Mortgage Questions
What are the basic loan types?
There are many loan products designed to meet each individual's financial criteria. Most of these products fall under a few basic loan types:
- Fifteen-year and 30-year fixed rate
- Five and seven-year balloons
- Adjustable Rate Mortgage (ARM)
- 5/1 and 7/1 fixed rate
- 2/28 and 3/27 ARM
What are fixed-rate mortgages?
These are mortgages where the payment and rate stay the same from start to finish of the loan term.
What are five or seven-year balloon mortgages?
These are mortgages where there is a lower start rate, then require a larger payment at a later date. Some balloon programs may be converted to an adjustable rate or a fixed rate (after the five or seven years) with a very low fee and attractive rate.
What is an Adjustable Rate Mortgage (ARM)?
These are mortgages with the lowest start rates, which adjusts either every six or 12 months (depending on the program and grade). ARMs rates are based on the economy 6 percent ceiling for prime and 7 percent ceiling for sub-prime.
What are 5/1 and 7/1 fixed-rate mortgages?
These are mortgages with fixed rates for the first five or seven years; the rate then shifts to an ARM.
What are 2/28 and 3/27 ARM mortgages?
These are mortgages with rates that are fixed for the first two or three years, then shift into a six-month ARM. These are sub-prime programs giving a rate lower than a sub-prime 30-year fixed loan. This is helpful for borrowers with credit problems, allowing a window of time for credit rebuilding and seasoning.
How much of a mortgage can I afford?
There are so many new and creative programs available today that this question is difficult to answer. Whether you have a down payment or not, whether you have good credit or not, whether you can verify your income or not, changes the amount of mortgage potential for an individual. The rule of thumb is that most people can afford a mortgage of about three times their annual income.
How much of a down payment do I need?
Today there are a number of programs that allow you to purchase a home with no down payment.
Can I buy a home if I have bad credit?
Today there are programs available to people who have had prior credit problems. You need to discuss your particular history with a professional mortgage officer to see just what programs may work for you.
When should I refinance?
People refinance for many reasons. Some just to get a lower rate. Some people refinance to get at the incredible equity they have built up in there homes. Bill consolidation, college education, home improvement, and other reasons exist for refinancing. The old rule of thumb regarding the necessity for rates to be at least a point lower in order to consider refinancing is no longer valid.
What are points?
A point is a fee that you pay to the lender to buy down your interest rate. Every point you pay will reduce your interest rate by about one quarter of a percent.
Can I include closing costs in my purchase or refinance?
Yes. Most of the time people will include their closing costs in a refinance situation. There are programs today that will allow you to include your closing cost even when you are purchasing a home.
How long does it take to get approved for a mortgage?
With the technology that mortgage companies use today you can get approved for your mortgage, in most cases, the same day you apply.
What is the difference between pre-approvals and pre-qualifications?
A prequalification is not much more than an opinion that you are eligible for a certain amount of a mortgage. A pre-approval means that you have actually been underwritten and approved by a lender for your financing. It's like having the money in the bank.
What's the difference between a bank and a mortgage company?
Years ago the only people lending mortgage money was the Banks. Today more than 75 percent of all mortgages are done by mortgage companies. Mortgage companies are specialists. You cannot get a checking account or CD at a mortgage company but, you get the best rates and service from a mortgage lender.
How do I apply for a mortgage?
That's easy, most companies are capable of accepting your application over the telephone or via the Internet. It makes the process quick and easy. Click here to submit your application online.
Do I need to have an appraisal done.
Most lenders require an appraisal to be done on every mortgage transaction. You do not have to do anything other than provide documents to your mortgage company. A professional mortgage lender does all the work for you.
What is an appraisal?
An appraisal is a comparison of the home you are buying or refinancing to other homes in your neighborhood to determine what the exact market value of your home is. It also verifies the structural integrity of your property.
Can I lock in my interest rate at the time of application?
Yes. Most companies offer rate locks on all of their programs. Sometimes however it is possible to get a better rate by floating the interest rate until you are closer to you closing date.
How much of a down payment do I need to buy a multi family home or an investment property?
Today there are programs available with as little as a 3% down payment for multi family owner occupied homes and as little as 5% for investment properties.
