The process of applying for a mortgage isn’t exactly a piece of cake. Luckily, our experts are committed to helping you understand the home-buying & financing process, including mortgages, so that you can make smarter decisions. We’ve pulled together answers to your important mortgage questions.
What is the difference between interest rate and APR?
Your interest rate is the monthly cost you pay on the unpaid balance of your home loan. (more…)
What are the closing costs?
Closing costs include items like appraisal fees, title insurance fees, (more…)
First Time Home Buyer
How do I determine how much house I can afford and qualify for?
A general rule of thumb to follow is to look the industry statistics. The average household can afford to pay up to 30% of their gross (before tax) monthly income. (more…)
How do I determine the amount of money needed for settlement?
The amount of money needed for settlement typically depends on multiple factors. There are 3 categories of items that make up the amounts that you will need to bring to closing upon the initial purchase of your home. (more…)
How do select the best mortgage product that is right for me ?
There is no simple way to determine which type of mortgage is “right” for you. (more…)
I am a Self-Employed Borrower. What additional documents do I need to buy a home?
- Individuals who are self-employed often have greater challenges in terms of getting a loan compared to a W2 wage earner.
- For lenders, verifying a self-employed person’s income is more difficult as these borrower’s typically lack pay stubs, and verifying employment is handled differently.
- In the absence of verifiable employment records, lenders most often rely upon 2 years of income tax returns for the business and / or personal 1040’s.
What are some common misconceptions about home buying ?
1) You need to have perfect credit to purchase a house.
• There are many affordable loan options offered by a variety of programs, both government and non-government (conventional) that allow for lower credit scores.
• For a complete list of loan programs, check out our Loan Options page to see what loan programs you may qualify for and the best product for you and your family.
2) Choose the lender with the lowest interest rate and APR.
• The interest rate on your mortgage is very important, as most of your monthly payment goes toward this lender cost during the first 10 years of your mortgage when obtaining a 30 year fixed rate loan.
• The APR is calculated based on the upfront or financed origination fees, discount points, upfront mortgage insurance premiums and other lender or broker fees associated with the loan. The APR takes into account these fees and amortizes them within your loan to provide you a true total cost of obtaining the mortgage. The note rate is the amount of interest the lender is charging you each year for borrowing the money.
* Your interest rate shouldn’t be the only consideration when comparing lenders as the expected service, communication and reputation of the mortgage company should be part of your decision when selecting a lender to work with.
• When you’re ready to choose a lender, compare loan estimates from multiple lenders that take into account all of the above criteria as sometimes the cheapest price may result in a painful loan process with broken promises along the way.
3) A 30 Year Fixed Mortgage is the best loan option for everyone.
• Many factors need be taken into account when selecting the mortgage product that’s right for you.
• Do you plan to stay in your home for a long period of time? If not, then an “Adjustable Rate Mortgage (ARM) may be the right choice for you! Are you about to retire? If so, then a loan with a shorter term may suit you better. Feel free to talk to one of our Licensed Loan Originators to discuss the many different loan options available.
• Another important fact to remember is that 15 year loan terms ( If you can afford the payment) are must less expensive loans than a 30 year loan. First, the interest rate tends to be about .5% less than a 30 year rate; and more importantly, the amount of interest you will pay over the life of the loan is about half. Depending on your loan amount, the interest savings on a 15 year mortgage could be hundreds of thousands of dollars. Again, if you can afford the payment, give a 15 year term some serious consideration.
What can I expect on the day of closing?
Closing is the completion of the real estate transaction between buyer and seller. On your “closing date,” ownership of the property is officially transferred over from seller to all buyers that will be on title to the property. (more…)
What can I use for a source of down payment?
Lenders require borrowers to come to closing with a down payment in order to account for a small portion of equity on the loan as an upfront guarantee to limit risk exposure. The required amount of down payment is typically dictated by the loan program the you agree to and qualify for. You can always put more money down that a lender may require in order to reduce your monthly payment amount.
The down payment does not cover any other fees associated with your loan, it is simply your “skin in the game”.
If a borrower does not have the required down payment necessary to complete the transaction, they may use a “gift” from an acceptable donor, usually a relative.
The “gift” from the donor must be accompanied by 1) a signed letter stating that the gifted funds to not have to be paid back, 2) a bank statement from the donor showing the money in their account, and 3) proof of the withdrawal of these funds. Additionally, the lender will require proof that the funds were deposited into your account through a bank statement or transaction history.
You can never borrower funds for a down payment or even closing costs unless you are obtaining a bona-fide loan from a 401K retirement account. This is the only allowable source of borrowing when purchasing a home.
What do closing costs include?
Soon after you apply for a loan, RMS will provide you with a “Loan Estimate” of your closing costs. (more…)
What is included in my monthly mortgage payment ?
- The amount of money borrowed to buy your house or the amount of the loan that has not yet been repaid to the lender.
- This does NOT include the interest that you will pay as a cost for borrowing the money.
- The principal balance can also be referred to as “the outstanding balance” or “unpaid principal balance.”
- The portion of your payment that reduces your loan balance with each payment paid.
What is the difference between preapproved and prequalified?
When a homebuyer is prequalified, the lender has been provided with basic information to determine which loan program the home- buyer may qualify for. A Pre-qualification letter typically means a lender has taken a preliminary loan application based on verbal information and pulled your credit. A quick analysis may have been done to see if you meet the required ratios for the loan program you are approved for; however, documentation has not been analyzed or reviewed by an underwriter. (more…)
When is Renting a better decision than Buying?
In general, buying a home is a good investment if you are looking to build equity and stay in a certain location for significant amount of time. ( Typically 2 years or more) (more…)
Which amounts are included in my monthly payments?
If you have a fully amortizing mortgage, portions of your monthly mortgage payment go toward loan principal and interest. (more…)
What is PMI?
Private Mortgage Insurance is provided by a private mortgage insurance company to protect lenders against loss if a borrower defaults. (more…)
Can I lock my interest rate when purchasing a home?
Absolutely. PRMI provides a variety of options to lock in your interest rate. (more…)
How much does it cost out of pocket to refinance?
A common trend today in terms of refinancing is to add the costs associated with getting a new mortgage into the total refinancing amount. This allows you to come to closing with NOTHING out of pocket. (more…)
What does “refinance” mean and when should I refinance?
There used to be “tall tale” that said “a good time to refinance when mortgage rates are approximately 1.5-2.0% lower than your CURRENT rate on your mortgage. “ This just isn’t true ! (more…)
What is equity, and how can I turn it into cash ?
Home equity refers to the appraised value, less the amount that you still owe on your loan(s). Equity is important for a number of reasons, as it defines how much potential cash you could walk away with when you are ready to sell. (more…)
What’s the difference between a cash out refinance and a home equity loan?
Cash Out Refinance