FAQ: Questions and Answers

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.

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.

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.

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.

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.

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.

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.

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.

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 include: 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.

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.

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.