When should I refinance?

There are several great reasons to refinance, but ultimately, it depends upon your individual needs. Here are a few reasons to refinance:

1) When you can lower your interest rate by 1% of your current rate.  

Lowering your monthly payment and paying less over the life of the loan will save you a substantial amount of money over time.

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2) Convert your Adjustable Rate Mortgage (ARM) to a Fixed rate, or vice-versa! 

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3) Payoff Debt to lower your monthly outgo and improve your budget!

Our goal is to help our customers save money. If you don't want to touch your 1st mortgage, you can always access your home equity with a small 2nd Home Equity Loan to take cash-out and pay off any type of debt.  

4) Any other needs for cash-out!

This may include home improvements, education or medical costs, large purchases, savings cushion, etc..

Knowing your needs is the first step! We are here to help you get there and show you other options along the way.  

How are Interest Rates determined?

Interest rates are influenced by the financial markets and can change daily – or multiple times within the same day. The changes are based on many different economic indicators in the financial markets.

How it the rate determined for an Adjustable Rate Mortgage?

The interest rate is based on an Index + Margin.  Depending upon the program and the lender, will determine which index the rate will follow. 

The Index changes based on the general market conditions.  Changes in the index plus the margin is what determines the change in your interest rate.  The Margin is determined by the investor and it does not change. 

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There are other factors included in your ARM, such as lifetime caps and adjustment terms, you should consider before accepting an ARM. 

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Index + Margin is known as the Fully Indexed Rate. 

What are points?

A point is a percentage of the loan amount, or 1-point = 1% of the loan.  One point on a $100,000 loan is $1,000.

Points charged are how a lender and mortgage broker are paid.  The rates they offer are wholesale rates, so they will typically be less than a retail bank can offer. 

Should I pay points to lower my interest rate?

Yes, if you plan to stay in the property for a least a few years. Paying discount points to lower the loan's interest rate is a good way to lower your required monthly loan payment, and possibly increase the loan amount that you can afford to borrow. However, if you plan to stay in the property for only a year or two, your monthly savings may not be enough to recoup the cost of the discount points that you paid up-front.

What is the origination charge?

The origination charge is the amount charged for services performed on the initial loan application and loan processing. This includes all charges (other than discount points) that lenders and brokers involved in the transaction will receive for originating the loan. It includes any fees for application, processing, underwriting services, and payments from the lender for origination.

What is an APR?

The annual percentage rate (APR) is an interest rate reflecting the cost of a mortgage as a yearly rate. This rate is likely to be higher than the stated note rate or advertised rate on the mortgage, because it takes into account points and other credit costs. The APR allows homebuyers to compare different types of mortgages based on the annual cost for each loan. The APR is designed to measure the "true cost of a loan." It creates a level playing field for lenders. It prevents lenders from advertising a low rate and hiding fees.

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The APR does not affect your monthly payments. Your monthly payments  are strictly a function of the interest rate and the length of the loan.  Because APR calculations are affected by the various different fees charged by lenders, a loan with a lower APR is not necessarily a better rate. The best way to compare loans is to ask lenders to provide you with a good-faith estimate of their costs on the same type of program (e.g., 30-year fixed) at the same interest rate. You can then delete the fees that are independent of the loan, such as homeowners insurance, title fees, escrow fees, attorney fees, etc. Now add up all the loan fees. The lender that has lower loan fees has a cheaper loan than the lender with higher loan fees.

What is PMI (Private Mortgage Insurance)?

On a conventional mortgage, when your down payment is less than 20% of the purchase price of the home mortgage lenders usually require you get Private Mortgage Insurance (PMI) to protect them in case you default on your mortgage. Sometimes you may need to pay up to 1-year's worth of PMI premiums at closing which can cost several hundred dollars. The best way to avoid this extra expense is to make a 20% down payment, or ask about other loan program options.

I'm thinking about purchasing a home.  What is the minimum down payment for conventional, FHA or VA loans?

• Conventional fixed-rate loans are available with a down payment as low as 3%.

  • Keep in mind that with a low down payment, private mortgage insurance will be required, which increases the cost of the loan and will increase your monthly payment. Ideally putting a minimum of 20% down makes your offer stronger and loan terms less expensive.

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• FHA loans are available with as little as 3.5% down.

  • FHA loans have the benefit of a low down payment, but you'll want to consider all costs involved, including up-front and long-term mortgage insurance and all fees. Be certain to ask your home mortgage consultant to help you compare the overall costs of all your home financing options.

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• VA loans offer low- and no-down-payment options for eligible veterans and other eligible borrowers.

What does it mean to lock the interest rate?

Mortgage rates can change from the day you apply for a loan to the day you close the transaction. If interest rates rise sharply during the application process it can increase the borrower’s mortgage payment unexpectedly. Therefore, a lender can allow the borrower to "lock-in" the loan’s interest rate guaranteeing that rate for a specified time period, often 30-60 days, sometimes for a fee.

How is my credit judged by lenders?

Credit scoring is a system creditors use to help determine whether to give you credit. Information about you and your credit experiences, such as your bill-paying history, the number and type of accounts you have, late payments, collection actions, outstanding debt, and the age of your accounts, is collected from your credit application and your credit report. Using a statistical program, creditors compare this information to the credit performance of consumers with similar profiles. A credit scoring system awards points for each factor that helps predict who is most likely to repay a debt. A total number of points -- a credit score -- helps predict how creditworthy you are, that is, how likely it is that you will repay a loan and make the payments when due.

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The most widely used credit scores are FICO scores, which were developed by Fair Isaac Company, Inc. Your score will fall between 350 (high risk) and 850 (low risk).

Because your credit report is an important part of many credit scoring systems, it is very important to make sure it's accurate before you submit a credit application. To get copies of your report, contact the three major credit reporting agencies:

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Equifax: (800) 685-1111
Experian (formerly TRW): (888) EXPERIAN (397-3742)
Trans Union: (800) 916-8800

These agencies may charge you for your credit report. You are entitled to receive one free credit report every 12 months from each of the nationwide consumer credit reporting companies – Equifax, Experian, and TransUnion. This free credit report may not contain your credit score and can be requested through the following website:

https://www.annualcreditreport.com

What can I do to improve my credit score?

Credit scoring models are complex and often vary among creditors and for different types of credit. If one factor changes, your score may change -- but improvement generally depends on how that factor relates to other factors considered by the model. Only the creditor can explain what might improve your score under the particular model used to evaluate your credit application.

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Nevertheless, scoring models generally evaluate the following types of information in your credit report:

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• Have you paid your bills on time? Payment history typically is a significant factor. It is likely that your score will be affected negatively if you have paid bills late, had an account referred to collections, or declared bankruptcy, if that history is reflected on your credit report.

• What is your outstanding debt? Many scoring models evaluate the amount of debt you have compared to your credit limits. If the amount you owe is close to your credit limit, that is likely to have a negative effect on your score.

• How long is your credit history? Generally, models consider the length of your credit track record. An insufficient credit history may have an effect on your score, but that can be offset by other factors, such as timely payments and low balances.

• Have you applied for new credit recently? Many scoring models consider whether you have applied for credit recently by looking at "inquiries" on your credit report when you apply for credit. If you have applied for too many new accounts recently, that may negatively affect your score. However, not all inquiries are counted. Inquiries by creditors who are monitoring your account or looking at credit reports to make "prescreened" credit offers are not counted.

• How many and what types of credit accounts do you have? Although it is generally good to have established credit accounts, too many credit card accounts may have a negative effect on your score. In addition, many models consider the type of credit accounts you have. For example, under some scoring models, loans from finance companies may negatively affect your credit score.

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Scoring models may be based on more than just information in your credit report. For example, the model may consider information from your credit application as well: your job or occupation, length of employment, or whether you own a home.

To improve your credit score under most models, concentrate on paying your bills on time, paying down outstanding balances, and not taking on new debt. It's likely to take some time to improve your score significantly.

What is an appraisal?

An Appraisal is an estimate of a property's fair market value. It's a document generally required (depending on the loan program) by a lender before loan approval to ensure that the mortgage loan amount is not more than the value of the property. The Appraisal is performed by an "Appraiser" typically a state-licensed professional who is trained to render expert opinions concerning property values, its location, amenities, and physical conditions.

What is title insurance?

An insurance policy protects a lender and homeowner against any loss resulting from someone challenging your title or from unknown title errors.

What is escrow?

An insurance policy protects a lender and homeowner against any loss resulting from someone challenging your title or from unknown title errors.

What are impounds, a.k.a. escrow account?

You have the option to include your property taxes and homeowners insurance into your monthly payment.  This allows you to budget those expenses avoiding a large lump sum due in once or twice a year. The lender or servicer of the loan uses the money in your impound account to pay the property taxes and homeowners insurance on your property for you.  You may hear it referred to as PITI:  Payment + Interest + Taxes + Insurance.

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Your property taxes and insurance can change annually, so your escrow account will adjust accordingly, changing your monthly payment due.  If you choose not to have an escrow account, make sure you budget accordingly.

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What is the DTI and what does it mean?

DTI stands for Debt to Income.  it is a determining factor that lenders use to qualify a borrower and their ability to pay back the money they are borrowing.  The higher the DTI, the higher the rate.  It is all your monthly debt payments divided by your monthly gross income.  

What is the LTV and what does it mean?

LTV stands for Loan-to-Value.  The total mortgage balances divided into the appraised value of the home.  The higher the LTV, the higher the rate and/or cost of the loan. 

What happens at closing ?

After you sign your loan documents and the funds have been transferred to the seller or the original lender has been paid in full, the loan is officially been "closed".

At closing, the ownership of the property is officially transferred from the seller to you. This may involve you, the seller, real estate agents, your attorney, the lender’s attorney, title or escrow firm representatives, clerks, secretaries, and other staff. You can have an attorney represent you if you can't attend the closing meeting, i.e., if you’re out-of-state. Closing can take anywhere from 1-hour to several depending on contingency clauses in the purchase offer, or any escrow accounts needing to be set up.

Most paperwork in closing or settlement is done by attorneys and real estate professionals. You may or may not be involved in some of the closing activities; it depends on who you are working with.

Prior to closing you should have a final inspection, or "walk-through" to insure requested repairs were performed, and items agreed to remain with the house are there such as drapes, lighting fixtures, etc.

In most states the settlement is completed by a title or escrow firm in which you forward all materials and information plus the appropriate cashier's checks so the firm can make the necessary disbursement. Your representative will deliver the check to the seller, and then give the keys to you.

How long does it typically take to close a loan?

30 day closings are ideal, but not always possible.  Sometimes it can be as quick as 25 days or as long as 45 days or more, depending upon your loan situation.  Most lenders want the loan closed and off their books as quickly as possible, but they are also held to high standards to make sure your loan is solid, with supporting documentation based on the information on your loan application.  

What documents do I need to prepare for my loan application?

Below is a list of documents that are required when you apply for a mortgage. However, every situation is unique and you may be required to provide additional documentation. So, if you are asked for more information, be cooperative and provide the information requested as soon as possible. It will help speed up the application process.

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Your Income

• Copies of your paystubs for the most recent 30-day period 

• Copies of your W-2 forms for the past two years

• Names and addresses of all employers for the last two years

• Letter explaining any gaps in employment in the past 2 years

• Work visa or green card (copy front & back), if it applies

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   If self-employed or receive commission or bonus, interest/dividends, or rental income:

• Provide full tax returns for the last two years PLUS year-to-date Profit and Loss statement (please provide complete tax return including attached schedules and statements. If you have filed an extension, please supply a copy of the extension.)

• K-1's for all partnerships and S-Corporations for the last two years (please double-check your return. Most K-1's are not attached to the 1040.)

• Completed and signed Federal Partnership (1065) and/or Corporate Income Tax Returns (1120) including all schedules, statements and addenda for the last two years. (Required only if your ownership position is 25% or greater.)

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If you will use Alimony or Child Support to qualify:

• Provide divorce decree/court order stating the amount, as well as proof of receipt of funds for the past 3 mo. (recent bank statements or canceled checks).  You may be required to provide up to 12 mo. 

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If you receive Social Security income, Disability, or VA benefits:

• Provide an award letter from the agency or organization

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Additional items needed for Purchase financing:

Contract Information

• Names, email, and telephone numbers of your realtor, if you have one.  If you need one, we have excellent referral sources!

• Copy of signed sales contract, including all addendums, if you already have an offer accepted.

• Verification of the deposit you placed on the home (3 mo. most recent bank statements)

• If the property is a condominium, please provide the name and contact of the condo association or provide us with the condominium declaration, by-laws, and most recent budget.

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Source of Funds and Down Payment

• Sale of your existing home - provide a copy of the signed sales contract on your current residence and statement or listing agreement if unsold (at closing, you must also provide a settlement/Closing Statement)

• Savings, checking or money market funds - provide copies of bank statements for the last 3 months

• Stocks and bonds - provide copies of your statement from your broker or copies of certificates

• Gifts - If part of your cash to close, provide a signed gift letter and proof of receipt of funds