What is the difference between pre-qualified and pre-approved?
Pre-qualified is when a homebuyer has provided the lender with basic material such as income, employment, credit, and bank account information. This material determines the loan program for which the prospective homebuyer may qualify. Whereas, pre-approved is when the lender has collected, verified, and presented in-depth information that is needed from the homebuyer for underwriting and approval purposes.
What is the difference between interest rate and APR?
Your interest rate is the rate you agree to pay on the unpaid balance of your home loan. It determines the interest portion of your mortgage loan. An Annual Percentage Rate (APR) is the annual rate charged for the mortgage loan. It is sometimes referred to as the “true cost of a loan” and includes both your interest rate and any additional cost or prepaid finance charges such as the origination fee, points, private mortgage insurance, underwriting, and processing fees. As a result, the APR tends to be higher and is often used as a universal measurement that can assist you in comparing the cost of mortgage loans offered by different mortgage lenders.
What will my rate be?
Mortgage loan interest rates are determined by various factors such as the loan purpose, your credit history, ability to repay, the collateral value, and the loan amount. Aside from the borrower’s financial standing, mortgage interest rates are also more generally influenced by economic factors and government financial policy.
What is an FHA mortgage?
FHA loans are mortgage loans insured through the Federal Housing Administration. FHA loans offer an excellent start to first-time homebuyers, with options such as a low down payment and affordable closing costs. Contact us today to see if you meet the eligibility requirements.
What are the closing costs?
Closing costs are fees paid at closing of a real estate transaction when the title to the property is transferred from seller to buyer. These costs include items like appraisal fees, title insurance fees, attorney fees, prepaid interest, and documentation fees. The cost of these fees may vary due to differences in mortgage type, property location, and approved rates. You will receive an estimate of your closing costs from your lender within three (3) days of application and you will receive a Closing Disclosure at least three (3) days prior to closing that outlines your closing costs.
Which amounts are included in my monthly payments?
There are typically four main components to your mortgage payment which are principal, interest, taxes, and insurance. However, how these four are divided up and paid may differ. For instance, an amortizing mortgage portions your monthly mortgage payment to go toward loan principal and interest. An interest-only mortgage payment includes only the interest that is due on the outstanding principal balance. Meanwhile, if your mortgage carries mortgage insurance, a portion of your monthly mortgage payment will pay this also (unless specified otherwise). Lastly, if you have set up an escrow account for your mortgage, then portions will also go toward your property taxes and homeowners insurance.
What is PMI?
Private Mortgage Insurance (PMI) is provided by a private mortgage insurance company to protect lenders against loss if a borrower fails to pay on their mortgage. PMI is generally arranged by the lender when the initial loan to value (LTV) percentage is more than 80%. Thus, if your down payment is less than 20% of the home’s purchase or refinance price, you will more than likely have to pay PMI, which is typically added to the monthly mortgage payment.
Can I lock my interest rate when purchasing a home?
Yes, there are a variety of options available when it comes to locking in your interest rate. Locking your rate means the lender agrees to provide you with a particular interest rate. This lock protects you from rate fluctuations, meaning your rate won’t go up or down regardless of market conditions that may change before you close on your home. If your mortgage is fixed-rate, your interest rate will remain the same throughout the life of the loan.
How does my escrow account work?
An escrow account is a separate account that holds funds that are beyond your mortgage payment for the purpose of paying for homeowners insurance and property taxes. The funds accrue until it is time for the lender to collect the funds and pay these bills for you when they come due. If you put less than 20% down on a home, most lenders require you set up an escrow account so that you can budget and spread the costs over 12 months.
When is my mortgage payment due?
After closing, your mortgage payment comes due on the first of each month. The first payment you will make will occur one month after the last day of the month in which your mortgage closed. Late charges will be assessed if the payment has not been received and processed by the date noted. Late payments can have a negative impact on your credit.
How do I know how much I can afford?
Our complimentary mortgage calculator can help you with this question.