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Q.
Is comparing APR's the best
way to see
which lender has the best rate and fees?
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A. The
Federal Truth in Lending law requires that all financial
institutions disclose the APR when they advertise a rate. The
APR is designed to present the actual cost of obtaining
financing, by requiring that some, but not all, closing fees are
included in the APR calculation. These fees in addition to the
interest rate determine the estimated cost of financing over the
full term of the loan. Since most people do not keep the
mortgage for the entire loan term, it may be misleading to
spread the effect of some of these up front costs over the
entire loan term. Also, unfortunately, the APR doesn't
include all the closing fees and lenders are allowed to
interpret which fees they include. Fees for things like
appraisals, title work, and document preparation are not
included even though you'll probably have to pay them. For
adjustable rate mortgages, the APR can be even more confusing.
Since no one knows exactly what market conditions will be in the
future, assumptions must be made regarding future rate
adjustments. You can use the APR as a guideline to shop
for loans but you should not depend solely on the APR in
choosing the loan program that's best for you. Look at total
fees, possible rate adjustments in the future if you're
comparing adjustable rate mortgages, and consider the length of
time that you plan on having the mortgage. Don't forget
that the APR is an effective interest rate-not the actual
interest rate. Your monthly payments will be based on the actual
interest rate, the amount you borrow, and the
term of your loan.
Q. Is there a fee charged or any
other
obligation if I complete the online loan application?
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A.
There's no cost at all for completing our application. Once it
is complete a lender will contact you and you will decide if you
want to proceed at that time.
Q. Tell me about closing fees and
how they are determined.
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A. A home loan often involves many fees, such as the
appraisal fee, title charges, closing fees, and state or local
taxes. These fees vary from state to state and also from lender
to lender. Any lender or broker should be able to give you an
estimate of their fees, but it is more difficult to tell which
lenders have done their homework and are providing a complete
and accurate estimate. We take quotes very seriously.
We've completed the research necessary to make sure that our fee
quotes are accurate to the city level - and that is no easy
task! To assist you in evaluating our fees, we've grouped
them as follows:
Third Party Fees: Fees that we consider third party
fees include the appraisal fee, the credit report fee, the
settlement or closing fee, the survey fee, tax service fees,
title insurance fees, flood certification fees, and
courier/mailing fees. Third party fees are fees that we'll
collect and pass on to the person who actually performed the
service. For example, an appraiser is paid the appraisal fee, a
credit bureau is paid the credit report fee, and a title company
or an attorney is paid the title insurance fees.
Typically, you'll see some minor variances in third party fees
from lender to lender since a lender may have negotiated a
special charge from a provider they use often or chooses a
provider that offers nationwide coverage at a flat rate. You may
also see that some lenders absorb minor third party fees such as
the flood certification fee, the tax service fee, or
courier/mailing fees.
Taxes and other unavoidables: Fees that we
consider to be taxes and other unavoidables include: State/Local
Taxes and recording fees. These fees will most likely have to be
paid regardless of the lender you choose. If some lenders don't
quote you fees that include taxes and other unavoidable fees,
don't assume that you won't have to pay it. It probably means
that the
lender who doesn't tell you about the fee hasn't done the
research necessary to provide accurate closing costs.
Lender Fees: Fees such as points, document
preparation fees, and loan processing fees are
retained by the lender and are used to provide you with the
lowest rates possible. This is the category of fees that
you should compare very closely from lender to lender before
making a decision.
Required Advances: You may be asked to prepay some
items at closing that will actually be due in the future. These
fees are sometimes referred to as prepaid items. One of
the more common required advances is called "per diem interest"
or "interest due at closing." All of our mortgages have payment
due dates of the 1st of the month. If your loan is closed on any
day
other than the first of the month, you'll pay interest, from the
date of closing through the end of the month, at closing. For
example, if the loan is closed on June 15, we'll collect
interest from June 15 through June 30 at closing. This also
means that you won't make your first mortgage payment until
August 1. This type of charge should not vary from lender to
lender, and does not need to be considered when comparing
lenders. All lenders will charge you interest beginning on the
day the loan funds are disbursed. It is simply a matter of when
it will be collected. If an escrow or impound account will
be established, you will make an initial deposit into the escrow
account at closing so that sufficient funds are available to pay
the bills when they become due. If your loan requires
mortgage insurance, up to two months of the mortgage insurance
will be collected at closing. Whether or not you must purchase
mortgage insurance depends on the size of the down payment you
make. If your loan is a purchase, you'll also need to pay
for your first year's homeowner's insurance premium prior to
closing. We consider this to be a required
advance.
Q.
What is title insurance and why do I need it?
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A.
If you've ever purchased a home before, you may already be
familiar with the benefits and terms of title insurance. But if
this is your first home loan or you are refinancing, you may be
wondering why you need another insurance policy. The
answer is simple: The purchase of a home is most likely one of
the most expensive and important purchases you will ever make.
You, and especially your mortgage lender, want to make sure the
property is indeed yours: That no individual or government
entity has any right, lien, claim, or encumbrance on your
property. The function of a title insurance company is to
make sure your rights and interests to the property are clear,
that transfer of title takes place efficiently and correctly,
and that your interests as a
homebuyer are fully protected. Title insurance companies
provide services to buyers, sellers, real estate developers,
builders, mortgage lenders, and others who have an interest in
real estate transfer. Title companies typically issue two types
of title policies:
Owner's Policy. This policy covers you, the homebuyer.
Lender's Policy. This policy covers the lending institution over
the life of the loan.
Both types of policies are issued at the time of closing for a
one-time premium, if the loan is a purchase. If you are
refinancing your home, you probably already have an owner's
policy that was issued when you purchased the property, so we'll
only require that a lender's policy be issued. Before
issuing a policy, the title company performs an in-depth search
of the public records to determine if anyone other than you has
an interest in the property. The search may be performed
by title company personnel using either public records or, more
likely, the information contained in the company's own title
plant. After a
thorough examination of the records, any title problems are
usually found and can be cleared up prior to your purchase of
the property. Once a title policy is issued, if any claim
covered under your policy is ever filed against your property,
the title company will pay the legal fees involved in the
defense of your rights. They are also responsible to cover
losses arising from a valid claim. This protection remains in
effect as long as you or your heirs own the property. The
fact that title companies try to
eliminate risks before they develop makes title insurance
significantly different from other types of insurance. Most
forms of insurance assume risks by providing financial
protection through a pooling of risks for losses arising from an
unforeseen future event, say a fire, accident or theft. On the
other hand, the purpose of title insurance is to eliminate risks
and prevent losses caused by defects in title that may have
happened in the past. This risk elimination has benefits
to both the homebuyer
and the title company. It minimizes the chances that adverse
claims might be raised, thereby reducing the number of claims
that have to be defended or satisfied. This keeps costs down for
the title company and the premiums low for the homebuyer.
Buying a home is a big step emotionally and financially. With
title insurance you are assured that any valid claim against
your property will be borne by the title company, and that the
odds of a claim being filed are slim indeed.
Q.
What is the maximum percentage
of my home's value that I can borrow?
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A. The maximum percentage of your home's value depends on
the purpose of your loan, how you use the property, and the loan
type you choose, so the best way to determine what loan amount
we can offer is to complete our on-line application!
Q.
Will an inquiry about my
credit affect my credit score?
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A. An abundance of credit inquiries can sometimes affect
your credit scores since it may indicate that your use of credit
is increasing. But don't overreact! The data used to
calculate your credit score doesn't include any mortgage or auto
loan credit inquiries that are made within the 30 days prior to
the score being calculated. In addition, all mortgage inquiries
made in any 14-day period are always considered one inquiry.
Don't limit your mortgage shopping for fear of the effect on
your credit score.
Q.
What is a credit score and how
will it affect my application?
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A. A credit score is one of the pieces of information that
we'll use to evaluate your application. Financial institutions
have been using credit scores to evaluate credit card and auto
applications for many years, but only recently have mortgage
lenders begun
to use credit scoring to assist with their loan decisions.
Credit scores are based on information collected by credit
bureaus and information reported each month by your creditors
about the balances you owe and the timing of your payments. A
credit score is a compilation of all this information converted
into a number that helps a lender to determine the likelihood
that you will repay the loan on schedule. The credit score is
calculated by the credit bureau, not by the lender. Credit
scores are calculated by comparing your credit history with
millions of other consumers. They have proven to be a very
effective way of determining credit
worthiness. Some of the things that affect your credit
score include your payment history, your outstanding
obligations, the length of time you have had outstanding credit,
the types of credit you use, and the number of inquiries that
have been made about your credit history in the recent past.
Credit scores used for mortgage loan decisions range from
approximately 300 to 900. Generally, the higher your credit
score, the lower the risk that your payments won't be paid as
agreed. Using credit
scores to evaluate your credit history allows us to quickly and
objectively evaluate your credit history when reviewing your
loan application. However, there are many other factors when
making a loan decision and we never evaluate an application
without looking at the total financial picture of a customer.
Q.
Can I apply for a loan before
I find a home to purchase?
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A. Yes, applying for a mortgage loan before you find a
home may be the best thing you could do! If you apply for your
mortgage now, we'll issue an approval subject to you finding the
perfect home. We'll issue a pre-approval letter on-line
instantly. You can use the pre-approval letter to assure real
estate brokers and sellers that you are a qualified buyer.
Having a pre-approval for a mortgage may give more weight to any
offer to purchase that you make. When you find the perfect
home, you'll simply call your lender representative to complete
your application. You'll have an opportunity to lock in our
great rates and then we'll complete the processing of your
request.
Q.
How do you decide what you
need from me to process my loan?
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A. We take full advantage of an automated underwriting
system that allows us to request as little information as
possible to verify the data you provided during your loan
application. Gone are the days when it was necessary to verify
every piece
of data collected during the application. The automated
underwriting system compares your financial situation with
statistical data from millions of other homeowners and uses that
comparison to determine the level of verification needed. In
many cases, a single W-2 or pay stub can be used to verify your
income or a single bank statement can be used to verify the
assets needed to close your loan.
Q. What happens at the loan closing?
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A. The closing will take place at the office of a title
company in your area who will act as our agent. If you are
purchasing a new home, the seller may also be at the closing to
transfer ownership to you, but in some states, these two events
actually happen separately. During the closing you will be
reviewing and signing several loan papers. The closing agent
conducting the closing should be able to answer any questions
you have or you can feel free to contact your lender
representative if you prefer. Just to make sure there are
no surprises at closing, your lender representative will contact
you a few days before closing to review
your final fees, loan amount, first payment date, etc. The
most important documents you will be signing at the closing
include:
HUD-1 Settlement Statement: This document provides
an itemized listing of the final fees charged in connection with
your loan. If your loan is a purchase, the settlement statement
will also include a listing of any fees related to the
transaction between you and the seller. If this loan will be a
refinance, the settlement statement will show the pay off
amounts of any mortgages that will be paid in full with your new
loan. Most items on the statement are numbered according to a
standardized system used by all lenders. These numbers will
correspond to the numbers listed on the Good Faith Estimate that
will be provided in your application package. This document is
also commonly known as the closing statement and both the buyer
and seller must sign this document.
Truth-in-Lending Statement: This document provides
full written disclosure of the terms and conditions of a
mortgage, including the annual percentage rate (APR) and other
fees. It is exactly the same as the TIL that you received
immediately after your initial application, except it has been
updated to reflect the final rate and fee information. Federal
law requires that all lenders provide you with this document at
closing. This is the document you sign to agree to repay
your mortgage. The note will provide you
with all of the details of your loan including the interest rate
and length of time to repay the loan. It also explains the
penalties that you may incur if you fall behind in making your
payments.
Mortgage / Deed of Trust: This document pledges a
property to the lender as security for repayment of a debt.
Essentially this means that you will give your property up to
the lender in the event that you cannot make the mortgage
payments. The Mortgage restates the basic information contained
in the note, as well as details the responsibilities of the
borrower. In some states, the document is called a Deed of Trust
instead of a Mortgage. If your loan is a refinance,
Federal Law requires that you have three days to decide
positively that you want a new mortgage after you sign the
documents. This means that the loan funds won't be disbursed
until three business days have passed. The closing agent will
provide more details at the closing
Q. Can I get advanced copies of
the documents I will be signing at closing?
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A. The most important documents you will sign at closing are the
note and mortgage, sometimes called the deed of trust. Unless
there are special circumstances, these documents are usually
prepared one to two days before your closing. Other documents
are prepared by the closing agent the day before or the day of
your closing. If you would like copies of the completed
documents to be sent to you after they are prepared, please
contact your lender representative.
Q. Who will be at the closing?
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A. The closing agent acts as our agent and will represent
us at the closing. However, your personal lender representative
will contact you prior to closing to talk about your final
documents and to provide a final breakdown of your closing fees.
If you have any questions that the closing agent can't answer
during the closing, ask them to contact your lender
representative by phone and we'll get you the answers you need -
before the closing is over!
Q. Where will the closing take
place?
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A. We use a nationwide network of closing agents to
conduct our loan closings. We'll schedule your closing to take
place in a location that is located near your home for your
convenience. In some cases a notary will close the loan at your
home. We'll deliver our loan documents and wire transfer
your loan funds to the closing agent prior to closing so that
they'll have plenty of time to prepare for your closing.
Q.
Can I make monthly payments
with an automated debit from my checking account?
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A. The ability to allow automated monthly payments is a
determination by the final investor/servicer of your loan in the
secondary market. Automated monthly payments are generally
available. When you receive your first payment notification from
the loan servicer you will have the opportunity to elect
automated payment if allowed.
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