FAQ
What is APR and how is it calculated?
APR stands for the Annual Percentage Rate and is a tool used to provide a standard of comparison for loans offered by competing lenders. APR takes into account the loan's interest rate, closing costs, and other fees such as points. An APR lets you see the total cost of a loan, including fees and points over the life of the loan, not just the interest due.
Will an appraisal be required for the property?
The simple answer to this question is yes. Whether you are buying a new home, selling your home, or refinancing your current mortgage lenders will almost always require an appraisal.
What types of problems generally cause closing delays?
Closing delays are commonly related to a failure to satisfy loan conditions or a buyer's delay in setting up their homeowner's insurance. The most common loan condition that will cause a delay is a borrower’s lack of documentation regarding the source of funds for the down payment and closing costs.
What is a fixed rate mortgage?
With this type of mortgage your interest rate will remain fixed for the entire life of the loan. This type of loan will provide you with the same payment amount every month until the loan is paid off.
What is an adjustable rate mortgage?
An adjustable rate mortgage is a loan in which the interest rate can move either up or down over the life of the loan. With this type of mortgage the interest rate will generally start low and increase the longer you have the loan.
What is pre-approval and do I need it?
Pre-approval is the process of getting a loan commitment from your mortgage company before you have found a home. The mortgage company will look at your credit and finances to pre-approve you. While you do not need a pre-approval letter it shows sellers that you’re a qualified buyer and it will give you one step up when you put an offer on a home.
What is Private Mortgage Insurance and will I have to pay it?
Private Mortgage Insurance (PMI) provides your lender with a way to recoup its investment if you are unable to repay your loan. PMI is usually required when the mortgage amount is higher than 80% of the home’s value. That means that if you buy a home with a down payment of less than 20%, you will probably have to pay PMI. Many people get around this by using an 80/20 program, which combines a first mortgage with home equity financing.
Should I lock my rate?
When you lock your interest rate your lender will guarantee that rate for a determined amount of time, no matter what the market does. Usually lenders will lock a rate for 30 to 60 days. If interest rates rise within that period, your lower interest rate is safe, and that is what you will pay on your loan. Talking with your mortgage lender will give you a better idea of whether you should lock your rate. They will usually keep up with current rates and know whether the interest rate is planning to rise or fall.
What will my mortgage payments include?
Your mortgage payment usually consists of two parts. The principal is the amount of money you are paying towards the amount borrowed. The interest is the amount of money you are paying to borrow the money. In the beginning of your mortgage you will pay more to interest and less to principal and as your mortgage progresses you will see a shift where more of the money is going to principal and less to interest.
What is a good faith estimate?
A Good Faith Estimate is an estimate
that outlines the costs you will incur
during the mortgage process. This is
provided to you when you apply for your
loan.
