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Frequently Asked Questions
Find answers to common questions
What is a closing?
Closing" is the date when the buyer, seller, and lender, or their agents,
agree to meet and legally transfer the property and disperse all the funds, or
reference the property.
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What are closing costs?
"Closing costs" are the costs associated with the transfer of
property. They may be costs such as discount points, appraisal fees, title
search fees, insurance charges, survey charges, mortgage brokers fees, and state
filing fees. Typical costs amount to approximately 2% and 3% of the mortgage
amount.
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What happens at closing?
The seller, buyer, and lender, or their agents, meet and legally transfer the
property, and associated funds, between parties.
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How often do I have to make mortgage
payments?
Depending on the lender you choose, payments will be monthly, biweekly, or
weekly.
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What is foreclosure?
"Foreclosure" is a legal action undertaken by a lender to sell a
mortgaged property, in order to pay a defaulted borrower's debt.
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Does it make sense to pre-pay my
mortgage or should I invest that money elsewhere?
Pre-paying your mortgage shortens the term of your loan which will save you
thousands of dollars in interest. As a general rule, on a 30-year mortgage, you
save $3 for every $1 you pre-pay. On an after-tax basis, you get back $2 for
every $1 you pre-pay. Pre-paying your mortgage is an easy, risk-free investment.
Even if you round your monthly payment up to the nearest $100, it will save you
money over the long term.
If your mortgage rate is 8 percent per year, that's what you'll earn on your
pre-payment. Compare that return with what you'd earn in other comparably safe
investments, like a Certificate of Deposit (CD). Also weigh the advantages of
pre-paying your mortgage against paying off debt. If your credit card interest
rate is 18 percent, it makes more sense to pay off this higher-interest debt
rather than to pre-pay your 8 percent mortgage.
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Some newspaper ads for home loans
show surprisingly low rates. Are these loans for real, or is there a catch?
Some of the ads you see are for adjustable-rate mortgages
(ARMs). These
loans may have low rates for a short time-maybe only for the first year. After
that, the rates can be adjusted on a regular basis. This means that the interest
rate and the amount of the monthly payment can go up or down.
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Can I get out of my mortgage if I
choose?
Most mortgages allow you to pay off the mortgage early. Some mortgages do have a
prepayment penalty, but most do not. Ask your loan officer about the program
you've applied for.
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What is "Fannie Mae",
"Freddie Mac", and "Ginnie Mae"?
Fannie Mae is the term for the Federal National Mortgage Association. This is an
institution incorporated by congress to buy and sell conventional, FHA insured
and VA guaranteed mortgages.
Freddie Mac is the term for the Federal Home Loan Mortgage Corporation, an
agency that purchases mortgages from insured savings institutions and HUD
approved mortgage bankers.
Ginnie Mae is the term for the Government National Mortgage Association. They
supply residential mortgages that are insured through the FHA or are guaranteed
by the VA.
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What is the difference between fixed
mortgages and an adjustable rate mortgage?
Fixed rate mortgages offer an interest rate that remains fixed for the entire
term of the loan. An adjustable rate mortgage (ARM) is a loan in which the
interest rate changes to reflect the current interest rates. Adjustable rate
mortgages may change rates according to the rate set at your closing. Ask your
loan officer for the options right for you.
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What does APR stand for?
This stands for Annual Percentage Rate. This amount also reflects the annual
cost of the mortgage, taking into account the points paid and other costs
incurred for the credit extended to the borrower. The A.P.R. is helpful in
comparing the costs of different loan packages.
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What happens if I am late or miss a
mortgage payment?
Typically, a late payment fee will be assessed, and must be paid. Of course,
interest will continue to accumulate. If the borrower stops making payments,
this will result in a defaulted mortgage, and foreclosure of the property.
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How much money can I qualify for?
Typical mortgage requirements say that if you have an average debt load, you can
obtain a mortgage between two and three times your annual income.
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What if I have credit problems?
You will need to explain the circumstances of the credit problem. If you no
longer have the problem and have kept current with your obligations for a period
of one year or more, most lenders will accept your mortgage application.
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What is private mortgage insurance?
Private mortgage insurance may allow you to purchase a home for as little as 5%
down payment, even if you do not qualify for a FHA-insured or VA-guaranteed
loan. Such coverage requires a monthly insurance fee to be paid.
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What is the difference between a
conventional loan and a FHA loan?
A conventional loan requires you to place a down payment of between 5% and 20%
of the selling price of the home. FHA (Federal Housing Administration) loans are
guaranteed by the Housing and Urban Development (HUD) and you can buy a home
with as little as 2.5% down payment.
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What is a convertible mortgage?
When you have a convertible mortgage, it allows you to change from the initial
ARM mortgage to a fixed rate mortgage. This option usually requires an extra
fee.
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What is amortization?
Amortization is the division of principal and total interest charges into equal
payments that will result in the complete payment of the debt by the end of a
fixed period of time.
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What is a cap?
A cap is a limit that is placed on an ARM mortgage. It may limit the maximum
loan rate amount, or the maximum amount the loan rate may increase per term, for
example, a one year ARM changes once a year.
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What does it mean to lock-in?
When you "lock-in", your lender will guarantee the interest rate on
your mortgage for a limited period, regardless of the current market rates. This
option usually is done for a fee. If you are concerned that rates may rise
before your closing date you may want to "lock-in".
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What is
P.I.T.I.?
This stands for the components of your regular home payment, "Principal,
Interest, Taxes, and Insurance".
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What is an appraisal?
This is an estimate of the value of the property you intend to buy or refinance.
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What documents will I need to
provide when I apply for a loan?
Be prepared to provide verification of income, including your pay stub and tax
returns for the previous two years. You will also need to provide bank account
numbers and details about your long-term debt, including credit cards, auto
loans, child support, etc. If you are self employed, you may need to provide
financial statements for your business. Lenders want detailed information. For
example, the origin of your down payment will be queried. Be sure to inform your
lender of any changes in your employment, salary, debt or marital status between
the time you submit your application and the time you close.
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Is an ARM the right type of loan for
me?
That depends on your financial situation and the terms of the ARM. ARMs carry
risks in periods of rising interest rates, but can be cheaper over a longer term
if interest rates decline. You will be able to answer the question better once
you understand more about adjustable-rate mortgages. Mortgages have changed, and
so have the questions that need to be asked and answered.
Shopping for a mortgage used to be a relatively simple process. Most home
mortgages loans had interest rates that did not change of the life of the loan.
Choosing among these fixed-rate mortgage loans meant comparing interest rates,
monthly payments, fees, prepayment penalties, and due-on-sale clauses.
Today, many loans have interest rates that can change from time to time. To
compare one ARM with another or with a fixed-rate mortgage, you need to know
about indexes, margins, discounts, and convertibility. Most importantly, you
need to compare your mortgage payment with your future ability to pay.
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Tampa Bay
Lending Corporation
115 E Bloomingdale Avenue, Suite # 146
Brandon, FL 33511
Office: 813-315-2537
Fax: 813-315-2527
info@tblsinc.com |
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