How do I know which is the best mortgage for me?

Multiple factors affect this question, and the complications of the mortgage market and lending terminology can make your search for the best loan seem daunting. It’s important to get expert advice from people who know the field inside and out as you research your options. That’s why we offer free consultations at any time to help you with any and all questions or concerns you may have.

What are the options for different kinds of loans?

Loan terms can range from five to 40 years, with the most common being the 30-year mortgage. Interest rates can be fixed or variable. Please see the section on “The Four Main Refinancing Plans” for a detailed explanation of the different kinds of loans you may want to consider.

Can I save money with an interest-only mortgage?

You will save money during the initial period when a low-interest rate is temporarily fixed. If you only plan to live in your home for a few years or believe your home will appreciate during the initial payment period and allow you to refinance, this could be a good loan option for you. However, keep in mind that with this type of loan payments will increase and ultimately be higher than payments on a normal mortgage. If the mortgage also has an adjustable rate, which could increase over time, your payments later in the life of the mortgage may be significantly higher.

I’ve heard of loans which have no closing costs. How do I get one?

All loans have closing costs. Sometimes lenders will waive fees, but to cover their costs they will increase the interest rate. In other cases the closing costs are rolled into the amount of the loan, so you will actually be paying interest on those fees over time. This also increases the amount of your loan balance, which could potentially drive up your interest rate. You must also consider whether there is enough equity in your home to balance the loan amount.

How long does it take to refinance?

The time required to refinance a loan varies. We can often take you from loan application to closing in 10 days or less. However, we never sacrifice quality for speed.

What does APR mean?

The Annual Percentage Rate (APR) expresses the actual cost of the loan as an interest rate. The ‘note rate’ is the interest rate base used to calculate payments. However, other finance charges are always added on. So the APR includes all charges to show what the actual cost of the loan will be expressed as an interest rate. The Truth-in-Lending form must disclose the APR.

Give me an example

Say you take out a $200,000 loan with a 30-year term and a fixed interest rate of 7.5%. There are additional charges for closing, title, application and other items that total $5000. The $5000 will be spread out over the 360 payments and included in the monthly loan payment. Your monthly payments will be $1433.39. So if you calculate your interest rate in reverse based on the monthly payment, you will actually be paying the equivalent of 7.75% interest on the $200,000 loan amount.

Why do interest rates change?

Interest rates are dependent on many different variables, such as the bond market, inflation, and Federal policies. Interest rates for which you are eligible are also affected by the specifics of your situation, including your credit profile, the amount you plan to mortgage, and the type of loan you’re seeking. Please see the section “Why Do Rates Fluctuate?” for a detailed and easy-to-understand explanation.

Should I lock in an interest rate?

If you have a property address, you can lock in an interest rate or float at any time. This must be an individual decision. No one knows which way rates will go in a day or week or year. So no one can tell you if the decision to lock in the current rate will ultimately be most advantageous for you.

Why do some mortgage lenders offer rates as low as 1%, while others don’t?

No one is actually offering interest rates that far below current rates. Companies which advertise such rates use sneaky techniques to add on extra fees and secretly raise the rate closer to market averages. Such low rates are really dishonest advertising strategies. Some companies do offer very low rates as part of a pay option adjustable-rate mortgage (ARM). These plans entail risks which you should understand thoroughly before signing on. We pride ourselves on offering comprehensive honest information about refinancing and your specific options. Even if you don’t want to take out a loan with us, call us first for lifesaving information about mortgage deals you may be contemplating. We offer very competitive rates with top-notch customer service. And we tell it as it is.

So how do I compare mortgage offers?

Use the Good Faith Estimate (GFE) and the Truth-in-Lending statement (TIL). The GFE is a standard form which provides an estimate of monthly mortgage payments and the settlement charges paid at closing. The GFE breaks down costs and should allow you to compare lenders’ offers and see how a loan offer will translate into monthly payment amounts.

Federal law requires that lenders provide a Truth-in-Lending statement disclosing all terms, conditions, and fees associated with the loan. The TIL states interest rates and gives the APR, which is always higher than the actual rate quoted. (See the explanation of APR above.) But because different lenders calculate the APR using different criteria, comparisons between loan proposals can be difficult.

How does my loan amount differ from my total costs?

The ‘amount financed’ refers to the amount of the loan minus prepaid finance charges, which are fees paid to the lender at the time of closing. These may include closing fees, points, adjusted interest and the initial insurance premium. The ‘amount financed’ can be found on the Truth-in-Lending form.

How do I determine the total amount of money I will pay over the term of my loan?

The ‘total of payments’ refers to the sum of money you will pay if you make all the number required payments for the entire term of your loan. This will include interest, principal, and mortgage insurance premiums if they are applicable. This differs from the ‘total interest payments’ which means the total of all interest paid on the loan for a given time or for the term of the loan.

Does my monthly mortgage payment cover principal and interest only?

In most cases, the monthly mortgage payment covers principal (the amount of money borrowed), interest (fees paid to the lender for the opportunity to borrow), taxes, and insurance. The Good Faith Estimate lists each of these costs and provides a basis for comparing loan offers.

Are there any other charges involved in owning my home?

Check the PITI. This acronym stands for principal, interest, property taxes and insurance. PITI can include private mortgage insurance and homeowners or condo association fees as well. The PITI represents the true total cost of living in your home.

When is Private Mortgage Insurance (PMI) required?

Private Mortgage Insurance is insurance from a private company designed to protect the lender in case you default on your loan. It is required when the borrower does not have a minimum 20% down payment to purchase a home, or 20% equity in the home when refinancing.

What is the loan-to-value (LTV) ratio?

The LTV ratio compares the size of the loan to the value of the home. In most cases, the loan amount will be less than the home valuation. For example, if you have $20,000 equity in your $200,000 home, and you refinancing a mortgage of $180,000, your LTV will be 90%. When refinancing, lenders always use the appraised value of your home to make this calculation.

How can I estimate how big a loan I can qualify for?

One important factor is the debt-to-income ratio (DTI). Divide your total monthly debts by your total monthly income to calculate it. This ratio is used to determine how much money you can borrow.

Is it necessary to make a large down payment?

It’s not required, but it is helpful. Many loan programs are available which require either a small down payment or no down payment at all. But don’t forget that private mortgage insurance is required for loans covering more than 80% of the home value. Alternatively, these programs may require a second mortgage or a line of credit.

What is my credit score?

A credit score is a number which attempts to represent your creditworthiness. The FICO score, the most well-known rating, is computed by credit reporting agencies based on your credit history, payment history, late payments and other factors. The FICO score is contained in your credit report. The credit report contains information on how you pay your bills, where you live and work, and information from the public record such as bankruptcies or lawsuits. You must give your permission for a lender to obtain your credit report. Don’t forget that your credit score may be lowered simply because numerous people run a credit check on you.

Can I still get a mortgage if I have bad credit?

It’s possible to obtain a mortgage with virtually any kind of credit. But the rates will increase as the credit score decreases. People with lower credit scores may not have access to all the mortgage loan programs available to those with higher credit scores. If you have a poor credit score, certain other factors can mitigate it. These includes: a funded 401(k), long-term employment, lots of cash in the bank, a low debt-to-income ratio (DTI), a low loan-to-value ratio (LTV) on the mortgage, and shorter terms.

Can I still get a mortgage if I’ve had a bankruptcy?

It may be possible to qualify for a home loan after bankruptcy. Keep in mind that a record of a bankruptcy generally stays on your credit report for 10 years. Other unfavorable information, such as late payments, normally remains on your credit report for seven years. Our loan consultants can provide specific helpful information about your situation.

What documents are required to apply for a refinance?

Lenders will initially request information on your recent employment history, current residence, current income, and assets. After a preliminary evaluation, lenders may request additional information to qualify you for a specific loan program.

Are taxes and insurance included in the mortgage?

Loan providers may set up an escrow account out of which your property taxes and homeowners insurance are paid. You pay into the escrow account every month with your mortgage payment. Alternately, lenders may charge impounds to cover property taxes and homeowners insurance. In some cases, you may be allowed to pay your own taxes and insurance in exchange for a slightly higher rate or a monthly fee. In the case of FHA loans, the government requires that an escrow account be set up to cover taxes and insurance.

I’ve heard the term ‘title work’. What does this mean?

This refers to the process of investigating whether there are any liens or lawsuits on the property in question which would prevent a clear transfer of the title.

What will I have to do at the closing?

The main thing you will have to do is sign papers — lots of them. Everything will be explained to you in detail so you understand exactly what you are signing. And you’ll receive copies of everything. The title company will distribute the funds in accordance with the loan plan. If there is any difference between the loan amount and the actual payouts, you’ll receive a check soon after.