The following questions below are those most frequently asked by consumers. Try out the on-line dictionary for more details:
Q: How much is the typical down payment?
A: There is no typical down payment because of the diverse nature of loans in mortgage finance. FHA (government insured) requires 3.5% down payment; VA (government guarantee-entitlement) is a zero down payment program; Conventional financing ranges from 3%+ down payment and with 20% down payment the borrower can avoid the monthly PMI (Private Mortgage Insurance) expense. These loan programs also require a closing cost in addition to the down-payment.
In today's market, there are down payment assistance programs so the buyer may only pay the closing cost associated with the best loan program.
Q: Why did I receive a Truth-in-Lending disclosure statement?
A: The TIL is a federal requirement to disclose the financial details of your loan transaction which includes amount financed and Annual Percentage Rate which represents the total cost of the borrowed amount. The APR is not related to the amount of your mortgage payments which are based upon the Promissory Note Rate.
Q: Can a non-citizen qualify and purchase a home?
A: The answer to this question depends upon the immigration status of the borrower. The immigration status determines the type of loan and documentation requirements for the mortgage loan. There are three situations that may apply.
Permanent residents with a green card may qualify for the same standards as citizens with Fannie Mae or FHA loans. Temporary residents with work visas are eligible for the same types of loans as permanent residents and citizens, including FHA loans with down payment assistance. There are some exceptions, such as a work visa that will expire within one year of applying for a mortgage loan.
Foreign nationals without the legal status to work in the U.S. are not eligible for government-insured or conventional loans but may qualify for a different type of loans. Foreign nationals typically purchase real estate in the U.S. for investment versus primary or permanent residence and often need a larger down payment.
Q: Should I get a fixed or adjustable interest rate?
A: There are a few factors to consider when making such a decision. It is suggested you contact one of our mortgage advisors to consider which would be best. However, fixed-rate mortgage payments provide stability and are good for the long term. Adjustable rate mortgages require the borrower to share some of the market risks of price fluctuations and therefore the payments change based upon a moving monetary index. Depending upon your overall investment goals, our job is to maximize your investment whether for a flip, long-term or your primary residence.
Q: Can I pay my loan off early without penalty?
A: The short answer is yes. Most loans for a primary or permanent residence will not have a prepayment penalty and can be paid off early. However, our minimum recommendation on a standard 30 year fixed rate mortgage is to make 13 annual payments which reduce the 30-year term to a 22-year term if done consistently. We suggest making 1/12 of the principal and interest payment each month. The result will be 13 annual payments each year. Consult our mortgage advisors for more detailed information.
Q: What is the difference between an FHA loan and a VA Loan?
A: An FHA loan is a government insured loan. The insurance is "Mortgage Insurance" and the borrower pays the premium which is a permanent part of an FHA loan obligation. MI is paid up front at the beginning of the loan and monthly so long as the borrower is obligated to make payments. MI is designed to protect the lender in case of loan default. A VA loan is a government guaranteed entitlement loan, which is similar to MI, but a specific amount is guaranteed by the VA and the veteran borrower is not obligated to pay MI like an FHA loan or a conventional loan with less than a 20% down payment.
Q: How do I know what my interest rate will be?
A: Your initial interest rate will be the prevailing market rate used to qualify you for a pre-approval. As the loan is processed, the interest rate may fluctuate which may modify your monthly mortgage payment. As soon as a property has been selected and you have an executed purchase contract (or if you are refinancing) the interest rate can be locked in for 15, 30, 45 or 60 days.
Once your interest rate has been locked in pending your loan closing, your interest rate will not change and you will know what your interest rate (promissory Note Rate) will be.
Q: What does points or origination fee mean?
A: One point is equal to one percent of the loan amount. An origination fee is usually one point of the loan amount and depending upon the type of loan, may represent commissions or revenue to the lender. Origination fees help pay the cost for the lender to do the loan.
Q: What is a mortgage LE and mortgage CD?
A: A loan estimate is a three-page form that you receive after applying for a mortgage loan. The LE is a form that provides you with important information, including the estimated interest rate, monthly payment and total closing cost for the loan. You may learn more here: The Loan Estimate
A Closing Disclosure form is a five-page document that provides final details about your mortgage loan. It includes the loan terms, your projected monthly payments and how much you will pay in fees and other costs to get your mortgage. You may learn more here: Closing Disclosure Statement
Q: How do I know if I need mortgage insurance?
A: Mortgage insurance is the insurance for a lender in case of mortgage loan default and foreclosure. The general rule is that mortgage insurance is required if your down payment is less than 20%. For FHA loans, MI is a requirement regardless of downpayment and is permanent for as long as you are obligated to make payments for an FHA loan. VA loans do not include MI because the entitlement is guaranteed by the government.
Q: How much money do I need in reserve after my mortgage loan closes? A: There isn't a reserve requirement for VA loans unless the property being purchased is a 3-4 unit investment (for rental) property and the income is used to qualify for the loan. In this case, the reserve requirement is six months of housing expense payments (PITI), plus three months reserves for each rental property owned that is not secured by a VA Loan.
There are no reserve requirements for an FHA loan purchase of 1-2 units properties. If the FHA purchase is for 3-4 unit properties typically the reserve requirement will be three months housing expense payments (PITI).
Otherwise, there are no reserve requirements for a primary residence.
Q: Where will I go for the closing of my loan? A: Your closing will take place at the escrow company, the lender's or broker's office, the title company or a closing agent will travel to your location. You will be advised where and when unless you request otherwise.
Q: What does it mean for me to waive escrows? A: Waiving an escrow account typically means, you take the responsibility of making the payments of your taxes and insurance separately rather than having them included with your monthly payments. This also means your monthly payment will be principal and interest (P&I) versus principle, interest, taxes, and insurance (PITI).
Q: Can I get a copy of my credit report and appraisal? A: Yes, we will assist you in getting a copy of your credit report. You will also receive a copy of the appraisal.
Q: Do I need to be pre-qualified before I begin searching for a home? A: While pre-approval is not a requirement, it is highly suggested for several reasons. First, pre-approval (not pre-qualification) places you on equal footing as a cash buyer. Second, pre-approval signals to the seller, you can close the transaction, whereas, all other things being equal, a seller may reduce the risk of a failed transaction by selecting the best-qualified buyer. Finally, pre-approval lets you know what your purchasing power and limits are so that you are prepared to make multiple and fast offers.