What is the APR and why is it higher than my interest rate?

This should not be confused with your note rate. The Annual Percentage Rate, or APR, is the cost of your credit expressed as an annual rate. Because you may be paying closing costs, also known as prepaid finance charges (origination fee, discount points, appraisal, interest, etc.), the APR on the disclosure is often higher than the interest rate on your loan. This APR can be compared to the APR of other loan programs to give you a consistent means of comparing rates and programs.

Why is the Amount Financed on the Truth In Lending lower than my requested loan amount?

This should not be confused with your loan (mortgage) amount. The Amount Financed is the amount of credit provided to you or on your behalf, MINUS Prepaid Finance Charges. Prepaid Finance Charges include, but are not limited to, items paid at or before the loan closing, such as loan origination, commitment or discount fees (points), interest, appraisal, etc. The Amount Financed represents a NET figure used to allow you to accurately assess the amount of credit actually provided. The Amount Financed is lower than the amount you applied for because it represents a NET figure. If someone applied for a mortgage of $50,000 and their Prepaid Finance Charges total $2,000, the Amount Financed would be shown as $48,000 ($50,000 minus $2,000). If your loan is approved for the amount you applied for, that’s how much will be credited toward your home purchase or refinance at closing.

The Truth In Lending states that if I pay the loan off early, I will not be entitled to a refund of part of the finance charge. What does this mean?

This means that you will be charged interest for the period of time in which you used the money loaned to you. Your PREPAID finance charges are generally not refundable, nor is any interest which has already been paid. If you pay the loan off early, you should not have to pay the full amount of the “Finance Charges” shown on the disclosure. This charge represents an estimate of the full amount the loan would cost you if the minimum required payments were made each month through the life of the loan. If you have mortgage insurance you may be entitled to a refund of any unused portion of mortgage insurance paid at time the loan closed.

Should I make my next mortgage payment?

You should always make your next mortgage payment unless instructed otherwise, as any defaults/delinquencies may impact your credit.

Do you offer an auto payment option for your loans?

Once your loan has been closed/funded and its servicing has been transferred, you can contact your new servicer to setup and schedule an auto payment.

How long does it take to complete my home loan refinance/purchase?

No two loans are ever the same, so it is difficult to estimate how long it takes to complete a loan. If you provide us with all of the requested documentation in a timely manner, we will certainly do everything in our power to make sure that your loan transaction is completed as quickly as possible and within any rate lock period specified (if your rate has been locked in).

What is the closing date for my home loan?

Unless this is a purchase transaction with an estimated closing date, the exact closing date for your loan is not typically known until the processor and underwriter have reviewed your application in its entirety and fulfilled any other conditions/documentation requested for it. We will definitely do our best to make sure that the transaction is completed as timely as possible.

Who can I contact to find out the status of my home loan application?

Please contact your loan officer or loan coordinator to obtain status updates for your loan.

Why are the credit scores I obtained through a free credit reporting site different than the FICO scores I obtained through my lender?

There are different formulas and models used to calculate your credit score, depending on the type of credit report that is obtained. A free credit report typically provides scores based on a “consumer” model, whereas the FICO® scores provided by your lender are based on a “mortgage” model. Because the information on your credit report is weighed differently depending on which model is used, there will be discrepancies between the scores.

Can I obtain new credit or increase the credit limits of my existing accounts during the processing of my home loan application?

A credit check occurs at the beginning of the loan processing, and we are also required to perform another credit check right before your loan closes. You should avoid opening any new credit accounts, or even increasing the limits of your existing ones, as this may affect your qualifying ratios and cause unintended delays or even the denial of your home loan.

What are the minimum down payment requirements available for a conventional, FHA, or VA loan?

Conventional loans usually require a minimum down payment of 5%. FHA mortgages are available for as little as 3.5% down. VA mortgages have a no-down payment option for eligible veterans.

How long do I have to pay for Private Mortgage Insurance (PMI) if my loan requires it?

Private Mortgage Insurance (PMI) is automatically terminated at 78% loan-to-value/22% equity (based on the amortization schedule) if the loan is current or has reached the midpoint of the payoff. You can also sometimes request that it be cancelled at 80% loan-to-value/20% equity.

Do I need to have an impound/escrow account for my property taxes and homeowner’s insurance?

You can elect to have an impound/escrow account to pay your property taxes and homeowner’s insurance along with your monthly mortgage payment, or to waive it and pay them both yourself. However, typically an impound/escrow account is required when your loan-to-value exceeds 80% or if you obtain an FHA loan. If you initially lock in your rate with an impound/escrow account, there may be a charge (points) or increase in the rate for waiving the account.

Why am I paying X number of months of property tax and homeowner’s insurance reserves at the closing of my loan?

To properly reconcile your impound/escrow account, the loan docs department must ensure that you hold enough reserves to pay off the property taxes and homeowner’s insurance when they come due. This may require several months of property taxes or homeowner’s insurance reserves being collected at the closing of your loan. If you currently have an impound/escrow account with your existing lender, you will be sent a refund for any remaining balance after your new loan closes.

Why are you collecting a payment for my property taxes and/or homeowner’s insurance renewal before they are due?

Our investors require that you pay the property taxes or homeowner’s insurance renewal at the closing of your loan if they are due within 60 days of the closing date. This is because the investor does not want the risk of assuming your loan, and then having the property taxes or homeowner’s insurance become delinquent. Also, in many states, there may be a “delinquent after” date for your property tax installment which can be a couple months after they are actually due. We must collect the property taxes based on the actual due date, and not the delinquent date.