Loans

For most homebuyers, purchasing a home involves obtaining a mortgage loan.

There are many types of mortgages, designed to suit a wide variety of individuals and their financial situations. Some loans allow buyers to have smaller down payments or to renovate their home at the time of purchase, while others are for restricted audiences (such as individuals with disabilities or veterans).

In addition to traditional loans FHA and Conventional Loans, homebuyers in Washington, DC and surrounding areas have access to a number of special loan programs that may make homeownership more affordable.

There are several loan programs available through the DC Housing Finance Agency (DCHFA), DC’s Department of Housing and Community Development (DHCD) and the Maryland State Department of Housing and Community Development. Many of these loans have unique eligibility criteria and can only be issued by authorized lenders. Read more about these and other loan programs below. Then, contact us for more information on how to pre-qualify.

Mortgage Terms to Know:

Good Faith Estimate

A Good Faith Estimate (GFE) is an estimate of all mortgage-related costs, including your down payment and closing costs, that will be needed at the time of closing. A GFE is a tool to help homebuyers shop and compare loan products.

Points

Points refer to money paid up front to reduce your mortgage’s rate of interest. Points my offer a savings to buyers who plan to stay in their home for a long period.

Principal

Your principal is the amount of money you borrowed to purchase your home. This amount will be paid back, with interest, over the term of the loan.

Rate

A rate or Annual Percentage Rate (APR) is the rate of interest that will be paid back to your mortgage lender for the term of your loan. Rates may be fixed or adjustable.

Terms

A mortgage term is the amount of time (usually in years), that a lending agreement is in effect. Typical mortgages carry 30- or 15-year terms.

Required Documentation 

In checking your assets and liabilities, a lender is looking to see not only if you can afford your monthly mortgage payments, which usually shouldn’t exceed 28% of your gross income (this amount will vary). The lender is also looking to see if you can handle a down payment on the property (and if so, how much), along with other up-front costs, such as loan origination or underwriting fees, broker fees, and settlement or closing costs, all of which can significantly drive up the cost of a mortgage. 

Among the items required are:

1. Proof of Income. 

These documents will include but may not be limited to:

• Thirty days of pay stubs that show income as well as year-to-date income
• Two years of federal tax returns
• Sixty days or a quarterly statement of all asset accounts, including your checking, savings, and any investment accounts
• Two years of W-2 statements

Borrowers also need to be prepared with proof of any additional income, such as alimony or bonuses.

2. Assets 

You will need to present bank statements and investment account statements to prove that you have funds for the down payment and closing costs on the residence, as well as cash reserves. If you receive money from a friend or relative to assist with the down payment, you will need gift letters, which certify that these are not loans and have no required or obligatory repayment. These letters will often need to be notarized.

3. Employment Verification 

Lenders today want to make sure they are loaning only to borrowers with a stable work history. Your lender will not only want to see your pay stubs but may also call your employer to verify that you are still employed and to check your salary. If you have recently changed jobs, a lender may want to contact your previous employer. Self-employed borrowers will need to provide significant additional paperwork concerning their business and income.

4. Other Documentation 

Your lender will need to copy your driver’s license or state ID card and will need your Social Security number and your signature, allowing the lender to pull your credit report.

Preparing for a Mortgage

Purchasing a home for the first time can be one of the most exciting and important decisions you will make. Making a mistake in the process can be devastating. However, most first-time home buyer mistakes are easily avoidable.

• Watch your credit score through a credit monitoring company.
• Make all your credit cards and installment debt payments on time.
• Save as much money as possible for any unknown expenses that may arise.
• Always be responsive to providing documentation requested from your lender.
• Be prepared to provide your EMD (earnest money deposit) from you own funds or acceptable gift funds.
• Discuss with your Mortgage Loan Originator how someone providing gift funds to you will be transferring the money.
• Communicate any positive or negative changes in your employment status or income.
• Notify your Mortgage Loan Originator of where your assets for closing will be derived.

After you’ve been pre-approved for a mortgage:

• Don’t open up any new loans, credit cards, cars or other debts until you go to settlement.
• Don’t change jobs or employment.
• Don’t deposit any cash into your account unless it is the exact amount that can be verified by a recent pay check. 
• Don’t borrower any money from any person or company. 
• Don’t transfer funds from different accounts before first discussing where the monies are coming from with your Mortgage Loan Originator.
• Don’t take any leave of absence or unpaid time off which could affect your qualifying income.
• Don’t spend the monies you are using for your down payment and closing costs.

Mortgage Approval Checklist

• Last two years Federal Income Tax Returns
• Most recent two years W2s
• Most recent two years 1099s (for all jobs)
• Two recent and consecutive pay stubs <30 days old
• Two months bank statements < 60 days old (include all pages)
• Asset Statements (401k, stocks, savings, mutual funds)
• If self-employed, most recent two years business returns and K1 schedules
• Clear copy of driver’s License(s)
• Clear copy of social security card(s)

Have more questions about District of Columbia and Maryland mortgage loans?

We’re here to help. Send us an email or call /text 202-818-8718 for one-on-one assistance.