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Are you getting the Best Home Loan?
Frequently Asked Questions
Ask My Own Question:
You will find most of your mortgage questions in this section. However, if you still need to ask something use following form to contact to mortgage experts:
What is an adjustable loan?
It is a loan that has interest rates that adjust based on Financial Index. For instance one of the indexes is LIBOR (London Inter Bank Offered Rate) an international index. If this index is higher than the rate will be higher, if it is lower than the rate will be lower.
How do adjustable loans work?
These loans generally begin with an interest rate that is 2-3 percent below a comparable fixed rate mortgage, and could allow you to buy a more expensive home.
The interest rate changes at specified intervals (for example, every year or 6 months) depending on changing market conditions; when interest rates go up, your monthly mortgage payment will go up, too. However, when rates go down, your mortgage payment will drop also.
There are also some adjustable-rate loan programs in which rate is fixed for three-year, five-year, seven-year and 10-year periods, respectively, but may adjust annually after that.
What is APR?
APR (Annual Percentage Rate) is a measurement of the full cost of a loan including interest and loan fees expressed as a yearly percentage rate. Because all lenders apply the same rules in calculating the annual percentage rate, it provides consumers with a good basis for comparing the cost of loans.
What are points?
Prepaid interest charged at closing by the lender to reduce your interest rate. Each point is equal to 1 percent of the loan amount (e.g., two points on a $400,000 mortgage would cost $8,000).
What are the loan costs?
Loan costs are expenses, which are over and above the price of the property that are incurred by buyers and sellers when transferring ownership of a property. Closing costs normally include an origination fee, property taxes, charges for title insurance and escrow costs, appraisal fees, etc. Closing costs will vary according to the area country and the lenders used.
What is interest only mean?
An interest-only payment is one that only requires that you pay the interest portion of a payment. None of the interest-only payment is applied the principal unless you decide to pay more towards the principle, but it is your option to pay only the minimum due, which is the interest-only payment.
What are “pre payment penalities?
A charge a borrower pays to prepay a loan before it is due. A pre-payment penalty is a penalty charged if the mortgage loan is paid off in its entirety earlier than the specified term of the loan (Usually from 1-5 years). Pre-payment penalties are calculated as a percentage of the outstanding balance (Usually equals about 6 months worth of interest) at the time the loan is paid off or as a certain number of months of interest and go away after the specified time.
Fixed Rate Mortgages
The most common type of mortgage program where your monthly payments for interest and principal never change.
Adjustable Rate Mortgages (ARM)
These loans begin with an interest rate that is lower than a comparable fixed rate mortgage, but the rate changes at specified intervals.
Standard ARMS and the Differences
Choosing an ARM with an index that reacts quickly lets you take full advantage of falling interest rates.
Introductory Rate ARM's
Most ARM's have a low introductory rate, which is good anywhere from 1 month to as long as 10 years.
Reverse Mortgages
A Special type of loan made to older homeowners (typically 62 +) to enable them to convert the equity in their home to cash to finance other needs.
London Inter Bank Offered Rate (LIBOR)
LIBOR is the rate on dollar-denominated deposits, also know as Eurodollars, traded between banks in London .
Balloon Mortgages
Short term mortgages that have some features of a fixed rate mortgage.
Interest Rate Buydowns
The buyer would pay points above current market points in order to pay a below market interest rate during the first two years of the loan. At the end of the two years they would then pay the old market rate for the remaining term.
Cost of Funds Index (COFI)
The ratio of the dollar amount paid in interest during the month to the average dollar amount of the funds for that month constitutes the weighted average cost of funds ratio for that month.
Graduated Payment Mortgage (GPM)
With a GPM the payments are usually fixed for one year at a time.
Choosing The Best Program
The right type of mortgage for you depends on many different factors
Two Key Factors in Qualifying for a Home Loan
When a lender makes a decision about a mortgage application, they consider two basic factors: your ability and willingness to repay the loan.
Mortgage Terminology
A glossary of mortgage terminology.
Economic Terminology
A glossary of economic terminology.
RESPA (Real Estate Settlement Procedures Act)
This law protects consumers from abuses during the residential real estate purchase and loan process and enables them to be better informed shoppers by requiring disclosure of costs of settlement services.
Annual Percentage Rate (APR)
In comparing any type of loan, whether it be a fixed rate loan to a fixed rate loan, adjustable rate loan to adjustable rate loan or fixed rate loan to adjustable rate loan, there is one way that can be used to compare apples to apples and even apples to oranges.
Choosing A Mortgage Company
When you are ready to shop for a loan, you can work directly with a lender or with a mortgage broker representing many individual lenders.
Your Initial Meeting With A Lender
The loan approval process generally begins with an initial interview where you and the mortgage professional meet to discuss the potential loan. You will need to bring information to verify your income and long-term debts.
After The Mortgage Application
Your mortgage company will begin the work of verifying all the information you've provided. This process can take anywhere from one to four weeks, depending on the type of mortgage you choose, whether you're buying a home outside your local community, or a host of other factors.
Speed Up The Mortgage Process
Once complete, your application will be given to a processor in the mortgage company who will organize your paperwork and may verify your employment, bank balances, and other information.
Escrow Account Basics
Mortgage escrow accounts are special accounts set up in which money is held to pay for property taxes, fire and hazard insurance premiums, mortgage insurance premiums, and other escrow items.
Real Estate Transaction Forms
Mortgage Application, Good Faith Estimate, Truth in Lending and other pdf documents.
Refinance Considerations
When you're making your decision, there are several things in mind.
Refinance Once Then Do It Again
When rates fall steadily, refinancing may make sense even if you have done so once already. Bob and Michelle Barbo of Kirkland, Wash. refinanced twice within three months in 1998.
Build Home Equity Faster
Many borrowers use a refinance to shorten the term of the mortgage. And brace yourself: Even at low rates, a shorter term means a higher monthly payment. The benefit is that you'll build up equity faster and pay far less in total interest over the life of the loan.
Get Your Hands on Some Cash
Another way to make a refinance work for you is to refinance for more than the balance remaining on your old mortgage -- in effect, tapping your home equity, or "cashing out," in mortgage speak.
Trade Your ARM For a Fixed Rate
By switching to a fixed-rate loan, you will not only reduce your payment, you will also likely lock in an attractive rate for as long as you own your home.
Mortgage Refinance Costs
When you refinance your mortgage, you usually pay off your original mortgage and sign a new loan. With a new loan, you again pay most of the same costs you paid to get your original mortgage.
Analyze Your Savings
Check the market closely to determine the available rates and the costs associated with refinancing. These costs can include items such as an appraisal and other various fees and points.
Paying Points For a Lower Rate
In refinancing, a mortgage company usually offers a range of interest rates at different amounts of points. A point equals one percent of the loan amount. For example, three points on a $100,000 mortgage loan would add $3,000 to the refinancing charges.
Your Personal Income Taxes
With a lower interest rate on your home loan, you will have less interest to deduct on your income tax return. That, of course, may increase your tax payments and decrease the total savings you might obtain from a new, lower-interest mortgage.
Consider Other Mortgage Programs
If you are thinking about refinancing your mortgage, you might want to consider other types of mortgages. For example, you might want to look into a 15-year, fixed-rate mortgage.
Deciding To Refinance
Traditionally, the decision on whether or not to refinance has meant balancing the savings of a lower monthly payment against the costs of refinancing. But in recent years, companies have introduced "no cost" and low-cost refinancing packages that minimize ...
Refinance Calculator
Calculate your refinance savings.
