FAQ

A few home loan basics.

Pre-qualifying

How do I qualify for a home loan?
TexStar Lending makes qualifying for a home loan easy. But still, you have to meet certain requirements. The first thing you should do is complete our home loan pre-qualification application. This is a basic evaluation of your credit worthiness. We will analyze your income, assets, debts and past credit use. This simple evaluation will determine if we're able to approve you for the maximum home loan amount for which you qualify.

To begin your home loan pre-qualification, simply contact a TexStar home loan Mortgage Specialist at (866) 563-7021 or apply now with our easy online application.

Understanding Credit Reports

Why is my credit report needed for the home-buying process?
When applying for a home loan, your lender will want to know your credit profile. There are three national credit-reporting agencies, each of which collects information about your payment habits. This information is placed in three separate credit profiles, which are then used by creditors and lenders to assess your credit worthiness.

Each credit-reporting agency reports information differently, which means your reports may not contain the same information. As a consumer, it is important to understand what each report includes and dispute any mistakes you may identify. Disputing credit reporting errors is your right under the Fair Credit Reporting Act (PDF Download), which was passed in 2004. 

To learn more about how your credit score is calculated, visit myfico.com. 

Where can I receive a free copy of my credit report?
You can order a free credit report from each consumer reporting company once every 12 months and dispute inaccurate or incomplete information that it contains by contacting the agencies listed below:

• Equifax
Box 740241
Atlanta, GA 30374
(800) 685-1111
http://www.equifax.com
• Experian
Box 949
Allen, TX 75013
(800) 422-4879
http://www.experian.com
• TransUnion
Box 390
Springfield, PA 19064-0390
(800) 888-4213
http://www.transunion.com

Finding the Home Loan that’s Right for You

What types of loans does TexStar offer?
TexStar Lending offers several excellent loan programs. Each of these can be customized to fit your needs in a fixed-rate mortgage or an adjustable-rate mortgage (ARM) option.

We offer all of these home loan options:
• FHA
• VA
• Jumbo
• USDA
• Conventional
• 10-, 15-, 20-, 25- or 30-Year Terms
• Second Liens
• Combo Loans

What exactly is a combo loan?
Combo loans are reserved for borrowers with average-to-above average credit ratings. A combo loan is a combination of a first and second mortgage. It is best for a borrower who wants to avoid a minimum down payment and would prefer to stay away from paying private mortgage insurance (PMI). For instance, the most common combo loan is an 80/15/5. This reflects two mortgages, the first one at 80% of the acquisition cost and the other at 15%. 5% is the down payment that is required.

What type of home loan is right for me?
Our Mortgage Specialists will assist you in choosing the best home loan based on three factors:
• How much will you need to borrow?
• How long do you plan to stay in your home?
• How much financial risk are you willing to take on?

For more information on available home loans, contact a TexStar Mortgage Specialist at (866) 563-7021 or contact us online.

Down Payments

How do I determine the amount of my down payment?
Your down payment will generally depend on the total cash amount accessible to you. In most cases, home loan plans have minimum down payment requirements based on the amount you need to borrow compared to the home value. This figure is frequently referred to as the loan-to-value ratio (LTV).

Calculating the LTV:
• Divide the loan amount by the appraised value.
• The larger the down payment, the lower the LTV.
• For example: Your home is purchased for $100,000 and you put $25,000 down. This equates to a LTV of 75% (75,000/100,000).

A lower LTV increases your home loan approval probability. Also, a low LTV will positively influence the interest rate of your home loan. This means a lower monthly mortgage payment.

To determine how different down payments can impact your monthly mortgage amount, utilize our Payment Calculator.

Understanding Interest Rates

What is the difference between an annual percentage rate (APR) and an interest rate?
The APR is a calculated rate, which includes the interest rate as well as other lender fees required to finance the loan. An APR is a universal measurement that will help you compare the cost of mortgage loans offered by different mortgage lenders. 

The interest rate is the percentage of the loan amount that is charged for borrowing money.

What is the difference between fixed-rate and adjustable-rate mortgages?
A fixed-rate mortgage is a loan in which the principal and interest payments never change during the life of the loan. An adjustable-rate mortgage (ARM) is a mortgage loan subject to changes in interest rates.

ARMs may be appealing to borrowers that do not plan to stay in their home for an extended period of time and those who do not qualify at higher fixed interest rates. ARMs typically permit borrowers to lower their initial payments if they are willing to assume the risk of interest rate changes.

Insurance

What is title insurance?
Title insurance is a one-time cost designed to ensure that the seller legally owns the property and that there are no outstanding financial or legal claims against the property (i.e. liens, title defects, etc.). In order to obtain a home loan, a title insurance company must research the property deed to confirm that there are no financial or legal claims against it.

What is homeowner's insurance?
Homeowner's insurance protects your property against disaster and liability. A borrower is required to be insured against unexpected hazards and expensive personal liability claims (injury to others while on your property).

Prepayment of the first year's homeowner's insurance will be part of your closing costs. Your ongoing insurance premiums will become part of your monthly mortgage payment.

Is windstorm/hail or hurricane insurance ever required?
There are unique hazards an investor or bank may require coverage for that are not included on typical homeowner's policies or fire polices. These include, but are not limited to, windstorm/hail or hurricane threats.

There are coastal areas in the United States where this is included as standard coverage. If the homeowner's insurance policy limits or excludes any requirements such as windstorm/hail or hurricane, then a separate policy covering these dangers must be provided.

What about flood insurance?
Flood insurance is coverage against property loss that results from flooding. If the property is in a flood hazard area, flood insurance will be required. If flood insurance is required on a property under the Federal Emergency Management Agency (FEMA) guidelines, the policy must be equal to the hazard coverage. Keep in mind, the maximum coverage available on a flood policy is $250,000.

What is private mortgage insurance (PMI) and how does it work?
Private Mortgage Insurance (PMI), or Mortgage Insurance Premium (MIP), shields lenders against the possibility of default. PMI makes home ownership possible for first-time buyers. This may be billed monthly, annually, as an initial lump sum or some combination of all options. Mortgage insurance protects the lender in cases where the borrower is not able to put down a 20% deposit. Mortgage life, credit life or disability insurance, designed to pay off a mortgage in the event of a borrower's death or disability, are all separate from PMI and should not be considered the same.

If I have an existing mortgage, is my PMI tax-deductible?
Unfortunately, the answer is no. The federal government is only allowing tax-deductible PMI for purchases and refinances that were closed in the 2007 tax year.

Home Inspection

What is a home inspection? Do I need one?
Your home loan may require a home inspection. Typically, this is a third-party evaluation of the general quality of the home with details about the structural condition of the house and the life expectancy of its major systems, such as plumbing, heating and electrical. The inspection will tell you whether or not your new home is free from obvious and hidden defects. With a home inspection contingency in your purchase contract, you'll have a designated amount of time to get the home inspected after your offer is accepted. You may also use the inspection checklist as a tool for final price negotiation.

Closing Costs

What is the total amount I will pay for closing costs?
Closing costs typically total between 2% and 5% of the purchase price of the home. These one-time fees include:
• Appraisal
• Underwriting fee
• Processing fee
• Title insurance
• Closing transaction fee
• Loan origination fee
• Discount points
• Recording fee

What are pre-paids?
To ensure your taxes and insurance are paid promptly, lenders collect what are known as “pre-paids.”  Pre-paids are fees you will owe to cover costs such as:
• Property tax
• Pro-rated interest
• Homeowner's insurance

What is involved in closing on a house?
Depending on your state and local laws, your closing will take place at an attorney's office, escrow office or a title company.
At closing, it is essential that you:
• Bring certified funds totaling the down payment, closing costs and pre-paids. (The total funds you must bring will be provided in a settlement statement, commonly known as a Housing and Urban Development (HUD) statement. The settlement statement outlines all fees and charges associated with the loan. The HUD statement will be included in the final closing documents.)
• Sign all of the pertinent documents. After you sign all of the documents, you'll receive a copy of everything you signed as well as the keys to your new home.

Refinancing Your Home

If I am refinancing a mortgage, do I still need to make my existing mortgage payment each month?
Yes. Until the refinancing is complete, you must continue to make your current mortgage payments.

Is my loan-to-value (LTV) based on the purchase price or appraised value?
When refinancing, the LTV is the appraised value compared to the loan. If your home appraises for $200,000 and your loan amount is $160,000, your LTV would be 80% (160,000/200,000).

Escrow

What are escrow accounts?
Escrows are payments you make to the mortgage company to pay the costs associated with home ownership. They are included in your monthly mortgage payment. The mortgage company is responsible for the timely disbursement of escrow funds.

What is an escrow waiver?
TexStar Lending considers requests for an escrow waiver.  If all requirements are met, we will evaluate the request during the credit review and issue the escrow waiver approval before closing. Borrowers with an escrow waiver are responsible for paying all taxes and homeowner insurance premiums when they are due.

To begin your home loan pre-qualification, simply contact a TexStar Mortgage Specialist at (866) 563-7021 or apply now with our easy online application.