FAQs

Can funds be borrowed to pay for a down payment?

Yes it is possible to borrow the money for your down payment. You could borrow money from your 401 K, or even another home that you may own. If you are borrowing the money for your down payment even if it is from your friends or family you should disclose this information to your lender. There are some cases were keeping this information private has been considered a breach of the loan agreement.

What is a fixed rate mortgage?

With this type of mortgage your interest rate will remain fixed for the entire life of the loan. This type of loan will provide you with the same payment amount every month until the loan is paid off.

What is an adjustable rate mortgage?

An adjustable rate mortgage is a loan in which the interest rate can move either up or down over the life of the loan. With this type of mortgage the interest rate will generally start low and increase the longer you have the loan.

What is a prepayment penalty and should I have one?

A prepayment penalty allows the lender to charge the borrower a fee if they close their low within a certain period, usually the first five years of the loan. This fee is usually equal to about six months worth of interest payments on a loan. In some cases you may be able to get a lower rate if the lender includes a prepayment penalty, but it is usually better to try and avoid it.

What is the difference between pre qualification and pre approval?

Pre qualification is when a prospective buyer discloses, either verbally or by providing documentation of, their income, assets and credit so that a lender can determine how much a borrower will be likely to afford in loan payments. A pre approval involves an underwriter and is a more formal review of your credit and income. A prequalification will commonly only provide you with an idea of what you can afford while a pre approval will actually guarantee you a loan of a certain amount.

Am I required to get financing from the lender that my real estate agents recommends?

A recommendation is just that, a suggestion, you are never required to choose the lender that anyone suggests to you. The best way for you to find a lender is to shop around and compare deals.

What are points?

Also called discount points, a point is 1% of the amount of the loan. Points are a one-time fee added to your closing costs and generally results in a slightly lower interest rate on your loan.

What is a good faith estimate?

A Good Faith Estimate is an estimate that outlines the costs you will incur during the mortgage process. This is provided to you when you apply for your loan.

What is an Escrow Payment?

The portion of your monthly payment that is held by the lender to pay for taxes, hazard insurance, mortgage insurance and other items as they become due is known as an escrow payment.

What is Private Mortgage Insurance and will I have to pay it?

Private Mortgage Insurance (PMI) provides your lender with a way to recoup its investment if you are unable to repay your loan. PMI is usually required when the mortgage amount is higher than 80% of the home’s value. That means that if you buy a home with a down payment of less than 20%, you will probably have to pay PMI. Many people get around this by using an 80/20 program, which combines a first mortgage with home equity financing.