Q. What is the difference between a fixed and adjustable rate mortgage?
A. The principal and interest payments stay the same throughout the life of your loan for fixed rate mortgages. This makes managing your monthly budget easier. Adjustable rate mortgages typically offer an initial fixed rate period and after a certain period of time your rate and payments will adjust and your payments may go up. Your initial principal and interest payment may be lower but they could change significantly as market conditions change.
Q. How are interest rates determined?
A. Interest rates adjust based on a variety of market conditions. Economic growth, inflation concerns and bond markets are the largest influences. Your rate could also be influenced by your credit score and loan to value ratio.
Q. Why is the APR lower with some lenders than others?
A. The APR or annual percentage rate calculation estimate the cost of financing over the full term of the loan. You can use this as a guideline for shopping around for the best rate and term. Not all closing costs are included in the APR calculations. Some of these fees are appraisals, title work, tax and insurance escrow. You will want to consider all of your fees when making a decision on what is the best loan for you.
Q. When can I lock my interest rate?
A. You should discuss this with your loan officer to thoroughly understand your options. Loans can be locked with a completed loan application.
Q. Do you charge a prepayment penalty?
A. We do not charge a prepayment penalty on any of our fixed rate mortgage loans. You can payoff your loan at anytime without any additional charges.
Q. What is mortgage insurance and when is it required?
A. Mortgage insurance as referred to PMI allows you to finance a home with less than 20% down by taking away some of the risk for the lender. The mortgage insurance premium is based on your credit score, type of loan, your loan to value ratio and the type of loan. The premium is typically paid monthly with your principal, interest and escrow payments.
Q. What is title insurance and why is it required?
A. The purchase of your home is mostly one of the most expensive and important purchases you will make in your lifetime. You and your lender want to make sure the property is indeed yours and that no one else has any interest, right, title or claim to your property. The function of title insurance is to make sure your rights and interests are clear and the transfer of the property takes place efficiently and correctly.
There are two basic types of title insurance; 1) Owners Policy covers you the homeowner; 2) Lenders Policy covers the lender or bank.
The title company will thoroughly examine the past records and any potential issues will be cleared up prior to your closing. Each time you finance your property the lender will require these records be examined to insure no additional liens or claims have been filed against your property since the last title search was completed. This provides protection for you and your lending institution.
Q. Is escrow for taxes and property insurance a requirement?
A. An escrow account is required on all government insured loans (FHA, VA, and Rural Housing). Escrow may be waived on conventional mortgage financing with 20% down or loan to values of less than 80% on mortgage loans with conventional (Fannie Mae/Freddie Mac) financing.
Q. What is the maximum percentage of my homes value I can borrow?
A. The maximum you can borrow is based on several factors including the purpose of your loan, the loan type, and how you use your property. Our experienced loan officers can assist you with your options.