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Mortgage Closing Disclosure: Purpose and Method

mortgage closing disclosure method

In part one of this two-part blog series, we went over some of the basics on mortgage closing disclosures. These are important documents that are sent to borrowers just ahead of their closing day, allowing them to confirm and double-check all the important financial details of the impending mortgage before they sign final documents and move forward.

At Altius Mortgage and our partners with Mortgage Ogden, we’re happy to explain closing disclosures or any other part of the mortgage process to our first-time homebuyers, or to any of our other home loan clients who may be unfamiliar. In today’s part two of our series, we’ll go over why the closing disclosure matters, what you should do with it, and what happens next once it’s been handled.

Purpose of Closing Disclosure

The purpose of a mortgage closing disclosure is to allow borrowers to know exactly what their new mortgage payments will be. Prior to the closing disclosure, they may have been under-estimating those payments by as much as 25% or more! The best time for borrowers to figure out what those final costs are going to be is now, before they sign on the dotted line and finalize their loan.

This will help you avoid issues arising during the actual closing itself. Having all this information up front — and verified as such via the closing disclosure — will allow you to calculate your loan payment as accurately as possible before you sign your final documents and move forward with homeownership.

How to Go Through a Closing Disclosure

As soon as you receive your closing disclosure, you should check it carefully for accuracy. Make sure that all the figures are correct and that you know exactly how much your monthly payments will be after factoring in any other upfront expenses such as private mortgage insurance (PMI), certain closing costs, and even estimated escrow amounts.

Once you’ve gone through it thoroughly, if there are certain figures that you’re not thrilled about or that you feel are inaccurate, don’t sign the closing disclosure just yet. Take a moment to consult with your loan officer, who can help tell you what’s correct and what isn’t.

What Happens After Closing Disclosure

Once everything is confirmed as accurate via the closing disclosure, it will be time to finalize your mortgage and sign the last remaining documents. You’ll be glad you took this time to review the closing disclosure in depth, as it will make for a smooth and straightforward closing process. All you have to do is bring a copy of the disclosure with you to closing day itself, just in case there’s any confusion.

For more on mortgage closing disclosures, or to learn about any of our home loan services or fantastic mortgage rates, speak to the team at Altius Mortgage today.

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Mortgage Closing Disclosures: Basics for Park City Homebuyers

mortgage closing disclosures basics

First-time homebuyers entering the market often have a number of questions, especially around the steps and documents involved in the process of obtaining a loan and securing their new home. There are several important facets to the process, and one that’s especially notable near the end of a home purchase situation is known as the closing disclosure.

At Altius Mortgage and our partners with Mortgage Ogden, we’re happy to provide a wide range of mortgage loans and related services throughout Park City and other parts of Utah, including for first-time homebuyers looking for assistance as they enter the market. We’ll assist you with a wide range of documents or related needs that may come up during your homebuying process, including the closing disclosure when it comes time. What is this document, why does it matter, and when will it become part of the picture? This two-part blog will go over everything you need to know.

Closing Disclosure Basics

For those who have not heard of them, a closing disclosure is an important document that comes at the end of a home purchase process, also known as a closing. There are often several different forms that come into play during various parts of the loan process, and one additional form your loan servicer will provide near the end is what’s known as a closing disclosure, which is meant to detail all costs associated with your mortgage.

The closing disclosure will generally be five pages in length, covering a number of different topics and different parts of your loan, including your interest rate, your down payment amount and the terms of your loan. It will also include all costs that you’ll be responsible for or fees that you’ll pay at closing, which can include a wide range of expenses from origination fees to property taxes to various other costs.

When Closing Disclosures Come

The law states that lenders are required to provide borrowers with a closing disclosure at least three days before closing. If you’re receiving a loan to purchase a home, this document is known as the HUD-1, and it’s important for all parties involved to know what it contains and how it will impact their lives after closing on such an important residential transaction.

It’s also important that borrowers go through their closing disclosure in detail, checking it for errors or other possible concerns. If any such mistakes are found, notify your lender immediately to fix the problem and remedy the situation before the closing date itself arrives.

For more on closing disclosures within a mortgage and homebuying situation, or to learn about any of our home loan services or fantastic mortgage rates in Park City, speak to the staff at Altius Mortgage today.

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Impact of Home Refinancing on Your Credit

impact home refinancing credit

Homeowners are always looking for ways to save money. With the cost of living going up every day, it can be hard to do so without sacrificing your future. Refinancing a home loan could help you get a lower interest rate and save you money on your monthly payments. At the same time, there are risks involved in refinancing, including the impact it may have on your credit, and you should consider these closely while making this decision.

At Altius Mortgage and our partners at Mortgage Ogden, we’re here to help. Not only do we offer a wide range of mortgage refinancing services, we also provide expertise and assistance with all the important factors to consider here. Let’s dive in.

Benefits of Refinancing a Home

Depending on your situation, there are numerous potential benefits to refinancing your home. These include both standard monetary benefits and those that speak to your personal well-being.

Standard benefits:

  • Save money on your monthly payments.
  • Get a lower interest rate – if the market allows for it.

Emotional benefits:

  • Live the life you deserve!
  • Enjoy peace of mind knowing that you will be able to afford your home for years to come.

How Refinancing Hurts Your Score

When you refinance your mortgage, the lender will create a new original (“hard”) credit pull on your report, which dings your score by a few points. Next, they’ll review your application and decide whether or not to approve you for the loan based on your credit history, income, assets, etc. If they don’t like what they see—for instance, if you have too much debt or are paying off a forbearance agreement with monthly payments that will interfere with repayment of this new loan—they may ask for additional documentation (like tax returns) or refuse to approve you outright.

In addition, refinancing means cancelling your initial mortgage, which may also lower your score. For this reason, it is best to be aware of the full financial situation before you begin.

Is Refinancing Worth It?

Refinancing is worth it if you find yourself in a difficult financial situation. You may be able to save money on your monthly payments or get a lower interest rate (depending on the market). However, when you refinance your home loan, your credit score will be reduced by a few points because the lender will create a new original hard pull from your credit report.

This will happen for any refinance that is not done through a mortgage company. It is advisable to do some research before you apply for the refinancing and see how this could affect your credit score before applying.

For more information on the impact refinancing may have on your credit score and whether this change is worthwhile for you, or to learn about any of our mortgage services or mortgage rates, speak to the staff at Altius Mortgage today.

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Value of Using a Cover Letter With Your Home Offer

value cover letter home offer

There are several potential elements that might be important to a home offer you make, from the dollar amount involved to a few others. One of these that’s considered optional, but may play a big role in your offer being considered by a seller, is your use of a cover letter.

At Altius Mortgage and our partners at Mortgage Ogden, we’re happy to offer a variety of home loan options, plus assistance to our clients with all the ins and outs of making an offer to a seller. Here’s a primer on why it’s often beneficial to include a cover letter, plus what you should be including.

What is a Home Offer Cover Letter?

A home offer cover letter is a document that you can include with your mortgage offer. This is optional, but can have a big impact on your mortgage offer’s chances of being accepted. You’ll want to include information about the mortgage loan you’re applying for and why it’s a good mortgage offer for the seller.

However, cover letters may also contain personal anecdotes or information that helps the seller get to know you.

A Cover Letter Helps the Seller Understand Your Perspective

A home offer cover letter can help a mortgage offer stand out to the seller. The mortgage offer helps them focus on one mortgage, so they better understand why it should be accepted over another mortgage. The home offer cover letter includes information on your mortgage loan and why it is a good mortgage for the seller.

Adding a mortgage offer cover letter is easiest when you use mortgage pre-approval service from one of our lenders. The mortgage approval service can help buyers show sellers what makes their mortgage loan a good mortgage loan to consider. When there are multiple offers on a home mortgage, sellers usually select a mortgage loan that stands out over the others.

Elements to Include in a Home Offer Cover Letter

The mortgage offer cover letter should include the following elements:

  • Mortgage loan details, including mortgage rate, down payment, and length of mortgage.
  • Mortgage approval service details, including mortgage product and mortgage protection features.
  • Personal anecdotes or other details on why the seller is interested in the home, such as their plans for the future or remodeling potential.
  • Details on closing elements or others that might matter to the seller, such as the ability to close on the home quickly if the seller needs an expedited process (this will vary based on seller need).

For more on why writing a cover letter for your home offer may improve its chances of being accepted, or to learn about any of our home loan services or mortgage rates, speak to the staff at Altius Mortgage today.

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Second Home Purchase: Budgeting and Other Tips

second home budgeting tips

In part one of this two-part blog series, we went over some of the basics on why certain homeowners choose to purchase a second home. Often for retirement or vacation purposes, or even sometimes to allow parents to live close by without entering a nursing home, the purchase of a second home can be enormously beneficial – but those going this route will have to consider some of the important details along the way to ensure they make a smart purchase.

At Altius Mortgage and our partners at Mortgage Ogden, we’re here to help. We offer a wide range of home loan options, ideal for everyone from first-time homebuyers to those considering a second home purchase – plus many others in between. While part one of our series looked at some of the top reasons why you might consider a home, today’s part two is for those who have already decided to move forward with a second home purchase. Here are some important details to attend to:

Proper Budgeting

First and foremost, in many of the same ways you’d budget and prepare for a mortgage and other expenses for your initial home, you have to take on the same themes here for a second home. Many of the steps here are similar or even identical: You should start by meeting with one of our lenders to discuss your situation, plus obtain pre-approval that not only gives you an idea of what you can afford, but allows you to prove your purchasing power.

In addition, keep in mind additional expenses and closing costs. These include home maintenance costs, taxes, utilities, and possibly more than one type of insurance coverage. Especially if you plan to rent out your second home for any period of time, this is a vital area to consider.

Taxes

While there are some tax deductions available for a second home, similar to for your initial home, they’re more limited. For instance, tax deductions on a second home are limited to a total of $10,000. In cases where you’re renting the second home, rental income will only be tax-free for the first 14 days – after this point, taxation is required.

Is a Consolidated Mortgage an Option?

A consolidated mortgage refers to a situation where your current remaining mortgage is folded into the new mortgage you take out on your second home, creating a single loan. In some cases, a consolidated mortgage will offer you great interest rates that makes it easier for you to manage payments on both homes. Speak to our staff about whether a consolidated mortgage might be an option for you if you’re considering a second home.

For more on purchasing a second home, or to learn about any of our mortgage rates or home loan services, speak to the staff at Altius Mortgage today.

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Second Home Purchase: Why Provo Buyers May Consider It

second home buyers consider

At Altius Mortgage and our partners with Mortgage Ogden, we’re here to help with a comprehensive range of mortgage needs and services in Provo and numerous other parts of Utah. From first-time homebuyers up through current homeowners who need assistance with mortgage refinancing, plus numerous buyer types in between, we offer a range of mortgage rates and home loan programs to ensure you have the proper funds available.

One particular buyer type we’re happy to assist in several areas, including their desire to purchase in the first place: Those considering a second home, whether for their own purposes or for someone close to them. This two-part blog series will begin by going over the common reasons why some people choose to purchase a second home, then will dig into some tips we offer to those who are entering this situation.

Retirement Planning

In many cases, a second home is desirable to those who are planning to retire in the near future, and want to move into a new space while doing so. For some in this position, the prudent move is to downsize slightly – you might not need all the space you have in your current home, especially if your kids have recently moved out. In this situation, you can often utilize the equity you’ve built in your current home, which will help you fund a second home purchase.

In other cases, you may pay for a second home using assets you already have, such as savings, dividend income or inheritances. In these cases, depending on the amounts you have available, you might not have to downsize at all, or could even purchase a larger home for retirement.

Home for Parents

For others who have the funds available, there may be a desire to purchase a second home for your parents. This often helps older adults avoid senior living facilities that they often have little interest in living in – in addition, purchasing your parents a home allows them to stay closer to you, plus any kids you have (their grandkids). Of course, it’s prudent to speak to your parents about this in detail before moving forward here.

Trips and Vacations

Finally, again for those who have the available budget, a second home is fantastic as a getaway location. Do you and your family have a single place you like to visit every year for vacation? Instead of wasting money on hotels or rentals, purchase a vacation home. The same goes for those who travel regularly to the same location for business purposes. And in periods where you aren’t actively using the home, you can rent it out for additional income (some purchase a second home purely for rental purposes, as well).

For more on the benefits of purchasing a second home and the situations where you might consider it, or to learn about any of our mortgage rates or home loan services in Provo and other parts of Utah, speak to the staff at Altius Mortgage today.

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Mortgage Payment Components: Taxes, Insurance, Amortization, Part 2

mortgage payment taxes insurance amortization

In part one of this two-part blog series, we went over some basics on the various components that make up your monthly mortgage payment. There are a few such elements to be aware of, but it’s also important to note that the precise percentages you pay toward each of these can and will typically vary throughout the life of your mortgage repayment.

At Altius Mortgage and our partners at Mortgage Ogden, we’re here to help with this and numerous areas of the mortgage process, both for first-time homebuyers and anyone else on the market. While part one of our series went over principal and interest payments, the two primary areas you should be aware of, today’s part two will go over taxes and insurance payments, plus give you a quick word on how to understand the changing percentages you’ll be paying toward as you move forward through the years.

Taxes

For any home that’s purchased, real estate or property taxes will be assessed by government agencies. These taxes go toward numerous public services, from police and fire departments to public schools and many others.

These taxes are calculated on a yearly basis, but for most mortgage holders, they’re paid monthly as part of your mortgage payment. This is done through the lender setting up a separate escrow account, one that collects these tax payments each month and then holds them until they actually need to be paid.

Insurance Payments

Another payment type that’s generally paid out into an escrow account through your lender is insurance payments, which come in two common types:

  • Property insurance: Required for virtually all homeowners, property insurance protects the home and its contents from disasters, theft risks and other potential issues.
  • Private mortgage insurance (PMI): For those who purchase a home with a down payment below 20%, private mortgage insurance is typically required to protect the lender in case of default. However, once you reach 20% equity in your home (or even 18% in some situations), you will be able to remove PMI from your payments, as risk for the lender will have dropped by this point.

Amortization Schedule

As we’ve noted multiple times in this series, payments will not be the same through the life of your loan. For the first few years, you’ll pay a larger portion of interest; as your payments proceed, larger and larger chunks will be devoted to principal.

And if you want to know exactly how this works for your mortgage, you have this information at your fingertips in the form of what’s known as an amortization schedule. Given to all borrowers at the time of closing, the amortization schedule demonstrates exactly how much you’ll be paying to principal, interest and various tax or insurance payments over the entire life of the loan – it will even give you the payment numbers for 25 years from now if you’re on a 30-year mortgage. This allows for detailed financial planning years or even decades into the future.

For more on the elements of your mortgage payment, or to learn about any of our mortgage services, speak to the staff at Altius Mortgage today.

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Mortgage Payment Components: Principal and Interest, Part 2

mortgage payment principal interest

If you’re in the home market and considering the important factors involved with a mortgage, one key element you’ll likely be interested in is what your monthly payments go toward. There are a few separate things you’ll be paying money toward as you pay down your mortgage, and understanding what these are – and how much of your monthly payments will be going toward each – is very important as you plan your finances moving into the future.

At Altius Mortgage and our partners at Mortgage Ogden, we’re here to help with this and numerous other areas of the mortgage process. We offer a huge range of home loans, including those tailored to first-time homebuyers, plus provide expertise and answers to all your most important questions. In this two-part blog series, we’ll go over all the important elements that go into a standard mortgage payment, plus some tips on how to best understand your payment schedule and plan out your long-term home finances.

Size and Term

While these are not direct components of your mortgage payment, the size and term (length) of your mortgage loan are important for a simple reason: They’re the single largest factors defining what you’ll be paying each month. The longer your term is, the lower your monthly payment will be; on the flip side, if you have the funds, you can go for a shorter term that comes with higher payments, but completes your payments far sooner and allows you full ownership of the home.

Our next several sections will dig into the specific components of your monthly payments.

Principal

Some portion of each monthly payment will be sent directly to repaying your principal loan balance, or the original amount you borrowed. This amount will begin on the lower end, with the bulk of your payments for the first few years often focused on interest (more on this in a moment); as the loan ages, however, your payments become a larger and larger percentage of principal, all the way up until you complete your final mortgage payment and own the home outright.

Interest

Interest, on the other hand, is the fee you pay the lender in exchange for the risk they take in loaning you this money. One of the single most important components of any mortgage is the interest rate, which will vary depending on your personal finances, credit history and other factors.

As we mentioned above, you pay the most interest nearer to the start of your mortgage. However, as time goes on and your principal balance shrinks due to payments you’ve made, your interest generated will also become smaller – and this allows you to make the same monthly payment as earlier in the mortgage, but to do so while sending more of the money directly toward paying down your principal.

For more on what comprises a mortgage payment, or to learn about any of our home loan services or mortgage rates, speak to the staff at Altius Mortgage today.

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First-Time Homebuyer Errors: Timing and Future Expenses

first-time homebuyer errors timing

In parts one and two of this multi-part blog series, we’ve gone over some of the most common errors to avoid if you’re a first-time homebuyer entering the market. While there are several such areas to steer clear of, you also have resources available to you for assistance, including your loan officer and realtor.

At Altius Mortgage and our partners at Mortgage Ogden, we’re proud to offer several loan programs that are ideal for first-time homebuyers, plus expertise on how to navigate the market if you’re entering it for the first time. In today’s final entry into our series, we’ll go over some of the errors we sometimes see later in the process, plus what you should do to avoid them and ensure you’re in a great position moving forward with your new home.

Other Credit Applications

It’s vital to be aware of the timing gaps between when you apply for your mortgage and when the home sale will actually be closed, which will be a few weeks in most cases. And during this in-between period, we strongly recommend taking on any other kind of credit application, whether for a car loan, furniture purchases or any other reason.

This is because your credit is still a deciding factor during this period, where your lender will be evaluating your credit score, debt-to-income ratio and your income to determine your creditworthiness. If you apply for other forms of credit that require hard inquiries, these will lower your credit score and may increase your debt-to-income ratio, neither of which will look good to your lender. As a result, your mortgage interest rate or fees on the mortgage might be changed, or your closing could be delayed.

Shopping Too Early

While we know the home shopping part of this process is what you’re really looking forward to, you can’t be impatient here. If you’re evaluating or even visiting properties before being at least pre-qualified or pre-approved for a mortgage, you’ll be doing so blind – without a true idea of your purchasing power or the ability to make a competitive offer. Instead, speak to your loan officer about the steps for being pre-approved.

Improper Cost Calculations

Finally, one mistake some first-timers make is miscalculating various long-term expenses as they close on their home. In some cases, these refer to various homeownership costs, including utilities, homeowners’ insurance and related expenses. In others, they’ll refer to repair or renovation needs that are required in the home, including some that will present safety or long-term property risks if they aren’t remedied.

For more on how to avoid common pitfalls among first-time homebuyers, or to learn about any of our home loan services or mortgage rates, speak to the staff at Altius Mortgage today.

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First-Time Homebuyer Errors: Programs, Savings, Points

first-time homebuyer errors savings

In part one of this multi-part blog series, we went over some of the common errors first-time homebuyers often make as they enter the market. Many of these are based on simple misunderstandings or myths that have arisen over time, but there are also some simple resources that will allow you to avoid these risks.

At Altius Mortgage and our partners with Mortgage Ogden, our quality loan officers are here to serve as one of these resources, assisting clients with numerous loan programs ideal for first-time buyers and providing several other areas of expertise. What are some of the other common issues we see our first-time buyer clients get wrapped up in, and how can you avoid these?

Missing Out on First-Timer Programs

As we just noted above, and as all first-time buyers should be aware, there are several programs out there that are either specifically designed for you or are often used for buyers in your position. These allow for themes like lower down payments, moderate interest rates or other benefits – but as a buyer, you have to do your research and determine which of these might be beneficial to you, something your loan officer will help you with.

Here are some of the specialty loan programs you might be eligible for:

  • FHA loans: These loans, backed by the Federal Housing Administration, allow for down payments as low as just 3.5% of the purchase price. In addition, they also have lower credit thresholds than other loan types, allowing you to qualify even if you might not have for a conventional loan.
  • VA loans: These loans are guaranteed by the US Department of Veteran’s Affairs, and are for military members, veterans and certain spouses. They allow for no down payment and 100% financing.
  • USDA loans: Meant for homes in rural areas, these loans are backed by the US Department of Agriculture and also allow for zero down and 100% financing.

Running Savings Dry

While you might use a sizable chunk of your savings for a down payment and closing costs on your home, it’s important not to sap them completely. It’s vital to leave funds available for unexpected repairs or costs once you move into the home, plus things like moving expenses. This is another area where our loan officers will be happy to provide basic advice.

Misunderstanding Discount Points

For some, the use of discount points – fees you pay up-front to reduce your interest rate down the line – might be valuable. Whether you go for discount points will depend on the break-even period, or how long it takes for this up-front cost to be exceeded by the monthly savings you’ll receive from a lower interest rate. In reality, only a small percentage of buyers will truly benefit from discount points, and you should inquire specifically with your loan officer about their benefits before considering them.

For more on how to avoid common first-time homebuyer errors, or to learn about any of our home loans or mortgage rates, speak to the staff at Altius Mortgage today.