Frequently Asked Questions
What are "points"?
Points are also called origination fees. These fees are charged by the lender to pay for certain expenses incurred in connection with the processing of the real estate loan. One point is equal to one percent (1%) of the amount of the loan.
What is APR (Annual Percentage Rate)?
APR stands for annual percentage rate and reflects the interest rate charge on the loan plus other finance charges including, for example, private mortgage insurance premiums, points and other financing costs you pay when obtaining the loan.
What is mortgage insurance?
Mortgage insurance gives protection to lenders by spreading a portion of the risk involved in lending money on homes to a separate, private company. Through this process, borrowers can get into a home at a substantially lower down payment.
What is an ARM loan and how does it work?
ARM stands for Adjustable Rate Mortgage whereby your interest rate changes periodically. This period can vary from 1 month to as long as 10 years! Initially you will get a very competitive rate with an ARM (the so-called teaser rate). Depending on your program, your interest rate will be adjusted after a predetermined period. Your rate will be determined by adding two key figures: the index plus the margin. The index is the fluctuating value in this equation. Your index may be the 1 Year T-Bill or other. Your margin is fixed for the life of the loan, and determined at time of lock (2.5, 2.75 etc.). Most loans, not all, will have periodic and lifetime rate caps to protect you from wild increases (or decreases).
What is an FHA or VA mortgage?
Federal Housing Administration (FHA) or Veteran's Administration (VA) mortgages are loans insured by the respective governmental agencies. FHA programs enable lenders to arrange financing for the borrower with a minimal down payment. Similarly, VA programs (available to veterans only) can be made to a borrower who has little or no down payment. When borrowing under these programs, you will pay a Mortgage Insurance Premium (FHA) or a Funding Fee (VA) to insure the mortgage. This is similar to private mortgage insurance on a conventional loan. These insurance premiums may be paid out-of-pocket at the time of closing or financed by increasing the mortgage amount.
How fast can I get my cash?
The average loan can usually close within 10 days to two weeks, but in some instances it may take longer. The type of loan, amount of home equity, and credit history are factors that effect how quickly we can get you your money.
What is the difference between locking or floating my interest rate?
When the borrower chooses to "lock-in" the interest rate, the lender takes the risk of interest rates increasing during the period of time from lock-in to loan closing. The down side is if interest rates fall, the borrower is locked in at the higher interest rate. The benefit is the security of knowing the interest rate is locked in if interest rates should increase. When floating the interest rate for any amount of time, the borrower takes the risk of interest rates increasing during the period from application to the time of lock-in. The downside to this, of course, is if interest rates increase during this time, the borrower is subject to the then current higher interest rates. The benefit would then be if interest rates went down, the borrower would have the option of a lower interest rate than if locked in previously.