Buying Basics – FAQ

How is your privacy protected?

Did you know that the major credit bureaus sell your personal information?! It's true! Known as "trigger leads", the files of borrowers applying for a home loan are immediately flagged, packaged, and sold by the credit bureaus to the highest bidders.  For about $25 to $100 or more, your name and certain specifics about your credit report, including your address, phone number, mortgage history, and even your FICO score range, are sold to unscrupulous mortgage companies which then blindly solicit your business. This results in numerous unwanted phone calls and junk mail offers which are in no way associated with your real estate agent or loan professional. We have included a link below for you to "opt out" of this practice and protect your credit.

Unfortunately, no legislation presently exists to prevent the credit bureaus from profiting at your expense. As a trigger lead, you are simply at the mercy of any number of too-good-to-be-true offers designed specifically to try and discredit the mortgage professionals you know and trust.

Don't be fooled! Ultimately, there are only a limited number of sources where lenders may turn to obtain mortgage money, and it's unlikely that you will find an unbelievably low rate without an unbelievably high cost. That's why, prior to taking an application for any loan program, Stearns always encourages its clients to opt-out of credit bureau solicitations by visiting OptOutPreScreen.com. For new home buyers, this is the simplest way to avoid the problem altogether.

As you embark on what could be the largest financial transaction of your life, it's important to have a professional mortgage specialist on your team who has your best interests at heart.

And while we are on the subject of protecting your privacy, there is another practice you should be aware of. When your loan closes, your mortgage is recorded at the County Recorder's Office, and it becomes part of the public record. Third party vendors not connected with Stearns (and literally anyone else) may routinely scan these public files for recent transactions and use them to contact new owners and recently refinanced owners to sell their products.

We in no way endorse this practice. If it were up to us, we would eliminate it entirely. So if you are bombarded with sales and mortgage offers from other lenders which even from time to time are presented with some variation of our company name, please remember that it is the result of public record inquiries and not Stearns Lending. We adhere to the strictest of privacy policies and do everything in our power to protect your privacy.

Do I need to be Pre-Approved with a lender?

One of the most disheartening experiences a homebuyer can undergo is to find the property of their dreams, only to have their mortgage application denied! Between the countless hours of searching and the enormous emotional investment, this can be a crushing blow. The easiest way to avoid this pitfall is to obtain pre-approval from Stearns Lending.

First, it is important to recognize the difference between pre-qualification and pre-approval. Pre-qualification is basically an informal discussion between the buyer and a loan officer, wherein the loan officer makes an assessment of the buyer's borrowing potential. This assessment is based solely on what the borrower tells the loan officer.

Pre-approval, on the other hand, is based on documented and verified information. Credit history, employment history, income and cash on hand are all used to determine a very realistic portrayal of a buyer's borrowing potential.

There are two major advantages to getting pre-approved. The first advantage is the most obvious. Pre-approval lets you know exactly how much you are able to spend. This can be very advantageous when looking for a new home.

The next advantage is more subtle, but also more powerful. Pre-approval is a very direct way for a homebuyer to tell a seller that they are serious about buying a home. If a seller is weighing multiple offers they may be inclined to sell to someone who has been pre-approved, even if the offer is not the highest one. Pre-approval is the next best thing to cash in the bank!

Between eliminating potential heartaches and increasing buying leverage, pre-approval is a very intelligent and advantageous option for any prospective homebuyer!

Should I use a Real Estate Agent?

A Real Estate Agent has a state license to practice real estate. In order to get a state license, they must take specific courses and pass a state exam.

On the other hand, a Realtor® is a Real Estate Agent who belongs to the National Association of Realtors® and subscribes to their strict code of ethics. 

A good agent will spend at least nine to ten hours working behind the scenes for every hour spent with a client. A seller's agent takes a financial risk every time they list a property, since they pay for all the marketing, advertising, etc. It is one of the only professions in which the client does not pay any money in advance for services rendered.

The best way to hire an agent is to ask a friend for a referral. Ask if the Realtor® is trustworthy, assertive (but not overbearing), made the transaction as convenient as possible, and did what they said they were going to do.

How a Realtor® can help you sell your home

Since nine out of ten consumers have stated that they would never try to sell their home themselves, and 75% of the rest wind up using agents anyway, this section has been designed to help you understand the qualities of a good agent.

When making the decision to sell your home, it is important to take advantage of every tool available. A good agent knows the market, can prepare your property for sale, market it and get it sold for top dollar. 

A good agent will educate you, giving you enough information to make clear, informed decisions. They will not make these decisions for you.  A good agent works full time, voluntarily restrict themselves by geographic location and property type and will tell you when they think adding other experts (lawyers, inspectors, etc.) to your team is advisable.

A Realtor® can research your housing needs through a Multiple Listing Service (MLS), even if you are relocating from another city. This enables them to show you only those homes best suited to your needs. They will take into consideration such factors as size, features, location, style, and accessibility to schools, transportation, shopping, and so forth. They can suggest simple, imaginative changes that make a home more suitable for you and improve its utility and value. Look for a Realtor® who will negotiate a win-win agreement that will satisfy both you and the seller.

Is there an organization that offers down payment assistance?

If you are considering buying a home but are concerned about the down payment, there are several organizations that provide down payment assistance.

Consult your Stearns Loan Officer to find out if you are eligible for these programs.

Can I buy a home without paying closing costs?

Closing costs are the fees associated with buying and selling a home. There are some options for keeping these costs to a minimum.

One option is to roll the majority of these costs into your final loan amount in order to minimize your "out of pocket" costs. This option is contingent on your ability to qualify for the increased loan amount. It is important to note that utilizing this option will not only increase your loan amount, but these costs will be amortized over the entire life of the loan until you sell the property or payoff the loan. However, it is a terrific option if your cash is restricted at the time of closing. You can visit our mortgage calculators page to tally your costs and payments.  It is also possible to request that the seller pick up some or all of the closing costs.

What do I need to know about purchasing a luxury home?

When considering the purchase of a luxury home, it is important to consult your financial advisor to see if it is more advantageous for you to pay cash for the property or to secure a mortgage. If it is in your best interests to secure a mortgage, you should work with a lender who is an expert in financing luxury homes. This lender would be able to discuss the benefits of jumbo financing versus originating two loans, also referred to as "piggyback" financing.

Jumbo financing rates are constantly in flux, averaging approximately a quarter of a percent above conforming rates. Historically, there have been instances where the jumbo rate was actually less than the conforming rate. When this occurs, the luxury homebuyer can save a lot of money.

Should this prove not to be the case, you may wish to consider "piggyback" financing. This enables the borrower to secure a first mortgage at the lower, conforming rate and loan limitation. The second loan will be either a Home Equity Line of Credit (HELOC) or a fixed term second mortgage. By splitting the purchase into two loans, you can lower your monthly payments. This also has the advantage of avoiding Private Mortgage Insurance (PMI). PMI is necessary anytime a homebuyer puts less than 20% down, unless they are doing a "piggyback" loan.
 
Remember to discuss your options with your tax advisor.

Can I buy a new home without selling my existing home?

One way your Loan Officer can structure the financing on your new home is to set up two separate loans for the purchase. The first loan would typically be set up to be the mortgage you want to end up with. The second loan amount is based upon the expected net of the sale of your existing home.

This way, when the sale of your existing home is complete, you can apply the net funds to payoff of your second loan, leaving only the desired first loan.
 
The second loan is usually a Home Equity Line of Credit (HELOC) or a Purchase Money Second. A HELOC is exactly what it sounds like, a line of credit based upon the equity in the home. This has the added benefit of being easily accessible by the borrower as the balance is paid down. The interest is usually tax-deductible, and this can be a great tool in the future for the purchase of cars, home improvements and even your child's college education. A Purchase Money Second is a closed end loan. Unlike a HELOC, as it is paid off, the funds cannot be accessed.

There are a few lenders who will not count mortgage debt against a borrower if the existing home is currently listed by a REALTOR® in the Multiple Listing Service (MLS). Most lenders, however, will count this debt against a borrower. Should this be the case, there are still several ways a homebuyer may qualify to purchase a new home, prior to the sale of the existing home.

A homebuyer may choose to lease the existing property, even for a short time. This has the advantage of allowing for more time to complete the sale of their property, as well as providing an additional source of revenue to offset the original mortgage debt service.*      

*Some restrictions apply.  Contact your Loan Officer for details.

A Bridge Loan is another option. A Bridge Loan enables you to borrow against the equity that is tied up in your old home until it sells. There are risk factors to consider before deciding that a Bridge Loan is right for you.

Bridge Loans tend to be more expensive than Purchase Money Seconds, because they're considered to be cash out refinances. They also tend to be short-term loans with a balloon payment. If your existing home doesn't sell in the projected time frame, you could wind up having to pay the total balance all at once.

I’m not a US citizen, can I buy a home in the US?

There are many new ways to buy a home in the United States, even if you are not a U.S. citizen. Just recently, regulations have been revised to grant non-permanent resident aliens the same financing opportunities as U.S. citizens, as long as the home purchased will be a primary residence.

Permanent resident aliens, those who have a green card, have always had the same borrowing power as U.S. citizens. Every borrower who is not a U.S. citizen must be able to show that they have the legal right to reside in the United States. Your lender will ask for a copy of your Visa or green card as part of the initial loan application process.

If you are a Foreign National or Dignitary who is buying a vacation or 2nd home, you can still buy a home if you are able to make a 20%-25% down payment. You may pay a slightly higher interest rate, however, you will be able take advantage of the stable mortgage money that is available in America.

Once your loan officer knows your exact buying scenario, they will be able to find the right program to fit your needs by using the credit, employment and income records from your homeland. For example, if you are European and have all of your credit history available in Europe, your lender may use one of the credit reporting agencies that have reciprocal agreements with other countries. They will document your income and assets by using a published currency conversion rate table. A translator will translate any of your documentation that is provided in a language other than English, such as bank statements, employment verifications or credit references.

Your lender will pull credit information from your country for a nominal fee. It can take up to three weeks for the lender to receive the report. If you have established any traditional or alternative credit within the United States it is very helpful and can save time. For example, you may have already established a checking/savings account or utility bills in the United States and these can be used to establish your credit history.

Be aware that while trying to establish your U.S. credit history, you should take care not to apply for an excessive amount of new credit. Too many new credit inquiries will lower your credit rating. Ask your Loan Officer for advice about the best way to establish good credit within the U.S.