| What is a Pre-approval? | Back to Top |
| - This allows you the ability to get approved for a specific loan amount prior to finding the home you want to purchase. The loan is underwritten and the lender commits to a specific loan amount. This can give you a great advantage with a homeowner or realtor if someone else is interested in the same home at the same time. Also, if you're thinking about refinancing and want to payoff creditors or take cash out, but not sure you would qualify - you can apply for a pre-approval and could save on the cost of getting an appraisal on your home until you know if you qualify.
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| What's the difference between pre-qualification and pre-approval? | Back to Top |
- Pre-qualification is an opinion of how much loan you can afford based on verbal information you provide. Pre-qualification will give you a general idea of the price range you should shop for a home.
Pre-approval is a firm loan commitment based on verified information prior to finding a property. |
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| What information do I need to provide when I apply? | Back to Top |
| - When you're ready to apply, you need the most current information on your monthly income and debt, a total of your assets, your social security number, and employment information. |
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| Is there a cost to apply? If so, how much? | Back to Top |
| - This varies from lender to lender. Some lenders charge an application fee to cover actual out of pocket expenses and money for their efforts. Other lenders charge a reasonable credit report and appraisal fee, which cover out of pocket expenses. This could range anywhere from $50.00 (credit report only) to $500.00. |
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| Where do I close and sign for my loan? | Back to Top |
| - Typically your closing will take place at a title closing agent's or attorney's office, although some lenders will have closings in their office. When all parties agree upon a closing date, you will be provided with the exact location and time of your loan closing. |
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| What documents will I receive at closing? | Back to Top |
| - At closing you will sign and receive copies of all legal documents that will be recorded and placed on record regarding the property that you are purchasing or refinancing. Also, you receive all pertinent information regarding your mortgage payment and servicing information for your new loan. |
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| How long will the loan process take? | Back to Top |
| - Loan approval and funding time frames vary depending on the type of transaction and the complexity of your personal finances. The process can take, on average, anywhere from 14-60 days. |
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| What is a lock-in? | Back to Top |
| - The lock-in represents the interest rate you choose and will be the interest rate used to factor your monthly payment. The lock-in secures the interest rate during the process of your loan approval as long as your loan is processed and closed prior to the rate expiration date. This date is given to you when you lock-in the rate. |
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| When can I lock-in my rate? | Back to Top |
| - You can lock or float your interest rate at any time during the process of your loan. The Loan Officer will discuss these options with you upon taking your loan application. If you are submitting your loan application via the Internet, a loan officer will be contacting you to discuss your interest rate lock or float options. |
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| How long is my rate lock valid? | Back to Top |
| - Depending on the type of transaction and the time you need, lock periods can be valid anywhere from 10 days up to 180 days. |
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| Can I pay my loan off early, can I pay extra each month? | Back to Top |
| - Yes, you can make principal payments at anytime during your loan term or pay the loan in full. You can also pay a set amount each month above the normal payment due or make lump sum payments periodically. |
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| What is an escrow account? | Back to Top |
| - An escrow account is typically established at the time you close your mortgage loan. This account is held by the lender for the future payments of recurring items relating to the mortgaged property, such as real estate taxes and insurance premiums, as they become due. Lenders usually require you to pay an initial amount for each of those items to start the reserve account at the time of closing. |
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| Are there any limitations on how much lenders can collect from a borrower for the borrower's escrow account? | Back to Top |
| - Lenders and servicers are required to follow the standards set forth in the Real Estate Settlement Procedures Act (RESPA) and applicable state law. RESPA and some states set limits on the amount which can be collected by the lender or servicer to pay for escrow items, such as property taxes and insurance, and place a cap on the amount of the reserve. Reserves are funds that a servicer may require a borrower to pay into an escrow account to cover unanticipated disbursements which will need to be made before the borrower's payment is available in the escrow account. There are limits on the additional amounts that can be collected as reserves. |
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| What is PITI? | Back to Top |
- This represents the accounts your money is applied to when you make your monthly mortgage payment:
P - Principal
I - Interest
T - Taxes
I - Insurance |
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| How do I know what loan is best for me? | Back to Top |
- Review your current situation and future goals, then answer the following questions to help determine the direction you may wish to take. Also, discuss these questions with your loan officer to help determine the type of loan you need.
How long do you expect to stay in the house?
Which is more important, low monthly payments, or low closing costs?
Will my income increase or decrease in the next three years?
How comfortable are you with your monthly payment potentially increasing? |
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| What is the difference between a fixed rate and adjustable rate mortgage? | Back to Top |
| - With a fixed rate mortgage, the interest rate and payment remains constant over the life of the loan. Whereas, with an adjustable rate mortgage, the interest rate can either increase or decrease, based upon the terms of the loan. This could cause the monthly payments to increase in order to have the loan paid in full by maturity. |
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| What is a convertible mortgage? | Back to Top |
| - A convertible mortgage allows you to convert your adjustable rate mortgage to a fixed rate mortgage for a flat fee during a specific time frame. This fee can range from $250 - $500 per lender. |
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| What is a balloon mortgage? | Back to Top |
| - A loan with a fixed rate payment for the first five to seven years of the loan, then a lump sum payment is due on the balance of the loan at a specified date when the balloon loan matures. |
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| What is a conventional loan? | Back to Top |
| - A mortgage not guaranteed by VA or insured by FHA, FMHA or State Bond Agencies. |
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| What is a jumbo loan? | Back to Top |
| - A conventional loan that exceeds the maximum agency (Fannie Mae, Freddie Mac) mortgage amount guidelines for a conventional loan. |
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| What is PMI? | Back to Top |
| - This stands for Private Mortgage Insurance. On a conventional loan PMI is required if you borrow over 79.99% of your appraised value. This protects the lender against financial loss if the loan is defaulted. |
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| How long will I be required to have PMI on my loan? | Back to Top |
| - The Homeowner's Protection Act of 1998 allows borrowers whose loans originated after July 29, 1999, to request cancellation of PMI at 80% loan to value (LTV) based on amortization or actual payments if the borrower has a good payment history, if the borrower provides evidence the property value has not decreased, and certifies there are no subordinate liens on the property. Lenders are required to terminate borrower paid PMI at 78% LTV based on the amortization schedule if the loan is current. If none of the above is done, PMI will terminate automatically at the midpoint of the loan term. |
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| How much does mortgage insurance cost? | Back to Top |
| - The cost of PMI is divided into two parts. The first part is a payment made at the time of closing. The second is an ongoing payment made each month with your principal and interest payment. |
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| What is mortgage life insurance? | Back to Top |
| - This insurance would pay the balance owed on your mortgage home loan in the event of your death during the term of the mortgage. |
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| What is hazard insurance? | Back to Top |
| - This represents the insurance that protects your investment in your home. It provides compensation to the insured in case of property loss or damage. |
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| What are points? | Back to Top |
| - Points represent an origination fee charged by the lender and loan discount points sometimes charged on the note rate to lower the interest rate. |
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| What is an origination fee? | Back to Top |
| - The origination fee is charged by the lender, and is typically 1% of the loan amount you borrow. This fee is used to cover expenses during the process of the loan. |
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| What is a buy-down? | Back to Top |
| - A fee paid to lower the interest rate on a mortgage. The buyer, seller, or any other interested party may pay it. A permanent buy-down would lower the rate for the entire term of the mortgage, while a temporary buy-down lowers the rate for a specified shorter term, generally 3 years or less. |
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| What are closing costs? | Back to Top |
| - Fees and costs that both buyer and seller must pay at closing. They generally include: origination fee, discount point, appraisal fee, credit report, title search, recording fees, and other costs described at settlement. |
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| Which is better: fewer points or a lower interest rate? | Back to Top |
| - It depends generally how long you expect to stay in your home. The lower the interest rate, the lower your principal and interest payment. You must weigh the monthly savings vs. the extra point(s). Divide the total cost of any discount points by the monthly savings and you'll see how many months you'll need to stay in the property to break even. |
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| Do bi-weekly mortgages really save money? | Back to Top |
| - In a bi-weekly mortgage, you make half monthly payments every two weeks (26 per year). This more rapid repayment of the mortgage, combined with what is essential a 13th monthly payment each year, can really pay off big. Depending on the interest rate environment, a 30-year mortgage will pay off 5 to 8 years early, saving you thousands of dollars over the life of your loan. Consult with a mortgage specialist for more information. |
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| Under what circumstances would an ARM be a better choice than a fixed-rate loan? | Back to Top |
| - If you expect to stay in your home for a shorter period of time (3 to 7 years), an ARM may be a good choice for you. You can potentially save a significant amount in payments up front because ARMs usually have a much lower initial rate. ARMs have the potential to rise after an initial fixed period, so discuss your options at your mortgage consultation. |
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I locked my interest rate but the Truth in Lending Statement says the Annual Percentage Rate is higher. Am I getting a different rate?
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- No, your mortgage note rate will be the rate you chose when you executed your Price Protection Election Agreement. In most cases, the mortgage note rate is not equal to the APR. Please see the following question for information regarding the APR.
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| What is the APR? | Back to Top |
| - The total yearly cost of a mortgage stated as a percentage of the loan amount includes such items as the base interest rate, private mortgage insurance and loan origination fees (points). |
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| How can I compare rates and fees when shopping for a mortgage? | Back to Top |
| - When comparison shopping, look at points, fees and the Annual Percentage Rate (APR). The APR includes the fees that are charged on your loan. Although one lender may have a slightly lower rate, they may charge more fees, and hence have the same APR as a lender with the slightly higher rate. |
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| What is pre-paid interest? | Back to Top |
| - An amount you pay at closing that represents the interest that accrues between the day your loan closes and the last date of that month. For example, if your loan closes on the 20th day of a 30-day month, at closing, you'll pay interest owed for the remaining 10 days in that month. |
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| How long does it take to obtain loan approval? | Back to Top |
| - Depending on your credit history and down payment and the loan program selected, some lenders may be able to approve your mortgage in as little as 24 hours. The average number of days from application to approval will vary from lender to lender. However, 7-10 business days is typical. |
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| If I refinance my loan with my existing lender, will I have to pay all the closing costs again? | Back to Top |
| - Typically, yes, as there is a cost to process any new loan application. This cost may include fees paid to third parties, such as the appraisal provider and the title and closing providers. |
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| Will the lender agree to include my closing costs in the loan amount? | Back to Top |
| - On a purchase transaction, you typically cannot finance your closing costs into the loan amount. Some lenders do, however, have special programs under which you may be able to finance some, or all, of the costs by agreeing to a slightly higher interest rate. Also, if you are refinancing, you may be able to refinance some, or all, of your closing costs. |
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| How quickly can a lender close on my home loan? | Back to Top |
| - Many lenders can facilitate closing 2 to 3 weeks after you have agreed on a purchase contract for a home. If you need more time, you can take as long as you need, while still closing prior to any rate lock expiration dates. Many lenders require 30-60 days from purchase contract and application to closing. |
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| Does the lender require title insurance for purchase transactions? | Back to Top |
| - Yes, a Mortgagee's Title Insurance Policy will be required on purchase transactions. |
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| What is title insurance? | Back to Top |
| - Title insurance provides the lender and the buyer (if you purchase owner's coverage) with coverage for losses resulting from specific title defects listed in the policy. In cases where land and property have changed hands over time, there is always the possibility an error has occurred. If an error has occurred, it may be that someone else may be in title to or have an interest in the property, that improvements encroach on property lines or that other similar problems may exist. In these scenarios, if you do not have title insurance you could lose your investment in your home. Lenders require "lender's coverage" to protect their investment and it only protects the lender. Owner's coverage is optional and provides separate coverage for the borrower. |
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| What homeowner's insurance requirements will I need to meet at closing? | Back to Top |
| - Most lenders require a one-year paid receipt for homeowner's insurance policy for at least the amount of the mortgage at the loan closing. |
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| Can I have my mortgage payment deducted automatically from my checking or savings account each month? | Back to Top |
| - Typically, after closing your mortgage loan, you will have the option of enrolling in an automatic mortgage payment program. You may be asked to provide an authorization form with a voided check or savings account slip attached to set up the draft. The payment is typically debited on a preset day each month. |
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| How can I determine what mortgage amount I will qualify for? | Back to Top |
| - Based on your income, your current debts and estimated down-payment, your lender can usually help you determine the maximum mortgage amount for which you could qualify within minutes. Many lenders have a toll-free 800 number where you may speak with a mortgage professional or you may also reference the lender's mortgage calculator located on its mortgage Internet site. This process is frequently referred to as a "prequalification analysis". |
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| What is the minimum down payment for conventional, FHA, and VA loans? | Back to Top |
| - As a general rule, conventional loans are available with a minimum down payment of 5%. FHA loans are available with as little as 3-5% down. With VA loans, veterans are not required to put any money down when purchasing a home. Veterans are still required to pay for their closing costs, which includes a VA funding fee, and prepaid items. Please consult your individual lender for specific down payment requirements and programs. |
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| Do most mortgage lenders provide construction loans? | Back to Top |
| - Many mortgage lenders have construction-to-permanent financing loan programs. Programs will vary with each individual lender. Typically, a construction loan is an interim loan secured by the property on which a dwelling is being constructed. The funds are usually disbursed throughout the construction period and replaced with permanent financing once the construction is completed. You may also choose to utilize separate lenders for the construction financing and the permanent financing. |
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| Do most lenders require a homeowner's inspection? | Back to Top |
| - No, a homeowner's inspection is generally requested by the buyer as a condition to the purchase of the home. Many homebuyers, however, will make the purchase of their home contingent upon a homeowner's inspection. A homeowner's inspection should not be confused with an appraisal, which is required by most mortgage lenders in order to support the valuation of the mortgage security. |
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