FAQs

The best way to get started is to do a search for rates using our innovative, user friendly search tool on the homepage or simply give John a call to discuss your goals. Online, you will receive live pricing for many programs, costs breakdown and can apply using our secure online application. We utilize the best of technology, including live pricing for rate quotes, online good faith summary and an easy to use online loan application to make the process as easy and user friendly as possible.

There will be a short list of documentation that will be requested to process your loan. In order to assure your transaction goes as smooth and efficient as possible you will want to provide these documents as soon as you can in the process. Depending on the specifics of your scenario there may be other detailed information needed. The standard documentation that you should gather and prepare to send to Cornerstone is list below.

Needed items:

• Copy of driver’s licenses.
• Most recent consecutive pay stubs covering a 30 day period. (if applicable).
• W2’s for the most recent 2 years (if applicable).
• Federal Tax Returns for the most recent 2 years, all schedules.
• Most recent 2 months bank statements and/or any other investment account, covering the past 2 months (ALL PAGES). “We cannot use internet printouts that do not have the borrower’s full name and account #.”
• Copy of a current mortgage statement for current loans.
• Copy of Homeowner’s insurance policy Declaration page (all properties owned).
• Copy of executed purchase contact (if applicable).

John’s pricing engine provides you with real time rate quotes 24/7 without any personal information required. Combine this innovative technology with John’s experience, commitment to high performance and you have a tremendous lending platform. These rates and fees are backed by Cornerstone Mortgage’s guarantee. You will be provided accurate pricing within seconds of your search. John Galkowski looks to empower the borrower by providing upfront, guaranteed rates and fees without any costs or commitment from you. John is very confident you will like the website, rates and fees and the most efficient lending platform in the market. You will have no surprises at closing and we look forward to serving you, your family and friends.

John Galkowski and Cornerstone Mortgage have worked tirelessly to create the most efficient loan origination system in the industry. As a direct lender utilizing the best technologies and a highly talented team we are able to work efficiently while passing on savings to our borrowers.

There’s no cost for completing an online application and obtaining a real time online rate quote. You are able to search real rates in real time that are guaranteed when in a position to lock. All this can be done without any personal information required. Upon receiving your online loan application and credit report you will be given an opportunity to lock your rate. If you wish to lock your rate, you will be asked to submit a $400 appraisal fee by credit card ($450-$550 if investment property or 2-4 units). These funds will be used to pay for your appraisal, a service performed by an independent third party

An escrow account, known as an impound account in California, is an account set up at the time you close your loan for the payment of your property taxes and homeowner’s insurance. You pay 1/12 of your annual taxes and insurance along with your mortgage payment each month and the funds are placed in the escrow/impound account. Your loan servicer pays your taxes and insurance out of the escrow/impound account when they come due. You receive an Escrow/Impound Analysis Statement each year, showing the activity and balance remaining in the account.

You are not required to have an escrow/impound account unless the Loan-to-Value ratio on your loan is over 80% (90% in California). However, if you decide not to have an escrow/impound account, your points can be up to a .25% higher.

The note rate is used to calculate your interest payment each month. The APR (Annual Percentage Rate) is a calculation based on standardized federal regulations. In addition to the interest rate, it factors in points and loan-related fees in an attempt to better show the total cost of the financing over the scheduled life of the loan. The APR is designed to help borrowers fairly compare different lenders and loan options. Please note that the loan amount will influence the APR calculation, with higher loan amounts reporting lower APR calculations. Our website allows you to input your loan amount and calculate an accurate APR.

Prepaid interest is paid at the time of closing of your loan to cover the interest that will accrue on your new loan for the remaining days of the month in which it is funded. You will make no payments in the month immediately following the month in which your loan funds. You will then begin making payments on the first of each month for the prior month’s interest.

Yes, in most cases Cornerstone Mortgage has negotiated with the best third-party providers in the business to get the best fees for your refinance possible. We value the partnership with these providers and Cornerstone Mortgage benefits from their lowest prices because we give them a consistent, high-volume amount of business. We are able to pass these savings on to you the borrower.

If your existing second mortgage or home equity line was not obtained in conjunction with purchasing your home, then paying it off with a new mortgage is considered cash out and may have an impact on pricing.

When you submit your online application, it will be reviewed by John and his Team who will order a credit report with your authorization. When loan parameters and credit have been confirmed you will be contacted by John to assist with your request and your loan can be locked. You will select the rate you wish to lock and will receive a lock confirmation by email.

At the time we are ready to draw your loan documents, if our posted rates are at least .25% lower than the rate you locked (for the same or less points, or the same or more rebate on conforming rates), you may float down your rate to the current rate plus .125%.

If the delay is caused by us, or a third party service provider selected by us, we will extend your lock for a sufficient time to complete the process at no cost to you. If the delay is caused by you, you will be required to pay for the cost of the lock extension. Delays caused by you could include requesting the subordination of an existing second mortgage or home equity line, not supplying supporting documentation within three days of our request or delaying appraisal inspections or document signing appointments.

In the event current rates are the same or lower than the rate you originally locked, you will receive a free 7-Day Extension (Original lock must expire within 7-Days to be eligible).

In the event current rates are higher than the rate you originally locked, you will be charged an extension fee of .125 for 5 days and a fee of .25 for a 15 day extension. . Your processor will calculate the number of days needed to close your loan and advise you of the total extension cost.

If your loan has not closed by the end of the extension period selected, any further lock extensions will require that the loan be re-priced at the worse-case scenario between the rate you originally locked and current rates.

John and Cornerstone Mortgage’s customers are guaranteed against any changes to the low interest rates, closing costs, and third-party fees quoted upfront by Cornerstone Mortgage. All applicable lender fees and closing costs are stated upfront in the good faith estimate and will not change. As a borrower you will know exactly what the rate as fees are at the time you commit and lock your loan.

Our quality control procedures prohibit us from using any appraisal not ordered directly by us from one of our licensed appraisers in your area. Our appraisers prioritize our work and will complete the assignment quickly.

We will lend on a home that requires repairs. Certain repairs may need to be performed before closing for items such as broken windows, missing appliances, damaged walls and other items which may affect the value of your home. Upon receipt of your appraisal, our underwriting department will make a determination as to which repairs are required to be made. In addition, the appraisal must indicate the condition of the home to be “average” or better.

On a refinance transaction, if the savings you will achieve with the new lower rate will recapture the closing costs of the loan in a relatively short period of time, you should probably go ahead and lock your rate and close your loan. Trying to time the bottom of an interest rate cycle is tricky and each month you delay costs you in the form of carrying a higher interest rate on your old loan. If rates fall further, you can always refinance again. On purchase transactions, in times of stable interest rates, most of our customers lock when they are within 30 days of closing. Locking for a period longer than 30 days increases the cost of the loan slightly but is sometimes a good idea if rates are volatile. If your closing is more than 30 days out, we recommend you compare rates and points on our website for 30, 45 and 60 day locks and make your decision accordingly.

We offer loan programs with as little as 0% down (VA – 0% down; Conventional – 3% down). However, significant savings may be achieved with a down payment of 10%, 20% or 25% so we encourage you to run multiple loan scenarios on our website if you can afford a greater down payment.

For a loan on a condominium, it is necessary that the common areas of the project, or at least the phase that your unit is located in, are complete. In the event all common areas are not yet complete, your builder will have a program to finance your purchase. Their rates will probably not be as low as ours so keep your closing costs to a minimum and you can refinance through us once the common areas are complete. In addition, in most cases an HOA certification is required and must be completed by your HOA. The certification must meet all underwriting guidelines. There may be a fee assessed by your HOA, which we will collect from you to send directly to the HOA for completion of the certification.

Federal Law requires all lenders to investigate whether or not each home they finance is in a special flood hazard area as defined by FEMA, the Federal Emergency Management Agency. This is to help to ensure that you will be protected from financial losses caused by flooding. We use a third party company who specializes in the reviewing of flood maps prepared by FEMA to determine if your home is located in a flood area. If it is, then flood insurance coverage will be required, since standard homeowner’s insurance doesn’t protect you against damages from flooding.

No, by offering financing only on traditional 1-4 family residential properties, we are able to be more efficient and offer the best possible pricing to our customers.

Our online application is very user friendly. You will not be asked for any account numbers and can estimate loan payment amounts, bank account balances, etc. The application is broken down into sections and you can track your progress through each section at the top of each screen. It should take less than 20 minutes to complete the application. Move through the application by using the back and next arrows at the bottom of each screen. Don’t use the back and next button on your browser while you’re completing the application. If you need additional help answering a question, click on the question mark at the end of the question for more information. If you don’t have time to complete the application once you’ve started, we’ll save the information you have completed. When you’re ready to finish, return to the site and enter your User ID and password to continue.

Loans may not be closed in the name of an LLC.If the title of your home is vested in an LLC, the title must be changed prior to submitting a loan application.

Yes, but this does complicate the refinance transaction somewhat. The holder of your second mortgage or home equity line will have to sign what is known as a subordination agreement, subordinating their existing lien position to the new first mortgage. Generally, they will be willing to do so provided the amount of the new first mortgage is no more than the remaining balance of the existing first mortgage. Your second mortgage lender will ask us to provide some documentation such as a copy of the mortgage note you’ll be signing and the appraisal before they provide the subordination agreement. We won’t be able to schedule your loan closing until we receive the subordination agreement. When subordinating an existing second mortgage or home equity line, John recommends you take a minimum 45 day lock to avoid potential lock extension fees.

For a No Cash Out refinance, the only requirement is that the home is not listed for sale at the time of loan application. For a Cash Out refinance, if the home was listed for sale in the past six months the maximum loan to value allowed is 70% of the appraised value.

Our pricing model is different than other lenders in that our profit is primarily built into one flat lender fee, allowing us to offer lower rates and points. We can then pass on the pricing we receive in the secondary market directly to our borrowers. Most lenders add points to the pricing they receive in the secondary market and offer the “marked up” pricing to the borrower.

In comparing lenders, we suggest you compare total lender points and fees for the same interest rate. If you compare our total points and fees to the total points and fees charged by another lender for the same rate, we are confident our total costs will be much lower for any given interest rate.

A rebate is a credit to the borrower by the lender for taking an interest rate higher than the zero point rate. The lender hopes to recapture the amount paid by collecting a higher interest rate over the life of the loan. Rebates may be used to offset any non-recurring closing costs, including the guaranteed lender fee, appraisal, closing agent, title insurance, recording and/or transfer taxes. Rebates may not be used to offset prepaid expenses, such as prepaid interest, initial escrow/impound account deposit or homeowner’s insurance premium.

If you do not know the account number of your current mortgage, leave this field blank as it is not a required field.

If you do not know the exact monthly payment or remaining balance of your current mortgage, make your best estimate.

Your loan processor will obtain accurate information as part of the loan process and make any necessary adjustments for you.

Maximum debt-to-income ratios are determined by an automated underwriting system that takes many factors into consideration, including your credit score, loan-to-value ratio and cash reserves. On jumbo loans, the maximum debt to income ratio is 38% to 43% depending on the loan program.

Our system is designed to deliver the very best rates and fees available to qualified borrowers. Our loans are underwritten by an automated underwriting system and, in most cases, FICO scores below 620 will not be approved by our system.

On a purchase transaction, one of the first things we’ll do after your loan is approved is to contact your real estate agent to discuss the items required for closing that the agent or seller is responsible for. Though there is some variance across the country, generally the agent is involved in ordering the title policy and scheduling the appraiser’s inspection of the home. We’ll make sure that everything necessary has been taken care of so that your closing happens as efficiently as possible.

We’ll require a copy of the settlement statement on the sale of your current residence to verify that you’ve received sufficient funds for our closing. If the closing of your current home is scheduled for the same day as the closing of your new home, we’ll ask the closing agent on that transaction to provide an estimated settlement statement.

If you’ll be withdrawing funds from a 401(K) or retirement account to fund your down payment, we’ll ask you to provide evidence that you have the funds available by providing a recent statement. If repayment is required, we’ll consider that monthly payment as well when calculating your debt-to-income ratios.

The information we need about additional assets that you own does not have to be exact. Estimated values are all we’ll need.

We need information about all the real estate you own to ensure we have a reasonable estimate of your net worth and debt-to-income ratios. If you don’t know the exact value of your real estate holdings, provide your best guess. In most cases that is all we will need to process your new mortgage request. Bottom of Form

On a refinance application, the year you purchased the property and the price you paid for it are provided to the appraiser to assist them in finding data about your home through local public records. In addition, if you purchased your home in the last year some of the loan programs we offer require us to compare the original purchase price to the current appraised value so that any large increases in value can be justified.

If you don’t remember the exact year and purchase price of the property an estimate will work just fine.

An installment debt is a loan that you make payments on, such as an auto loan, a student loan or a debt consolidation loan. Do not include payments on other living expenses, such as insurance costs or medical bill payments. We’ll include any installment debts that have more than 10 months remaining when calculating your debt-to-income ratios.

We order the appraisal as soon as the appraisal fee is paid. Generally, it takes 5-7 days before the written report is sent to us. If you are refinancing, the appraiser will contact you to schedule a viewing appointment. If you don’t hear from the appraiser within three days of the order date, please inform your Loan Processor. If you are purchasing a new home, the appraiser will contact your real estate agent, if you are using one, or the seller to schedule an appointment to view the home.

An appraisal report is a written description and estimate of the value of a property. National standards govern not only the format for the appraisal, they also specify the appraiser’s qualifications and credentials. In addition, most states now have licensing requirements for appraisers evaluating properties located within their states.

The appraiser will create a written report for us and you’ll be given a copy prior to closing. The report will compare the qualities of your home with other homes that have sold recently in the same neighborhood. These homes are called “comparables” and play a significant role in the appraisal process. Using industry guidelines, the appraiser will try to weigh the major components of these properties (i.e., design, square footage, number of rooms, lot size, age, etc.) to the components of your home to come up with an estimated value of your home. The appraiser adjusts the price of each comparable sale (up or down) depending on how it compares (better or worse) with your property. If your home is for investment purposes, or is a multi-unit home, the appraiser will also consider the rental income that will be generated by the property to help determine the value.

Underwriting guidelines require us to use the lower of the appraised value or the sales price to determine your down payment requirement.

If you own rental properties, we’ll generally ask for the most recent year’s federal tax return to verify your rental income. We’ll review the Schedule E of the tax return to verify your rental income, after all expenses except depreciation. Since depreciation is only a paper loss, it won’t be counted against your rental income.

If you haven’t owned the rental property for a complete tax year, we’ll ask for a copy of any leases you’ve executed and we’ll estimate the expenses of ownership.

Yes, it’s important to know how much you qualify for before you begin your home search. Complete our online application anytime, 24/7. Your application will be instantly run through our Automated Underwriting System and a Free Online Pre-Approval will be issued. Our Pre-Approvals are free of charge and no advance deposit is required. You are under no obligation to obtain a mortgage from our company.

As soon as we receive your appraisal, we’ll update your loan with the estimated value of the home. As a standard practice we will provide a copy of your appraisal prior to closing.

The note rate is used to calculate your interest payment each month. The APR (Annual Percentage Rate) is a calculation based on standardized federal regulations. In addition to the interest rate, it factors in points and loan-related fees in an attempt to better show the total cost of the financing over the scheduled life of the loan. The APR is designed to help borrowers fairly compare different lenders and loan options. Please note that the loan amount will influence the APR calculation, with higher loan amounts reporting lower APR calculations. Our website allows you to input your loan amount and calculate an accurate APR.

Private Mortgage Insurance (PMI) makes it possible for you to buy a home with less than a 20% down payment by protecting the lender against the additional risk associated with low down payment lending. The PMI insurance premium is based on the loan-to-value ratio and is included in your monthly payment. On a 1-unit primary residence or second home, federal regulations require that PMI be automatically cancelled when your loan balance reaches 78% of the original property value at the time the loan was secured. Depending on the loan program, you may be able to request in writing that PMI be removed sooner, based on an increase in the property value as determined by a new appraisal to be ordered by the servicer. Generally, PMI must have been in place for at least two years and you must have a good payment history for PMI to be cancelled under this scenario.

If you won’t be able to attend the loan closing, contact your Loan Processor to discuss other options. If someone you trust is able to attend on your behalf, you can execute a Power of Attorney so that this person can sign documents on your behalf. In other cases, we’re able to mail you the documents in advance so that you can sign them and forward them to the closing agent. We’re sure to have a solution that will work in your circumstances.

The function of title insurance is to make sure your rights and interests to the property, and those of your lender, are fully protected. Title companies issue two types of title policies: an Owner’s Policy which covers the homeowner and a Lender’s Policy which covers the lending institution. If the loan is for a home purchase, both types of policies are issued at the time of closing. If the loan is a refinance, you already have an owner’s policy that was issued when you purchased the property, so only a lender’s policy will be issued.

Once a title policy is issued, if any claim covered under your policy is ever filed against your property, the title company will pay the legal fees involved in the defense of your rights. They are also responsible to cover losses arising from a valid claim. This protection remains in effect as long as you or your heirs own the property.

Can I select my own closing agent (or attorney) and title insurance company?

By law, you have the right to select your own provider for these services. Certain providers used regularly by us have agreed to a guaranteed fee schedule, as shown on our website. If you wish to use a different provider and agree to pay the fee charged by them, we will be happy to work with them.

All student loans should be included in the application. If you are not exactly sure what the monthly payment will be at this time, enter an estimated amount.

The closing agent (or attorney) will issue a check and mail it to you. You can also arrange for the funds to be wired directly into your bank account.

Our standard lock period is 30 days. We are confident we will close your loan in this timeframe as long as you fax your supporting documentation within three days of request and schedule your appraisal inspection in a timely manner. Because we are a direct lender, we have control over the approval process, drawing loan documents and funding the loan. Additionally, the third party service providers we work with, such as appraisers and title insurance companies, prioritize our orders because we provide them with a high volume of quality business.

Generally, a co-signed debt is considered when determining your qualifications for a mortgage.If the co-signed debt doesn’t affect your ability to obtain a new mortgage we’ll leave it at that. However, if it does make a difference, we can ignore the monthly payment of the co-signed debt if you can provide verification that the other person responsible for the debt has made the required payments, by obtaining copies of their cancelled checks for the last 12 months.

Complete the application as if this were your current employer and indicate that you have been there for one month. The information about the employment you’ll be leaving should be entered as a previous employer.

An abundance of credit inquiries can sometimes affect your credit scores since it may indicate that your use of credit is increasing. But don’t overreact. The data used to calculate your credit score doesn’t include any mortgage or auto loan credit inquiries that are made within the 30 days prior to the score being calculated. In addition, all mortgage inquiries made in any 14-day period are always considered one inquiry. Don’t limit your mortgage shopping for fear of the effect on your credit score. If a lender gives you this advice, it is probably because they do not offer competitive rates and are afraid you will discover this by shopping for a mortgage with other lenders.

Gifts are an acceptable source of down payment, if the gift giver is related to you or your co-borrower. We’ll ask you for the name, address, and phone number of the gift giver, as well as the donor’s relationship to you. If your loan request is for more than 80% of the purchase price, we’ll need to verify that you have at least 5% of the purchase price in your own assets. Prior to closing, we’ll verify that the gift funds have been transferred to you by obtaining a copy of your bank receipt or deposit slip to verify that you have deposited the gift funds into your account.

Enter the name of the school you attended and the length of time you were in school in the “length of employment” fields. You can enter a position of “student” and income of “0.”

Typically, income from a second job will be considered if a two-year history of secondary employment can be verified.

Information about child support, alimony, or separate maintenance income does not need to be provided unless you wish to have it considered for repaying this mortgage loan.

Generally, two years personal tax returns are required to verify the amount of your dividend and/or interest income so that an average of the amounts you receive can be calculated. In addition, we will need to verify your ownership of the assets that generate the income using copies of statements from your financial institution, brokerage statements, stock certificates or Promissory Notes.

Typically, income from dividends and/or interest must be expected to continue for at least three years to be considered for repayment.

We will always attempt to approve you for the loan without using these sources of additional income to reduce the amount of documentation you need to provide.

The percentage of your home’s value that can be borrowed on a refinance loan (known as the maximum Loan-to-Value ratio) varies by loan program. Please review “Program Guidelines” for the loan program you are interested in under the tab titled “Loan Options.”

You can pay off your mortgage any time with no additional charges.

You must contact the credit agencies directly and dispute the reported item. Following is the information on how to contact the agencies:

Transunion Consumer RelationsPO Box 1000
Chester, PA 19022
800-888-4213
https://www.transunion.com

Equifax Consumer RelationsPO Box 105873
Atlanta, GA 30348
800-685-1111
https://www.equifax.com

Experian Consumer RelationsPO Box 2002
Allen, TX 75013
888-397-3742
https://www.experian.com

We do not currently offer loan programs for borrowers who are not able to document their income.

Several non-profit agencies offer free counseling to assist you in this regard. Consult the yellow pages or the Internet under the heading Credit Counseling Services to find a counseling service in your area.

The Fair and Accurate Credit Transaction Act of 2003 (FACTA) provides that every consumer is entitled to a free credit report every 12 months from each of the three national repositories: Equifax, TransUnion and Experian. Customers may obtain their personal credit report through the following website: www.annualcreditreport.com

A subordination agreement is a document prepared by a second mortgage lender agreeing to remain in second position when a first mortgage is refinanced. Without such an agreement, the second mortgage holder would move into a first lien position when the existing first mortgage was paid off. The second mortgage lender usually charges a fee to process the subordination agreement, which is incurred by the borrower. Additionally, this process often increases the amount of time necessary to process a first mortgage refinance transaction, so an applicant wishing to subordinate a second mortgage may want to take down a 45 day lock to ensure sufficient time to obtain the subordination agreement.

Prepaid interest is paid at the time of closing of your loan to cover the interest that will accrue on your new loan for the remaining days of the month in which it is funded. You will make no payments in the month immediately following the month in which your loan funds. You will then begin making payments on the first of each month for the prior month’s interest.

A conforming loan is one that is less than the maximum loan amounts set by Fannie Mae and Freddie Mac. The loan amounts are revised each year to reflect the change in the national average cost of a home. The current conforming loan amount limits are:

SFR/Condo:$417,000($625,500 in Alaska & Hawaii)2-Unit Property$533,850($800,775 in Alaska & Hawaii)3-Unit Property$645,300($967,950 in Alaska & Hawaii)4-Unit Property$801,950($1,202,925 in Alaska & Hawaii)

A super conforming loan is a temporary loan category that was created by the Economic Stimulus Act of 2008. The Act allows Fannie Mae and Freddie Mac to purchase mortgages in “high cost” housing markets. These “Super Conforming” limits are set equal to 115 percent of local median house prices up to a maximum of $625,500 (higher limits permitted for 2-4 unit properties and properties located in Alaska and Hawaii). To view a list of “high cost” housing markets and the maximum super conforming loan amount allowed in each, click on “Super Conforming Loans” under the “Loan Programs” tab.

We will ask for copies of your recent pension check stubs, or bank statement if your pension or retirement income is deposited directly in your bank account. Sometimes it will also be necessary to verify that this income will continue for at least three years since some pension or retirement plans do not provide income for life. This can usually be verified with a copy of your award letter. If you don’t have an award letter, we can contact the source of this income directly for verification.

If you’re receiving tax-free income, such as social security earnings, in some cases we’ll consider the fact that taxes will not be deducted from this income when reviewing your request.

On refinance transactions, Federal law mandates that you have three days, after signing your loan documents, in which to cancel your loan. This three day period includes Saturdays, but excludes Sundays and holidays. Your loan will not be funded until this period has expired.

If your existing second mortgage or home equity line was not obtained in conjunction with purchasing your home, then paying it off with a new mortgage is considered cash out.

Loans may not be closed in the name of a Trust. The settlement agent or attorney will prepare a grant deed removing the property from the trust prior to recording your new loan.

In order for bonus, overtime, or commission income to be considered, you must have a history of receiving it and it must be likely to continue. We’ll usually need to obtain copies of W-2 statements for the previous two years and a recent pay stub to verify this type of income. If a major part of your income is commission earnings, we may need to obtain copies of recent tax returns to verify the amount of business-related expenses, if any. We’ll average the amounts you have received over the past two years to calculate the amount that can be considered as a regular part of your income.

If you haven’t been receiving bonus, overtime, or commission income for at least one year, it probably can’t be given full value when your loan is reviewed for approval.

We will always attempt to approve you for the loan without using these sources of additional income to reduce the amount of documentation you need to provide.

On a Single Family Residence or PUD, there must be a minimum of 60 days of coverage remaining on your policy from the time of funding. On a condo, your association Home Owners Insurance policy must be current.

Credit scores (FICO scores) are based on information collected by credit bureaus and information reported each month by your creditors about the balances you owe and the timing of your payments. A credit score is a compilation of all this information converted into a number that helps a lender to determine the likelihood that you will repay the loan on schedule. The credit score is calculated by the credit bureau, not by the lender. Credit scores are calculated by comparing your credit history with millions of other consumers. They have proven to be a very effective way of determining credit worthiness.

Some of the things that affect your credit score include your payment history, your outstanding obligations, the length of time you have had outstanding credit, the types of credit you use, and the number of inquiries that have been made about your credit history in the recent past.

Credit scores used for mortgage loan decisions range from approximately 300 to 900. Generally, the higher your credit score, the lower the risk that your payments won’t be paid as agreed.

Cornerstone Mortgage is a direct lender, also known as a mortgage banker. As such, we make loans with our own funds and close the loans in our name. After the loan is closed, it is sold to a secondary market investor, freeing up the funds for additional lending. Loans sold into the secondary market may be sold “servicing-retained” or “servicing-released” referring to whether the rights to service the mortgage are retained by us or released to the secondary market investor at the time of sale. Our decision to retain or release the servicing rights depends on a number of factors, the most important being which method allows us to offer the lowest rates and points to our customers.

You will be notified at the time you sign your loan documents regarding the servicing of your loan and be given instructions on where to make your mortgage payment. We sell loans servicing-released to only the largest mortgage investors in the country and are confident that your loan will be properly serviced whether we sell it servicing-retained or servicing-released.

Closing Costs are “one time costs to obtain a mortgage, paid at closing” and include the following:

• Guaranteed Lender Fee: Our pricing model is different than other lenders in that our profit is primarily built into one flat lender fee, allowing us to offer lower rates and points.
• Guaranteed Discount Points OR Guaranteed Rebate: You may elect to pay discount points to buy down your interest rate. Or you may choose a slightly higher rate and obtain a rebate to offset some or all of your closing costs. Perform an online rate search to view all combinations of rates, points and rebates.
• Guaranteed Appraisal Fee: Your appraisal fee is collected in advance on a credit card. The funds are held in a trust account and used to pay for your appraisal, a service performed by an independent third party. Appraisal fees are guaranteed on both purchase and refinance transactions.
• Guaranteed Tax Service Fee: This is a service that notifies the lender if the property taxes have been paid and any liens are placed on the subject property for the life of the loan.
• Guaranteed Flood Cert Fee: This is a service that notifies the lender if the subject property is located in a FEMA designated Flood Zone. Flood Insurance may be required if it is determined that the subject property is located in a designated flood zone.
• Guaranteed Closing Agent and Title Insurance: Closing agent (or attorney) and title insurance fees are guaranteed if you use the national service provider we contract with to provide these services in your state. You will notice that these fees are extremely competitive due to the high volume of business that we provide to these service providers.
• Guaranteed Government Recording Charges: The county recorder’s office will charge a recording fee to record your new mortgage or deed of trust.
• Guaranteed Government Transfer Taxes: Some states, counties and cities charge a transfer tax (also known as a Mortgage Tax or Tax Stamps) when you purchase a property or refinance a mortgage.

Prepaids are “recurring costs of homeownership, partially prepaid at closing” and include the following:

• Initial Escrow/Impound Account Deposit: If an escrow/impound account is to be established for the ongoing payment of your property taxes and homeowner’s insurance, funds will be collected at close to make an initial deposit into the account so that sufficient funds will be available to pay these recurring expenses as they become due.
• Prepaid Interest: Your mortgage payment due date will be the first of each month. If your loan is closed on any day other than the first of the month, prepaid interest will be collected at closing, calculated from the date of closing through the end of the month.
• First Year Homeowner’s Insurance Premium: If your loan is a purchase transaction, your first year’s homeowner’s insurance premium will be collected at closing and paid to your insurance company.

We always recommend that you make your payment to avoid any late charges.

On a purchase transaction or a refinance of a second home or rental property, we can typically close within three days (one day to review the docs, one day to fund the loan, and one day for the loan to record). On a refinance of a primary residence, there is also a three-day rescission period that must pass before your loan can fund.

The Internet, fax machines and overnight mail services have eliminated the need for proximity to process and close a loan. On a purchase transaction, we work with the closing agent or attorney you and the seller have selected. On a refinance transaction, we utilize a professional signing service to bring the loan documents to your home or business for signing. We wire transfer your loan funds to your closing agent or attorney prior to closing so that they’ll have plenty of time to prepare for your closing.

You will be asked to support your income with recent paystubs covering the past 30 days and the prior two year’s W-2 forms and tax returns. Funds needed to close the transaction will typically be supported with a copy of two recent month’s bank statements. If proceeds from the sale of another property are being used for the down payment, an estimated closing statement on that transaction will be required prior to closing.

A $395 Appraisal Fee is collected by credit card at the time you lock your rate ($495 if investment property or 2-4 units). The funds are maintained in a trust account and used to pay for your appraisal, a service performed by an independent third party. In the event your loan is declined or withdrawn, any funds remaining after payment of your appraisal costs will be refunded to you. You are entitled to a copy of your appraisal.

There’s no cost for completing an online application and obtaining an online loan approval. Upon receiving your online loan approval, you will be given an opportunity to lock your rate. If you wish to lock your rate, you will be asked to submit a $395 appraisal fee by credit card ($495 if investment property or 2-4 units). These funds will be maintained in a trust account and used to pay for your appraisal, a service performed by an independent third party.

An escrow account, known as an impound account in California, is an account set up at the time you close your loan for the payment of your property taxes and homeowner’s insurance. You pay 1/12 of your annual taxes and insurance along with your mortgage payment each month and the funds are placed in the escrow/impound account. Your loan servicer pays your taxes and insurance out of the escrow/impound account when they come due. You receive an Escrow/Impound Analysis Statement each year, showing the activity and balance remaining in the account.

You are not required to have an escrow/impound account unless the Loan-to-Value ratio on your loan is over 80% (89.99% in California). However, if you decide not to have an escrow/impound account, your points will be .25% higher.

Generally, the income of self-employed borrowers is verified by obtaining copies of personal (and business, if applicable) federal tax returns for the most recent two-year period. However, based on your entire financial situation, we may not need full copies of your tax returns. We’ll review and average the net income from self-employment that’s reported on your tax returns to determine the income that can be used to qualify. We won’t be able to consider any income that hasn’t been reported as such on your tax returns. Typically, we’ll need at least one, and sometimes a full two-year history of self-employment to verify that your self-employment income is stable.

To ensure there are no surprises at closing, your Loan Processor will send you an estimated closing statement prior to your scheduled signing appointment so you can review your final fees, loan amount, first payment date, etc. On a purchase transaction, the closing will take place at the office of your closing agent, attorney or title company. On a refinance transaction, a mobile notary will be sent to the location of your choice. You will be reviewing and signing several loan documents. The most important documents include:

Note: This is the document you sign to agree to repay your mortgage loan. The Note will provide you with all of the details of your loan including the interest rate and length of time to repay the loan. It also explains the penalties that you may incur if you fall behind in making your payments.

• Mortgage or Deed of Trust: This document pledges your property to the lender as security for repayment of the debt. The Mortgage restates the basic information contained in the note, as well as details the responsibilities of the borrower.
• Truth-in-Lending Statement (TIL): This document provides a full disclosure of the terms and conditions of your mortgage, including the annual percentage rate (APR) and other fees.
• HUD-1 Settlement Statement: This document provides an itemized listing of the final fees charged in connection with your loan.

If your loan is a refinance of a primary residence, Federal Law requires that you have three days to decide positively that you want a new mortgage after you sign the documents. This means that the loan funds won’t be disbursed until three days have passed (excluding Sundays and Federal Holidays). The closing agent will provide more details at the closing.

Federal and state laws require that mortgage lenders provide certain disclosures at the time a customer completes an application. Those laws apply to online lenders as well as traditional lenders. Some of the most common disclosures include information about certain loan types and information about the rate, points and fees being charged. These disclosures are displayed for you at the end of the application, since the disclosures vary depending on the information you provide during the application. You’ll be able to print copies of the disclosures once the application process is completed and return to our website using your login and password to obtain copies of them at any time during the loan process.

An adjustable rate mortgage, or an “ARM”, is a loan type that offers a lower initial interest rate than most fixed rate loans. Against the advantage of the lower payment at the beginning of the loan, you should weigh the risk that an increase in interest rates would lead to higher monthly payments in the future. For some people, an ARM may be the right mortgage choice, particularly if you only plan on being in the home for less than three, five, seven or ten years.

Here’s some detailed information explaining how ARM’s work.

• Adjustment Period: The interest rate and monthly payment are fixed for an initial time period, generally three, five, seven or ten years. After the initial fixed period, the interest rate can change every year.
• Index: Interest rate changes are tied to changes in an index rate. The current values of the indices used on our ARM programs are published weekly in the Wall Street Journal and shown on our website. At each adjustment date, if the index rate has moved up, so will your mortgage rate, and you will have to make a higher monthly payment. On the other hand, if the index rate has gone down, your rate and monthly payment will decrease.
• Margin: To determine the new interest rate on an ARM, at each adjustment date, a pre-disclosed amount, called the “margin”, is added to the index to determine the new interest rate.
• Interest Rate Caps: An interest rate cap places a limit on the amount an interest rate can increase or decrease at each adjustment. ARMs have three types of caps: an initial cap, which limits the interest rate increase or decrease at the first adjustment; a periodic cap, which limits the interest rate increases or decreases at all following adjustments; and a lifetime cap, which limit the interest rate increase over the life of the loan.

We offer online locks for 30, 45 and 60 day periods. Refinance transactions may be locked at the time of loan application. Purchase transactions may be locked once you have an accepted offer on a property. You may apply and lock online, 24/7.

When you submit your online application, it will be analyzed by our Automated Underwriting System while you wait and, in most cases, be immediately approved. A rate chart will then appear showing all available rates for your loan request, along with the related points or rebates. You will select the rate you wish to lock. You will receive a Lock Confirmation by email the same day (or the next business day if you lock after hours or on a weekend). In the event our Automated Underwriting System is not able to provide an instant online approval, your application will be forwarded to a Loan Officer who will contact you the same business day to resolve any issues with your loan application.

You will be asked to submit a $395 appraisal fee by credit card at the time you lock your rate ($495 if investment property or 2-4 units). These funds will be maintained in a trust account and used to pay for your appraisal, a service performed by an independent third party.

Most of our customers lock for 30 days, which is plenty of time to close your loan as long as all parties do their part. On a purchase transaction, you want to make sure your lock period at least runs through the scheduled date of your closing. On refinance transactions involving the subordination of an existing second mortgage or home equity line of credit we recommend a 45 day lock.

If the delay is caused by us, we will extend the lock at no cost. If the delay is caused by you or a third party service provider and your rate lock expires within seven days or less, your loan will be relocked at the higher of the pricing in place on the date of your original lock or current pricing.

Delays caused by you or a third party service provider include but are not limited to: requesting subordination of an existing second mortgage or home equity line of credit; not supplying documentation in a timely manner; providing inaccurate, inadequate, obsolete or incomplete documentation or loan information; changes in loan terms or loan programs; HOA delays in completing and returning questionnaires; delays by a title company, closing agent or appraiser; and delayed appraisal inspections, termite inspections, survey inspections or document signing appointments. If you believe any of these issues may occur on your loan, you may want to consider a longer lock period.

You may but your revised pricing will be the higher of the pricing in place on the date of your original lock or current pricing. Please take the time upfront to choose the program and rate that is best for you.

If you cancel your application and reapply within 30 days of your cancellation date, your pricing will be the higher of the pricing in place on the date of your original lock or the date of your new lock. If 30 days has passed since your cancellation date, your lock will be based on the pricing in effect at the time of the new lock.

If you let your rate lock expire and relock within 30 days, your pricing will be based on the higher of the pricing in place on the date of your original lock or the date of your new lock.

On a refinance transaction, if the savings you will achieve with the new lower rate will recapture the closing costs of the loan in a relatively short period of time, you should probably go ahead and lock your rate and close your loan. Trying to time the bottom of an interest rate cycle is tricky and each month you delay costs you in the form of carrying a higher interest rate on your old loan. If rates fall further, you can always refinance again.

On purchase transactions, in times of stable interest rates, most of our customers lock when they are within 30 days of closing. Locking for a period longer than 30 days increases the cost of the loan slightly but is sometimes a good idea if rates are volatile. If your closing is more than 30 days out, we recommend you compare rates and points on our website for 30, 45 and 60 day locks and make your decision accordingly.

Each discount point is equal to one percent of the loan amount. Discount points are paid to obtain a lower rate. Whether you should pay discount points depends on your tax situation and how long you expect to be in the property. To calculate how many years it takes to “break even” on the amount paid for points, divide the difference in points by the difference in rate.

There may also be tax advantages to paying points. For most taxpayers, points paid on purchase loan transactions are tax deductible in the year the home is purchased and points paid on refinance transactions are tax deductible over the life of the loan. Tax consequences vary so we encourage you to consult your tax advisor.

The VA charges a Funding Fee to most veterans who obtain VA mortgage loans to help sustain the program. Although the full amount can usually be financed as part of the loan amount or paid in cash, most people finance it as part of their mortgage. We’ve automatically assumed you will finance the maximum VA Funding Fee amount and have included it as part of your Total Loan Amount. If you choose to pay the VA Funding Fee instead of financing it, your loan amount will decrease and the amount of cash required at closing will increase.

The VA charges a Funding Fee to most veterans who obtain a VA mortgage loan to help sustain the VA home loan program. The VA Funding Fee is between 1.5% and 3% of the loan amount and varies depending on your military classification, whether or not you have obtained a VA loan before, and the amount of down payment you are making. Veterans receiving VA disability are exempt from paying this fee. In most cases, the VA Funding Fee is financed rather than being paid in cash at closing.

VA loans are loans guaranteed and administered by the Department of Veterans Affairs and are offered as a benefit to qualified individuals who have served in the armed forces. The significant advantage of a VA loan is that a down payment is not required. If you are a qualified veteran and wish to purchase a home with little or no down payment, a VA loan may be your best bet. If you have funds that you wish to use for a down payment, it is wise to compare Conventional loans with VA loans to determine which financing type is best for you.

To officially determine if you are a qualified veteran, you must request a Certificate of Eligibility (COE) from the VA. This certificate indicates that the VA has determined you are eligible for a VA home loan and shows the amount of available entitlement or guaranty. To obtain a certificate of eligibility, complete the “Request for a Certificate of Eligibility for VA Home Loan Benefits (VA Form 26-1880)” form and submit it to the VA. This form, as well as additional information about VA home loan eligibility requirements, are available on the VA website at the following address: www.homeloans.va.gov

In general, any veteran who served on continuous active duty during the timeframes and for the number of days listed below and has received an honorable release or discharge is eligible for a VA home loan:

• World War II (09/16/40 to 07/25/47) – 90 Days
• Pre-Korean (07/26/47 to 06/26/50) – 181 Days
• Korean Conflict (06/27/50 to 01/31/55) – 90 Days
• Post Korean (02/01/55 to 08/04/64) – 181 Days
• Vietnam Conflict (08/05/64 to 05/07/75) – 90 Days
• Post Vietnam (05/08/75 to 09/07/80) – 181 Days (Enlisted)
• Post Vietnam (05/08/75 to 10/16/81) – 181 Days (Officers)
• Pre-Persian Gulf (After 09/07/80) – 24 Months (Enlisted)
• Pre-Persian Gulf (After 10/16/81) – 24 Months (Officers)
• Persian Gulf (08/02/90 to TBD) 2 Years or period called to active duty (not less than 90 days)

In addition, the following individuals may also be eligible for a VA home loan.

• *Reservists or National Guard members who have served at least six years.
• *Veterans discharged due to service related disabilities, even if the timeframes above are not met.
• *Surviving spouses (not remarried) of veterans who died as a result of service connected injuries or diseases during service or after separation.
• *Commissioned Public Health Officers, National Oceanic and Atmospheric Administration Officers, Environmental Science Service Administration Officers, and Coast and Geodetic Survey Officers.