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Mortgage Information Centre FAQ's
What is a rate lock?
A
rate lock is a lender's guarantee of an interest rate for a set period
of time, usually between loan application and loan closing. A lock
period can range anywhere between 15 days to 90 days during which time
you, as a borrower, are protected against rate fluctuations. Rate locks
can be expensive for lenders, and so it is usually true that the longer
the lock-in period, the higher the cost is for you. Our experienced
Mortgage Bankers can help you understand which choice may be better for
you.
Do you have no cost or low cost options?
Absolutely. With the large variety of loan programs available today,
there's many different ways you can finance your home. With a no cost
or minimal cost loan, you can see immediate savings in your payment
amounts, and you won't have to sacrifice your savings or equity to get
a great rate. We offer no down and low down payment home purchase
options and no cost refinance programs. Just ask one of our friendly
Mortgage Bankers for our flexible financing options or view our loan choices page.
How long does the mortgage process take?
The length of the mortgage process depends on a number of things. For
example, some mortgage transactions are subject to a three-day legal
"right of rescission," which starts the day you sign the disclosure
document. This legal right automatically could add three days onto your
mortgage funding. Also, specific types of mortgage loans have
pre-determined timeframes. The closing date on a purchase loan is
determined by the escrow closing date agreed upon by the buyer and the
seller or builder. Usually, purchase escrow periods range between 30 to
90 days. On refinance transactions, the process can take anywhere from
5 to 30 days depending on whether there are any special circumstances
surrounding the transaction. At HomeLoanCenter.com we control the
entire mortgage process in-house which means you'll receive accurate
information and faster closing times. Talk to one of our Mortgage
Bankers to find out how quickly your needs can be met by
HomeLoanCenter.com.
Is a fixed rate or adjustable rate mortgage better?
No one loan product is objectively better than another. The best
mortgage for you depends on a variety of factors, including your
financial situation and housing goals. Generally speaking, adjustable
rate mortgages (ARMs) offer lower initial interest rates than fixed
rate loans, but also have the potential to fluctuate every month, every
six months, or every year, depending on the type of adjustable mortgage
you get. An ARM therefore may be more attractive to homeowners who plan
to sell their home in the timeframe before the adjustable rate
surpasses a fixed-rate loan. On the other hand, homeowners who plan to
remain in their home, or who want more stability in their rate and
monthly payments, may find a longer-term 15, 20, or 30 year fixed rate
more attractive. A fixed interest rate provides homeowners with a
stable mortgage payment that does not change. Ask one of our Mortgage
Bankers about HomeLoanCenter.com's adjustable, short term fixed, and
long term fixed rate loan programs to see what can best help you with
your individual goals.
What is an APR?
Annual
Percentage Rate, or APR can be defined as the annual cost of a loan,
expressed as a yearly rate. APR is designed to measure the "true cost
of a loan," and to prevent lenders from hiding fees from you. Although
the rules to compute APR are not clearly defined, the fees it generally
includes are pre-paid interest, points, origination fees, and private
mortgage insurance ( PMI),
so APR will be slightly higher than the actual interest rate on the
loan. However, different lenders calculate APR differently, so you want
to be careful when you are shopping for your loan to make sure you
understand what fees are computed. It can be more practical for you to
compare lenders by the interest rate they offer for the same loan type
and term, and then compare the applicable points and total closing
fees.
What are points?
Paying points is a way to reduce your interest rate when you purchase
or refinance your home. In essence, you are paying up front for a lower
interest rate to reduce your monthly payment over the life of your loan
term. One point is equivalent to one percent of your loan amount, so
one point on a $100,000 loan amount is equal to $1,000. As a general
rule, it makes sense to pay points if you intend to keep your home for
a long enough period of time where the savings in your monthly payment
eventually makes up for the extra fees you pay up front. To find out if
paying points makes sense for your situation, call one of our friendly
Mortgage Bankers for a no-obligation, free quote.
What is Loan to Value?
Loan-to-Value (LTV) refers to the amount of the loan as a percentage of
the current market value of your home. You can calculate your LTV
fairly easily by dividing your existing loan amount by current value of
your home. For example, if you borrow $200,000 and your home is valued
at $300,000, your loan to value is 66%. LTV is important when it comes
to qualifying for a refinance loan, and will determine whether you will
be required to get private mortgage insurance ( PMI) on your purchase or refinance transaction.
What is PMI?
Private
mortgage insurance (PMI) is purchased by a buyer when the down payment
is less than 20% of the purchase price or the loan amount is more than
80% loan-to-value.
Mortgage insurance is designed to protect the lender against default.
Homeowners will continue to pay mortgage insurance even after they
refinance their home, as long as the loan-to-value remains above 80%
What is an escrow or impound
account?
An escrow or impound account is set up by your lender during the loan
closing to pay property taxes, fire and hazard insurance premiums,
mortgage insurance premiums, and other escrow items on a monthly basis.
Escrow accounts make sure that there is always enough money to pay
these bills when they are due, and that these important payments are
made on time. Escrow accounts also protect homeowners like you from
having to come up with several large, lump sum payments at different
times throughout the year.
What are Freddie Mac and Fannie Mae?
Mortgages made by lenders and banks are generally sold on the secondary
market to produce cash so the lenders can make more mortgages. The
largest purchasers on the secondary market are the Federal National
Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage
Corporation (Freddie Mac). These two organizations, called
government-sponsored enterprises, or GSEs, were originally created by
the government to make mortgages available to more people with low and
moderate incomes, although both organizations are now privately run.
Freddie Mac and Fannie Mae have specific requirements for the loans
they will purchase from banks and lenders, including a loan limit for
single-family homes in the United States. Loans within this limit are
the "conventional" or "conforming" loans you may hear about in the news.
What is the difference between a conforming and jumbo loan?
Conforming loans have a well-established secondary market which is
provided by the two government sponsored entities, Freddie Mac and
Fannie Mae. A jumbo loan is any loan that exceeds the conforming loan
amounts and the rates for these loans are typically higher than for
conforming loans.
