Frequently Asked Questions

1. What is the difference between Pre-qualification versus Pre-approval?

Pre-qualification gives you an estimate of how much you may be able to borrow. Pre-approval, on the other hand, indicates that you have been approved for a set loan amount prior to property selection. Pre-approval for a loan is based upon verified information and by pulling a credit report. This method is preferred for all parties involved.

2. What items are needed to process a loan application?
1. Copies of current Bank Statements for past 2 months on all checking and savings accounts
2. Copies of statements for past 2 months on all investment accounts such as 401k, IRA, and stocks (most recent statements are adequate)
3. Copies of past 30 days paycheck stubs
4. Copies of past 24 months W-2 forms
5. Copies of proof of other income, if applicable
6. Copies of driver’s license
7. Copy of Social Security Card (or proof of SS#)
8. If self employed, commission income, or if rental property income, copies of your last 2 years complete tax returns
9. Copy of Settlement Statement for any real estate sold in the past 2 years.
3. Do I need Mortgage Insurance?

Private mortgage insurance and government mortgage insurance protect the lender against default and enable the lender to offer a loan which the lender considers a higher risk. Lenders require mortgage insurance for loans where the down payment is less than 20% of the sales price. The mortgage insurance premium is reflected in the monthly mortgage payment.

The mortgage insurance premium is canceled when there is 20% equity in the home. That means that when the mortgage is paid down to a 20% equity position that the PMI is canceled and the monthly payment is lowered. On Conventional loans, products such as the 80/20, 80/15/5, and 80/10/10 are available which eliminates the requirement of mortgage insurance since the first lien is not greater than 80% (not available on FHA and VA loans).

4. What is Title Insurance?

Title insurance is a special type of protection for home and building owners. It is issued for a single one-time premium, with its coverage lasting almost indefinitely. A title insurance policy is not a guarantee of ownership, but is more of an indemnity against loss or damage sustained or incurred by the insured as a result of the covered risks.

Some issues that title insurance addresses include:

• Deeds, wills, and trusts that contain improper vesting and incorrect names
• Transfer of property by a mental incompetent or minor
• Marital status of owner improperly given
• Previously undisclosed heirs with claims against the property
• Confusion due to similar or identical names
• Property line disagreement
• Outstanding mortgages, judgments, and tax liens
• Incorrect notary acknowledgments
• A gorged deed that transfers no title to real estate
• Mistakes in public records

In the State of Texas, the one-time title insurance premium is determined by the Texas Department of Insurance. This means that all title companies must charge the same premium amount for title policies issued for property in Texas. The premium charge includes the research into the history of the title, the closing of the property transaction, and the actual insurance provided by the policy.

The wording of title insurance policies is also determined by the Texas Department of Insurance to avoid discrepancies and confusions. All policies are identical, except for any specific coverage conditions set out in a policy by the title company handling the transaction.

There are two major types of title insurance. Buyers are most familiar with the “Owner Title Policy.” This policy is usually issued in the amount of the property’s real estate purchase price, and protects buyers/owners from any losses caused by a problem with the title to their property. The coverage lasts as long as the policy’s buyer/owner, or his/her heirs, retain and interest in the property. In this sense, the policy’s original buyer and his/her heirs can enjoy the protection provided by the title policy indefinitely. However, the title policy, and its coverage, cannot be transferred to a completely new buyer. A new buyer would need to purchase a new title insurance policy.

The other major type of title insurance is the “Mortgage Title Policy.” Unlike the Owner Title Policy, which protects the buyer, the Mortagee Title policy protects the property’s mortgage lender. This type of title policy insures that the lender is receiving a valid mortgage on the property, with no liens on the property prior to the lender’s mortgage.

Title insurance is extremely necessary in protecting property owners against conflicts and unforeseen claims that may jeopardize their hold on their property. Title insurance gives property owners the satisfaction of knowing that any problems dealing with the title to their property will be taken care of promptly and properly.

5. What fees might I pay at closing?

There are costs associated with closing a loan. Rates may vary daily and within products greatly, with VIP Mortgage, Inc. you can be sure that the fees are more than competitive and minimal.

APPRAISAL FEE

This is charged to pay an appraiser to research and assess the market value of the property on which a mortgage is being placed.

COURIER/MESSENGER FEES

This fee pays for overnight courier services and messenger services used to transport doucments to and from the lender and to and from the local county courthouse where the deed and mortgage are recorded.

CREDIT REPORT FEE

This is charged to pay a credit service bureau to provide the lender with a report detailing a borrower’s credit history.

DOCUMENTATION PREPARATION FEE

This is charged by lenders to offset costs associated with preparing paperwork for a loan closing.

FLOOD CERTIFICATION FEE

This is charged to offset fees paid by lenders to flood service companies to determine initially and on an ongoing basis, whether properties on which the lender has a mortgage are part of or become part of a “flood hazard area” as determined by appropriate Federal agencies. If so, the property owner is required to obtain flood insurance.

HAZARD INSURANCE ESCROW

Similar to real estate tax escrows, many lenders require that they collect 1/12 of the property’s annual hazard insurance premium with each mortgage payment to fund an escrow account from which the lender will pay the premium when it becomes due. (Hazard insurance is property insurance that you are required to purchase to cover any damage that may occur to the property itself or to someone while in or on the property.) Even though in a purchase transaction you are required to pay the first year’s premium prior to or at the closing and in a refinance transaction the insurance may be paid up for many months following the closing, the escrow insures that the lender will have enough money in your escrow account when the premium next becomes due. The lender is also entitled to collect an additional amount to provide a one to two month “buffer” in your escrow account.

At closing, hazard insurance escrow requirements generally range from two months in purchase transactions to anywhere from one to eleven months in refinance transactions.

INSPECTION FEE

This may be charged if a lender has to have someone inspect a property after an appraisal has been done. For example, if work being done to a property is not completed at the time the appraiser viewed the property.

MORTGAGE INSRUANCE

In the event that the loan you are requesting from the lender exceeds 80% of the market value of the property.