Frequently Asked Questions


People have many questions about mortgage, how they can get a mortgage and what they need to qualify. They also have concerns about applying for a mortgage. Here are a few of some of the most common questions along with their answers.

Question: I don’t have very good credit; can I still qualify for a mortgage?

Answer: Yes you can, a mortgage can be obtained by people with all kinds of credit such as Excellent, Great, Average, Below Average, and Poor Credit. The rates will increase slightly as credit scores go down but a mortgage can still be acquired. Additionally, with a lower credit score the available mortgage programs may be limited to a few less programs. On the other hand, if your credit score were excellent, you would have more programs available. But please understand that if your credit score is low, there are compensating factors such as money put away in checking or savings accounts, low LTV (loan to value), 401k's, investments, etc., long job time, low DTI's (debt to income ratios), and lower loan terms (15 year instead of a 30 year loan) may help to compensate somewhat for a lower credit score and qualify you for a little better rate.

Question: What are the mortgage loan terms available for me as a borrower?

Answer: Multiple loan terms are available for you. Some of the most common loan terms are 5, 10, 15, 20, 25, 30 and now even 40 and 50 year home loan terms. There are some lenders that will still let you do the years in between these ones also, although not very common. The 40 and 50 year loan term is still relatively new to the market but the rest have been around for quite a while. Generally the lower the term you select, the lower the rate you can acquire. The 30 year mortgage term is still the most common loan term used for home mortgage financing.

Question: What is PMI?

Answer: PMI, or Private Mortgage Insurance, is a form of insurance that is required on conforming loans where the borrower does not have a minimum of 20% equity in the home or available to put a minimum of 20% down. PMI is an insurance that the borrower pays for to protect the bank in case you default on your loan. Any time that you do not put down 20% for a purchase transaction or have at least 20% equity in a refinance transaction the loan is considered a higher risk to the bank. This is why they require this type of insurance.

Question: What might be the best mortgage for me?

Answer: In today’s mortgage world there are many mortgage options for a borrower. will assess your situation and recommend the best options for you at that time. We have multiple programs including a simple fixed rate mortgage, interest only, pay option arms, lot loans, construction, rehab, manufactured, commercial and many other options to fulfill your lending needs.

Question: Can I get a mortgage even after a bankruptcy?

Answer: Yes, you may still qualify for a home loan even if you have a prior bankruptcy. The best way to find out if you can qualify for a home loan after a bankruptcy is to speak with a loan officer and discuss your options. You may be surprised at how many options you have. Be sure to mention as much as possible regarding your past bankruptcy so that your loan officer can match you with the best programs to meet your needs.

Question: What is APR?

Answer: APR, or Annual Percentage Rate, is the effective rate that takes the lender bank's charges into consideration and express the total of all these charges in the form of an interest rate. Because there are always multiple finance charges in addition to the note rate (the interest rate base on which payments are calculated), the APR is almost always higher than the note rate. The APR is one of the items required by the Truth-in-Lending to disclose to every potential borrower.

Question: What is PITI?

Answer: PITI, or Principal, Interest, property Taxes, and Insurance, is essentially the cost of living in your particular home. PITI can also be expanded to include any private mortgage insurance and homeowner’s association fees or condominium association fees.

Question: What is Lender Paid Mortgage Insurance?

Answer: The lender pays the mortgage insurance in exchange for a slightly higher rate.

Question: Do you have the lowest rates available?

Answer: We have loans to fit just about every situation with rates that are competitive with everyone else. Many lenders advertise rates that are actually not available just to get you to talk to them and get you to originate a loan with them. Actually all mortgage money that all lenders lend comes from the same sources. Rather than choosing a lender based on whoever quotes the lowest rate, you should choose on the basis of the loan officer's professionalism, experience and skill in finding a loan program that would be best suited for your particular situation. Doing it this way will get you a proper loan program with a competitive rate and a borrowing process that is closer to stress free.

Question: What is a Good Faith Estimate?

Answer: A Good Faith Estimate is a preliminary estimate of the closing costs and fees for your mortgage. When comparing a Good Faith Estimate between mortgage brokers be sure to have the Truth N' Lending with you.

Question: What is a Truth N' Lending statement?

Answer: A Truth N’ Lending is used in connection with the Good Faith Estimate. A Truth N’ Lending shows you the total cost of a mortgage including the closing costs and fees. A Truth N’ Lending will allow you to determine if a higher rate with low fees is better than a lower rate and higher fees, and vice versa.

Question: What are impounds?

Answer: Impounds are the part of your monthly payment that cover Home Owners Insurance and Property Taxes. Impounds are calculated by taking your annual payment and dividing by 12. From time to time, for a higher rate, the lender will allow borrowers to pay insurance and taxes themselves. However, lenders prefer to collect these in monthly installments and pay them when due. This ensures that these are paid on time and prevents tax liens or lapsing of insurance. Normally, at closing, lenders will collect whatever is currently due in addition to 2 months extra for reserves or what should have been collected since the last due date for the insurance or taxes plus an additional 2 months extra for reserves. The borrower will always have this 2 months extra in reserves for as long as the borrower has the loan. If you pay your mortgage late, this allows the lender to pay your taxes and insurance on time.

Question: I am currently self-employed or I have a steady income that is difficult to prove. Is there a mortgage for me?

Answer: Yes there is. Depending on your credit history, down payment, and several other factors your Mortgage Professional may suggest a 'Stated Income' program for you to consider.

Question: Is it possible for me to buy a house with no money down or even with no money out of my pocket?

A. Yes it is. You can buy a home with zero money down. There are lots of different types of 100% financing programs out there for home-buyers and even for first-time homebuyers. There are also programs that will allow you to finance the closing costs so that you will not have to take any money to closing. Another option is to have the seller pay for your closing costs. A seller contribution is computed and placed into the purchase price of the property. This way the seller will pay for some or all of your closing costs. As you can see, there are many ways to obtain financing for a home purchase with no money down and/or no out of pocket money.

Question: What does “Loan to Value” mean?

Answer: Loan to Value (LTV) is the size of your loan in proportion to the value of your home. It is important to know that a lender will always use the lesser of the appraised value or the purchase price for the value. If you refinance, then the appraised value is always used.

Question: What does DTI mean?

Answer: DTI means Debt to Income Ratio. This is a ratio that will very strongly decide how much of a loan you can afford. Your Debt to Income Ratio or DTI is calculated by dividing your total monthly debts with your total monthly income.

Question: Why should I buy instead of renting?

Answer: A home is always an investment. When you rent the money is gone forever and you are basically paying your landlord's mortgage. When you are buying a home, you can deduct the cost of your loan interest from your taxes. The property taxes you pay as a homeowner are also deductible. Additionally, the value of your home may go up over the years.

Question: What is a credit report or tri-merge?

Answer: A credit report or tri-merge is a report that contains information on how you pay your bills, where you work and live, and any information that is on public record, such as a bankruptcy, judgments, tax liens and lawsuits. Your permission is required in order for a lender to order a copy of your credit report.

Question: How long will negative credit information stay on my credit report?

Answer: Most negative credit statements remain on credit reports for seven years. Some exceptions are bankruptcies, which can remain for 10 years along with certain lawsuits, which can remain on the credit report until the statute of limitations runs out.

Question: How is an index and margin used in an Adjustable Rate Mortgage (ARM)?

Answer: An index is an economic indicator that lenders use to set the interest rate for an Adjustable Rate Mortgage or more commonly called an ARM. Generally the interest rate that you pay is a combination of an index rate and a pre-specified margin.

Question: Why should I refinance my mortgage?

Refinance to pay off your 1st mortgage and reduce your mortgage rate and monthly payment, to pay off your 1st mortgage and take out some additional cash, to pay off your first and second mortgages and reduce your mortgage rate and monthly payment, you currently have no mortgage liens on your property and wish to obtain cash by applying for a 1st mortgage or you currently have a construction mortgage loan and wish to pay it off and obtain permanent financing.

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