Understanding How A Loan Works.

A mortgage is a loan from a lender to help you finance the purchase of a new home, or refinance an existing property. The mortgage acts as collateral, which means when you take out a mortgage loan you agree that the lender has the right to take your property should you fail to repay the money you’ve borrowed under the terms agreed upon.

Sounds ominous, but it’s not. We’re here to help provide you with the support and tools necessary to make your home buying experience an uplifting event.

We answer some questions below to help ease any fears you may have, and show complete transparency throughout your loan process.

How do I get approved?

You can either fill out an online application here on our site, or contact us directly to speak with a professional mortgage advisor

What is the difference between Conventional & FHA financing?

FHA loans are insured by the federal government.  Conventional loans are not.

General lending requirements vary slightly between the two, such as down payment requirements, debt to income limits, previous work history, and the overall credit profile.

Your mortgage advisor can walk you through in detail the specifics to help determine which type of loan product best suits your individual needs.

What is PMI?

Private Mortgage Insurance protects the lender from losses that might be incurred if the loan defaults.  It’s required on Conventional financing when a mortgage loan is secured for more than 80% of the property’s value (or purchase price).

What is the difference between a second home and an investment property?

A second home is a residence you intend to occupy in addition to your primary residence for part of the year.  It must be a certain distance from your primary home and not rented out for income.

An investment property is not a primary residence or second home.  There are no distance requirements from your primary residence and it is purchased for the intent of generating income.

What is a pre-approval, and why do I need it?

Obtaining a pre-approval is the first step in the home buying process. It involves complete analysis of your submitted loan application and credit profile.

The results will guide you in the following:

  • Let’s you know how much of a mortgage loan you qualify for.
  • Down payment requirements.
  • Your estimated monthly payments at various price points.
  • Details on the loan products available to you.

It provides an understanding of the entire loan process from start to finish.

Having a bonafide pre-approval in hand is important prior to beginning any home searching journey.

What is the difference between the interest rate and APR?

Let’s break it down between the two.

 

INTEREST RATE

  • Your interest rate is the monthly cost paid on the unpaid balance of your home loan.
  • It is the interest being charged to secure financing.
  • The interest rate is what drives your monthly payment and is the rate used in determining your mortgage financing.

APR

  • The APR, or Annual Percentage Rate, is intended to provide the cost of securing a mortgage loan over the lifespan of that loan.
  • It includes the total costs associated with the mortgage loan in addition to the interest being collected, and will therefore be higher than your secured interest rate.

How much down payment do I need?

The start of any great journey needs a solid foundation to begin. A down payment is the money you give to a seller at the closing when you buy a home, which can be scary and daunting.  However, we have a variety of programs to help reduce and remove that stress. The amount needed will vary depending on the type of mortgage financing secured, and the purpose of the loan.

The larger the down payment, the better it will be on your monthly mortgage payment and interest rate. You can get into a home with as little as 0-5% of the purchase price.  Our mortgage experts can guide and inform you of options to make the best decision.

What is an escrow account?

An escrow account is a separate account set up by the lender for the purpose of paying required bills associated with your home, such as property taxes, homeowner’s insurance, and private mortgage insurance (PMI).

The lender collects the funds needed for this account as part of your monthly mortgage payment, and then pays the bills when they become due. For some loans, escrow accounts are required.

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