Frequently Asked Questions

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Q: What is a mortgage?

A: Great question. A mortgage is a loan that a borrower uses to purchase a property. The property is used as collateral for the loan, which means that if the borrower defaults on the loan, the lender can take possession of the property. Mortgages are typically repaid over a period of 15 to 30 years, and they usually have an interest rate that is lower than the interest rate on other types of loans.

 

Q: What are mortgage points?

A: A mortgage point is a fee equal to 1 percent of your loan amount. Mortgage points are used to lower your interest rate and monthly payments. One point costs 1 percent of your mortgage balance. For example, if you have a $100,000 mortgage, one point costs $1,000. Mortgage points are sometimes called discount points or premium points.

 

Q: What is the difference between preapproval vs prequalified mortgage?

A: If you’re in the market for a new home, you’ve probably heard the terms “preapproval” and “prequalified” used interchangeably. But they actually mean two different things. A pre-approval is based on a more thorough evaluation of your financial history and will give you a better idea of how much house you can afford. A pre-qualified mortgage is based on the information you provide to the lender, such as your income, employment history, and credit score.

 

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Q: How do I find out how much I qualify for?

A: Assuming you’re looking to qualify for a mortgage, there are a few key things you need to know. How much you make, how much you have in savings, and your credit score will all play a role in how much of a loan you can take out. The first step is talking to a lender to get pre-qualified, which will give you an idea of how much they’re willing to lend you.

 

Q: Is it possible to get a mortgage loan for bad credit?

A: If you have bad credit, you may think that getting a mortgage loan is out of reach. But there are options available to you. There are companies that specialize in mortgage loans for people with bad credit. These companies work with you to find a loan that meets your needs and helps you improve your credit score. With the right mortgage loan, you can buy the home of your dreams.

 

Q: What are the income and debt ratios?

A: Income and debt ratios are two important financial concepts that everyone should understand. An income ratio is simply a measure of how much money you make compared to how much money you spend. A debt ratio, on the other hand, is a measure of how much debt you have compared to your assets. Both ratios are important in determining your financial health and stability.

 

Q: What are cash reserves?

A: Cash reserves are a type of short-term investment that companies use to maintain liquidity and protect themselves from unexpected expenses. Companies typically keep cash reserves in a checking or savings account or invest in short-term Treasury bills. Cash reserves can also be used to take advantage of opportunities that arise unexpectedly, such as investing in a new product line or expanding into a new market.

 

Q: What is an Annual Percentage Rate?

A: An Annual Percentage Rate (APR) is the cost of credit for a 12-month period, expressed as a percentage. It includes the interest rate, points, mortgage insurance, and other fees associated with the loan. The APR is the true cost of borrowing money and is used to compare different loans. For example, a loan with a 5% APR will cost $50 in interest for every $1,000 borrowed.

 

Q: What is a mortgage loan process?

A: A mortgage loan process is when a borrower takes out a loan to purchase a property. The loan is secured by the property itself, meaning that if the borrower defaults on the loan, the lender has the right to seize the property. The mortgage loan process typically takes 30 to 45 days from start to finish.

 

Q. What are Conventional, FHA, USDA, and VA mortgage loans?

There are four main types of mortgage loans: conventional, FHA, USDA, and VA. Each type of loan has its own set of rules and guidelines. Conventional loans are the most common type of loan. They are not backed by the government and can be either fixed-rate or adjustable-rate mortgages. FHA loans are backed by the Federal Housing Administration and can be a good option for first-time homebuyers or those with low credit scores.

 

Q. What is prepaid interest in a mortgage?

When you close on a mortgage, you may be charged for interest that accrues from the date of your closing until the end of that month. This is known as prepaid interest, and it’s just one of the fees you’ll need to pay at closing. Prepaid interest is calculated based on the interest rate of your loan, and it’s added to your loan balance. You’ll make your first mortgage payment the following month, which will include principal and interest.

 

Q. How long does it take to close a mortgage?

It can take anywhere from a few weeks to a few months to close on a mortgage, depending on a number of factors. The biggest factor is usually the type of mortgage you choose. For example, with a fixed-rate mortgage, your interest rate will stay the same throughout the life of your loan, so you’ll know exactly how much your monthly payments will be. This makes it easier to budget and plan for your future.

 

Q. What are the closing costs of a mortgage?

When you’re ready to buy a home, you’ll need to start saving for a down payment and closing costs. Closing costs are the expenses associated with finalizing your mortgage loan and can add up to several thousand dollars. Knowing what to expect and budgeting for closing costs can help make the home-buying process less stressful. Closing costs can range from 2% to 5% of the home’s purchase price.

 

Industry Terms:

LTV: Loan-to-Value Ratio

PTI/DTI: Payment/ Debt to Income Ratio

PPP: Prepayment Penalty

APR: Annual Percentage Rate of Charge

ARM: Adjustable Rate Mortgages

HELOC: Home Equity Line of Credit

 

Regulations:

ECOA: Equal Credit Opportunity Act

FCRA/ FACT: Fair Credit Reporting/Transactions Act

FHA: Fair Housing Act

HMDA: Home Mortgage Disclosure Act

TILA: Truth in Lending Act

RESPA: Real Estate Settlement Procedure Act

HOEPA: Home Ownership & Equity Protection Act

 

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