Frequently Asked Questions

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What makes Clara different than other banks or lenders? Expand / Collapse

We’re on a mission to save people time, money, and hassle with world’s most efficient lending platform. Today, mortgage origination involves a hefty amount of data collection, verification, and information management. The average turn time for refinancing is 70 days. Purchase is about 50. Internal processing costs average $8K per loan. All this translates to a drawn out, painful experience for customers, that we think costs them more than it should. By automating and streamlining the process with technology, we reduce the time and cost it takes to get a mortgage so we can pass these savings back to customers (1% of the loan amount currently. See terms and conditions.) Consumers are also more in control and have more visibility into where their loan stands, making it not only quicker and less costly, but also less stressful to get a mortgage.

What loan products do you offer? Expand / Collapse

We offer 30-year fixed, 25-year fixed, 20-year fixed, 15-year fixed, 10-year Fixed, 7/1 ARM, and 5/1 ARM for both purchase and refinance loans.

What is a conventional loan? Expand / Collapse

A conventional loan is simply a loan that is backed by any government agency. The most common type of conventional loans are conforming loans, which conform to Fannie Mae and Freddie Mac guidelines.

What are the maximum loan limits for a conventional loan? Expand / Collapse

 

Units2017 Loan Limits for Non-High Cost Areas
1$424,100
2$543,000
3$656,350
4$815,650

 

Units2017 Loan Limits for High-Cost Areas
1$636,150
2$814,500
3$984,525
4$1,223,475

 

To see what the conforming loan limit is for your county, you can download Frannie Mae’s Loan Limit Look Up Table here.

Will applying for a home loan affect my credit? Expand / Collapse

You can get a rate quote without affecting your credit score on our website. You can also get prequalified for a purchase loan on our website with a soft credit inquiry, which won’t affect your credit.  Once you’re ready to apply, we will request your full credit report from all three consumer reporting agencies. This is considered a hard credit inquiry and could affect your credit. However, a single credit inquiry will have little impact on your score .  What’s more, multiple mortgage-related inquiries that occur within any 45-day period are treated as a single inquiry, so you won’t be penalized for comparison shopping.

Why do you need my Social Security number? Expand / Collapse

Your Social Security number is needed to verify your identity so that an accurate credit inquiry can be made.

What are the terms and conditions of your 15-day close guarantee? Expand / Collapse

“Clara will close your purchase loan in 15 days, or we’ll give you up to $5,000 at closing.”  

Terms & Conditions

  • Guarantee is available only for purchase loans for single-family properties.
  • Applicant must have received a pre-approval letter from Clara that covers the subject property before the purchase contract is submitted to Clara.  The pre-approval letter must not expire prior to the designated closing date.  Pre-approval means the income, assets, and liabilities submitted on your pre-approval application have been verified by a Clara underwriter who issued a pre-approval letter.
  • You must apply and qualify for a loan from Clara that matches the loan program in the requisite pre-approval letter.
  • A minimum of 15 days is required to close the loan, as measured from the date on which Clara has received the final, fully-executed purchase contract, the appraisal payment, and your “Intent to Proceed” (the “Start Date”).  This Guarantee also applies to purchase transaction closing timelines of longer than 15 days.
  • You must provide all requested documentation no later than five days after the Start Date.  
  • You must lock your rate and satisfy all loan requirements and conditions, including payment of all advance fee deposits, no later than 5 days after the Start Date.
  • You must satisfactorily respond to requests for additional documentation and questions regarding your loan application within 24 hours.
  • Appraisal must be completed no later than 7 days after the Start date.
  • As always, the information on your loan application must be accurate and must not contain fraudulent information or material misrepresentations.
  • The appraised value of the property must be at least equal to the contracted purchase price.
  • You may not request changes to loan program and terms after a conditional approval has been rendered, e.g., changes in loan program, term of loan, or down payment amount.
  • You must be available to sign closing documents on the date provided by Clara.
  • $5,000 credit is dependent on closing credits not exceeding closing costs.  The $5,000 credit will be provided only to the extent that closing costs exceed closing credits.
  • Applicable law or investor requirements may impose a required waiting period prior to closing, and that waiting period may prohibit Clara from closing within the 15-day timeline.
  • Loans made or arranged pursuant to a California Finance Lender’s Law license and available only for California properties.

 

*Offer subject to termination without notice.  Please confirm with your Loan Specialist that this offer is still available before proceeding.

What are the exclusions of your 15-day close guarantee? Expand / Collapse

Unforeseen circumstances adversely affecting the ability to perform (natural disasters, inclement weather, catastrophic event, or other major event beyond Clara’s control), as well as applicant or third party delays (e.g., inspection findings leading to required repairs or re-inspection, flood zone determination, delay in appraisal due to seller’s or appraiser’s availability), will void the 15-Day Close Guarantee.

The following loan programs are not eligible for the Guarantee:

– Refinance loans;

– Loans in excess of $636,150 for single family properties;

– Properties requiring repairs or re-inspection;

– Bank owned properties or homes purchased through a “short-sale.”

What are Freddie Mac and Fannie Mae? Expand / Collapse

Fannie Mae and Freddie Mac are government sponsored enterprises subsidized by taxpayer dollars. Their purpose is to provide the mortgage industry with liquidity by purchasing mortgages in the secondary market. This in turn provides lenders with the means to continue to make more mortgages at cheaper costs to consumers.

Why does it take 3 days to fund a refinance loan after signing final documents? Expand / Collapse

This is called the rescission period. During this three day period, a borrower is allowed to rescind the agreement if the refinance is on a primary residence. The right of rescission does not apply to second homes or investment properties.

When will I hear from my servicer? Expand / Collapse

At Clara Lending we have several investors. Once your mortgage process has completed, you will receive a closing letter from Clara Lending and a welcome package from your new loan servicer, typically within a few weeks.

When I refinance my loan, what happens to my current escrow account and money? Expand / Collapse

Oftentimes the positive escrow balance will be credited to you via the payoff quote.  However, any funds remaining in an escrow account after the loan has been paid in full, will be returned to you.

Does Clara offer Home Equity Lines of Credit (HELOCs)? Expand / Collapse

Not currently. As a substitute to a HELOC, many of our customers opt to refinance and take cash out and, generally, take advantage of lower fixed rates.

Does Clara offer HARP loans? Expand / Collapse

At this time Clara does not offer HARP eligible loan programs.

What is a mortgage credit inquiry? Expand / Collapse

A mortgage credit inquiry occurs specifically when you apply for a mortgage and a lender requests a full credit report to help determine your creditworthiness.  It’s important to point out that this is not the same as a “consumer credit inquiry,” which occurs when you check your own credit and does not impact your credit score.

What impact to mortgage inquiries have on my credit? Expand / Collapse

Mortgage inquiries can impact your credit score because they indicate that you’re looking to acquire a large amount of debt. However, once an initial mortgage inquiry has been performed, subsequent inquiries within 45 days will not impact your credit score further.

If I just checked my credit score on a free website (like Credit Karma), can I skip pulling my credit? Expand / Collapse

You cannot skip pulling credit when apply for a loan Clara or any other reputable lender. These free credit score websites often show different credit scores than the one used for mortgages and credit scores can change. This is why we do a direct inquiry with the credit bureaus. The good news is that within 45 days, these mortgage credit inquiries only count as one inquiry. This lets you shop around and get accurate rate quotes without damaging your credit. Be wary of any lender who doesn’t require a credit pull as the Consumer Finance Protection Bureau (CFPB) considers it a standard among mortgage lenders and an important piece of your borrower profile.

What’s a lender credit? Expand / Collapse

On any given day there are various loan programs available to borrowers to best meet their financial goals. A lender credit is a monetary credit that may be offered on loans with interest rates slightly higher than the market on that day. This credit is directly applied to the closing costs of the loan.

What’s a discount point? Expand / Collapse

On any given day there are various loan programs available to borrowers to best meet their financial goals. A discount point is an additional cost that an individual can pay to obtain an interest rate that is below the market baseline on that day. The discount point would be cost that is in addition to the closing costs of the loan.

What’s prepaid interest? Expand / Collapse

Mortgage interest is paid in arrears. This means that the interest you pay on the 1st of the month, as a part of your mortgage payment, is the interest accumulated for the previous month. Typically, when you complete a mortgage transaction, part of the interest due for that month needs to be paid to the previous lender and the other prepaid to the new lender. This number fluctuates through the process based on your closing date.

What kind of third-party costs can I expect? Expand / Collapse

Closing costs are costs associated with obtaining a new mortgage or a refinance of an existing mortgage. Typical closing costs include fees for appraisal, title insurance and title search, transfer taxes (excluded on FHA loans), settlement services, property taxes, hazard insurance premiums, mortgage insurance, and government recording fees. These fees will vary depending on the transaction type and may vary due to the geographic location of the property.

Does Clara offer refinance loans without closing costs? Expand / Collapse

Absolutely. There are two ways Clara can help you refinance your home without paying costs out-of-pocket: lender credits that cover closing costs or by rolling fees into the loan amount.

Are there prepayment penalties? Expand / Collapse

No, with Clara loans, you can pay additional principal or your can pay your loan in full at any time without incurring a prepayment penalty.

What is an escrow / impound account? Expand / Collapse

It’s an account connected to your mortgage loan. As part of your monthly mortgage payment, you make contributions to this account. When property tax installments and insurance premiums are due, your mortgage company will make these payments on your behalf using the funds from your escrow / impound account.

What does debt-to-income ratio mean? Expand / Collapse

The debt-to-income ratio expresses how much you pay in monthly obligations versus how much you earn in gross monthly income. This ratio helps determine a borrower’s ability to repay their mortgage and overall creditworthiness. Fannie Mae guidelines state that a borrower’s total monthly obligations  (revolving credit, mortgage, auto, personal or student loans etc.) should not exceed 45% of the borrower’s gross monthly income. There are special circumstances where exceptions may be made, speaking to your loan specialist would be best to answer any specific debt-to-income questions.

What’s a loan-to-value ratio? Expand / Collapse

A loan-to-value ratio is the calculation used when discussing the loan amount as a percentage of the home value. This ratio is important to lenders when considering the type and structure of a loan you qualify for because it illustrates how much equity you have available versus how much debt you have, or will have,  leveraged against your home.

What’s mortgage insurance? Expand / Collapse

Mortgage insurance is a financial protection that is mandated by Fannie Mae on any loan where the loan amount is equal to or greater than 80% of the home value. Because the loan is such a high portion of the home value, insurance is deemed necessary as added protection to the lender. Ultimately, by lowering  the lender’s risk of making the mortgage, you are able to borrower a higher loan amount than usual.

When can I remove mortgage insurance? Expand / Collapse

You may request your mortgage insurance be removed when your original or newly appraised loan-to-value (LTV) reaches 80.00% and your loan is in good standing.

Otherwise, once the loan reaches mid-point or an LTV of 78.00% (based on the original value) whichever comes first, and if your loan is current and in good standing, the mortgage insurance must be dropped automatically. Annually, your mortgage servicer must provide you with when and ways in which you can remove MI.

FHA Loans: Borrowers with FHA loans must pay PMI for the life of that loan or until such time the loan is refinanced out of FHA and into a conventional product.

Is the appraisal fee the only cost out-of-pocket? Expand / Collapse

Yes, as a part of the refinance and purchase process, the appraisal payment is the only financial commitment you make prior to closing the loan.  

 

The appraisal is important because it provides an objective assessment of the fair market value of your property. As a lender, we factor in the appraisal information to evaluate the eligibility of your loan. However, as a homeowner, this information is also valuable to you because it gives you insight in the contributing elements affecting the value of your home.

 

Clara collects a $450 fee (the “Base Appraisal Fee”) from you prior to locking your loan and sending your loan file to underwriting.

 

After you pay the Base Appraisal Fee, Clara Lending will place an order and pay an appraisal management company on your behalf to conduct  your home appraisal.  Note, of course, that paying this fee does not guarantee that your loan application will be approved, but it will move your application along.

Who can apply for a mortgage with Clara? Expand / Collapse

You can apply with us if you are buying or refinancing a 1-4 unit residential property located in California. Please note, all applicants must be U.S. citizens, permanent residents, or non-permanent residents with acceptable visas and be the age of majority in their state of residence.

What is the minimum downpayment Clara will accept? Expand / Collapse

We have programs available that require as little as 3% down payment for qualified applicants. Your Loan Specialist can help you determine if you meet loan amount and eligibility requirements.

Does Clara finance mobile homes? Expand / Collapse

Not currently. The property types we finance include modular homes with a foundation, single family homes, condos, townhomes, PUDs and multi-unit (2 to 4 units) residential properties.

What types of properties are eligible for a home loan with Clara? Expand / Collapse

Mortgages are available for primary owner-occupied residences, second homes and investment properties. The property types include single family homes, condos, town homes, PUDs and multi-unit (2 to 4 units) residential properties. Clara is currently lending for properties located in California only (but stay tuned for future states).

What types of documentation will Clara need while I go through the mortgage process? Expand / Collapse

In general, we’ll need to verify your income, employment, assets, and liabilities.  To do so, we request documentation consistent with standard underwriting practices like pay stubs, W2s, personal tax returns and bank statements.  This will vary depending on your qualifications and the loan program you’ve selected. We make the process of providing your documentation easy and convenient by enabling you to securely upload documents via our online portal, and verify your assets by linking directly to your financial accounts.

Why do I need to sign some disclosures but not others? Expand / Collapse

We try to save you time by only requiring you to sign forms that confirm important information on your loan and are essential to the loan process. As a lender, the federal government asks us to verify identity, tax filings, among other things. Some of these documents allow us to work on your behalf to complete the mortgage.

Does Clara require a property appraisal? Expand / Collapse

Usually. Clara’s standard underwriting process requires a property appraisal, although there are some properties that qualify for an appraisal waiver. Talk to your Loan Specialist to see if your property qualifies.

How do I submit a loan application? Expand / Collapse

Clara has an online portal that allows you to efficiently and conveniently complete your application. Just click or tap the “Get Started” button. If you have questions along the way, feel free to contact one of our licensed Loan Specialists via live chat or phone at415-802-1813. We look forward to working with you!

What is your rate lock policy? Expand / Collapse

Clara offers rate locks for up to 45 days once you submit an application, indicate your “Intent to Proceed” and pay the Base Appraisal Fee.  The rate must be locked at least 7 days before the scheduled closing date.

Rate locks expire if you cancel the lock or withdraw your application, or if we decline the loan application. Outside of the rate-lock period, our mortgage rates may change at any time.

Clara does not offer rate locks on pre-approvals or to-be-determined properties.

How long does it take to close a loan with Clara? Expand / Collapse

We can process a purchase loan in as few as 15 days if you would like to move that quickly. See more about what’s involved to close that quickly here. For refinancing, we can close in as few as 30 days (vs. industry average of 70 days). The time-to-close is largely dependent on how quickly third-party services are completed (appraisal, payoff, title), and how quickly customers are able to provide necessary documents. In general, we aim to close the loan on your timeline.

Why do we need to wait 3-4 days to schedule a notary after the CD is signed? Expand / Collapse

 This time period is a “cooling off” period prescribed by federal lending regulations. This time period is in place to give the borrower an opportunity to consider their decision.

Why can I shop for Notary and Title, but not an Appraiser? Expand / Collapse

Federal regulations have specific rules and procedures surrounding interaction with an appraiser. These regulations protect the appraiser’s independence and require lenders to ensure no interested party (including the borrower)can influence the appraiser in any way. There are no such guidelines surrounding notary or title companies.

Now that my loan is funded where do I send my first mortgage payment? Expand / Collapse

Part of the closing document package is a first payment letter. This letter states the servicer and location your first payment should be sent to. Your loan servicer will also send you a welcome package so that you can set up an account directly with them. As a part of refinance it is not required to make a mortgage payment the month after the loan has closed. Payments begin the following month.

Can I cancel my escrow account and pay my taxes and insurance myself? Expand / Collapse

Please contact your mortgage servicer after you have made your first payment to better understand the requirements to cancel your escrow.

Why are you collecting a “cushion” for my escrow account? Expand / Collapse

Over the course of a calendar year, property values (and resulting taxes / tax installments) and insurance premiums may increase. In doing so, the amount of money taken from your escrow account to pay these bills will exceed what was collected by your mortgage servicer.  The cushion, allowable by law, helps account for these increases.

Each year, as required by law, your escrow account will be analyzed.

Shortage: If there is not enough funds in the escrow account to meet those obligations, the servicer will advance the monies into your escrow account to pay the bills.  If the amount collected is less than what is needed, it is called a shortage. The shortage is spread out over 12 months to help ease you into building up your escrow account again. In some instances, the shortage, at your request, may be spread out over a term greater than 12 months. Your mortgage servicer will advise you of the shortage, when the shortage recovery will begin, and your new payment amount.

Overage: If the amount collected exceeds what is needed plus the allowable cushion, you will get a refund. Generally, your mortgage servicer will send you a letter with the overage check.

How long does it take to get funds back from my current escrow account? Expand / Collapse

Your current mortgage servicer has 30 calendar days from the date the loan has been paid in full to return your escrow funds to you. The funds frequently will be returned to you in the form of a check.

What if the amount sent is over the payoff; what happens to the overage? Expand / Collapse

 If the amount sent to your current mortgage servicer exceeds the actual payoff amount, the excess will be placed into a suspense account. The servicer has 30 calendar days to return those funds to you.  The funds will frequently be returned to you in the form of a check.

My tax installment and/or homeowners / flood insurance premium(s) are due at or near the time loan is going to close, who will pay bills that are due? Expand / Collapse

Contact your mortgage servicer. In many instances, your county and/or insurance provider has sent a “tape” to your mortgage servicer requesting payment. Your current mortgage servicer will be able to tell you if the request has been received, when the payment is scheduled to be drawn from your escrow account, or when the payment has been made.

If the loan is likely to be paid-in-full before the payments are made by your current servicer, we or your next mortgage servicer will make the payments for you. Please note: in some states and during periods when tax installments are due, we are required to collect the amount due from you as part of your closing costs. You will need to notify your current mortgage servicer that you are paying the current tax installment as part of your closing.

What is the difference between a pre-qualification and a pre-approval? Expand / Collapse

Pre-qualifications and pre-approvals often mean different things to different lenders so it’s important to understand how your lender uses the terms.

In a pre-qualification letter from Clara, we tell you what you may be able to afford based on a very basic review of a soft credit pull and self-reported asset, income and liability information.

With Clara, a pre-approval means an underwriter has reviewed your application, evaluated and verified your assets, income, liabilities and credit by reviewing a full credit report and  supporting documentation.

A pre-approval letter can help make you a stronger buyer in a competitive housing market. Real estate agents often recommend a pre-approval letter when shopping for a home as a signal that you’re serious and will qualify for a mortgage. Once you have been pre-approved and identified a property to purchase, the next step is to submit an application and get approved for a loan.

Does Clara sell its mortgages? Expand / Collapse

Yes. Clara originates mortgages loans via our licensed Loan Specialists and mortgage operations team.  Once a loan closes, Clara then sells the loan to an investor who then services the loan (i.e., manages the payments and account).  This is a common practice in the mortgage industry.  When you close your loan with Clara, we’ll give you a letter that tells you who the servicer of your loan is.

What is the Base Appraisal Fee? Expand / Collapse

A $450 payment (the “Base Appraisal Fee”) is required prior to to underwriting your loan application and will be used to pay for the cost of your home appraisal. If the Base Appraisal Fee is less than the final appraisal fee, as disclosed in your Closing Disclosure, you will be responsible for paying the balance at closing. Please refer to the “Appraisal Fee” item in the Loan Estimate for an estimate of the final appraisal fee.

Clara will refund the Base Appraisal Fee to you only to the extent that the $450 amount collected is in excess of the actual cost of the appraisal incurred by Clara Lending or in the event that Clara does not receive an appraisal report on the property. Refunds will be processed within 30 days of the final disposition of your loan and will be made to the original form of payment.

After you pay the Base Appraisal Fee, Clara Lending will place an order for your appraisal with an approved appraiser. You are not paying the appraiser directly. Paying an appraisal fee does not guarantee that your loan application will be approved.