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Q.
Why did my realtor refer me to you?
A. A high quality realtor knows that the key to a successful
transaction means TEAMWORK with a professional mortgage banker. Any experienced
realtor could tell you horror stories about times when a client made a poor
choice of mortgage company, and ended up with big surprises at the closing
table, or worse, no closing taking place at all! A good realtor will form
relationships with trusted individuals who have proven themselves time and time
again, so that they know you will be given the excellent service that you
deserve. It is important to know that your realtor is NOT given any compensation
or "kickbacks" for referring you to a mortgage banker. As mortgage
professionals, we desire more referrals, both from you and your realtor, so
consider the extra motivation this provides for us to take great care with your
satisfaction!
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Q.
Why should I use a realtor?
A. First and foremost, because you need an experienced
professional working on your behalf. The realtor's commission is not paid by the
buyer, but by the seller of the home being purchased, and it is in each party's
best interest to have professional representation. As a seller, profits are
generally maximized by having an experienced realtor market and sell your home,
rather than deal with the headaches of trying to do it all on your own. See our
page on "selecting a realtor" for more information.
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Q. Why and how do interest rates change?
A. Many people are surprised to learn that rates change on a daily
and sometimes hourly basis. Interest rates fluctuate in response to changes in
the financial markets. The bond market is generally a good indicator of the
general trend of interest rates.
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Q. What
is title insurance?
A. It is a policy provided by the title company guaranteeing the
accuracy of the title work done on your home at the time of purchase. As a
buyer, you are required to purchase a lenders policy of title insurance as part
of your standard closing costs, which only protects the mortgage company. You
may also choose to purchase an owners policy, which would protect you against
any loss in the event of any legal issues relating to the title of your
home.
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Q. What is mortgage Insurance?
A. This is generally required in one form or another when the down
payment is less than 20%, and protects the lender in the event of loan default.
The lower the down payment, the higher the risk for the lender, and thus the
higher the monthly premium. Depending on your particulars, there are ways in
which mortgage insurance can sometimes be avoided at purchase, or dropped
altogether at some point in the future.
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Q.
How will I know how much I can qualify for?
A.A
Loan Officer can work with you to get you qualified BEFORE you look for a
home. Based upon information you present to the Loan Officer at the loan
application, they will determine the approximate amount of money that you
will be allowed to borrow. You will be "pre-qualified" for that loan amount.
By allowing your Loan Officer to run your credit report and verify your
assets and income, your loan application can be submitted to the underwriter
for a full credit approval. We can help you obtain a complete written credit
approval (subject to an appraisal) before you make an offer on a home, if
you desire.
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Q.
What are income and debt ratios?
A.The
Income Ratio is your total monthly housing expense divided by your gross monthly
income (before taxes). The Debt Ratio is your total monthly housing expense PLUS
any recurring debts (i.e. monthly credit card minimum payment, car payments, or
other loan payments) divided by your income. Standard underwriting suggest a
maximum guideline of 28% on the Income Ratio and 36% on the Debt Ratio, but
these ratios can vary based on the loan program, the financial strength of the
borrower and the down payment.
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Q.
What
are "Cash Reserves"?
A.Cash
Reserves are the funds a borrower has remaining after their loan funds. The
normal requirement could be monies equal to 2 months of the mortgage payment.
The amount of Cash Reserves varies by loan program, but larger reserves are a
strong compensating factor.
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Q.
What
is Mortgage Insurance?
A.Mortgage
Insurance insures lenders in the event of a borrower's foreclosure. It is paid
for by the borrower, and allows lenders to grant loans that they otherwise would
not consider. Depending on credit scores and loan structure, mortgage insurance
may be required when the down payment is less than 20%.
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Q.
What
does "loan to value" mean?
A.Loan
to value (LTV) is the loan amount divided by the lesser of the sales price or
appraised value. For example, if you are paying 15% of the total cost of the
home as a down payment, you would only be borrowing 85% of the total sales price
from the lender. Therefore your LTV would be 85%.
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Q.
How
do I "lock-in" my interest rate?
A.A
Loan Officer can "lock-in" the interest rate quoted, over the telephone during
their pre-qualification interview with you. We will provide you a written
Interest Rate and Price Determination Agreement which details the interest rate
and terms of the loan you have requested, as well as the period of time the rate
is locked. This may vary between 10 days and 60 days depending upon your
projected closing date.
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Q.
What do I need to bring to closing?
A.The
closing will take place at the title company. Each borrower will need to bring
a valid driver's license the day of closing. The funds due at closing must be
in the form of either a cashier's check made out to the title company or a wire
transfer. You may write a personal check up to $1,500.
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Q.
How much do I need to insure my home for?
A.It
is your responsibility to secure homeowner's insurance on the home you are
purchasing prior to closing. The minimum dwelling coverage required is the
lesser of either:
a) The total combined loan amount
or
b) The replacement cost on the appraisal
Because you may begin shopping for homeowner's insurance before the appraisal is
in, it may be necessary to begin gathering quotes with a minimum dwelling
coverage of the combined loan amount. You will be notified of the replacement
cost once your appraisal is in.
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Q.
What
is the Annual Percentage Rate on my Truth in Lending Document?
A. The
Annual Percentage Rate (APR) is the cost of your credit expressed as an annual
interest rate. Points and other prepaid finance charges are factored into the
APR to show the true yield on the loan, which is why the APR is often higher
than your note rate. The APR can be compared to the APR on other loan programs
to give you a consistent means of comparing rates and programs.
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Q.
Should I consult a financial planner before
deciding on a mortgage?
A.
Absolutely yes, if you can. Your mortgage is
usually your largest debt and in many cases becomes your largest asset so it
should definitely be an integral part of your overall financial plan. A
financial consultant in concert with you loan consultant can help you make the
best decision for your situation and align the mortgage with your financial
goals.
If you are not working with a
good financial planner we can help refer you to an experienced, reputable
representative.
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Q.
When should I consider refinancing?
A.
You should consider it every time you have a
change in your financial standing. This could be a raise at work, a bonus from
your job, an inheritance, a layoff, a large debt or any number of other
circumstances both good and bad that have an effect on your finances. All of
these can have an effect on your long and/or short term financial goals and
refinancing may be a tool to help achieve those goals. A competent and
professional loan consultant can work with you and your financial planner to
sort through your options.
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