|
There are many common questions
that our clients have regarding their mortgage; how to get a
mortgage, what they need to qualify, and about specific
concerns they have about applying for a mortgage. Here are
some of the most common questions and their answers.
Q: If my credit is not very good can I
still qualify for a mortgage?
A: Yes, a mortgage can be obtained by people with all kinds
of credit (Excellent, Great, Average, Below Average, and
Poor Credit). Obviously, the rates will increase slightly as
credit score get a little lower but a mortgage can still be
obtained. Also, with a lower credit score you may be limited
to a few less mortgage loan programs than you would with
exellent credit. Sometimes compensating factors such as a
lot of money put away in checking or savings accounts,
401k's, investments, etc..., good job time, low LTV (loan to
value), low DTI's (debt to income ratios), and lower terms
(15 year instead of a 30 year) may help to compensate
somewhat for a lower credit score and qualify you for a
little better rate.
Q: What
mortgage loan terms are available for me as a borrower?
A: You can choose almost any loan term that you desire. The
most common loan terms are 5, 10, 15, 20, 25, 30 and now
even 40 year home loan terms. Some lenders will still let
you do the years in between these ones also, although it is
not very common. The 40 year loan term is still relatively
new to the market but the rest have been around for quite
some time. Generally the lower the term you select, the
lower the rate can be. The 30 year mortgage term is the most
common loan term used for home mortgage financing.
Q: What is
PMI?
A: PMI, or Private Mortgage Insurance, is an insurance from
a private company that is required on conforming loans where
the borrower does not have a minimum of 20% equity in the
home. PMI is an insurance that you, the borrower, pay for to
protect the bank in case you default on your loan. Any time
that you do not put down 20% for a purchase transaction or
have at least 20% equity in a refinance transaction this is
considered a higher risk to the bank and this is why they
require this type of insurance.
Q: What is
the best mortgage for me?
A: There are many mortgage options for a borrower today. We
will assess your situation and provide the best options for
you at that time. We have any program from a simple fixed
rate mortgage, interest only, pay option arms, lot loans,
construction, rehab, manufactured, commercial and many other
options to fulfill your lending needs.
Q: Can I get a mortgage after
a bankruptcy?
A: You may still qualify for a home loan even if you have a
prior bankruptcy. The best way to find out if you can
qualify for a home loan after a bankruptcy is to meet with a
loan officer and discuss your options. Be sure to bring all
paperwork regarding your past bankruptcy so that your loan
officer can match you with the best lenders to meet your
needs.
Q: What is APR?
A: APR, or Annual Percentage Rate, is the effective rate
that takes the lender bank's charges into consideration and
express the total of all bank charges in the form of an
interest rate. Because there are always other finance
charges in addition to the note rate (the interest rate base
on which payments are calculated), the APR is almost always
higher than the note rate. The APR is one of the items
required by the Truth-in-Lending to disclose to every
potential borrower.
Q: What is PITI?
A: PITI, or Principal, Interest, Taxes (property taxes), and
Insurance, is basically the cost of living in your
particular home. PITI can also be expanded to include any
private mortgage insurance and homeowners association fees
or condo association fees.
Q: What is Lender Paid
Mortgage Insurance (LPMI)
A: Lender paid mortgage insurance is a program in which the
lender will pay the mortgage insurance in exchange for a
slightly higher rate.
Q: Do you have the lowest
rates?
A: We have loan programs to fit just about every situation
with rates that are competetive with anyone. Playing the
rate game in the mortgage world can get quite frustrating.
Many lenders advertise rates that are simply not available
just to get you to talk to them and get you in the process
with them. The fact is that mortgage money that all lenders
lend comes from the same sources. There is never one lender
that will have significantly lower rates than another.
Rather than choosing a lender based on whoever can shout out
the lowest rate, why not choose on the basis of the loan
officer's professionalism, experience and skill in finding a
loan program best suited for your particular situation.
Doing it this way will get your a proper loan program with a
competetive rate and a borrowing process that is stress
free.
Q: Can I get a mortgage with
bad credit (not so good credit, poor credit)?
A: Of course you can get a mortgage with bad credit. Consult
with a licensed mortgage consultant to find out what
programs are available for you and your maximum loan amount.
Usually, the lower your credit score the higher your rate
will be, however most mortgage professionals can provide you
with a mortgage loan at maybe a little higher rate now,
along with a plan on how to improve your credit so that
within a couple of years you can qualify for the best rates
available and the rates you deserve. Also, keep in mind that
some of the closing costs may be tax deductible and that the
mortgage interest is tax deductible too so even paying a
little higher rate for a year or two will still have its
advantages until you are ready to qualify for the best
rates.
Q: What is a Good Faith
Estimate (GFE)
A: A GFE is a prelimanary estimate of the closing costs and
fees for your mortgage. When comparing a GFE between
mortgage brokers be sure to have the Truth N' Lending (TIL)
with you.
Q: What is a Truth N' Lending
(TIL) statement
A: A TIL is used in connection with the GFE. A TIL gives you
the total cost of a mortgage with the closing costs and fees
included. A TIL will allow you to determine if a higher rate
with low fees is better for you than a lower rate and higher
fees, & vice versa.
Q: How big is an acre?
A: An acre is equal to 43,560 square feet. So if you are
looking at buying a house that sits on 3 acres of land, that
would be equivalent to 130,680 square feet, or a possible
lot size of approximately 130 feet wide by 1000 feet deep.
Q. What are "impounds"?
A. Impounds are the part of your monthly house payment that
cover Home Owners Insurance and Property Taxes. This is
calculated by taking your annual payment amount and dividing
by 12.
Sometimes, for a higher rate, the lender will allow
borrowers to pay insurance and taxes themselves. However,
lenders prefer to collect these in monthly istallments and
pay them when due. This ensures that these are paid on time
and prevents tax leins or lapsing of insurance.
Typically, at closing, lenders will collect whatever is
currently due plus 2 months extra for reserves or what
should have been collected since the last due date for the
insurance or taxes plus 2 months extra for reserves. You
will always have this 2 months extra in reserves for as long
as you have the loan. This allows the lender to pay your
taxes and insurance on time even if you should pay your
mortgage payment late.
Q: I am self-employed or I
have steady income that is difficult to prove. Is there a
mortgage for me?
A: Yes. Depending on your credit history, down payment, and
several other factors your preferred Mortgage Professional
may suggest a 'Stated Income' program
Q. Can I buy a house with no
money down or possibly even with no money out of my pocket?
A. Yes you can buy a home with 0 money down. There are many
different types of 100% financing out there for home-buyers
and even for first-time homebuyers. There are also programs
that will allow you to finance the closing costs so that you
will not have to bring any money to closing. Another popular
way to not pay closing costs is to have the seller pay for
your closing costs with a seller contribution. A seller
contribution is something worked into the purchase price of
the property where the seller may pay for some or all of
your closing costs. Therefore there are many ways to obtain
financing for a home purchase with no money down and/or no
money out of your pocket.
Q. What is Loan To Value
(LTV)?
A. LTV is the size of your loan in proportion to the value
of your home. For example, if you are buying a home for
$100,000, and you make a down payment of $10,000, then your
loan amount would be $90,000. Your LTV would be 90% (the
loan is 90% of the value). It is important to know that
lenders will always use the lesser of the appraised value or
the purchase price for the value. If you refinance, then the
appraised value is used.
Q: What is DTI?
A: DTI stands for Debt to Income Ratio. This pretty much
will decide how much of a loan you can afford. Your DTI is
calcuated by dividing your total monthly debts and your
total monthly income.
Q: I applied for a mortgage
online and now I'm having 10+ telephone calls per day
soliticing my business. What happened?
A: The online company where you applied may not be a
mortgage company at all. Many "lead providers" have websites
where they collect your information and sell it over and
over again to the highest bidders. The solution: Use caution
when applying online and never provide your personal
information to a website without first determing their
reputation in the industry.
Q: How does my credit affect
my ability to buy a home?
While credit is an important part of the loan process, don't
be discouraged if yours is less then perfect. Judgments,
late payments, and bankruptcy can all affect your credit
score, but they won't necessarily prevent you from getting a
loan.
Q: Can I get a loan if I am
self-employed?
A: Yes! There are loan programs available for self-employed
borrowers to borrow up to 100% of the home value. Options
are also available for borrowers with no income
verification.
Q - I have seen interest rates advertised on television
sometimes as low as 1%, why are you not providing this low
of a rate to me?
A - Many of the televised rates are "too good to be true."
You will call the company, and by a series of add ons, and
criteria specific to your deal, the rate will raise to
something closer to the market average. However, there are
some loan programs that can offer payments with rates
extremely low, such as Pay Option ARMS, but make certain to
talk to a series of mortgage professionals before you commit
to such a loan.
Q: Why should I buy instead
of rent?
A: A home is an investment. When you rent that money is gone
forever and you are essentially paying your landlord's
mortgage. When you own your home, you can deduct the cost of
your mortgage loan interest from your taxes. You can also
deduct the property taxes you pay as a homeowner. In
addition, the value of your home may go up over the years.
Q: What is a credit report?
A: A credit report is a file that contains information on
how you pay your bills, where you live and work, and any
information that is on public record, i.e., bankruptcy,
judgments, tax liens and lawsuits. Your permission is
required in order for a lender to order a copy of your
credit report-they will request your name, address and
social security number.
Q: How long can negative
information remain on my credit report?
A: Most derogatory credit comments remain on credit reports
for seven years. Exceptions are bankruptcies, which can
appear for 10 years, as well as some lawsuits, which can
remain on the credit report until the statute of limitations
runs out.
Q: Why is the APR different
from the interest rate for which I applied?
A: The APR is computed from the amount financed and based on
what your proposed payments will be on the actual loan
amount credited to you at settlement, In a $50,000 loan with
$2,000 prepaid finance charges, a 30 year term and a fixed
interest rate of 12%, the payments would be $514.31
(principal and interest). Since the APR is based on the
amount financed ($48,000), while the payment is based on the
actual loan amount given ($50,000), the APR (12.533%) is
higher than the interest rate.
Q: How is an index and margin
used in an ARM?
A: An index is an economic indicator that lenders use to set
the interest rate for an ARM. Generally the interest rate
that you pay is a combination of the index rate and a
pre-specified margin. Three commonly used indices are the
One-Year Treasury Bill, the Cost of Funds of the 11th
District Federal Home Loan Bank (COFI), and the London
InterBank Offering Rate (LIBOR).
Q: What is the amount
financed?
A: The amount financed is the loan amount applied for, minus
the prepaid finance charges. Prepaid finance charges include
items paid at or before settlement, such as loan
origination, commitment or discount fees (points): adjusted
interest, and initial mortgage insurance premium . The
amount financed is over lower than the amount you applied
for because it represents a NET figure. If you applied for
$50,000 and the prepaid finance charge total $2,000, the
amount financed would be $48,000.
Q: What is the total of
payments?
A: The figure represents the total amount you will have paid
if you make the minimum required payments for the entire
term of the loan. This includes principal,. Interest and
mortgage insurance premiums, but does not include payments
for real estate taxes or property insurance premiums.
Q: How do I know which type
of mortgage is best for me?
A: There is no simple formula to determine the type of
mortgage that is best for you. This choice depends on a
number of factors, including your current financial picture
and how long you intend to keep your house. Foundation
Capital Group can help you evaluate your choices and help
you make the most appropriate decision.
Q: What does my mortgage
payment include?
A: For most homeowners, the monthly mortgage payments
include three separate parts:
Principal: Repayment on the amount borrowed
Interest: Payment to the lender for the amount borrowed
Taxes & Insurance: Monthly payments are normally made into a
special escrow account for items like hazard insurance and
property taxes. This feature is sometimes optional, in which
case the fees will be paid by you directly to the County Tax
Assessor and property insurance company.
Q: Is there a real savings to
"no closing cost loan"?
A: No. Usually the lender will merely increase the interest
rate to offset the costs of waiving fees.
Q: What is a seller
concession?
A. A seller's concession is an agreement in a purchase
contract whereby the seller agrees to pay(from the proceeds
of their sale) some or even all of the buyers closing costs
to purchase the home. This allows a buyer to purchase with
less out of pocket expense.
Q: Does an Interest-Only
mortgage save me money?
A: Over the last several years we have seen a dramatic
increase in interest only options on traditional mortgages.
Although the payment will be lower during the interest only
period, it will increase following that period and actually
be higher than your normal mortgage payment. If this is also
coupled with an interest rate that adjusts, your new payment
can be significantly higher than the payment you have
currently. If you do not expect to remain in your home
longer than the interest only period, then you may benefit
from the lower initial payment, as long as your home value
remains stable so you are able to sell or refinance in the
future.
DISCLAIMER: The
information contained in this article on 'Mortgage FAQ's' is
a collection of contributions by licensed mortgage
professionals and is not the opinion of MSA Mortgage. Always
consult a licensed professional before applying for a
mortgage. |
