled to a free report, you must contact the credit bureau(s) separately, see below.

Otherwise, there may be a fee for each report you request (about $8.00; charges may vary by state).

Equifax
Credit Information Services
P.O. Box 105496
Atlanta, GA 30348-5496
800-997-2493
http://www.equifax.com

Experian (formerly TRW)
National Consumer Assistance Center
P.O. Box 2104
Allen, TX 75013-2104
888-397-3742
http://www.experian.com

Trans Union LLC
Consumer Disclosure Center
P.O. Box 1000
Springfield, PA 19022
800-888-4213
http://www.tuc.com

How Credit Scoring Works

Three national credit bureaus collect information from creditors and provide reports to lenders. These reports include a summary of a borrower's loans, credit cards, lines of credit and revolving credit accounts, including detailed information on any late payments or other problems with the accounts.

Based on the information collected, each bureau, using an algorithm created by various vendors, also calculates a credit score for the borrower.

Factors that can impact a credit score:
Poor Payment History - Paying bills late, having bills sent to collection agencies, having foreclosures on home loans, having cars or other purchases repossessed or declaring bankruptcy.

Approaching Your Credit Limit - Keeping high balances on a number of credit accounts, especially when the debt is close to the credit limit.

Short Credit History - Having credit accounts for a short time or never having had a credit account or loan.

Too Many Credit Applications - Applying for several credit cards in a short period or allowing auto dealers to run your credit while shopping for a new car is not a good idea.

Too Few Credit Accounts - It's better to have a few revolving credit accounts with low balances than 1 or 2 with balances that are close to your credit limit.

Too Many Credit Accounts - Having too many credit cards or loans. Generally, it is recommended to have no more than 3 or 4 credit cards.

Past credit problems, such as late payments, can stay on your credit report for up to 7 years from the date the original payment should have been made. Bankruptcies can be reported for up to 10 years.

Lenders do tend to give more weight to the most recent payment information. And no matter what your credit is like now, you can take steps to improve your credit for the future.

How to Improve Your Credit

There are many simple things you can do to improve your credit. In addition to making it easier and more affordable to get a loan, these actions can help make your financial future brighter and more secure.

• Check Your Credit Reports
• Correct Errors on Your Credit Reports
• Close Unnecessary Credit Accounts
• Track Your Spending
• Set New Spending Goals
• Pay on Time, Every Time
• Consider Using Your Home's Equity for Debt Consolidation
• Get Reliable Information and Help with Credit Issues
• Consider Using a Qualified and Reputable Credit Counselor

For information and publications on personal finance and credit problems, try these federal information resources.

Federal Trade Commission:
http://www.ftc.gov/bcp/menu-credit.htm

Consumer Information Center
Pueblo , CO 81009
719-948-4000
http://www.pueblo.gsa.gov

Factors Affecting Rates

Many factors affect interest rates. By looking at your complete financial picture, we can give you a meaningful rate quote that addresses your unique situation.

Credit and Payment History
Making timely mortgage or rent payments is very important. Paying late just once by 30 days or more can affect both the loan and the interest rate offered you. Late payments on credit cards, car payments and other bills can also affect your interest rate and loan amount.

Debt To Income Ratio
Your monthly debt obligations and income get converted to a debt-to-income ratio when you apply for a loan. Lenders often have a maximum ratio percentage that they will allow a borrower to have. Often, the higher the ratio the higher the rate offered.

Loan Amount vs. Property Value
Lenders often refer to this comparison as your loan-to-value (LTV). Because more equity or money down decreases the risks involved with lending, a lower LTV may result in a lower rate.

Property Type
One of the first questions a lender asks involves the type of property you are buying or refinancing. Common types include single-family homes, condominiums, manufactured homes, and multi-family homes. While loans may be available for many different property types - your interest rate might be lower for a single-family home than for a multi-family home. It all boils down to the risk involved with writing loans on a particular property type. The less risky, the better the rate.

Occupancy
Another question lenders frequently ask concerns occupancy type. Whether your loan is for the home you live in full-time, part-time or rent to others affects the interest rate you are offered. Generally, owner-occupants who live in their homes full-time enjoy the best rates, followed by vacation homeowners and property investors.

Loan Amount
Sometimes the amount of money you borrow makes a difference in your interest rate. Just as buying in bulk might reduce the price paid per unit, borrowing larger sums of money might result in discounted interest rates.

Reduced Paperwork
Many lenders offer reduced paperwork options. While this option may increase the convenience of getting a loan for the consumer, it may also increase the risks for the lender. To balance risk with convenience, reduced paperwork often involves a slightly higher rate.

Property State
Different states have different regulations and requirements that result in varying business costs. For lenders, these costs are frequently passed to the consumer in the form of an interest rate. Varying costs mean varying interest rates across the nation.

Points
Borrowers can often receive a lower rate by paying extra points . While the discounts to the interest rates may vary, each point paid typically equals 1 percentage point of the total amount of the loan. While this option increases the upfront costs for a mortgage, it lowers the interest rate.

Market Forces
The Federal Reserve Board has the power to raise and lower interest rates. This ultimately affects the interest rates charged to consumers. For adjustable rate mortgage loans, interest rates are tied to an index. Variations in an index might affect the interest rate of a particular loan both for the initial rate offered and for the interest rate paid over the course of the loan.

Application Checklist

• This page provides a standard list of the information you may need to pull together and have ready when you apply for your loan. It's important to note that original documents are often required.
  
  When applying for a Residential Loan, the decision to supply supporting documentation is up to you. For all other loan types, please contact Grant Realty and Finance. Here are the most popular choices:
  1. Full Documentation. This option offers the most attractive and competitive interest rates in the market as well as most flexible loan programs (larger loan amounts, larger cash outs, etc.)
  2. Stated Income, Verified Assets (SIVA). Your income is whatever you state in your loan application, but you allow your claimed assets to be verified (Bank accounts, Down Payments, etc.). You will still get good interest rates, but the loan cost will be higher as lenders consider this a higher risk.
  3. Stated Income, Stated Asset (SISA) . No income or asset documentation is required. Lender typically will ask for employment verification or in case of self-employment, a letter from the accountant verifying business existence for at least two years.
  4. No Income, No Asset (NINA) . Very few lenders support this option. As the name applies, there is no income or asset verification.
  5. No Ratio . This option requires no income verification. However, employment and asset is verified, and borrower must qualify via credit score.
• In all cases, a full appraisal, Title Report, Mortgage Rating (for an existing mortgage), loan application and an acceptable credit score is required.
• The following is a list of acceptable supporting documentation:
• Hourly or Salaried Employment:
  Original W-2 for the past year and original paycheck stub showing year-to-date income (within last 60 days)
• For Self-Employment, Sole Proprietor:
  Complete copy of previous year's federal tax return
  Copy of year-to-date Profit and Loss statement
• For Self-Employment, Corporation:
  Copy of Form 1120 for previous year
  Copy of year-to-date Profit and Loss statement
  Complete copy of federal tax return for previous year (including all schedules)
  Original W-2 for the past year (if applicable)
  Original paycheck stub showing year-to-date income (if applicable)
• For Retirement Income:
  Original Social Security Award Letter or Pension Award Letter
  For Rental Income:
  Copy of complete tax return for previous year      (including Schedule E)
  Copy of lease or rental agreement for all properties
• Other Income:
  You do not need to reveal alimony, child support, or separate maintenance income information unless you want it considered for qualification purposes.
  A 1-year history of receipt and a copy of the fully executed divorce decree, if applicable and Evidence of 1 full year of receipt of payments.

In addition, you may need to supply documentation to support claimed asset:

• Originals of the two most recent account statements for all checking, savings or other asset accounts.
• A copy of the fully executed divorce decree indicating the amount of child support, alimony or separate maintenance payments, if applicable, for purchase loans a copy of the fully executed purchase contract. Additional documents might be required.

Understanding the Loan Process

Grant Financial Services is constantly working to streamline the loan process. But getting a loan can still take some time. It helps to understand the steps behind the scene.

The following list outlines the steps required for getting any kind of loan. Remember, you can always count on Grant Financial Services staff to help you through these steps.

• Find out how much you can borrow : Use "How Do I" menu to access several tools that will help you decide the loan amount you need.
• Choose a loan that is right for you : Whether it's a fixed rate loan for a purchase or a refinance, there are many to choose from.
• Apply for the loan : Apply for the loan either through our online system or simply call us, and we will be happy to help you fill out the application and begin the process.
• Loan processing begins : This is where we go to work and prepare the loan package and all required documentation for obtaining and finalizing the loan.
• Loan process ends : Your are asked to go to the escrow office to sign the loan documents.
• Transaction is recorded and funds transferred . That's it! If this was a loan to purchase a new home, then you are given the keys!