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Frequently asked questions (by category)
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Most Common
Selecting a Mortgage questions
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Q.What is the difference between a fixed rate and an adjustable rate loan?
A.A fixed rate loan has an interest rate and monthly principal and interest payment that will not change for the life of the loan. An adjustable rate loan has an interest rate that is linked to an index which changes over time. This fluctuation in rates causes the interest rate and monthly payment on the adjustable rate loan to change. For this reason, adjustable rate loans carry more risk due to the possibility that your monthly payment could increase. Normally, you can get a little better rate on an adjustable rate loan than you would on a fixed,due to the fact that you are assuming some of the risk that rates might go up. To avoid worry about future rising interest rates, most borrowers choose fixed rate loans for protection.
Q.What is the term of the loan?
A.The term of a loan is the length of time it will take you pay off the loan given that you make the minimum required monthly payment. The term of your loan can vary according to your preference. Most borrowers choose 30 year terms because it makes a reasonable monthly payment and they can always pay extra on the mortgage. Still some borrowers choose a shorter term like 15 years in order to build equity faster and pay down the loan quickly. Longer term loans tend to have a little higher interest rate than the shorter term, while shorter term loans will always have a higher monthly payment.
Q.Should I pay discount "points"?
A.Points are paid upfront when you close your mortgage. One point is equal to one percent of the value of your mortgage. You can pay points upfront to lower the interest on your loan.
Q.How much money do I need for a down payment and closing costs?
A.There are loan programs available that require no money down.
For most loans a minimum down payment of 5% is required plus money for closing
costs. Some programs allow the down payment and/or closing costs to be
a gift from a family member. Government and non-profit grants may be available for down payment assistance. Our loan experts can help you choose from the different types and find one that fits your down payment requirements.
Q.What is Private Mortgage Insurance and can I avoid it?
A.Private Mortgage Insurance (PMI) is insurance for the Lender in case
the borrower defaults on the mortgage and the property goes into foreclosure. PMI is
placed on any conventional loan where the loan amount is greater than 80% of the sales
price. PMI benefits the borrower by allowing him/her to put a smaller down payment on the
home. Normally, you can avoid PMI if you put more than 20% down on your property.
Q.What is a Conventional Loan?
A.Conventional Conforming Loans are loans that conform to national guidelines established by the Federal National Mortgage Association (FNMA or Fannie Mae) or the Federal Home Loan Mortgage Corporation(FHLMC or Freddie Mac). These guidelines insure the security of your mortgage and therefore the security of your home.
Loan Amounts for conventional loans can vary in size, but can not go over $275,000 for a single-family home. Conventional loans with higher balances are referred to as jumbo loans. Conventional loans allow for larger loan sizes than FHA or VA but require more stringent criteria and excellent credit.
Q.What is a FHA loan?
A.FHA Home Loans feature low down payments and flexible guidelines to make it easier to qualify. FHA loans are popular with first time home buyers but they can be equally attractive to move-up buyers. FHA home loans are insured by the Federal Housing Administration (FHA), a division of Housing and Urban Development (HUD). HUD does not generally provide the funds for the mortgages, but they insure (see Mortgage Insurance) mortgage loans made by private industry lenders such as banks and mortgage bankers. HUD/FHA offers a variety of single family home loan programs including single family (1-4 unit homes) mortgage lending programs.
Q.What is a VA Loan?
A.VA loans, guaranteed by the Veteran's Administration, are for
veterans. VA loans do not require any down payment and in some
cases the seller may be willing to pay all or part of the closing costs. This allows the
veteran to purchase a home with little or no money down.
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