Clear Loans | Frequently Asked Questions

Pre-Approval

Why do I need a pre-approval letter?

Pre-approval is not required but highly recommended. Some real estate agents will not show you houses until you have a pre-approval letter in hand. It’s a good idea to get pre-approved for a home loan early in the search process. Knowing approximately what size mortgage you can get will help you shop within the right price range. When you find your ideal property, a pre-approval letter will strengthen your offer and help sellers take you seriously.

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What documents do I need to apply for pre-approval? 

You will need to provide relevant financial documents—such as pay stubs, tax forms, and W-2 forms—to verify your income. We will also run a soft credit check. The soft check will not show up on your credit report and will not affect your credit score.

What is the difference between pre-qualification and pre-approval?

Pre-qualification is a quicker and less thorough process compared to pre-approval. To get a better idea of what size loan you’ll be able to secure (i.e., how much home you can afford), apply for pre-approval with a trusted lender.

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First-Time Homebuyer

Is it the right time to buy a home?

This answer to this question is unique to each person. Before you jump into buying a home, make sure you understand the financial commitment, plan for life events, and budget accordingly. If you are planning to stay in your home for at least 5 years, it is generally better to buy vs. rent—financially speaking. However, don’t confuse your maximum affordable rent payment with your maximum monthly payment on a house. Do your homework to understand all of the costs involved and determine how much you can afford.

How much home can I afford?

The answer to this question largely depends on your debt-to-income ratio (DTI). Use the following calculator to determine what size loan you can afford based on your maximum affordable monthly payment.

Find more answers in our Essential Tips for First-Time Homebuyers.

Repeat Homebuyer

What’s different about the homebuying process the second or third time around?

As a repeat buyer vs. first-time homebuyer:

You’ll be required to make a bigger down payment (5% vs. 3% minimum)
Your loan options will be a little different
You’ll need to coordinate your buying and selling timelines

What are my options for coordinating buying and selling?

Options for Buying and Selling

Option 1: Sell First

Option 2: Buy First

Option 3:
Buy and Sell at the Same Time

Desc.

Sell your current home first, then shop for a new home

Buy new home first, then put your current home on the market

Buy new home on a contingency (agree to buy only if you're able to sell your current home in a given period)

Pros

Carry one mortgage at a time
Qualify for a loan more easily
Make a standard vs. contingent offer

Move only once
Make a standard vs. contingent offer (standard offers are more competitive, less risky)

Move only once
Carry one mortgage at a time

Cons

Move twice
Arrange for housing during the gap between selling and buying

Carry two mortgages until your current home is sold
May be difficult to qualify for a loan

Contingent offers are less attractive to sellers
Risk losing the new property if your current home doesn’t sell

What if my offer is contingent on selling my current home?

If you have a signed purchase agreement with a home sale contingency (i.e., you’ve agreed to buy a property only if you’re able to sell your current home in a given period), you can and should go ahead and apply for a loan. However, your loan cannot be fully processed and closed until your home has sold.

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Refinance

What’s the difference between a cash-out refinance and a home equity loan?

 A cash-out refinance and a home equity loan are two different ways to access the value that’s accumulated in your home. If you already have a mortgage, a cash-out refinance will replace your current loan with a new term, rate, and monthly payment. A home equity loan (a.k.a. “second mortgage”) will be a second payment to make in addition to your current monthly mortgage payment.

Is it better to refinance or take out a home equity loan?

When deciding between a cash-out refinance and a home equity loan, the best choice depends on interest rates. If you can get a lower rate than your original mortgage, cash-out refi is probably your best option.

What documents do I need to apply for refinance?

Loan Application Checklist: Refinance

Current home info (appraised value, property taxes, insurance)
Current loan info (most recent mortgage statement)
Personal info (contact info, social security number)
Employment info (employer names and addresses for the past 2 years)
Income verification (W-2s, recent pay stubs, tax returns)
Asset info (bank accounts, mutual funds, stocks and bonds, life insurance, 401k)
Co-borrower info (provide all of the above for co-borrower, if applicable)

The Loan Process

What are the steps to getting a home loan? 

The home loan process can be a little overwhelming. At Clear, we’re on a mission to make it as easy as possible. Here’s the entire process in a nutshell:
I. Before You Apply
1. Do your homework
2. Get pre-approved
3. Find your dream home
4. Get it under contract
5. Choose a lender
II. During the application
6. Set up an account on our website
7. Complete tasks and upload documents
8. Submit your loan application online
III. After you apply
9. Receive a rate lock within 1–3 days
10. Provide additional documents as needed
11. Underwriting
12. Loan approval
13. Close within 4-6 weeks
IV. After Closing
14. Funding and deed recording
15. Begin your monthly payments‍

Check out our complete Home Loan Process Timeline for more details.

Can I apply for a loan and lock my rate before I find a property to purchase?

Yes. You can apply for a loan and we can underwrite everything TBD (property address and purchase price “to be determined”) before you have a property under contract. However, we cannot lock your rate until we have a property address. This option to apply early is helpful in a hot market because you can close faster, which makes your offer more appealing.

Please note: If you are still in the early stages of home shopping, the first step is to apply for pre-approval. You must be pre-approved before we can move forward with a TBD loan approval as described above.

What documents do I need to apply for a home loan?

Loan Application Checklist: Purchase Loan

Property info (closing date, address, property type, year built)
Loan info (purchase price, down payment amount)
Personal info (contact info, social security number)
Employment info (employer names and addresses for the past 2 years)
Income verification (W-2s, recent pay stubs, tax returns)
Asset info (bank accounts, mutual funds, stocks and bonds, life insurance, 401k)
Co-borrower info (provide all of the above for co-borrower, if applicable)

What does being a co-signer entail?

A co-borrower or “co-signer” is any additional borrower whose name appears on the loan documents. As a co-borrower, your income and credit history are used to qualify for the loan. You also accept responsibility for repaying the loan.

Please note: If you’re applying for a home loan as a co-borrower with your spouse (or other co-signer), the lowest median credit score between the two of you is the single qualifying score that lenders will use when evaluating your ability to repay a loan.

How long will it take to close and fund my loan? 

For a home purchase loan, once your application is complete, we’ll lock your rate within 1–3 business days and close your loan in as little as 4–6 weeks.

Types of Loans

What’s the difference between a fixed and adjustable rate mortgage (ARM)? 

A fixed rate mortgage (FRM) has the same interest rate and monthly payment for the entire term of the loan. An adjustable rate mortgage (ARM) has an interest rate that can change, causing your monthly payment to go up or down. ARMs are more risky, but you can get a better rate starting out.

Common ARM types are 10/6, 7/6, and 5/6. For example, a 5/6 ARM has an interest rate that is fixed for 5 years and then adjusts every 6 months throughout the remainder of the loan term.

What is the best home loan type and term?

If you’re not sure, we recommend going with a 30-year fixed rate mortgage. The fixed rate loan type is more consistent (less risky), and the 30-year term will keep your monthly payment lower. The downside of choosing a 30-year vs. 15-year loan term is that you will pay more interest over time. However, you can make additional principal payments at any time—without penalty—to reduce total interest payments, build equity, and pay off your loan faster.

What are the different types of home loans? 

You have many options when applying for a mortgage. The main choices include:

Fixed rate vs. adjustable (ARM)
Conventional vs. government-backed (FHA ,VA, USDA/RHS)
Conforming vs. jumbo (exceeds loan limits set by Fannie Mae and Freddie Mac)

What types of loans does Clear offer?

We offer a large selection of residential property loans, including:

Conventional home loans
FHA loans
VA loans
USDA/RHS loans
Jumbo loans
Construction-to-permanent loans
Refinance loans (rate-and-term, cash-out)
Investment property loans

Need help figuring out what type of loan is right for you? Reach out to a Loan Expert.

Down Payment

How much money do I need to put down?

It is a myth that you need to put 20% down to buy a home. Most first-time homebuyers choose to put down 3–10%. With a smaller down payment, you will have to pay for private mortgage insurance (PMI) until you’ve paid down your loan balance to 80%. But nowadays the cost of PMI is quite low. The main advantage of a larger down payment is the more money you put down, the smaller your monthly payment.

Can I borrow my down payment?

Technically, yes, you can take out a personal loan to cover your down payment on a home. But you can only use secured debt (e.g., borrow against another property or take out a 401k loan). We advise against this, because the additional debt will hurt your chances of getting approved for a mortgage. Keep saving until you can put down at least 3-5% on a home.

Rates

How are mortgage rates determined?

Mortgage rates are determined based on how much of a risk the lender thinks it's taking on both you and the economy. Many different factors go into this determination. Mortgage-backed securities play a significant role in driving mortgage rate fluctuations.

What is the difference between the interest rate and APR?

The interest rate does not include lender fees or points. The annual percentage rate (APR) combines the interest rate and various lender fees into a single rate. This makes it easier for borrowers to compare different loan options.

How will my credit score affect my rate? 

Your credit score helps lenders analyze your ability to pay back a loan based on your borrowing history. The higher your credit score, the better rates you can get. A lower rate can provide significant savings over the life of your loan.

‍Please note: If you’re applying for a home loan with your spouse (or other co-borrower), the lowest median credit score between the two of you is the single qualifying score that lenders will use.

Why is my credit score different online?

If you look up your own credit score online, it may be different from the score we use. For one thing, your consumer credit score is different from your mortgage credit score. Furthermore, when we run your credit, we pull three different credit scores per person from the three major bureaus (Experian, Equifax, and TransUnion). The middle or median number is the one we use to determine your eligibility for a home loan.

How and when can I lock my rate?

Apply for a home loan online with Clear. Once your application is complete, we’ll lock your rate within 1–3 business days.

Can I float my rate down?

It's possible to float your rate down, but it’s not something you can count on. It really depends on the market, timing, etc. Some lenders advertise this, but there’s no guarantee because the market is constantly changing. You must talk to a Loan Officer to find out if you might be able to float your rate down.

Should I buy points? 

Buying points means paying down a percentage of your mortgage at closing in exchange for a lower interest rate. Each "point" costs 1% of your mortgage balance. Depending on your individual situation, you may be able to save more money by buying points vs. increasing your down payment.

Costs and Fees

Are there any fees to apply?

No. Clear does not charge any application fees. You can apply online for free. At Clear, we do everything we can to keep your costs as low as possible.

What fees and costs can I expect with Clear?

There is no fee to apply. Closing costs (e.g., loan origination fees) are standard with any loan, and you will pay those at the time of closing to complete your real estate transaction. Closing costs are external fees—they do not go to Clear.

Clear is a low-cost lender, meaning we keep our overhead low and use technology to streamline the home loan process. Because we run our operations very efficiently, we’re able to offer highly competitive rates. Our goal is to help you keep as much money in your pocket as possible.

Build a Custom Rate Quote

What is PMI and can I avoid it?

PMI stands for private mortgage insurance. You do not have to purchase PMI if your down payment equals 20% or more of the purchase price.

Can I borrow money to cover my closing costs?

Not for a purchase loan. However, if you are refinancing, you may choose to roll your closing costs into your loan. The downside is that your interest rate will probably be a little higher with this option.

Escrow

What is escrow?

Escrow is a legal agreement to hold money in a neutral third-party account (escrow account) until a specific condition has been met. During the homebuying process, you will encounter two types of escrow accounts:

Escrow account for purchasing a home: When buying a home, your earnest money or “good faith deposit” is held in an escrow account until the real estate transaction is complete–at which time the money is applied to your down payment.
Escrow account for taxes and insurance: After you buy a home, your lender will typically set up an escrow account to hold the portion of your monthly payment that covers property taxes and homeowners insurance. When the annual premiums are due, the lender uses that money to pay the bills on your behalf.

Can I pay my own taxes and insurance?

If your down payment is 20% or more, you will have the option to waive escrow and pay your taxes and insurance bills on your own. Note that if you decide to waive escrow, you will be charged a one-time fee at closing.

What are the pros and cons of waiving escrow?

You can only waive escrow if your down payment is at least 20%. The main benefits of waiving escrow are that you can maintain more control of your cash flow and potentially save on costs. The main drawbacks are that you might forget to pay your taxes and insurance on time, resulting in fees, or you might underestimate the amount you need to set aside for the annual premiums. Also, you will be charged a one-time fee at closing if you waive escrow.

Does escrow change every year?

Your escrow payment is the portion of your monthly payment used to cover taxes and homeowners insurance. The amount is reassessed annually and may go up or down, usually due to fluctuations in property taxes and home insurance. Your monthly payment will adjust accordingly. In other words, your total monthly payment may go up or down every year due to changes in escrow.

Frequently asked questions

Jump to a section:

Pre-Approval

First-time Homebuyer

Repeat Homebuyer

Refinance

The Loan Process

Types of Loans

Down Payment

Rates

Costs and Fees

Escrow

Pre-Approval

First-Time Homebuyer

Repeat Homebuyer

Refinance

The Loan Process

Types of Loans

Down Payment

Rates

Costs and Fees

Escrow

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