GENERAL FAQs - All Categories

What kind of security does your Web site have?
Your privacy and security is very important to us. We take stringent measures to keep our communications and transactions with you both safe and private. That's why we have obtained a certified Secure Server ID from a trusted third party.

Secure Server IDs are also known as digital certificates. They bind an identity, in this case LoneStar.ClassicHomeFinancial.com, to a pair of electronic keys that can be used to encrypt and sign digital information. Our unique Secure Server ID ensures our authenticity to you, assuring that you are really dealing with LoneStar.ClassicHomeFinancial.com and not an imposter. It also allows our communication with you to be encrypted so that no third parties can access it. It guarantees that only Lone Star Bank & Classic Home Financial will be able to see the personal information you exchange with our site.

How do I determine which loan, line of credit or mortgage product will meet my needs?
A home financial specialist can explain the many programs available and help you determine what's right for you.

How much money can I borrow?
Lenders use specific criteria to determine if you qualify for a loan and the amount you can qualify for. You can use our calculator tools to determine whether you can qualify for a loan, the types of loan products that are best for you, and many other things. We allow you to apply and get pre-approved right here online - it's fast, easy, and free (There are no charges for an application fee).

I have bad credit. Can I still get a loan?
A less-than-perfect credit history doesn't have to stand in your way of reaching your homeownership goals. We have helped thousands of individuals move beyond credit challenges into homes of their own.

What if I want to talk to a loan agent?
You can talk to a home financial specialist at any time by calling (866) 620-9147 .

Why is the loan-to-value ratio (LTV) important and how do I calculate my LTV?
The loan-to-value ratio (or LTV) is one of the most important factors in your loan process. It is used to determine the limits within which your housing and debt ratios must fall for your loan to be approved. It can also determine which fees you will be charged for your loan and the amount of these fees. It will also determine whether you must pay Private Mortgage Insurance (PMI) and use an impound/escrow account.

Your loan-to-value ratio (LTV) is simply the amount you are borrowing divided by the value of the subject property you are purchasing or refinancing. This gives you a simple ratio. For example, a house valued at $100,000 which you intend to purchase with an $80,000 loan (and a $20,000 down payment of your own cash) is said to have an LTV of 80 percent - that is, the loan represents 80 percent of the value of the house.

What happens after I apply for a loan online?
Our home financial specialist will confirm the information on your application and will contact you. He or she will then turn the application over to a loan processor, who will monitor the progress of your application until closing.

Once you submit the application, your loan will immediately begin the underwriting process. In most cases we will deliver your credit decision within 24 hours. Meanwhile your home financial specialist will contact you within one hour to answer any questions.

How do I receive and sign my loan documents?
After you complete your application with a home financial specialist, we will provide you with a package in one of three ways: via e-mail, fax, or via express mail. This package will contain your loan application and disclosure documents.

How quickly can I get a loan approved?
Loan approval can come as quickly as within 24 hours. The average time for closing a loan varies, but generally loans close within 20 to 25 business days.

What if I have trouble filling out a section of the online application?
You can talk to a home financial specialist at any time by calling (866) 620-9147.

Can I change my application after I've submitted it?
Yes, just talk to your home financial specialist.

What kind of information do I need to provide to qualify for a loan?
You will need to provide credit, income, asset, and liability information, including your income, residence, and personal identification. That information will include:

• Your employment and salary history for the past two years, addresses of your residences for the past two years (as well as landlords names and phone numbers if you rented), your social security number and that of your co-borrower(s)
  
• Your current income including base salary, any commissions and bonuses or dividends. (income from alimony, child support or separate maintenance payment need not be revealed if you prefer)
  
• The numbers and locations of your bank accounts
  
• Your bank or investment account numbers, balances, and names of the institutions holding them

What if I'm self-employed or my co-borrower is? Do we still qualify for a loan?
We typically provide loans to individuals who are self-employed. If you are self-employed or compensated by commissions, you will need to supply your federal tax returns for the two most recent years you filed.

What kind of loan fees will I have to pay?
There are no fees to apply. There may be fees due at loan closing and/or points added on to the loan, depending on the type of loan you choose.

Are there extra fees for getting a loan online?
Our fees are the same regardless of application method.

What are points and how many do I have to pay?
Generally speaking, points are fees added onto loans. One point is equal to 1 percent of your loan amount. Points are paid when the loan closes, not at the time you apply for the loan.

When you get a loan, you'll have the opportunity to "buy down" the interest rate by paying discount points - essentially paying a fee to lower your interest rate. By lowering your interest rate, you will be lowering your monthly payment and the amount of interest you'll be paying over the life of the loan. You pay more at the beginning of your loan but will save money in the long run. Keep this in mind as you determine whether to pay points.

Paying points requires a higher immediate expenditure, so it may not be for you. In that case, let the loan do its job - allowing you to borrow the money you need and pay it back as fast as you can.

Should I roll the fees into my loan?
Again, the choice basically comes down to "pay now" or "pay later." If you have the funds now, it makes sense to cover the expenses out-of-pocket and save through lower loan payments and interest costs on a smaller loan. On the other hand, if your budget is currently tight, rolling in the costs with your loan amount makes sense because it allows you to get the loan without immediate expense.

We give you the option of rolling these funds into your loan amount. This allows you to get your loan with no out-of-pocket expense, but your loan amount will be slightly higher. The alternative to rolling the costs into your loan is to provide these funds yourself when the loan closes. You'll be borrowing a smaller loan than with a roll-in, but you will incur immediate out-of-pocket expenses.

Will the interest on my loan or line of credit be tax deductible?
The interest you pay on a mortgage is usually tax deductible. Please consult your tax preparer for specifics of how your taxes will be affected. Interest on credit cards or automobile loans is not normally tax deductible.

CREDIT FAQs

What is a FICO score?
Developed by Fair Issac & Co., a FICO is a credit score that is used to determine the likelihood that credit users will pay their bills. This credit score is expressed as a single number; the higher the number, the better the score. Three nationwide credit bureaus--Experian, Trans Union, and Equifax calculate consumer FICO scores.

Your credit scores are determined by these bureaus after they analyze your credit history and consider such factors as:

• The amount of time credit has been established
  
• The amount of credit available versus the amount of credit used
  
• Length of time at present residence
  
• Employment history
  
• Late payments
  
• Negative credit information such as bankruptcies, charge-offs, or referrals to collection agencies

Why isn't my credit score higher?
Below are the top ten most frequently given score reasons for a less than desirable score.
1. Serious delinquency
2. Serious delinquency, and public record or collection filed
3. Derogatory public record or collection filed
4. Time since delinquency is too recent or unknown
5. Level of delinquency on accounts
6. Number of accounts with delinquency
7. Amount owed on accounts
8. Proportion of balances to credit limits on revolving accounts is too high
9. Length of time accounts have been established
10. Too many accounts with balances

Does my income affect my credit score?
Income might affect your ability to get a loan, but it does not affect your credit score. Only your credit history such as timely payments and how much you owe affects your score. Regardless of income, if you manage your debt responsibly, you can have a high score.

Will my FICO score drop if I order my credit report?
Self-inquiries do not affect your score, as long as you order your credit report directly from the credit reporting agencies, or through an organization authorized to provide credit reports to consumers. It's a good idea to check your credit report once a year.

Is credit scoring discriminatory?
Scoring considers only credit-related information. Factors like gender, race, nationality, and marital status are not included. The Equal Credit Opportunity Act (ECOA) prohibits lenders from considering this type of information when issuing credit. Because the credit score is mathematically calculated, it treats all borrowers the same.

How can I increase my FICO score?
Increasing your credit score isn't an overnight process, but here are some tips on how to improve your score over a period of time:

1. Pay your bills on time. Late payments and collections can have a serious impact on your score
2. Do not apply for credit frequently. Having a large number of inquiries on your credit report can worsen your score
3. Reduce your credit-card balances. If you are "maxed" out on your credit cards, this will affect your credit score negatively
4. If you have limited credit, obtain additional credit. Not having sufficient credit can negatively impact your score
5. Correct any errors on your report by reporting them to the credit bureau. The three major bureaus in the U.S., Equifax (1-800-685-1111), Trans Union (1-800-916-8800) and Experian (1-888-397-3742) all have procedures for correcting information promptly

HOME PURCHASE FAQs

What is the minimum down payment I must have?
We offer loan products with as little as zero percent down.

Can I apply for a purchase loan before I find a property?
Yes, in fact, most buyers prefer that you at least be pre-qualified for a home loan and being pre-approved is even better.

What is the difference between being pre-qualified for a loan and being pre-approved?
Imagine you're a seller with multiple purchase offers. Let's consider the type of buyers you may be dealing with:

Buyer One is neither pre-qualified nor pre-approved. This buyer provides no evidence of being able to afford to purchase your property. You may wonder how serious they are.

Buyer Two is pre-qualified. This buyer has met with a mortgage broker (or lender) and provided that broker with general information regarding income, expenses, assets and liabilities. The broker may also have seen a credit report. The buyer gives you a letter from the broker stating an opinion about what the buyer can afford.

Buyer Three is pre-approved. This buyer has completed a loan application, providing a broker or lender with written evidence of income, expenses, assets, liabilities and credit. All information has been verified by a lender. As a result, much of the paperwork for this buyer's loan has been completed. This buyer will probably be able to close quickly. You have been provided with a letter (pre-approval certificate) from the lender. You're as certain as possible that this buyer can close.

As a potential buyer, you can see that being pre-approved will inspire the seller with the most confidence and give the buyer the best chance of getting an offer accepted. We recommend that you apply for pre-approval. A pre-approval will review your financial situation to determine if you are likely to qualify based on the estimated loan amount and purchase price information that you provide in your application. A pre-approval gives you greater flexibility and leverage while you conduct your home search.

How are interest rates set?
The general interest rate level in the economy is determined by the Federal Reserve Board, degrees of inflation, demand for borrowing money, the stock market, and a number of other factors.

What is a rate lock?
A rate lock is a written agreement in which we guarantee you a specified interest rate, provided the loan closes within a set period of time. You cannot close a mortgage loan without locking in an interest rate. There are four components to a rate lock: interest rate, loan program, points, and length of the lock.

The longer the length of the lock, the higher the points or the interest rate. This is because the longer the lock, the greater the risk for the lender offering that lock. After a lock expires, most lenders will let you re-lock at the higher of the original rate/points or current rate/points. In most cases you will not get a lower rate if rates drop.

Lenders can lose money if your lock expires. This is because they are taking a risk by letting you lock in advance. If rates move higher, they are forced to give you the original rate at which you locked. Lenders often protect themselves against rate fluctuations by hedging.

Some lenders do offer free float-downs-i.e., you may lock the rate initially and if the rates drop while your loan is in process, you will get the better rate. However, the free float-down is costly for the lender and you pay for this option indirectly.

What if the rates drop after I've locked my rate?
Most lenders will not budge unless the rates drop substantially (3/8 percent or more), because it is expensive for them to lock in interest rates. If lenders let borrowers improve their rate every time the rates improved, they would spend a lot of time relocking interest rates. Also they would have to build this option into their rates and borrowers would wind up paying a higher rate.

Is a fixed rate or adjustable rate mortgage (ARM) better?
That depends on your particular financial situation and interest rate levels. If interest rates are low, many first time home buyers prefer the safety of a fixed-rate 30-year mortgage since the monthly payments stay the same for the life of the loan. If interest rates are high, some buyers prefer an ARM because they have a lower interest rate in the beginning and these buyers plan to refinance or resell the property within a few years.

Talk to one of our home financial specialists and find out what's best for you.

What is the difference between a jumbo and a conforming loan?
Conforming loans have a well-established secondary market provided by the two government sponsored entities, the Federal Home Loan Mortgage Corporation (Freddie Mac) and Federal National Mortgage Association (Fannie Mae). Currently the conforming loan limits are as follows (with the exceptions of Alaska and Hawaii):

• 1 Unit-up to $417,000
  
• 2 Units-up to $533,850
  
• 3 Units-up to $645,300
  
• 4 Units-up to $801,950
  

How much money will I need at closing?
At the least, your loan payment will consist of the principal and interest for one month. In some states, you may elect to have your insurance and taxes prorated and added onto the monthly cost. In other states, it may be required that you pay for insurance taxes as part of your monthly loan payment. This money would be placed in an impound or escrow account by the lender.

We offer loans with and without closing costs, depending upon what type of loan you want and the amount of money you are borrowing.


When should I look for insurance for my home?
Start looking for home owner's insurance as soon as your offer has been accepted. Waiting too long could delay your loan or mean that you have to settle for less than the best insurance rates.

What is Private Mortgage Insurance (PMI)? Can I get rid of the PMI on my loan?
PMI is normally required when you buy a home with less than 20 percent down. Mortgage insurance is a type of guarantee that helps protect lenders against the costs of foreclosure. This insurance protection is provided by private mortgage insurance companies to protect the lender. It enables lenders to offer loans with lower down payments. In effect, mortgage insurance pays the lender a certain percentage of your original purchase price to cover a lender's losses in the unfortunate event of foreclosure. Therefore, without mortgage insurance, you would need to make a 20 percent down payment in order to buy a home.

The cost of PMI increases as your down payment decreases. Example: The cost of PMI on a 10 percent down payment is less than the cost of PMI on a 5 percent down payment. Your PMI premium is normally added to your monthly mortgage payment.

Federal law requires PMI to be cancelled under certain circumstances, and Fannie Mae guidelines provide for cancellation of PMI in additional situations if the loan is owned by Fannie Mae. In general, PMI for a loan originated on or after July 29, 1999, which is secured by the borrower's one-family principal residence or second home will be cancelled at the borrower's request when the loan-to-value ratio (LTV) reaches 80 percent based on the value of the home at loan origination.

What is an escrow or impound account?
An escrow or impound account is established to allow the lender to collect property tax and hazard insurance payments on a monthly basis. The escrow/impound payment is collected with your monthly mortgage principal and interest payment and is calculated by taking your yearly tax and annual insurance payment and amortizing it over 12 months, along with a mandatory pad of at least two additional months worth of payments for each. The lender will draw from the account annually to pay the insurance policy and twice a year when the property tax installments are due, paying the county tax collector and insurance company directly. The escrow/impound account offers a convenient and timely way for borrowers to ensure that their property tax and insurance payments are paid.

Can I make extra principal payments so I can pay off the loan more quickly? Is there a prepayment fee?
Depending on the loan, and what your state permits, it is feasible for you to make extra payments on the loan. Extra payments will have an effect on the amortization schedule over the remaining term of your loan.


HOME EQUITY FAQs

How do I know how much equity I have in my property?
Equity is the value of a homeowner's interest in real estate. Equity is computed by subtracting the total of the unpaid mortgage balance and any outstanding liens or other debts against the property from the property's fair market value. A homeowner's equity increases as he or she pays off his or her mortgage or as the property appreciates in value. When a mortgage and all other debts against the property are paid in full, the homeowner has 100 percent equity in his or her property.

Must I occupy the residence I'm using as loan collateral?
You do not have to occupy the residence you are using as collateral unless you are requesting a home equity loan or line of credit to access more than 80% of your available equity

What is the difference between a home equity loan and a home equity line of credit?
A home equity loan is closed, meaning you get all your money up front and make payments until it is paid if full. In many cases, a home equity loan's interest rate is fixed and your loan payments stay the same each month over the life of the loan.

A home equity line of credit (HELOC) is open, meaning you can get numerous advances for various amounts as you desire.

If you want a loan for a specific purpose such as to pay off credit cards and other expenses or to remodel your home, a home equity loan will fit your needs.

REFINANCE FAQs

Why would I want to refinance my home?
The most common reason for refinancing is to save money. Saving money through refinancing can be achieved in two ways: (1) By obtaining a lower interest rate that allows one's monthly mortgage payment to be reduced, or (2) By shortening the term of the loan, thereby saving money over the life of the loan.

For example, refinancing from a 30-year loan to a 15-year loan might result in higher monthly payments, but the total interest paid during the life of the loan can be reduced significantly.

Some people refinance to convert their adjustable loans to fixed loans. The main reason for doing this is to obtain the stability and the security of a fixed loan. Fixed loans are very popular when interest rates are low, whereas adjustable loans tend to be more popular when rates are higher. When rates are low, homeowners refinance to lock in low rates. When rates are high, homeowners prefer adjustable loans to obtain lower payments.

A third reason why homeowners refinance is to consolidate debts and replace high-rate loans with a low-rate mortgage. The loans being consolidated may include second mortgages, credit lines, student loans or credit cards. In many cases, this kind of debt consolidation results in tax savings, since consumer loans are not tax deductible, while a mortgage loan is usually tax deductible.

If I refinance, how large an amount should I borrow?
The amount of the new loan will depend on your financial needs -- whether you want to borrow the same amount as the current mortgage or whether you also want some extra cash to pay off bills, etc.. In addition, it will depend on your home's appraised value.

How do I calculate the value of my property?
Since a mortgage is a loan secured by a piece of real property, a crucial factor is in the correct value of the property in question. The value of your property is its appraised value OR the amount you pay for the property (the market value), whichever is lower. In the initial stages of qualification and approval, your property's value is understood to be an estimate. It will be confirmed, if necessary for your particular loan, by a professional appraiser hired by us.

Isn't it easier to refinance through my existing lender?
While your existing lender may not require a new property appraisal, you may still have most, if not all, of the closing costs to pay again. Plus your existing lender may not have the best rates and programs.

There is a general misconception that it is easier to work with your current lender. In most cases, your current lender will require the same documentation as other companies. This is because most loans are sold on the secondary market and have to be approved independently. Even if you have made all your mortgage payments on time, your existing lender will still have to verify assets, liabilities, employment, and other information all over again.

Is it smarter to wait to refinance until interest rates drop to at least two percent below my current interest rate?
Let's say you have a 30-year fixed rate loan. A loan officer calls up and says you can refinance to a rate 0.5% lower than your current rate, and there will be no points, no appraisal fee, no title or escrow fees. He's offering a No Cost loan, with a lower rate, lower payment and your loan balance stays the same.

This is not a scam. Thousands of homeowners have refinanced using a zero-point/zero-fee loan. Some refinanced multiple times in a single year.

This works due to rebate pricing, also known as yield-spread pricing or service-release premium pricing. You pay a higher rate in exchange for cash up front, which is then used to pay the closing costs. You are financing the closing costs by paying a higher rate. A zero point loan, with the borrower paying the closing costs would be 0.25 to 0.5% lower than the no cost loan.

On a $200,000 loan, the home financial specialist can offer you a rate with a cost of -1 point (rebate), which is a $2,000 credit towards your closing costs. A mortgage broker can use rebate pricing to pay for your closing costs and keep the balance of the rebate as profit. A no cost loan would need to have enough rebate points to cover all your closing costs, plus the broker's profit margin.