|
|
 |
|
 |
|
| 1. |
TOP 5 MISTAKES PEOPLE MAKE WHEN SHOPPING FOR A MORTGAGE Answer |
| 2. |
Glossary of terms Answer |
| 3. |
Escrow Accounts Answer |
| 4. |
Questions regarding PMI or Private Mortgage Insurance Answer |
| 5. |
Questions regarding "The Approval and The Closing" Answer |
| 6. |
What is the difference between "locking in" an interest rate and "floating"? Answer |
| 7. |
What is the difference between APR and interest rate? Answer |
| 8. |
What is an origination fee? Answer |
| 9. |
How do I get started? Answer |
| 10. |
If I close a loan with GOLD KEY MORTGAGE, who will I make my payment to? Answer |
| 11. |
What are GOLD KEY MORTGAGE's closing costs? Answer |
| 12. |
Are there any extra costs in using a mortgage broker? Answer |
|
Q
:
|
TOP 5 MISTAKES PEOPLE MAKE WHEN SHOPPING FOR A MORTGAGE |
|
A
: |
1. They don't look for the loan that fits their needs. Most people don't need a 30 year fixed rate mortgage. In fact most people don't keep their mortgage for more than five to seven years. There are a wide variety of programs available such as adjustable rate mortgages, balloon mortgages, pre-pay mortgages, negative amortization loans, 3-2-1 and 2-1 buydown program, etc. Every borrower has their own individual financing needs. At GOLD KEY MORTGAGE we find the loan that fits your needs.
2. They do not maximize the tax benefits available in a purchase, and they incorrectly assess the effects of the balance between interest rates and closing costs.
3. When purchasing a home, the buyer does not negotiate Seller Concessions into the Purchase Agreement. Call Gold Key Mortgage today and ask for my informative article on Seller Concessions, a powerful tool in the structuring of a home purchase.
4. They think that interest rate is the most important aspect of a mortgage. Although interest rates are important, people shopping for a mortgage should look at all aspects of a loan. Questions regarding closing costs, annual percentage rate (total effective rate of borrowing), and the terms of the loan are significant factors of who has the best deal. For example, one lender may have a low interest rate, but high closing costs, while another lender could have a higher rate but less closing costs.
5. They're not prepared. Typical borrowers don't have all their financial information gathered when they start the mortgage process. This hinders their loan process and often they become upset with the lender. On the following page you'll find a document checklist listing the usual required documents. For most borrowers the process should be swift, but without the correct information you are putting your quick loan approval at risk. Be sure to give your loan officer all account numbers, addresses, phone numbers, and your landlord(s) name, phone number(s) and address. Also write a brief explanation on any pertinent details regarding to credit that may be in question from a lender's perspective.
|
| |
|
Q
:
|
Glossary of terms |
|
A
: |
Glossary of Terms
Abstract of Title
A written history of ownership to a specific area of land. An abstract of title covers the period from the original source of title to the present time and summarizes all subsequent documents that have been recorded against that area.
ACH (Automatic Clearing House)
Electronic Drafting system that debits an authorized bank account and electronically transfers funds scheduled for remittance.
Acquisition Costs
Costs of acquiring property other than purchase price, for example, attorney fees, title insurance, lender's fees.
Addendum
An agreement or list that is added to a contract, agreement, or other document such as a letter of intent. FHA and VA require that an addendum be added to or incorporated in a sales contract, if it is written prior to the appraisal.
Additional Principal Payment
A payment by a borrower of more than the scheduled principal amount due in order to reduce the remaining balance on the loan.
Adjustable Rate Mortgage (ARM)
A mortgage in which the interest rate is adjusted periodically according to a pre-selected index.
Adjusted Gross Income
A person's total income, as reported on his or her IRS 1040 tax return form, after allowable contributions, deductions and expenses (alimony).
Adjustment Period
The period that elapses between the adjustment dates for an adjustable rate mortgage (ARM).
Agricultural Property
Unimproved property available for farming activities.
Alimony
Periodic payments made under a divorce decree or a written separation agreement toward the support of a former spouse.
American Land Title Association (ALTA)
A national association of title insurance companies, abstractors, and attorneys specializing in real property law. The association speaks for the title insurance and abstracting industry and establishes standard procedures and title policy forms.
Amortization
Payment of a debt in regular, periodic installments of principal and interest as opposed to interest only payments.
Amortization Schedule
A timetable for payment of a mortgage showing the amount of each payment applied to interest and principal and the remaining balance.
Annual Percentage Rate (APR)
A term used in the Truth-in-Lending Act to represent the percentage relationship of the total finance charge to the amount of the loan. The APR reflects the cost of your mortgage loan as a yearly rate. It will be higher than the interest rate stated on the note because it includes, in addition to the interest rate, loan discount points, fees and mortgage insurance.
Applicant
A prospective borrower who has completed an application. An application is series of steps, usually including the completion of documents, a lender requires of those seeking a loan.
Application
A printed form used by a mortgage lender to record necessary information concerning a prospective mortgage.
Application Fee
A sum of money paid towards estimated initial mortgage processing expenses such as appraisal and credit report.
Appraisal
A report made by a qualified person setting forth an opinion or estimate of property value. The term also refers to the process by which this estimate is obtained.
Appraised Value
An opinion of value reached by an appraiser based upon knowledge, experience, and a study of pertinent data.
Appraiser
A person qualified by education, training and experience to estimate the value of real and personal property.
Appreciation
An increase in the value of property due to either a positive improvement of the area or the elimination of negative factors. Commonly, and incorrectly, used to describe an increase in value through inflation.
Arm's-Length Transaction
Legal slang meaning that there existed no special relationship between the parties involved in any matter which would taint the result.
As Separate Property
Ownership in real property which is to be specifically excluded from community property.
Assessed Valuation
The value that a taxing authority places on real or personal property for the purpose of taxation.
Assessment
A charge against a property for purpose of taxation. This may take the form of a levy for a special purpose or a tax in which the property owner pays a share of the cost of community improvements according to the valuation of his or her property.
Assumable Mortgage
A mortgage that can be taken over (assumed) by the buyer when a home is sold.
Balloon Mortgage
A mortgage that has level monthly payments that will fully amortize it over a stated term, but which provides for a lump-sum payment to be due at the end of an earlier specified term.
Bankruptcy
A proceeding in a federal court in which a debtor, who owes more than his or her assets, can discharge personal liability for his or her debts. This affects the borrower's personal liability for a mortgage debt but not the lien of the mortgage.
Biweekly Mortgage
A mortgage with payments due every two weeks, totaling 26 payments a year.
Borrower
A person (also known as mortgagor) who receives funds in the form of a loan with an obligation to repay principal with interest.
Break-Even Point
The point at which total income is equal to total expenses.
Bridge Financing
A loan spanning the gap between the termination of one loan (generally short-term) and the start of another (generally permanent long-term) loan. Also referred to as gap financing.
Bridge Loan
A form of second deed of trust or mortgage that is collateralized by the borrower's present home (which is usually for sale) in a manner that allows the proceeds to be used for closing on a new house before the present home is sold.
Buydown
Money advanced by an individual (builder, seller, etc.) to reduce the monthly payments for a home mortgage either during the entire term or for an initial period of years.
Cash
Currency, checks and other negotiable instruments acceptable for direct deposit by a bank.
Cash to Close
Liquid assets that are readily available to be used to pay the closing costs involved in a closing of a mortgage transaction.
Cash Reserve
A requirement by some lenders that buyers have sufficient cash remaining after closing to make the first mortgage payment.
Cash Out Refinancing
When the principal amount of a new mortgage involved in refinancing is greater than the principal amount outstanding of the existing mortage being refinanced, and all or a portion of the equity is converted to cash.
Closing
The consummation of a real estate transaction. The closing includes the delivery of a deed, financial adjustments, the signing of notes, and the disbursement of funds necessary to complete the sale and loan transaction.
Closing Costs
Money paid by the borrower in connection with the closing of a mortgage loan. This generally involves an origination fee, discount points, appraisal, credit report, title insurance, attorney's fees, survey, and pre-paid items such as tax and insurance escrow payments.
Closing Statement
A form used at closing that gives an account of the funds received and paid at the closing, including the escrow deposits for taxes, hazard insurance, and mortgage insurance.
Co-Borrower
Additional borrower(s) whose income contributes to qualifying for a loan and whose name(s) appears on documents with equal legal obligations.
Collateral
Property pledged as security for a debt, such as the real estate pledged as security for a mortgage.
Collection
The servicing procedure followed to bring a delinquent mortgage current and to file the required notices to bring foreclosure when necessary.
Commitment (Loan)
A binding pledge made by the lender to the borrower to make a loan, usually at a stated interest rate within a given period of time for a given purpose, subject to the compliance of the borrower to stated conditions.
Commitment Fee (Loan)
Any fee paid by a potential borrower to a lender for the lender's promise to lend money at a specified rate and within a given time period.
Commitment Letter
A formal offer by a lender stating the terms under which it agrees to loan money to a homebuyer.
Deed
The legal document conveying title to a real property.
Deed of Trust
An instrument used in many states in place of a mortgage. Property is transferred to a trustee by the borrower (trustor), in favor of the lender (beneficiary) and reconveyed upon payment in full.
Default
The failure to perform an obligation as agreed in a contract.
Delinquency
A loan payment that is overdue but within the period allowed before actual default is declared.
DeMinimus PUD
A Planned Unit Development (PUD) in which the common property has less than a 2% influence upon the value of the premises. The 2% rule of thumb is calculated by dividing the dollar amount of amenities by the total number of units.
Department of Housing and Urban Development (HUD)
A governmental entity responsible for the implementation and administration of housing and urban development programs. HUD was established by the Housing and Urban Development Act of 1965 to supersede the Housing and Home Finance Agency.
Department of Veterans Affairs (VA)
A cabinet-level agency of the federal government. The Servicemen's Readjustment Act of 1944 authorized the agency to administer a variety of benefit programs designed to facilitate the adjustment of returning veterans to civilian life. Among the benefit programs is the VA Home Loan Guaranty program, which encourages mortgage lenders to offer long-term, no down payment financing to eligible veterans by partially guaranteeing the lender against loss upon foreclosure.
Deposit
A sum of money given to bind a sale of real estate. Also known as earnest money.
Depreciation
A loss of value in real property brought about by age, physical deterioration, functional or economic obsolescence.
Disclosure
Information relevant to specific transactions that is required by law.
Discount Point
A point paid to the lender to permanently buy down the or lower an interest rate. It is usually a percentage of the loan amount.
Discounted Loan
When the note rate on a loan is less than the market rate, it is a discounted loan. However, the lender requires additional points to raise the yield on the loan to the market rate.
Down Payment
Money paid to make up the difference between the purchase price and the mortgage amount.
Earnest Money
A portion of the down payment delivered with a purchase offer by the purchaser of real estate. Delivered to the seller, or an escrow agency, by the purchaser with the purchase offer as evidence of good faith. Also known as a deposit.
Easement
A right of way giving persons other than the property owner access to or over a property.
Effective Interest Rate
The actual rate of return or yield to an investor. The actual rate of interest paid by a borrower.
Encroachment
An improvement that illegally violates another's property or right to use that property.
Encumbrance
Anything that affects or limits the fee simple title to property, such as mortgages, liens, leases, easements, or restrictions.
Equal Credit Opportunity Act (ECOA)
A Federal law requiring lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, sex, age, marital status, receipt of income from public assistance programs or past exercising of rights under the Consumer Credit Protection Act.
Equity
The ownership interest; i.e. portion of a property's value over and above the liens against it.
Equity Loan
A loan based on the borrower's equity in his or her home.
Escrow
An item of value, money or documents, deposited with a third party, to be delivered upon the fulfillment of a condition. For example, the deposit by a borrower with the lender of funds to pay taxes and insurance premiums when they become due, or the deposit of funds or documents with an attorney or escrow agent to be disbursed upon the closing of a sale of real estate. In some parts of the country, escrows of taxes and insurance premiums are called impounds or reserves.
Escrow Account
The segregated trust account in which escrow funds are held.
Escrow Agent
The person or organization having a fiduciary responsibility to both the buyer and seller (or lender and borrower) to see that the terms of the purchase/sale (or loan) are carried out. Also called escrow company or escrow depository.
Escrow Payment
That portion of a mortgagor's monthly payments held by a lender or servicer to pay taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Also called impounds or reserves in some states.
Fair Credit Reporting Act (FCRA)
This law requires consumer reporting agencies to exercise fairness, confidentiality and accuracy in preparing and disclosing credit information.
Federal Home Loan Mortgage Corporation - FHLMC (FREDDIE MAC)
A quasi-governmental agency that purchases conventional mortgages in the secondary mortgage market from insured depository institutions and HUD-approved mortgage bankers. It sells participation sales certificates secured by pools of conventional mortgage loans, their principal, and interest guaranteed by the federal government through the FHLMC. It also sells Government National Mortgage Association bonds to raise funds to finance the purchase of mortgages. Popularly know as Freddie Mac.
Federal National Mortgage Association - FNMA (FANNIE MAE)
A taxpaying corporation created by Congress to support the secondary mortgage market. It purchases and sells residential mortgages insured by the Federal Housing Administration (FHA) or guaranteed by the Veterans Administration (VA) as well as conventional home mortgages.
Fee Simple
The greatest possible interest a person can have in real estate, including the right to dispose of the property or pass it on to one's heirs.
First Mortgage
A real estate loan that has priority over any subsequently recorded mortgages.
Fixed Interest Rate
An interest rate which does not change during the loan term.
Fixed-rate Mortgage (FRM)
A mortgage in which the interest rate and payments remain the same for the life of the loan.
Foreclosure
A legal procedure in which property mortgaged as security for a loan is sold to pay the defaulting borrower's debt.
Gift Letter
A written explanation signed by the individual giving the gift stating, "This is a bona fide gift and there is no obligation expressed or implied to repay this sum at any time."
Ginnie Mae
Created in 1968 by an amendment to Title III of the National Housing Act (12 USC 1716 et seq.), this federal government corporation is a constituent part of the Department of Housing and Urban Development. Among other governmental functions, it guarantees securities backed by mortgages that are insured or guaranteed by other government agencies. Also called Government National Mortgage Association (GNME).
Good Faith Estimate (GFE)
A document which tells borrowers the approximate costs they will pay at or before settlement, based on common practice in the locality. Under requirements of the Real Estate Settlement Procedures Act (RESPA), the mortgage banker or mortgage broker, if any, must deliver or mail the GFE to the applicant.
Gross Income
Total income produced by a property before any expenses are deducted.
Gross Monthly Income
Total monthly income earned before tax and other deductions.
Hazard Insurance
A contract whereby an insurer, for a premium, undertakes to compensate the insured for loss on a specific property due to certain hazards (i.e. fire).
High-Ratio Loan
Mortgage loans in excess of 80 percent of the loan amount divided by the lower of the sales price or appraised value.
Home Equity Line of Credit
A form of revolving credit in which your home serves as collateral.
Home Equity Loan
A revolving line of credit or loan based on the equity in the mortgagor's house. The property is the security for the loan, which is usable for any purpose.
Homeowners' Association Dues
The fees imposed by a condominium or homeowners' association for maintenance of common areas.
Home Mortgage Disclosure Act (HMDA)
Federal legislation which requires certain types of lenders to compile and disclose data on where their mortgage and home improvement loans are being made.
Homeowner's Insurance
An insurance policy that combines liability coverage and hazard insurance.
Homeowner's Policy
A multiple peril insurance policy available to owners of private dwellings which covers the dwelling and its contents, as well as personal liability.
Housing Expense Ratio
The relationship of a borrower's monthly payment obligation on housing (PITI and other applicable housing expenses) divided by gross monthly income, expressed as a percentage. Also called the top ratio.
Income/Expense Ratio
A qualifying ratio used in underwriting a residential mortgage loan which computes the percentage of monthly income required.
Index
A published interest rate, such as the prime rate, LIBOR, T-Bill rate, or the 11th District COFI. Lenders use indexes to establish interest rates charged on mortgages or to compare investment returns. On ARMs, a predetermined margin is added to the index to compute the interest rate adjustment.
In File Credit Report
Unverified credit report which may contain unchecked, duplicated, or overlapping data. It is often used for a quick look at a prospective borrower's credit history.
Installment
The periodic payment that a borrower agrees to pay a mortgage lender.
Insured Loans
A loan insured by HUD-FHA or a private mortgage insurance company.
Interest
Consideration in the form of money paid for the use of money. Also a right, share or title in property.
Interest Rate
The percentage of an amount of money which is paid for its use for a specified time.
Interest Rate Cap
A provision of an ARM limiting how much interest rates may increase per adjustment period. See also Lifetime cap.
Interest Rate Floor
On a floating rate instrument, the lowest the interest rate may go.
Investment Property
Real estate owned with the intent of supplementing income and not intended for owner occupancy.
Joint Tenancy
An undivided interest in property, taken by two or more joint tenants. Upon the death of a joint tenant, the interest passes to the surviving joint tenants, rather than to the heirs of the deceased.
Judgment
Final determination by a court of the rights and claims of the parties to an action.
Land Acquisition Loan
A loan made for the purpose of purchasing land only, not improvements on or to the land. Also called an acquisition loan.
Late Charge
The penalty a borrower must pay when a payment is made after the due date.
Lender Paid Mortgage Insurance (LPMI)
Insurance in which the cost of the mortgage insurance is included in the interest rate. Although the interest rate is slightly higher with LPMI, this option usually results in a lower monthly payment and a larger tax deduction.
Lien
A legal claim or attachment against property as security for payment of an obligation.
Lifetime Cap
A provision of an ARM that limits the total increase in interest rates over the life of the loan.
Limited Partnership
A form of business ownership that consists of one or more general partners who are fully liable, and one or more limited partners who are liable only for the amount of their investment.
Line of Credit
An agreement by a commercial bank or other financial institution to extend an open-ended line of credit up to a certain amount for a certain time to a specific borrower. (See also home equity line of credit.)
Liquidity
The ability to readily convert assets or investments to cash.
Loan-To-Value Ratio
The ratio between the amount of a given mortgage loan and the lower of sales price of appraised value.
Lock-in Period
The number of days during which a lender guarantees a borrower a specific interest rate and terms on a mortgage.
London Interbank Offered Rate (LIBOR)
The rate at which banks in the foreign market lend dollars to one another. LIBOR varies by deposit maturity. A common interest rate index; one of the most valid barometers of the international cost of money.
Loss Payable Clause
An insurance policy provision for payment of a claim to someone other than the insured, who holds an insurable interest in the insured property.
Manufactured Home
Factory-built or prefabricated housing, including mobile homes.
Margin
The set percentage the lender adds to the index rate to determine the interest rate of an ARM.
Market Value
The most probable price which a ready, willing and able buyer would pay and a willing seller will accept, both being fully informed under no pressure to act. The market value may be different from the price a property can actually be sold for at a given time (market price).
Maturity
The termination or due date, on which final payment on a loan must be paid in full.
Mobile Home
A factory-assembled residence consisting of one or more modules, in which a chassis and wheels are an integral part of the structure, and can be readied for occupancy without removing the chassis and/or wheels.
Modular House
A factory-assembled residence built in units or sections, transported to a permanent site and erected on a foundation. Excludes mobile homes.
Monthly Payment
Usually, the amount of PITI (principal, interest, taxes, and insurance) paid each month on a mortgage loan.
Mortgage
The conveyance of an interest in real property given as security for the payment of a loan.
Mortgage Broker
A company that helps customers find the very best program to fit their needs.
Mortgage Commitment
An agreement between lender and borrower detailing the terms of a mortgage loan such as interest rate, loan type, term and amount.
Mortgagee
The lender on a mortgage transaction.
Mortgage Insurance
See private mortgage insurance.
Mortgage Insurance Premium (MIP)
The consideration paid by a mortgagor (borrower) for mortgage insurance -either to the FHA or to a private mortgage insurer.
Mortgage Note
A written promise to pay a sum of money at a stated interest rate during a specified term. The note contains a complete description of the conditions under which the loan is to be repaid and when it is due.
Mortgagor
The borrower in a mortgage transaction who pledges property as security for a debt.
Negative Amortization
A loan payment schedule in which the outstanding principal balance goes up, rather than down, because the payments do not cover the full amount of interest due. The unpaid interest is added to the principal.
Non-Conforming Loan
Conventional home mortgages not eligible for sale and delivery to either FNMA or FHLMC because of various reasons, including loan amount, loan characteristics or underwriting guidelines.
Note
A general term for any kind of paper or document signed by a borrower that is an acknowledgment of the debt, and is, by inference, a promise to pay. When the note is secured by a mortgage, it is called a mortgage note and the mortgagee is named as the payee.
Occupancy
The use of a property as a full-time residence, either by the title holder (owner-occupancy) or by another party through a formal agreement (rental).
Origination
Securing a completed mortgage application from a commercial or residential borrower.
Origination Fee
The amount charged for services performed by the company handling the initial application and processing of the loan.
Payoff Figures
The unpaid principal balance and escrow amounts to be used for payment in full of the mortgage or for closing sale of the property.
Percentage Point
One percent of the loan or a measure of the interest rate.
PITI (Principal, Interest, Taxes, and Insurance)
The most common components of a monthly mortgage payment.
Planned Unit Developoment (PUD)
A comprehensive development plan for a large land area. A PUD usually includes residences, roads, schools, recreational facilities, commercial, office and industrial areas. Also, a subdivision having lots of areas owned in common and reserved for the use of some or all of the owners of the separately owned lots. See also DeMinimus PUD
Plans And Specifications
Architectural and engineering drawings and specifications for construction of a building or project. They include a description of materials to be used and the manner in which they are to be applied.
Points
A one-time charge by the lender to increase the yield of the loan; a point is 1% of the amount of the mortgage.
Power of Attorney
A legal document authorizing one person to act on behalf of another.
Preliminary Title Report
The results of a title search by a title company prior to issuing a title binder or commitment to insure clear title.
Prepaids
Closing costs related to the mortgage loan which are collected at loan closing - including per diem pre-paid interest and initial deposits of monthly escrows of taxes and insurance.
Prepayment Penalty
A fee charged to a borrower who pays off a loan before it is due.
Prequalification
The process of determining how much money a prospective home buyer will be eligible to borrow before a loan is applied for.
Primary Residence
A residence which the borrower intends to occupy as the principal residence.
Principal
The amount borrowed or remaining unpaid; also, that part of the monthly payment that reduces the outstanding balance of a mortgage.
Principal Balance
The remaining balance due on a debt, exclusive of accrued interest.
Private Mortgage Insurance
Insurance written by a private company protecting the mortgage lender against loss resulting from a mortgage default.
Processing
The preparation of a mortgage loan application and supporting documentation for consideration by a lender or insurer.
Purchase Contract (Agreement/Offer)
An agreement between a buyer and seller of real property, setting forth the price and terms of the sale. Also known as a sales contract.
Qualifying Ratios
Guidelines applied by lenders to determine how large a loan to grant a home buyer.
Quitclaim Deed
A deed relinquishing all interest, title, or claim an owner has in a property. A quitclaim deed implies no warranty.
Rate Lock Option
An agreement guaranteeing an individual a specified interest rate on a loan provided the loan is closed within a set period of time.
Real Assets
Real estate or real property owned by an individual or business.
Real Estate Settlement Procedures Act (RESPA)
A federal law requiring lenders to provide home mortgage borrowers with information on known or estimated settlement costs. It also establishes guidelines for escrow account balances.
Real Property
Land and that which is affixed to it.
Refinancing
The repayment of a debt from the proceeds of a new loan using the same property as security.
Satisfaction of Mortgage
The recordable instrument issued by the lender verifying full payment of a mortgage debt.
Second Home (Vacation Home, Weekend Home)
A residence other than the borrower's primary residence which the borrower intends to occupy for a portion of each year. Must be suitable for year-round occupancy.
Secondary Mortgage Market
A market where existing mortgages are bought and sold. It contrasts with the primary mortgage market where mortgages are originated.
Second Mortgage
A mortgage that has rights that are subordinate to the rights of the first mortgage holder.
Security
In lending, the collateral given, deposited, or pledged to secure the payment of a debt.
Security Instrument
Mortgage or deed of trust evidencing the pledge of real estate as collateral for the loan.
Security Interest
The interest of a creditor in the security collateralizing an investment.
Section 203(k) Loan Program
HUD's primary program for the rehabilitation and repair of single-family properties. A 203 (k) loan is a first mortgage that covers the costs of rehabilitation and purchase or refinance of an eligible property. The goals of the Section 203(k) loan program are community and neighborhood revitalization and expanded opportunities for homeownership for low-and moderate-income families.
Seller Contributions
Payment by the seller or any other interested party of some or all of the purchaser's usual closing costs. Investors and insurers sometimes limit the amount of seller contribution and require lenders to adjust the property's value if contributions exceed limitations. Undisclosed seller contributions (such as decorating allowances, appliances, or payment of moving expenses) are made to borrowers outside of closi |
| |
|
Q
:
|
Escrow Accounts |
|
A
: |
What is an escrow account?
An escrow account is typically established at the time you close your mortgage loan. This account is held by the lender for the future payments of recurring items relating to the mortgaged property, such as real estate taxes and insurance premiums, as they become due. Lenders usually require you to pay an initial amount for each of those items to start the reserve account at the time of closing.
Are there any limitations on how much lenders can collect from a borrower for the borrower's escrow account?
Lenders and servicers are required to follow the standards set forth in the Real Estate Settlement Procedures Act (RESPA) and applicable state law. RESPA and some states set limits on the amount which can be collected by the lender or servicer to pay for escrow items, such as property taxes and insurance, and place a cap on the amount of the reserve. Reserves are funds that a servicer may require a borrower to pay into an escrow account to cover unanticipated disbursements which will need to be made before the borrower's payment is available in the escrow account. There are limits on the additional amounts that can be collected as reserves.
|
| |
|
Q
:
|
Questions regarding PMI or Private Mortgage Insurance |
|
A
: |
What is PMI and why is it required?
Private mortgage insurance (PMI) is insurance written by a private company that protects the lender from losses in the event the borrower defaults on the mortgage. Borrowers are required to pay the premium for private mortgage insurance. Private mortgage insurance limits a lender's exposure to financial loss resulting from loan default. If you make a down payment of less than 20%, even if you have a good credit profile, lenders generally require private mortgage insurance.
What is the minimum down payment required by a lender in order to eliminate PMI?
Typically, on a primary residence, the minimum that you need to put down to eliminate PMI is 20%. If you are putting less than this down, but wish to avoid PMI, your lender may have alternative products and pricing options they may offer in lieu of PMI.
How long will I be required to have PMI on my loan?
The Homeowner's Protection Act of 1998 allows borrowers whose loans originated after July 29, 1999, to request cancellation of pmi at 80% loan to value (LTV) based on amortization or actual payments if the borrower has a good payment history, if the borrower provides evidence the property value has not decreased, and certifies there are no subordinate liens on the property. Lenders are required to terminate borrower paid pmi at 78% LTV based on the amortization schedule if the loan is current. If none of the above is done, pmi will terminate automatically at the midpoint of the loan term.
For loans originated prior to July 29,1999, PMI guidelines will vary from lender to lender and can change at any time. Some investors will not allow the cancellation of PMI. Typically, PMI is required on your loan for a minimum of 24 consecutive payments absent any law to the contrary. After that time, if you have 20% or more equity in your property and meet certain other conditions, you may request to have it removed. Typically, there is no guarantee that your PMI will be removed, and most loan investors will require a new appraisal at your expense prior to removing PMI.
Do lenders offer any alternative to mortgage insurance?
Some lenders offer alternative options other than purchasing PMI. Under these programs, a premium may be added to the interest rate. This could be a benefit as private mortgage insurance is generally not tax deductible and mortgage interest may be. You may wish to consult with a tax advisor or an accountant for information and advice on this matter. Lender-paid private mortgage insurance (LPMI) differs from Borrower paid mortgage insurance (BPMI) in that it may not be cancelled, usually has a higher interest rate than BPMI and may be tax deductible. Lenders must disclose a 10 year generic analysis comparing LPMI and BPMI at loan commitment.
|
| |
|
Q
:
|
Questions regarding "The Approval and The Closing" |
|
A
: |
How long does it take to obtain loan approval?
Most loans closed by Gold Key Mortgage can be approved virtually instantly.
How long will it take to close?
Typically, 30 days is a good time frame to allow from application to close. Contact Gold Key Mortgage as soon as you are considering a purchase or refinance and we will help you close your loane in the time frame you would like.
If I refinance my loan with my existing lender, will I have to pay all the closing costs again?
Typically, yes, as there is a cost to process any new loan application. This cost may include fees paid to third parties, such as the appraisal provider and the title and closing providers.
Will the lender agree to include my closing costs in the loan amount?
On a purchase transaction, you typically cannot finance your closing costs into the loan amount. Some lenders do, however, have special programs under which you may be able to finance some, or all, of the costs by agreeing to a slightly higher interest rate. Also, if you are refinancing, you may be able to refinance some, or all, of your closing costs.
How quickly can a lender close on my home loan?
Many lenders can facilitate closing 2 to 3 weeks after you have agreed on a purchase contract for a home. If you need more time, you can take as long as you need, while still closing prior to any rate lock expiration dates. Many lenders require 30-60 days from purchase contract and application to closing.
Can I close on a home without having to be at the closing table?
Many lenders are willing to accommodate what is termed a "mail away" closing.You may also appoint someone to act for you by using a Power of Attorney. In this scenario, you would actually assign someone to sign on your behalf. Each state has its own specific requirements, so please check with your closing agent for state specific requirements. If you select a "mail away," the lender will coordinate overnight delivery of the documents to ensure a timely closing. Please note this process may require some additional coordination time.
What is direct billing?
A direct billing program allows a relocation lender to pay all the non-recurring closing costs on your behalf and, in turn, bill them directly to your employer. This makes the closing process easier and reduces the out-of-pocket expenses you are responsible for at the time of closing. Direct billing is only available in certain situations.
How much money will be required at closing?
You should consult with your individual lender and closing agent; however, the amount of money needed for cash to close is comprised of your down payment, closing costs, as well as the prepaid items for your initial taxes and insurance escrow accounts. A lender is required to provide you with a good faith estimate of settlement costs at the time of application. Also, typically within 24 hours prior to your closing, the closing agent will provide you with the final sum of money required for the closing.
Does the lender require title insurance for purchase transactions?
Yes, a Mortgagee's Title Insurance Policy will be required on purchase transactions.
What homeowner's insurance requirements will I need to meet at closing?
Most lenders require a one-year paid receipt for homeowner's insurance policy for at least the amount of the mortgage at the loan closing.
|
| |
|
Q
:
|
What is the difference between "locking in" an interest rate and "floating"? |
|
A
: |
If you are concerned that interest rates may rise during the time your loan is being processed you can "lock in" the current rate for a short time, usually 15, 30, 45 or 60 days. When you "lock in" to an interest rate, you are guaranteed that rate for that agreed upon length of time. The benefit is the security of knowing the interest rate is fixed if interest rates should increase. If you are locked in and rates deacrease, you will not usually get the benefit of the decrease in interest rates. If you choose to "float" or defer locking in an interest rate, your rate will fluctuate with the market and will be subject to both upward and downward trends in the market. The benefit to floating the interest rates were to decrease, you would have the option of locking into a lower rate. |
| |
|
Q
:
|
What is the difference between APR and interest rate? |
|
A
: |
The APR (annual percentage rate) reflects the cost of your mortgage loan as a yearly rate. It also incorporates the cost to obtain the loan, such as discount fees and the loan origination fee. The interest rate is the actual note rate. |
| |
|
Q
:
|
What is an origination fee? |
|
A
: |
The amount charged for services performed by the company handling your mortgage loan |
| |
|
Q
:
|
How do I get started? |
|
A
: |
Call today at 515-253-9475, or fill out our online application (see Home Page - Apply Now). Our trained mortgage specialists can Pre-Qualify you over the phone and give you a list of documents required to be Pre-Approved by one of our lenders.
Or fill out our online application (see Home Page). We will contact you within 24 hours after receiving the application. |
| |
|
Q
:
|
If I close a loan with GOLD KEY MORTGAGE, who will I make my payment to? |
|
A
: |
Your payment will be made to the lender who had the best loan product to fit your needs. At closing you'll be given a customer service phone number and the lender will send you a payment coupon book or they will offer a direct deposit option to have your payment automatically sent from your bank account.
|
| |
|
Q
:
|
What are GOLD KEY MORTGAGE's closing costs? |
|
A
: |
Our closing costs are very competitive with other lenders in the community and are a direct reflection to the type of loan the customer is acquiring. For instance, some lenders may charge lower fees on certain types of loans and higher fees on others. To obtain a Good Faith Estimate on the specific closing costs a particular loan call your loan officer today!
|
| |
|
Q
:
|
Are there any extra costs in using a mortgage broker? |
|
A
: |
No. We originate mortgages on behalf of over 50 lenders at no additional cost to you! |
| |
|
|
|
|