Frequently Asked Questions
Common Mortgage Questions, Simple Answers
The most common types of mortgages right now are fixed rate loans. They are typically 10, 15, 20, 30, or 40 year terms. There is also ARM (adjustable rate mortgage) loans that offer a lower rate for an initial fixed period and then becomes adjustable. Several loans also have an interest only option where the minimum payment is just the interest due.
There are no hidden fees. All fees will be disclosed up front. If you choose to proceed with the no-cost option, those fees will all be credited back to you.
Any non-recurring closing costs (NRCCs) will be included. These are any fees being charged by the lender, title and escrow. Pre-paid items are not included.
These items are not to be confused with closing costs. The most common forms of pre-paid items are interest payments in-between your old loan and new loan, property tax, homeowner’s insurance, and homeowner’s association dues.
Appraisal fees will be paid up-front by the borrower. In order for the appraiser to schedule an appointment, they will require their fee to be paid first. Upon closing the loan, any fees incurred by the appraiser will be refunded back to you.
Definitely. Most lenders will be required to review two years tax returns to document income. A current P&L may be used to support income.
Refinancing will reset your loan term to the new maturity date. If you are refinancing to reduce your interest rate, you can either take advantage of the lower monthly payment, or keep the same payment as before to pay the loan off earlier.
This scenario happens fairly often. In order to exclude the liabilities of that other property, you must document 12 months of payments from the other party. Otherwise, you must qualify with that other housing payment.
A pre-approval letter can be issued relatively fast. All that is needed is an initial loan application briefly filled out, a credit check and proof of income. In some situations, an automated loan approval can be issue if the listing agent requests it.
PMI stands for Private Mortgage Insurance. This occurs when there is less than 20% down payment. It is a monthly fee to insure the lender in case of default. Once your equity has reached 20%, you may cancel the PMI.
A good relationship with the lender is vital to get good response times. Most loans can be closed within 30 days. For loans that need to be closed in a shorter period, rush requests can be made.
Your payments will be made to the lender that provided the financing. The mortgage broker is the middle man and does not get involved in servicing the loan. Depending on the type of lender, your loan could be sold to different loan servicers. If there are any changes, you will be notified in advance.
A mortgage broker goes through the wholesale channel, not retail. I like to compare it to going to Costco as opposed to a local supermarket. Wholesale does larger volume and can typically offer items/services at a larger discount than others.
No. None of these loans will have any prepayment penalty. There will be a disclosure requiring you to keep the loan for at least 180 days (six months) before you can refinance again if you decide to go with the no cost option. If you refinance within the 180 days, those closing costs will need to be refunded back to the broker.