Frequently Asked Questions

What is a discount point?

A discount point is paid to the lender to permanently buy down or lower an interest rate. It is usually a percentage of the loanFast Home Loans in Woodland Hills Ca amount.

How can I compare rates and fees when shopping for a mortgage?

When comparison shopping, look at the points, the fees and the Annual Percentage Rate (APR). The APR includes lender fees that are charged on your loan. Although one lender may have a slightly lower rate, they may charge more fees, and therefore have the same APR as a lender with the slightly higher rate.

What is the difference between APR and interest rate?

The APR (Annual Percentage Rate) reflects the cost of your mortgage loan as a percentage of the net amount borrowed. It incorporates the cost to obtain the loan, such as lender fees, discount fees and loan origination fee. The interest rate is the actual note rate.

What is the difference between 'locking' and 'floating'?

If you choose to 'lock-in' on a particular rate, you will receive protection for a specified period of time from financial market fluctuations in interest rates. If you choose to 'float' your rate, it will fluctuate with the market and will be subject to both upward and downward movements in the market.

What is the difference between a prequalification and a pre-approval application?

A prequalification is typically the result of information shared between a mortgage lender and a potential borrower. It usually does not involve a credit report or verification of any information obtained. The end product for a prequalification analysis will be an estimate of the maximum mortgage amount for which you may qualify. A mortgage loan pre-approval application typically results in a written loan decision following a complete mortgage application, with a specific loan amount. Many lenders will require an upfront fee to cover the expenses such as the credit report and the credit analysis. You can typically apply for a pre-approved mortgage prior to signing a purchase agreement for a home. Many lenders will also allow you to lock in an interest rate at the time you apply for a pre-approved mortgage. A pre-approval can also add to your negotiating strength when you are ready to make an offer on a home.

What documents will typically be requested when I make application for a first mortgage loan?

For most borrowers, you will need to provide pay stubs that cover a 30 day period, complete copies of your most recent bank statements, and the purchase contract on the home you are buying. If you are self-employed, you may also be required to provide your personal tax returns. Documentation requests vary by loan type.

What is title insurance?

Title insurance provides the lender and the buyer (if you purchase owner's coverage) with coverage for losses resulting from specific title defects listed in the policy. In cases where land and property have changed hands over time, there is always the possibility an error has occurred. If an error has occurred, it may be that someone else may be entitled to or have an interest in the property, improvements may be encroaching on property lines or that other similar problems may exist. In these scenarios, if you do not have title insurance you could lose your investment in your home. Lenders require 'lender's coverage' to protect their investment and it only protects the lender. Owner's coverage is optional and provides separate coverage for the borrower.

What is Loan-to-Value (LTV)?

LTV is the ratio between the loan amount and the appraised value or the sales price, whichever is lower. A loan amount of $80,000 with a purchase price of $100,000 would be an 80% LTV.

What is PMI and why is it required?

Private mortgage insurance (PMI) is insurance written by a private company that protects the lender from losses in the event the borrower defaults on the mortgage. Borrowers are required to pay the premium for private mortgage insurance. Private mortgage insurance limits a lender's exposure to financial loss resulting from loan default. If you make a down payment of less than 20%, even if you have a good credit profile, lenders generally require private mortgage insurance.

How long will I be required to have PMI on my loan?

In most cases, the borrower can request cancellation of PMI at 80% loan to value (LTV) based on amortization or actual payments. The borrower must have a good payment history, provide evidence the property value has not decreased, and certify there are no subordinate liens on the property. Lenders are required to terminate borrower paid PMI at 78% LTV based on the amortization schedule if the loan is current. If none of the above is done, PMI will terminate automatically at the midpoint of the loan term. Typically, PMI is required on your loan for a minimum of 24 consecutive payments absent any law to the contrary. After that time, if you have 20% or more equity in your property and meet certain other conditions, you may request to have it removed. Typically, there is no guarantee that your PMI will be removed, and most loan investors will require a new appraisal at your expense prior to removing PMI.

What are escrow accounts and how much do I need in my escrow account?

Escrows are payments made by a mortgagor to a mortgagee for the purpose of paying the mortgagor’s taxes, insurance, and other payments associated with home ownership. The mortgagee is responsible for the timely disbursement of escrow funds to pay the mortgagor’s bills as they come due. Usually, a mortgage company collects funds for placement into the mortgagor’s escrow account with the mortgagor’s periodic payment for principal and interest. An escrow account has sufficient funds if there is enough to pay all bills when they come due. It is common practice for mortgage companies to hold an escrow cushion for a mortgagor. The cushion is kept by the mortgage company to assure that if the cost of any escrowed item were to increase in the future, there would be sufficient funds to pay all bills as they come due. 

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