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Top Five
Most Commonly Asked Questions
General
Rates and
Costs
Loan
Decision
Closing
Top Five
Most Commonly Asked Quesitons
What if interest
rates go down after I lock my rate?
Once you lock the rate, it cannot be
changed. For that reason, it's important to consider
carefully the timing of your rate lock. If you follow the
market or plan to watch it closely, be sure you're
comfortable with the trends you see before you lock. You may
want to consider our Rate Protect Program to help safeguard
against changes in interest rates.
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What
causes mortgage rates to change?
Interest rates charged to consumers for
mortgages change based on the supply and demand of mortgage
securities. Among the biggest influences on rates are
economic reports on the performance of our economy. Economic
news is viewed in one of three ways, inflationary,
deflationary or neutral. If news is inflationary rates tend
to increase, and conversely, if the news is viewed as
deflationary the rates tend to drop. Inflation is associated
with a growing economy. When the economy grows too strongly,
the Federal Reserve increases short-term interest rates to
slow the economy down and reduce inflation. When the economy
is weak, the Federal Reserve decreases short term rates to
spark the economy and drive growth.
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How soon can I
close on my loan?
We can schedule your closing once all
conditions have been satisfied and all costs finalized. This
date will differ depending on the state in which you live
and the required information that needs to be gathered.
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What documents will
I need to provide to complete my loan transaction?
We have included a list of some sample
documents you may be required to submit. (This list is not
all-inclusive.)
- A fully executed agreement of sale for the property being
purchased
- Financial statements for bank and brokerage accounts
- A HUD-1 settlement statement on the property you are
selling, if applicable
- Copy of your most recent pay stub
- Previous W2s
- Copy of a rental lease
- Form 4506
- Homeowner's insurance policy
- Flood insurance policy
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How
is my appraisal obtained?
Once your loan is approved, we will
arrange a date and time for your property appraisal. You
will be asked to provide a contact name, and the appraiser
will contact that person for access to the property. If you
are purchasing a home, you can list either your real estate
agent or the seller's agent. Once the appraisal is complete,
the appraiser will send us the results, and your mortgage
processor will contact you.
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General
How soon do I have
to return my application package?
To provide you with the best service,
we would like to have your package back to us within 3-4
days from the time you receive it. If you are closing within
30 days, it is important that you send your package back to
us within 24 hours.
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How is my appraisal
obtained?
Once your loan is
approved, we will arrange a date and time for your property
appraisal. You will be asked to provide a contact name, and
the appraiser will contact that person for access to the
property. If you are purchasing a home, you can list either
your real estate agent or the seller's agent. Once the
appraisal is complete, the appraiser will send us the
results, and your mortgage processor will contact you.
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Who can tell me
what my property taxes will be?
The seller and/or your Realtor should
provide you with the current taxes for the property.
Property taxes are reassessed from time to time, so this
amount may change. For confirmation of your property taxes,
you can call your county Recording Office.
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What is a Good
Faith Estimate?
Required
by federal law, the Good Faith Estimate is a written list of
the estimated closing costs associated with your mortgage
transaction, including the lender's charges along with the
local closing agent's charges and fees. It also includes
estimated amounts for real estate property taxes and
homeowner's insurance.
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What is a
Truth-in-Lending statement?
Required by federal law, the
Truth-in-Lending statement provides detailed information
about the total charges that you will incur over the life of
the loan. It includes the Annual Percentage Rate, the amount
of interest you'll pay, the amount financed and schedule of
payments, the total of your payments, and late payment
charges.
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Are fees I've paid
to you refundable?
If you
decide to cancel your transaction with us, the mortgage
origination fee is NONREFUNDABLE. However, if your loan is
declined, this money will be used to cover the mortgage
origination fee (as permitted by state and federal law) and
the remaining balance will be refunded to you.
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What causes
mortgage rates to change?
Interest rates charged to consumers for
mortgages change based on the supply and demand of mortgage
securities. Among the biggest influences on rates are
economic reports on the performance of our economy. Economic
news is viewed in one of three ways, inflationary,
deflationary or neutral. If news is inflationary rates tend
to increase, and conversely, if the news is viewed as
deflationary the rates tend to drop. Inflation is associated
with a growing economy. When the economy grows too strongly,
the Federal Reserve increases short-term interest rates to
slow the economy down and reduce inflation. When the economy
is weak, the Federal Reserve decreases short term rates to
spark the economy and drive growth.
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Rates and Costs
Why is the Annual
Percentage Rate (APR) different from the interest rate?
The annual percentage rate reflects the
total cost of your mortgage loan. To calculate the APR,
lenders consider the interest rate on your mortgage loan,
the term of the loan, and other loan fees such as closing
costs, points, etc. Your monthly payment is calculated based
on the mortgage note rate, not the APR. The APR will be
higher than your interest rate, especially if you are paying
any points.
To be used as a valid evaluation tool, the APR must be loan
specific. The actual APR will show up on the
Truth-in-Lending statement that you will see once you have
submitted your information and reserved your funds. When
comparing loan programs based on APR, make sure you check
each lender's criteria for determining the APR.
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What if interest
rates go down after I lock my rate?
Once you lock the rate, it cannot be
changed. For that reason, it's important to consider
carefully the timing of your rate lock. If you follow the
market or plan to watch it closely, be sure you're
comfortable with the trends you see before you lock. You may
want to consider our Rate Protect Program to help safeguard
against changes in interest rates.
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What happens if my
loan does not close before the rate lock expiration date?
When you lock your interest rate, you
are guaranteed to receive that rate as long as you close and
fund your loan by the specified expiration date. If your
loan closes and funds after this date, you are no longer
guaranteed your locked interest rate. Instead, you will
receive the higher of the current market rate or your locked
rate. Please note that you cannot receive a lower rate by
allowing your lock to expire.
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If I have selected
rate protection and do not exercise my one-time float down
option, what will happen?
If you do not exercise your one-time option to float down,
your rate will automatically be locked at the market rate,
five days prior to your closing date. If the rate has gone
up and over your capped rate, you will receive the capped
rate. If the rate is lower than the cap, you'll be locked in
at the lowest rate available to you.
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What are points?
Points are a percentage of the loan
amount paid at closing that affect your interest rate. For
instance, on a $90,000 loan, 1 point = 1% or $900. If you
pay points, you are buying down the rate. Alternatively, in
exchange for a higher rate, the lender pays points to offset
your closing costs. These are considered negative points.
Negative points may be a wise option if you have limited
funds to use at closing. Points are also referred to as
discount points. Points are itemized on your Good Faith
Estimate and are typically paid at closing.
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Are discount points
tax deductible?
In many
cases they are. Contact your tax preparer or the IRS to
obtain a qualified opinion and the best expert advice.
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What
is Private Mortgage Insurance (PMI)?
Private Mortgage Insurance is an
insurance that protects the lender against financial loss is
case of default by the borrower. Lenders generally require
borrowers to purchase private mortgage insurance on loans
with less than 20 percent down payment.
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What conditions need
to be met to terminate Private Mortgage Insurance?
Under the Homeowners Protection Act of
1998, automatic termination of borrower paid PMI must occur
on the date the outstanding principal balance on a loan
closed on or after July 29, 1999 is scheduled to
reach 78% of the lesser of the sales price or the original
appraised value. All loan payments must be current on the
loan as of this date in order for termination to occur. If
the payments are not current at that time, termination must
occur as of the date the borrower becomes current.
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Loan Decision
How long is my
Letter of Approval valid?
If the information you provided to us remains the same, the
letter of approval will remain valid until you close your
loan. If any of the information you provided to us changes,
such as your income or debt, we will need to re-evaluate
your approval. We will also need your permission to
re-evaluate your credit every 60 days to make sure nothing
has changed.
If you have not decided on a rate lock option, you can
obtain a new letter by changing your personal information
online and resubmitting the information to us.
If you have already chosen a rate lock option and paid your
fee, you will need to call your loan processor for an
updated letter.
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What does a
mortgage lender consider when making a loan decision?
A mortgage lender generally looks at
three areas:
- Income and Assets: To determine your ability to repay the
loan.
- Debts and Credit History: To evaluate your buying habits
and your history of repaying other financial obligations.
- Property Information: An appraiser compares the home you
are buying to similar homes in your area to make sure the
property provides sufficient collateral for your loan.
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I already put
earnest money down on the property. Is this included on the
Good Faith Estimate?
Yes.
Any earnest money paid is listed under "Prepaid deposit for
property" on the Good Faith Estimate.
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What
documents will I need to provide to complete my loan
transaction?
We have included a list of some sample
documents you may be required to submit. This list is not
all-inclusive.
- A fully executed agreement of sale for the property being
purchased
- Financial statements for bank and brokerage accounts
- A HUD-1 settlement statement on the property you are
selling, if applicable
- Copy of your most recent pay stub
- Previous W2s
- Copy of a rental lease
- Form 4506
- Homeowner's insurance policy
- Flood insurance policy
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What is a 4506
form?
A 4506 form is an
IRS form that authorizes a mortgage lender to obtain copies
of a borrower's tax returns directly from the IRS.
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Closing
How soon can I
close on my loan?
We can
schedule your closing once all conditions have been
satisfied and all costs finalized. This date will differ
depending on the state in which you live and the required
information that needs to be gathered.
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Do I have to attend
closing? What are my options?
It is not required that you attend the
closing if you've given an acceptable power of attorney or
taken the necessary steps to complete a mail away closing.
Your mortgage processor can help determine your options
based on your needs.
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How does it benefit
me to let you select the closing agent?
By using one of our closing agents, we
can guarantee your closing date on any conventional loan. If
we do not meet this date, we will lower your interest rate
by 1/8th of a percent for the life of the loan.* In
addition, by using our network, you will receive a
competitive price for the closing agent's services and the
superior service that you deserve.
* Approved, conventional, purchase loans only using our
preferred closing agent.
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Where
do I go to close the loan?
In most cases, you will go to a
local title company or attorney's office for the closing. If
you let us select the closing agent for you, we will work
with our network and try to find an agent within 15 minutes
of the property.
If you prefer a different location (e.g. your office, home,
bank) our preferred closing agents will work with you to try
to accommodate your needs. The closing agent will have all
the mortgage documents needed for your closing. You may need
to bring money, picture identification, etc. Your closing
agent will let you know what you need to bring.
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Can I bring a
personal check to the closing?
You will need a cashier's check or
certified check for closing. Since this is such a large
transaction, a cashier's check provides verification that
the funds are actually available.
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What is title
insurance and why is it required?
Title insurance protects the lender or
you against losses from disputes over the title of a
property. It ensures against the possibility that there may
be an unknown lien or any discrepancies in ownership. You
may want to consider purchasing a separate buyer's policy to
protect your interests.
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How much title
insurance do I need?
The amount of title insurance needed is
based on the value of your home and the amount of your
mortgage. Lenders are covered for the full value of the
mortgage. This policy is required and will vary from state
to state. There is a one-time fee for the policy that you
pay at closing. In addition, you can obtain a separate
owner's insurance policy to cover the full value of your
home. However, this additional policy is not required.
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How much
homeowner's insurance do you require?
Your homeowner's insurance policy must
cover the cost to rebuild the home. The insured amount may
be higher or lower than the actual purchase price as long as
it meets the program requirements. The insurance company you
choose can give you an actual quote based on specific
information about the property.
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How do I know if I
need flood insurance?
We will perform a flood hazard
determination for your property. If your home is located in
a Special Flood Hazard Area, federal law requires you to
purchase flood insurance. Most standard homeowner's
insurance policies do not cover loss due to flood. If you
choose, you can obtain flood insurance coverage even if you
are not required to do so by the lender.
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How are my
property tax bills paid?
It depends on your loan program and state requirements.
Generally, if your monthly mortgage payment includes money
for property taxes, these funds are held in escrow by the
lender and the lender pays your property taxes as they
become due. Generally, if your payment does not include
property taxes, you are responsible for paying them by the
due date mandated by your state.
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What type of
inspections do I need before I close on my home?
Certain inspections may be required
under your particular loan program. However, depending on
the home and the location, there are a variety of
inspections you may want to consider before you close on
your new home even if they are not required under your
program, such as:
- Home Inspections
- Termite Inspection
- Water Test (for well water)
- Septic Tank Inspection
- Radon Test
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What is a HUD-1
and when should I expect to receive it?
A HUD-1 statement is a form used by the
settlement agent to itemize all charges imposed upon a
borrower and seller for a real estate transaction. You
should receive this statement a least one day before closing
from your title company, closing attorney or escrow agent.
Monies should not be exchanged without you first signing the
HUD-1 settlement statement.
Click here to view a sample HUD-1.
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