Tools & Resources
Purchase Frequently Asked Questions
Finding a Mortgage
When should I start evaluating financing options, and how do I know what I can afford?
You should look for a mortgage before you start looking for a new home. Once you examine financing options and get a pre-approval decision, you'll know how much money you can borrow and what level of home you can afford.
Before you begin looking for your home or property, real estate agents may ask you to get pre-approved. Having a pre-approval letter in-hand can give you an advantage over other buyers who may be interested in the same home – it shows the seller and real estate agent that you're financially ready to buy the home.
Do I need to sell my current home before I apply for a new mortgage loan?
No, but depending on your income and debt levels, you may need to sell your home before you can close on the new one. Ask one of our experienced loan consultants for more information.
How much down payment will I need?
The minimum required down payment depends on the mortgage program you qualify for. In general, at least 3.5% of the sale price is required for an FHA or VA mortgage. If you put down less than 20% on a conventional loan, you may need private mortgage insurance (PMI).
Unlike primary homes, however, second homes do not qualify for FHA or VA mortgage financing. Buyers of second homes may be required to contribute a higher down payment for a second home – so be prepared if you are financing a vacation home or investment property.
You may be eligible to incorporate closing costs into your loan, added into either your interest rate or your loan amount. You will still need money for your down payment, but this will help reduce the amount of money you need to bring to the closing. An experienced PHH Mortgage loan consultant can help you find the loan that fits your needs, including the amount of the down payment. To discuss down payment options, call (800) 210-8849.
Can I be pre-approved for a loan if I have credit problems?
Yes, we offer mortgage loan options to customers who may not have perfect credit. If you are concerned about your credit, or have other questions about credit, visit our article “All About Your Credit,” or contact an experienced PHH Mortgage loan consultant who can help you find a mortgage loan that fits your unique financial needs.
Why is an appraisal necessary? Can I use the tax value of the home?
Appraisals compare the current market value of your home to other properties in your area that have recently sold. A current appraisal is necessary for the lender to justify the loan amount that you've requested. Note that the appraised value of your home differs from the value used for property taxes, and then be aware that the appraisal is not a guarantee of the home’s value.
How do I get an appraisal?
Once you have applied for a mortgage, the lender will schedule a property appraisal for the home or property you are considering. You must designate a contact, usually your real estate agent, to give the appraiser access to the property. The appraiser then comes and evaluates the condition of the home – including its structure, electrical wiring, plumbing and more – and sends the results to your lender.
For more information about your appraisal or any other steps in the home-buying process, contact an experienced loan consultant at (800) 210-8849.
How much will my property taxes be?
You can find this information out from the home’s seller or your real estate agent and confirm it with the recording office in the county where the property is located. Property taxes are reassessed from time to time, so this amount may change.
What is a Truth in Lending statement?
A Truth in Lending statement contains detailed information about the total charges that you will incur over the life of your loan. Required by federal law, the Truth in Lending statement includes:
- The annual percentage rate (APR) of the loan.
- The amount of interest you will pay.
- The amount financed by the loan and schedule of payments.
- Your total number of payments.
- Rules about late payment charges.
Rates and Costs
What is the Annual Percentage Rate of a loan, and how is it different from the interest rate?
The annual percentage rate (APR) is the total annual cost of your mortgage loan, including the interest rate (the fee to borrow money calculated as a percentage of the amount borrowed), loan fees, points and any other charges. APR is required by the Truth-in Lending Act and gives you a tool for comparing the mortgage rates of different loan programs.
How often do interest rates change?
Interest rates change based on fluctuations in the market; however, some lending products allow you to “lock in” on a specific rate. With a rate lock, your rate will not change regardless of what happens in the interest rate market, as long as you close on or before the rate lock expiration date.
What factors go into determining the interest rate on my loan?
Rates are influenced by current market conditions. In addition, your credit history will be evaluated – and good credit is typically rewarded with a lower rate. To learn about credit and its importance in obtaining a mortgage loan, see our article “All About Your Credit.” Also taken into account are factors such as your loan-to-value ratio, your income, your assets and the purpose of the loan.
When should I lock my rate?
If you have a contract on a property and are within 90 days of closing, you can lock your rate. If you have selected the rate protection option, you can lock between 60 and 5 days of closing. With all programs, you must lock your rate at least 5 days prior to closing.
If you are refinancing, you can lock within 60 days of closing. If you have selected the rate protection option, you can lock between 35 and 5 days of closing. With all programs, you must lock your rate at least 5 days prior to closing.
Once I have selected a program, what are my rate options?
You will be presented with rate options that apply to your loan type and closing date, which may include:
Rate Protection: If interest rates go up, your rate does not — it is protected.
- Rate protection sets the maximum interest rate you will pay, as long as you close your loan by the expiration date of the rate protection program.
- If rates decrease, you will have a one-time option to lock in your loan at a lower rate. Simply call your loan officer. You must lock in a new rate at least 5 days before closing. If you are refinancing, you can lock in your rate within 15 days of closing.
Rate Lock: Committing to an interest rate. A rate lock can be done only one time. Your rate will not change regardless of what happens in the interest rate market, as long as you close on or before the rate lock expiration date.
Contact an experienced PHH Mortgage loan consultant, who will help you decide which option is right for you.
What if interest rates go down after I lock my rate?
Once you lock the rate, it cannot be changed.
What happens if my loan doesn't close before the rate lock expiration date?
When you lock your interest rate, you are guaranteed to receive that rate as long as you close your loan by the specified expiration date. If your loan closes after this date, you are no longer guaranteed your locked interest rate. Instead, you will receive the higher of the current market rate or your locked rate. Please note that you cannot receive a lower rate by allowing your lock to expire.
Contact an experienced loan consultant for more information about interest rates or options for locking in or protecting the interest rate on your mortgage: (800) 210-8849.
What are points and how do they work?
Discount points can be paid by the buyer at closing to reduce the interest rate, while “negative points” can be paid by the lender to offset closing costs, resulting in a higher interest rate. Points are determined as a percentage of your loan amount. For instance, on a $90,000 loan amount, one point equals 1%, or $900. In many cases, discount points are tax deductible, consult your accountant or tax advisor for advice.
If I'm short on cash, do I have options to help with my down payment and closing costs?
Yes. There are a number of options that may help you if you do not have much cash to purchase a home.
- Consider one of our low down payment programs, which may require as little as 3% for a down payment.
- If you meet the criteria, you will be offered the option to add your closing costs in to either the loan amount or the interest rate.
- If you choose the loan amount option, closing costs will be added to your loan amount. The amount due over the life of the loan will increase, but the amount you need to bring to closing will decrease.
- If you choose the interest rate option, the rate for the life of the loan will increase, as will your monthly payment, but the amount of cash you need to bring to closing will decrease.
- You can also consider negative points. This means that in exchange for a higher rate, we will contribute funds toward your closing costs.
To discuss strategies and options, call an experienced loan consultant at (800) 210-8849.
How can I apply for a loan and find out the decision?
You can apply for a loan pre-approval decision by calling us at (800) 210-8849 or get started online. In most cases, you can receive a pre-approval decision in as little as one business day.1
What factors will a mortgage lender consider when making a pre-approval decision?
Your application is evaluated based on your ability to repay a loan. A mortgage lender will generally look at:
- Income and assets (including your primary residence and your potential for rental income) to determine your ability to repay the loan.
- Debts and credit history to determine your total financial obligations and your history of repayment.
- Property information, such as that needed for the home appraisal.
Can I change the loan amount, down payment or program after I've received my loan pre-approval decision?
Yes, as long as you meet the criteria for the new loan amount or new program you've selected. If you have not locked in a rate, you can make changes to your information and resubmit it online for a new loan pre-approval decision.
To make a change or get more information, call an experienced PHH Mortgage loan consultant at (800) 210-8849.
I already put a deposit down on the home or property. Is this included in the Good Faith Estimate?
Yes. Any deposit or earnest money paid will be listed under "Prepaid deposit for property" on the Good Faith Estimate.
What documents will I need to provide to complete my loan transaction?
Requirements for documentation vary by state and depend on a variety of factors. Here is a list of some of the common documents you’ll need:
- A fully executed agreement of sale for the property being purchased.
- Financial statements for your bank and brokerage accounts.
- A HUD-1 settlement statement on the property you are selling, if applicable.
- A copy of your most recent pay stub.
- Previous W-2s.
- Statements for your primary residence or a copy of a rental lease.
- A homeowners’ insurance policy.
- A flood insurance policy, if applicable.
For more information, or to discuss any aspect of financing a home, contact an experienced PHH Mortgage loan consultant at (800) 210-8849.
Do I have to attend the closing in person?
In most cases, you will need to attend the closing on a home or property purchase. However, in some cases you can grant power of attorney to a friend or family member to represent you or take the steps to complete a mail-away closing. Your mortgage representative can help evaluate your options.
If you have questions about closing or any aspect of purchasing a home, we can provide answers. Simply call a PHH Mortgage loan consultant at (800) 210-8849.
What checks do I need to bring to the closing?
You will need a cashier's check or certified check for your closing costs and fees. It is also a good idea to bring a few blank personal checks in case any last-minute costs arise.
What is title insurance and why is it required?
Title insurance protects the lender (and you, if you purchase a separate, additional policy) against losses from disputes over a property’s title, such as unknown liens or other discrepancies in ownership. You also pay a one-time fee for the policy at the closing.
For more information about title insurance or any aspect of a closing, contact an experienced loan consultant at (800) 210-8849.
How much title insurance do I need?
The amount of title insurance you need is based on the value of your home and the amount of your mortgage. Your closing agent or closing attorney will advise you on the proper coverage.
How much homeowners’ insurance do I need?
A homeowners’ insurance policy, as required by the lender, needs to cover the cost to rebuild the home. The insured amount may be higher or lower than the actual purchase price, and your insurance company can give you an estimate based on specific property information.
For more information about homeowners’ insurance, or any element of a closing, contact an experienced loan consultant at (800) 210-8849.
How do I know if I need flood insurance?
We will perform a flood hazard determination for your property and let you know if your home is located in a Special Flood Hazard Area. If it is, flood insurance is required by federal law. Note, however, that most standard homeowners’ insurance policies do not cover loss due to flood, and you can also obtain flood insurance coverage even if you are not required to do so by law.
Flood insurance is an important consideration for vacation homes especially, as they are often located near oceans or lakes, or in other areas prone to flooding.
How are my property tax bills paid?
It depends on your loan program and state requirements. If your monthly mortgage payment includes money for property taxes, those funds are held in escrow by the lender, who pays your property taxes as they come due. If your mortgage payment does not include property taxes, you are responsible for paying them by the due date.
For more information about property taxes, insurance or any aspect of buying a home, contact an experienced loan consultant at (800) 210-8849.
What type of inspections do I need before I close on my home?
Certain inspections may be required under your particular loan program. Based on the home and its location, there are various inspections you may want to consider even if they are not required, such as:
- Termite inspection.
- Water test (for well water).
- Septic tank inspection.
- Radon test.