As a North Carolina Mortgage Broker we can offer you a variety of mortgage products with various lenders.

FHA seems to be one of the top mortgage programs that our borrowers ask for. Please make sure to visit our FHA mortgage section. We also are having a high amount of VA loan applications from Veterans looking to take advantage of the ‘no down payment‘ program. Please visit our rate page to view Today’s Mortgage Rates.

There are 4 main factors that are used today by underwriters to determine a mortgage approval. These factors help a mortgage underwriter understand the borrower’s qualification. These factors determine if a borrower can receive a preapproval, prequalification, and meet necessary underwriting guidelines.

The first factor known to the American population is called the ‘credit’ criteria. Credit scores can help determine the risk level for interest rates, and private mortgage insurance (PMI). Credit scores over 720+ will help to receive the best interest rates, and credit scores of 620+ will help to avoid high PMI payments. FHA mortgage loans have no score requirement, but look towards the ‘credit worthiness’. Credit worthiness consists of how long the credit tradelines have been open, the quantity of credit tradelines, bankruptcies, foreclosures, judgments, and mortgage lates. A lot of borrowers are obtaining 700+ credit scores after filing for bankruptcy within two years! Every mortgage lender looks for 3-5 credit tradelines that have been opened for at least 24months. Superb credit consists of 5-7 tradelines that have been open for at least 4+years. Credit criteria is one of the first steps taken for preapprovals. Underwriting guidelines suggest strong credit history to make a high risk decision.

The second factor looked for is called ‘capacity’. Capacity is how much a borrower makes in income compared to his monthly debt obligations. It also consists of employment history whether it is stable or will be continuous. Self employment income requires two years of business tax returns with all schedules. Any commissions, bonuses, and overtime will need to have been received for two years, and would need to be averaged by two years. If these guidelines aren’t met, then it will not be included towards a borrower’s income. Income earnings can be verified by last paystubs covering 30 days, last two years of w-2′s, and last two years of full tax returns. Alimony, child support, social security, and disability would need to have been received for the last 3months, and have a continuance period of 3yrs. This step is commonly used to prequalify a borrower. Income is calculated against the debt, and no credit is pulled to prequalify a borrower.

The third factor used in a mortgage approval is called ‘capital’. Capital is how much ‘liquid assets’ a borrower may have to cover the down payment, closing costs, and monthly reserves. Liquid assets consists of checking, savings, 401k, IRA’s, stocks, bonds, mutual funds, and certificates of deposits. The amount used for 401k’s is 70% of the ‘vested balance’ minus any loans against it. Down payments can help lower the interest rate by lowering the loan-to-value (LTV). FHA purchase mortgage loans required a down payment of 3%, and conforming loans are from 5, 10, and 20% down. MyCommunity mortgage & HomePossible mortgages are zero down programs, but will require a 620 credit score to avoid high PMI payments. This is the 2nd step used to prequalify an individual for a mortgage. Automated underwriting guidelines tend to ease up when large assets are present.

The last factor used in a mortgage approval process is called ‘collateral’. The Collateral factor looks at the subject property of the mortgage loan. The mortgage rates can receive price hits due to the subject property being a high rise condo, co-op, Non-warrantable condo, second home, investment property, timeshare, rural area, log cabin, and if there aren’t any comparable homes in the area. Most appraisals require at least three comparable homes to find the value of a subject property. This step isn’t required for preapprovals or to prequalify a borrower. Underwriting guidelines are very strict when the market values are declining. New VA home Purchases has the strictest type of appraisal, and can be overwhelming if the home is over 10yrs of age.

Acceleration clause: a provision that allows the lender to demand full repayment of the total remaining loan balance in the event that a borrower any clauses in the mortgage note.

Amenity: home or property features that is beneficial to the buyer. Maybe natural or artificial items such as forest, waterfront, and location or orchard, garden, and underground pool.

Amortization: monthly installments on a mortgage loan consisting of principal and interest; the monthly mortgage payment is based on a amortizing schedule that will allow the borrower to own the home at the end of a specific time period.

Alternative documentation: Lender chooses to verify employment, assets, and credit by other means to expedite the mortgage loan process. Documentation may include w-2′s, verbal verification of income, verification of deposits, etc.

ALT-A Mortgage: Also known as “A-minus”, this mortgage risk is below the prime paper, and above subprime

Annual Percentage Rate (APR): the APR shows the cost of the mortgage loan; shown as a annual interest rate, it includes interest, points, mortgage insurance, and other fees associated with the mortgage loan.

Application: commonly known as the 1003; this application form is used to record information about the borrower which is necessary to the underwriting process.

Appraisal: an evaluation of a subject property’s fair market value; an appraisal is required by a lender before giving a loan approval. It ensures that the mortgage loan doesn’t exceed the property’s value.

Appraiser: an individual who is qualified to perform an evaluation of the subject property

Adjustable Rate Mortgage ARM: a mortgage that is subject to changes from the initial interest rate; when the interest rate changes, ARM monthly mortgage payments decrease or increase at amounts set by the caps;

Assessor: an official from the government whose responsibility is to the determine the value of a property for tax purposes.

Assumable mortgage: a mortgage loan that is able to be conveyed from a seller to a buyer; once the mortgage loan is assumed by the buyer, the seller is no longer responsible for repaying it; there may be a fee associated with the conveyance of an assumable mortgage.

Balloon Mortgage: a mortgage loan with low rates for an initial period. After the initial period elapses, the remaining balance is due.

Bankruptcy: a federal law that where a person’s assets are turned over to a court appoint trustee, and is used to payoff outstanding debts; this occurs when a person owes more than the ability of repayment.

Biweekly Mortgage: A mortgage loan which receives payments every 2 weeks. Twenty-six payments are made in a year to cut the term of the mortgage.

Borrower: a person receives a loan to repay back with fees and interest.

Building code: based on agreed upon safety standards within a specific area, a building code is a regulation that determines the design, construction, and materials used in building.

Caps: the limit that are placed on an adjustable rate mortgage, indicating how much a monthly payment or interest rate can decrease or increase.

Cash reserves: a cash amount required to be held in reserve in addition to the closing costs and the down payment.

Certificate of title: a document prepared by a title company/attorney, that shows the property’s legal owner; title is transferred at closing, and should be free and clear of all claims/liens.

Closing: also known as close of escrow or settlement, at this time the property is formally sold, and transferred from the seller to the buyer; the borrower takes on the loan obligation, pays all closing costs, and receives title/deed from the seller.

Closing costs: closing costs above the purchase price of the property that covers the transfer of ownership at closing; these closing costs generally vary by geographic location, and are given to the borrower after the loan application’s submission.

Commission: an amount referred by a percentage of the property sales price, that is charged by a real estate professional as a fee for negotiating the transaction.

Condominium: ownership of a structure in which individuals purchase and own a unit of housing in a multi-unit complex; the homeowners also shares financial responsibility for the common areas.

Conventional loan: a private sector loan, one that is not guaranteed or insured by the U.S. government.

Cooperative (Co-op): residents purchase stock in a cooperative corporation that owns a structure; each stockholder is then entitled to live in a specific unit of the structure and is responsible for paying a portion of the loan.

Credit History: the record of an individual’s debt payment; mortgage lenders use this information to evaluate a borrower’s ability to repay a mortgage loan.

Credit Report: a history record that lists all present and past debts, and the timeliness of their repayment.


Credit Bureau score: a numerical value representing the borrowers ability to repay or default on a extension of credit; information from the credit history is used to determine ability to qualify for a mortgage loan.

Debt-to-income ratio: the difference of gross income to housing and credit related housing expenses; With the FHA mortgage program, the monthly mortgage payment should not exceed 29% of the monthly gross income. Also, the mortgage payment combined with credit related debts should not exceed 41% of the gross income.

Deed: also known as title; the legal document that transfers ownership of a property.

Deed-in-lieu: to avoid foreclosure (“in lieu” of foreclosure), a deed is given to the lender to fulfill the obligation to repay the debt; this process doesn’t allow the borrower to remain in the house but helps avoid the costs, time, and effort associated with foreclosure.

Default: the borrower’s inability to repay monthly mortgage payments in a timely manner or to otherwise fail to meet the mortgage terms.

Delinquency: the borrower’s failure to make on time mortgage payments under a loan agreement.

Discount point: upfront closing cost calculated to be equivalent to 1% of the total loan amount; discount points are paid to lower the interest rate on a mortgage loan.

Down payment: the money put down on a home’s purchase price that is paid in cash and also lowers the mortgage loan amount.

Due on Sale Clause: A contractual loan provision that states that if the property is sold the mortgage loan balance must be repaid. This disallows the seller from conveying responsibility for an existing mortgage loan to the buyer when the mortgage rate on the loan is below the current market value. Assumable Mortgages do not contain a due-on-sale clause.

Earnest money: money put down by a buyer to show that he/she is serious about purchasing the home; it becomes part of the down payment if the offer is accepted, is returned if the offer is rejected, or is forfeited if the buyer pulls out of the deal.

EEM : Energy Efficient Mortgage: an FHA mortgage program that helps homebuyers save money on utility bills by enabling them to finance the cost of adding energy efficiency features to a new or existing home as part of the home purchase.

Equity: the difference of the mortgage loan, and the fair market value of the property.

Escrow account: a separate bank account into which the mortgage lender puts a portion of each monthly mortgage payment; an escrow account provides the funds needed for such expenses as home property taxes, homeowners insurance, mortgage insurance, etc.

Fair Housing Act: a law that prohibits discrimination in all facets of the home buying process on the basis of race, color, national origin, religion, sex, familial status, or disability.

Fair Market Value: the evaluated price that a willing buyer and seller will agree upon when they are acting freely, carefully, and with complete knowledge of the situation.

Fannie Mae:Federal National Mortgage Association (FNMA); a federally-chartered enterprise owned by private stockholders that purchases residential mortgages and converts them into securities for sale to investors; by purchasing mortgages, Fannie Mae supplies funds that lenders may loan to potential homebuyers.

FHA: Federal Housing Administration; established in 1934 to advance home ownership opportunities for all Americans; assists home buyers by providing mortgage insurance to lenders to cover most losses that may occur when a borrower defaults; this encourages lenders to make loans to borrowers who might not qualify for conventional mortgages.

Fixed rate mortgage: a mortgage loan with payments that remain the same throughout the lifetime of the loan, because the interest rate and other terms are fixed, and do not change.

Flood insurance: homeowners insurance that protects against losses from a flood; if a home is located in a flood plain, the mortgage lender will require flood insurance before approving a mortgage loan.

Foreclosure: a legal process in which a mortgaged property is auctioned off to pay the loan of the defaulting mortgage borrower.

Freddie Mac: Federal Home Loan Mortgage Corporation (FHLM); a federally-chartered corporation that purchases residential mortgages, securitizes them, and sells them to investors; this provides lenders With funds for new home buyers.

Gift of Equity: A home purchase price below market value, where the difference is a gift from the sellers to the buyers. Such gifts are usually between family members. Mortgage lenders will usually allow the gift to count as down payment.

Ginnie Mae:Government National Mortgage Association (GNMA); a government-owned corporation overseen by the U.S. Department of Housing and Urban Development, Ginnie Mae pools FHA-insured and VA-guaranteed loans to back securities for private investment; as With Fannie Mae and Freddie Mac, the investment income provides funding that may then be lent to eligible borrowers by lenders.

Good Faith Estimate: an estimate of all closing fees including prepaid, and escrow items as well as the mortgage lender charges; must be given to the borrower within three days after submission of a mortgage loan application.

HELP:Homebuyer Education Learning Program; an educational program from the FHA that counsels people about the home buying process; HELP covers topics like budgeting, finding a home, getting a loan, and home maintenance; in most cases, completion of the program may entitle the homebuyer to a reduced initial FHA mortgage insurance premium-from 2.25% to 1.75% of the home purchase price.

Home inspection: a professional examination of the structure, and mechanical systems to determine the home’s safety.

Home warranty: offers protection for mechanical systems, and attached appliances against unexpected repairs not covered by the homeowner’s insurance; coverage extends over a specific time period, and does not cover the home’s structure.

Homeowner’s insurance: an home insurance policy that combines protection against damage to a dwelling, and its contents with protection against claims of negligence.

Housing counseling agency: provides counseling and assistance to individuals on a variety of issues, including loan default, fair housing, and home buying.

Housing Expense: The sum of the mortgage payment, homeowner’s insurance, property taxes, and homeowner association fees.

HUD: the U.S. Department of Housing and Urban Development; established in 1965, HUD works to create a decent home and suitable living environment for all Americans; it does this by addressing housing needs, improving and developing American communities, and enforcing fair housing laws.

HUD1 Statement: also known as the “settlement sheet,” it itemizes all closing costs; must be given to the borrower at or before closing.

HVAC:Heating, Ventilation & Air Conditioning; a home’s heating and cooling system.

Index: a measurement used by mortgage lenders to determine changes to the Interest rate charged on an adjustable rate mortgage loan.

Inflation: the number of dollars in circulation exceeds the amount of goods and services available for purchase; inflation results in a decrease in the dollar’s value.

Interest: a fee charged for the use of money.

Interest rate: the amount of interest charged on a monthly mortgage payment; usually expressed as a percentage.

Insurance: protection against a specific loss over a period of time that is secured by the payment of a regularly scheduled premium.

Judgment: a legal decision made against a party to repay a debt; when requiring debt repayment, a judgment may include a property lien that secures the creditor’s claim by providing a collateral source.

Lease purchase: helps low-to moderate-income homebuyers in purchasing a home by allowing them to lease a home with an ‘option to buy’; the rent payment is made up of the monthly rental payment plus an additional amount that is credited to an account for use as a down payment.

Lien: a legal claim against property that must be satisfied when the subject property is sold

Loan: money borrowed that is usually repaid with interest.

Loan fraud: purposely giving incorrect information on a mortgage loan application in order to better qualify for a mortgage loan; may result in civil liability or criminal penalties.

Loan-to-value (LTV) ratio: a percentage calculated by dividing the amount borrowed by the purchase price or appraised value of the home; the higher the LTV, the less cash a borrower is required to pay as down payment.

Lock-in: since mortgage interest rates can change frequently, many mortgage lenders offer an interest rate lock-in that guarantees a specific interest rate if the mortgage loan is closed within a specific time.

Loss mitigation: mitigating process to avoid foreclosure; the mortgage lender tries to help a borrower who has been unable to make loan payments, and is in danger of defaulting on his or her mortgage loan

Margin: an amount the mortgage lender adds to an index to determine the interest rate on an adjustable rate mortgage.

Mortgage: a lien on the subject property that secures the promise to repay a mortgage loan.

Mortgage banker: a company that originates mortgage loans, and resells them to secondary mortgage lenders like: Fannie Mae or Freddie Mac.

Mortgage broker: a firm that originates and processes loans for a number of mortgage lenders.

Mortgage insurance: a policy that protects mortgage lenders against some or most of the losses that can occur when a borrower defaults on a mortgage loan; mortgage insurance is required primarily for borrowers with a down payment of less than 20% of the home’s purchase price.

Mortgage insurance premium (MIP): paid upfront at closing with FHA, and charged on a monthly payment -paid by a borrower for mortgage insurance.

Mortgage Modification: a loss mitigation option that allows a mortgage borrower to refinance and/or extend the term of the mortgage loan, and thus reduce the monthly payments.

Offer: indication by a potential buyer of a willingness to purchase a home at a specific price; generally put forth in writing.

Origination: the process of preparing, submitting, and evaluating a mortgage loan application; generally includes a credit check, verification of employment, and a property appraisal.

Origination fee: a charge for originating a mortgage loan; is usually calculated in the form of points, and paid at closing.

Partial Claim: a loss mitigation option offered by the FHA that allows a mortgage borrower, with help from a mortgage lender, to get an interest free mortgage loan from HUD to bring their mortgage payments up to date.

PITI:Principal, Interest, Taxes, and Insurance – the four elements of a monthly mortgage payment; the payments of principal & interest go directly towards repaying the mortgage loan while the portion that covers taxes and insurance (homeowner’s & mortgage, if applicable) goes into an escrow account to cover the fees when they are due.

PMI:Private Mortgage Insurance; privately-owned insurance companies that offer standard and special affordable mortgage insurance programs for qualified borrowers with down payments of less than 20% of a purchase price.

Pre approval: a mortgage lender that commits to lend to a potential borrower; commitment remains as long as the borrower still meets the qualification requirements at the time of purchase.

Pre-foreclosure sale: allows a defaulting mortgage borrower to sell the mortgaged property to satisfy the loan and avoid foreclosure.

Pre qualify: a mortgage lender informally determines the maximum amount an individual is eligible to borrow based on stated information from the borrower.

Premium: an amount paid on a regular schedule by a insurance policyholder that maintains insurance coverage.

Prepayment: payment of the mortgage loan before the scheduled amortization schedule.

Principal: the original amount borrowed from a mortgage lender; doesn’t include interest or additional fees.

Real estate agent: an individual who is licensed to negotiate and arrange real estate sales; works for a real estate broker.

Realtor: a real estate agent or broker who is a member of the NATIONAL ASSOCIATION OF REALTORS, and its local and state associations.

Refinancing: paying off one mortgage loan by obtaining another; refinancing is generally done to secure better mortgage loan terms (like a lower interest rate or better term).

Rehabilitation mortgage: a mortgage loan that covers the costs of rehabilitating (repairing or improving) a property; some rehabilitation mortgage loans – like the FHA 203k – allow a borrower to roll the costs of rehabilitation and home purchase into one mortgage loan.

RESPA:Real Estate Settlement Procedures Act; a law protecting consumers from abuses during the residential real estate purchase, and loan process by requiring mortgage lenders to disclose all settlement costs, practices, and relationships

Settlement: another name used for closing.

Special Forbearance: a loss mitigation option where the mortgage lender arranges a revised repayment plan for the borrower that may include a temporary reduction or suspension of the monthly loan payments.

Subordinate: to place in a rank of lesser importance or to make one claim secondary to another.

Survey: a property diagram that indicates legal boundaries, easements, encroachments, rights of way, improvement locations, etc.

Sweat equity: using labor to improve or build a property as part of the down payment

Title 1: an FHA insured mortgage loan that allows a borrower to make non-luxury improvements (like renovations or repairs) to their primary home; Title I loans less than $7,500 doesn’t require a property lien.

Title insurance: insurance that protects the mortgage lender against any claims that arise from arguments about legal ownership of the property; also available for homebuyers.

Title search: a search of public records to insure that the seller is the recognized legal owner of the real estate, and that there are no unsettled liens or other claims against the subject property.

Truth in Lending (TILA): a federal law obligating a mortgage lender to give full written disclosure of all fees, terms, and conditions associated with the mortgage loan initial period, and then adjusts to another rate that lasts for the term of the loan.

Underwriting: the analyzation of a mortgage loan application to determine the amount of risk involved in making the mortgage loan; it includes a review of the potential mortgage borrower’s credit history, and a judgment of the property value.

Veteran’s Administration: Department of Veterans Affairs: federal agency who guarantees mortgage loans made to veterans; similar to mortgage insurance, a loan guarantee protects lenders against loss that may result from a borrower default.

A fixed rate mortgage is a mortgage loan where the interest rate on the note remains the same through the term of the loan. Fixed rate mortgages are the most classic form of loan for home and product purchasing in the United States. The most common terms are 15 year fixed, and 30 year fixed mortgages, but shorter terms are available, and 40 year fixed, and 50 year fixed mortgages are now available (common in areas with high priced housing, where even a 30 year fixed term leaves the mortgage amount out of reach of the average family).

Outside the United States, fixed rate mortgages are less popular, and in some countries, true fixed rate mortgages are not available except for shorter-term loans. For example, in Canada the longest term for which a mortgage rate can be fixed is typically no more than ten years, while mortgage maturities are commonly 25 years.

Fixed rate mortgages are usually more expensive than adjustable rate mortgages. Due to the inherent interest rate risk, long-term fixed rate loans will tend to be at a higher interest rate than short-term loans. The difference in interest rates between short and long-term loans is known as the yield curve which generally slopes upward (longer terms are more expensive). The opposite circumstance is known as an inverted yield curve and is relatively infrequent.

The fact that a fixed rate mortgage has a higher starting interest rate does not indicate that this is a worse form of borrowing compared to the adjustable rate mortgages. If interest rates rise, the ARM cost will be higher while the FRM will remain the same. In effect, the lender has agreed to take the interest rate risk on a fixed rate loan. Some studies have shown that the majority of borrowers with adjustable rate mortgages save money in the long term, but that some borrowers pay more. The price of potentially saving money, in other words, is balanced by the risk of potentially higher costs. In each case, a choice would need to be made based upon the loan term, the current interest rate, and the likelihood that the rate will increase or decrease during the life of the loan. FHA mortgages, VA loans, Super Jumbo loans, and other home loan programs usually are offered as a fixed rate mortgage.