Mortgage FAQ’s & guide
How do I know what type of mortgage is best for me?
You can obtain this answer through one of our mortgage specialists. We will help you arrive at the best answers for your mortgage questions.
- Your current financial situation
- How long you intend to keep your house one of the most important aspects of your decision making process!
- Do you expect your finances to change?
Pre-qualification?
A borrower’s qualification for a mortgage loan amount (or range), based on the borrower’s assets, debts, income and selected loan program(s).
evaluation:
- Will you be able to pay the debt?
Two debt ratios are used to determine your capacity to repay a loan.
The “Housing Ratio”:
- Monthly Housing Expenses*/Gross Monthly Income = Housing Ratio
* This includes: loan payment (principal and interest), real estate taxes, hazard insurance, flood insurance, mortgage insurance, homeowners’ association dues, ground rent (leasehold), special assessments, subordinate financing.
The “Debt Ratio”:
- Monthly Fixed Expenses**/Gross Monthly Income = Debt Ratio
**This includes: monthly housing expenses, installment credit balances with more that 10 months remaining, revolving credit with more than 10 months remaining, real estate loan payments on non-income-producing property or negative cash flow on non-owner-occupied property, alimony, child support or maintenance.
What is a buy-down?
Where the buyer, seller or lender pays additional discount points in return for a below market interest rate. During times of high interest rates, buy-downs may induce buyers to purchase property they may not otherwise have purchased.
What is the origination fee?
The amount charged to originate and close a mortgage loan. Origination fees are usually expressed in points.
What are closing costs?
Costs payable by both seller and buyer at the time of loan settlement (close of escrow), when the purchase or refinance of a property is finalized.
- Title search and insurance, escrow fees
- Sales commissions (Realtor)
- Origination fee
- Discount points
- Recording fees
- Courier charges
- Processing and document preparation fees
What is an escrow account – or – an impound account?
When borrowers make their monthly mortgage payments, they usually also make a payment towards the anticipated annual amount needed to pay taxes and insurance premiums. These funds are placed in an escrow account (also known as Impound account), until the lender pays the taxes and insurance as they become due.
What is the APR?
APR is Annual Percentage Rate. It is the actual interest rate, taking into account points and other finance charges, for the projected life of a mortgage. Disclosure of the APR is required by the Truth-In-Lending Law and allows borrowers to compare the actual costs of different mortgage loans.
What is amortization?
The reduction of a debt by regular, usually monthly, installments of principal and interest.
How long will the loan process take?
Once you apply, we will begin to verify all the information you provided. The total can take anywhere from a week plus. Other factors include whether the applicant is self-employed, title clearance, etc. Time delays can also occur if outside sources or you do not provide documents to the lender in a timely manner. Be sure to respond promptly to requests for information while processing is taking place.
What is PITI?
principal, interest (on the mortgage loan), property taxes and insurance – the total amount of those items.
What is hazard insurance?
A form of insurance that protects the insured property against physical damage such as fire. Mortgage lenders often require a borrower to maintain an amount of hazard insurance on the property that is equal to at least the amount of the mortgage loan.
Will my loan be sold?
The “servicing” on your loan is a marketable asset, which your lender can sell to other sources. As part of the loan documentation, you will sign a form that recognizes the fact that the servicing of your loan may be sold. Most fixed rate loans are sold.
Is there a prepayment penalty if I pay the loan in advance, either monthly or in full?
On some loans, check with your loan agent, but most allow you to pay off the entire loan or make additional payments any time without penalty.
What does LTV stand for?
Loan-to-Value. This is the relationship, expressed as a percentage, between the amount of a loan and a property’s value or sales price. For example, a $80,000 loan on a property appraised at $100,000 is 80 % LTV.
What is the difference between a fixed-rate and an adjustable-rate mortgage?
A fixed rate mortgage is a mortgage that has an interest rate that stays fixed for the life of the loan. On an adjustable rate mortgage the interest rate changes based upon a specific financial index (such as Government Treasury bill rates) and payments may go up or down based on the movement of that index.
Why do interest rates go up and down?
Because lenders pool loans into securities and then sell them in “the secondary market” they are competing with the entire pool of worldwide investment opportunities like treasury bonds and stocks, causing your interest rate to rise or drop depending on the situation and market at that time.
Can I change the loan amount or program after I’ve applied for a loan?
Yes BUT…Please remember that any changes that you make may extend the time that it takes to close your loan, or may increase the cost of closing.
After I apply, what should I expect?
Within 2-4 business days you will receive a package from us. The package will include a copy of your application and a list of documents that we need to close your loan in a timely manor. If you do not receive your package within two days, please don’t apply online again. Call us, and we’ll try to help you.
How do you save me money?
Our website and software were developed to guide borrowers through the loan decision and application process with ease. The efficiencies of receiving a complete application file and supporting documentation dramatically reduces our costs. Those savings are passed on to you.
After I send my paperwork back, what happens?
Loan will be reviewed and processed. Once it is submitted to the final lender, there may be additional needs. We will try to anticipate those and make the process easy for you.
What about the appraisal?
We can arrange for an appraisal of your property and will use your estimated value as a guideline. The appraisal must be paid at the time of the service.
Who handles my closing and where do I sign?
If you’re buying a home, your closing agent(Title/Escrow Co.) will be selected by your Realtor or you can pick one yourself. If you’re refinancing a property, you can choose the company or we’ll select a closing agent for you.
This information should guide you in the right direction when you decide to apply for a new mortgage loan or refinance your current mortgage.
