FAQ

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  • 1. What are “Discount Points”?
     

    We get this question a lot, and the simple explanation of it is that a “Discount Point” is a fee you can pay to lower the interest rate of your loan. Let’s say you are paying a point of 0.5 to lower your interest rate. The loan you are getting is for $150,000. This means that the cost of that 0.5 point would be $750. This is because one point equals to one percent of your loan amount. Since in the example above we only did 0.5 points that means you pay an extra 0.5% of the loan amount which comes out to $750. A lot of times it can be very beneficial to pay down your interest rate. A big component of making the decision is how long you plan on staying in the home. If you are only planning on staying for 3 years it might not make sense to use a discount point. If you are planning on staying for a long period of time then it could make sense to use a discount point. When you lower the interest rate your monthly payments will be lower, so if you stay long enough to save more than you paid upfront then it would be beneficial for you. It’s just about what is financially better for you.

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  • 2. What is an escrow account?
     

    An escrow account is an account that is made that will go toward your property taxes and homeowner’s insurance. Every month you make your monthly payment to your lender, and included in this payment is usually going to be money that will go to that escrow account. Then when property taxes are due the lender will make that payment for you with the money from that escrow account. You won’t worry about having to make that payment once a year. Same thing with homeowner’s insurance, whenever that is due the lender will make the payment from the escrow account. There are times the escrow account can be waived, it varies from lender to lender. That’s if you do want to make the payments yourself and not have to pay it through your monthly payment.

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  • 3. When will my first mortgage payment be?
     

    Your first mortgage payment will depend on when you close on your home. If you close in July then your first payment would be in September. The reason for this is that the monthly interest on the loan is paid in arrears. This means that for every monthly payment you are paying off the interest from the month before. So, when you close in July you will pay the interest due in July at closing which will be included in the closing costs and you can see it on the Loan Estimate. Then in August the interest will accrue and come September you will make your first payment on the mortgage. This payment will pay the interest from the month of August. This is standard practice in the mortgage industry.

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  • 4. What is a bi-weekly mortgage payment?
     

    When you opt to go with the bi-weekly payment option you actually pay more payments than you would with a monthly payment. There are 52 weeks in the year, so divided by 2 there are 26 pay periods. The payment is half of what the normal monthly payment would be but you actually make an extra payment a year. It could be a good option for you, it depends on what you are comfortable with. Also, not every lender offers this option. Many just prefer the standard monthly payment plan.

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  • 5. Why did I get a letter saying my loan has been transferred?
     

    When you receive a letter that says this it means that your mortgage was sold to another servicer. When that happens the new mortgage servicer will reach out to you and let you know they will be the ones collecting the payments and how to pay it. This is extremely common, and standard practice for most lenders. It’s nothing to worry about, nothing will change with your loan. It just means someone else will be collecting the payments. The only loans that don’t get sold to someone else are called “Portfolio” loans. This means that whoever is lending the money intends on keeping the loan themselves. These loans usually have a higher interest rate but they can be good for people who have unusual circumstances and wouldn’t be able to get a traditional mortgage. Bottom line is don’t worry if your loan has been sold, nothing will change with the loan. The only part that changes is where you send the payments to.

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  • 6. What is Mortgage Insurance?
     

    Mortgage insurance is insurance that will help protect the lender in case you stop paying your mortgage payment. This is a required payment when you are putting less than 20% down. On a conventional loan if you put less than 20% down there will be the mortgage insurance payment each month, and the lender will let you know how much that is from the beginning. Then when you reach a Loan-to-Value of 78% your monthly mortgage insurance will go away automatically. That is for a conventional loan, there are different rules with FHA, USDA, and VA. With FHA the mortgage insurance will last the life of the loan. Unless you put 10% down or more then the mortgage insurance can go away after 11 years. The USDA loan has what’s called an “annual fee” which is pretty much equivalent to mortgage insurance, but it is less than FHA. However, it still lasts the life of the loan. With VA loans there is no monthly mortgage insurance at all, and is a great program for those who have served our country.

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  • 7. What is Debt-to-Income?
     

    Debt-to-Income is one of the main tools we use to evaluate your finances and your ability to repay the loan. What we do is take your gross monthly income (before taxes) and use that as the income part, and any other income you have that will reflect on your taxes. The debt part comes from the proposed monthly payment on the loan and your other monthly payments such as credit cards and car payments. Then we divide that monthly debt amount by your gross monthly income to get a percentage back. For example, if you make $5,000 per monthly and the total debt we got was $2,000 that means your Debt-to-Income ratio is 40%. That number is a big part of what we look at to evaluate your ability to repay the loan.

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  • 8. What is Loan-to-Value?
     

    The Loan-to-Value ratio is the ratio of your total loan amount to the value of your home. If your total loan amount is $180,000 and the value of your home is $200,000 then the LTV (Loan-to-Value) is 90%. This number is important because it can determine a couple things about your loan. If your LTV is above 80% you will have to have mortgage insurance, and if you do have mortgage insurance it will drop off automatically when you reach 78% LTV.

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  • 9. How important is credit score?
     

    Your credit score is a huge part of getting a mortgage. If your credit score is below the necessary requirement then you wouldn’t be able to get a mortgage until it gets up to the requirement level. Even if you make $1,000,000 a month if your credit score isn’t high enough then you wouldn’t be able to qualify for that mortgage. However, just because your credit isn’t where it needs to be doesn’t mean there’s no hope. There’s several ways to get your credit score up and depending on your circumstance you could actually be really close to getting your credit score where it needs to be. It’s good to evaluate where you are at and develop some strategies of what you need to do, and we can help you do that if you’d like.

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  • 10. Why is my credit score different than what I pulled online?
     

    This is a very common question we get, because when we pull your credit many times it is different than what you might see when you look on sites such as Credit Karma. The credit score we use for qualifying is the middle score between the three scores we get from the three credit unions TransUnion, Equifax, and Experian. One of the main reasons the credit score we get is different is because the mortgage industry uses a different model for developing the credit score. It evaluates the credit report differently and then we normally get a different score from that. The score you pull online is from a consumer model that has its own way of evaluating the credit report.

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  • 11. Should I lock my interest rate?
     

    Locking your interest rate is an important decision to make, and you should consult with your lender on when to do so. Most times it makes sense to lock the rate, because then you won’t have to worry about the rate going up. The rate is based on the market and if something happens in the market that could negatively affect the interest rate then it would have been better to have locked the rate. There are very few times something will happen that could drastically affect the rate. The most recent time was the 2016 election, and after that the interest rates went up significantly. In normal circumstances there will be moves up and down but nothing too significant. The only time floating the rate can benefit is if there is something expected that could lower the interest rate. It is a risk though and something you need to talk to your lender about.

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  • 12. If I’ve filed bankruptcy in the past few years, will I still qualify for a mortgage loan?
     

    Yes, it's possible to get approved for a mortgage loan after a bankruptcy filing.Depending on the type of filing — Chapter 7 vs. Chapter 13 — and other factors, you may have to wait anywhere from two to four years before you can get another mortgage loan. Short sales and foreclosures are different. Give us a call to discuss your options.

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  • 13. What are some of the benefits of Government loans (FHA, VA, USDA Rural Housing)?
     

    Government backed loans have become an increasingly attractive option for borrowers. With the ease of qualification and enticing low interest rates, these loans provide many borrowers with access to affordable mortgages. There are FHA, VA, and USDA programs that require little or no down payments, no pre-payment penalties, and limited amounts of certain fees and charges the borrower must pay to establish the loan. These programs also have rates that are comparable to conventional loans.

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  • 14. How is my ARM rate determined?
     

    Adjusted Rate Mortgages have variable interest rates - interest rates that change on monthly basis depending on market conditions. Rates are determined by adding a margin to an index on a specific date.

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  • 15. How is my monthly mortgage payment applied to my mortgage loan?
     

    The amount of your payment that goes to your principal will change each month. At the beginning of your loan it will be a smaller amount, but as you make more payments the principal amount of each payment will increase. For example, the blue line of the graph is your interest payment, and the red line is the principal payment. So, each month your interest payment decreases while your principal payment increases. Your monthly payment on the loan will always stay the same, just the amount that goes to principal or interest will change.

    Image result for amortization graph

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  • 16. What is the difference between pre-qualification and pre-approval?
     

    Pre-qualification is a lender's judgment of your ability to make payments on your mortgage, based on your verbal statement of income, assets, and employment history. Pre-approval is the underwriting decision that you are conditionally qualified and is subject to the lender's review of your completed application, verification of your income, assets, employment history, credit check, appraisal and other determining factors.

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  • 17. Is there a fee to submit my application online?
     

    Absolutely not. The application is completely free, and a personal consultation is free.

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  • 18. Once I’ve submitted my application online, how long will it take before I know if I’ve been pre-qualified?
     

    Once you submit your online application, you will hear from one of our mortgage experts within 24 hours. We will review the file with you and depending on the complexity of your loan scenario we will be able to pre-qualify you very quickly. The pre-qualification is just a basic review of your information and qualifying you based on that. However, it does not guarantee you will be approved for the mortgage. Approval comes after an underwriter has reviewed it.

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  • 19. What is the difference between the interest rate and the annual percentage rate (APR)?
     

    The interest rate is the rate you agree to pay for your mortgage loan. It is used to determine the interest portion of your monthly payment. The annual percentage rate (APR) includes your interest rate and prepaid finance charges to give you an average yearly rate.

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