faq
WHY CHOOSE A BROKER VS. BANK?
What is a Buyer’s Real Estate Agent ?
The Buyer's Real Estate Agent is one who exclusively represents the buyer’s best interests in a real estate transaction. The Buyer’s Real Estate Agent receives a commission that is typically paid by the Seller or Listing Real Estate Broker at closing.
WHAT IS A MORTGAGE LOAN?
A mortgage is a type of loan you can use to buy or refinance a home. Mortgages are also referred to as “mortgage loans.” Mortgages are a way to buy a home without having all the cash upfront.
Mortgage loans are secured by collateral, which is the home. With a secured mortgage loan, the borrower promises collateral to the lender in the event that they stop making payments. In the case of a mortgage loan, it is important that you make on-time payments on your mortgage because if you default on your Mortgage Note, your lender can accelerate the loan, making the mortgage loan balance immediately due and payable, and file notice to begin foreclosure proceedings to take possession of your home.
What is an Federal Housing Administration (FHA) Mortgage?
The Federal Housing Administration is the largest insurer of mortgages in the world. The FHA makes home financing possible for people who might not qualify for conventional mortgage programs to purchase a home or refinance their current mortgages, including Adjustable Rate Mortgages. The most common FHA program requires 3.5% down payment.
What is a Conventional Mortgage?
Conventional loans are the most common in the mortgage industry. They’re funded by private financial lenders and then sold to government-sponsored enterprises like Fannie Mae and Freddie Mac.
Which is a better loan FHA or Conventional?
FHA loans allow lower credit scores than conventional mortgages do, can be a bit easier to qualify for because the program allows for a higher debt-to-income ratio (DTI). Conventional loans have a bit higher credit score requirement and lower debt-to-income ratio (DTI), but allow slightly lower down payments for First Time Home Buyers.
What is the difference between a pre-qualification and a pre-approval?
A pre-qualification is when the lender relies on information provided by the buyer in order to estimate the amount he or she can borrow. A pre-approval is when the lender verifies the buyer’s information and documentation to determine exactly how much the borrower can afford. It also establishes the down payment and available loan programs.
What are some of the upfront out-of-pocket expenses I may incur in the initial process of home buying?
Generally, some of the upfront out-of-pocket expenses that you may incur are (but, not limited to) the following: application fee, credit report, home inspection, pest inspection, septic tank inspection, appraisal, among other possible specialized inspections depending on contents that may be unique to the home. PMS has a $50 application fee, which includes the credit report fee. Home Inspections generally range anywhere from $200 – $600-plus; the national average fee for a home inspection is $360.
What is a Home Inspection and why is it important to get a Home Inspection?
For Your Protection, Get A Home Inspection! Home inspections provide an opportunity for a buyer to identify any major issues with a home before closing. A good inspector will examine certain home components and then produce a report covering their findings. The typical inspection lasts two to three hours, and either you or your Realtor should be present for the inspection to get a firsthand explanation of the inspector's findings and, if necessary, ask questions. This home inspection report can be helpful in your Realtor’s negotiation of your sales contract.
What is an appraisal and why do I have to get an appraisal inspection?
A home appraisal is an estimate of your property’s value, based on factors like age, condition, building materials, neighborhood and sales of comparable nearby homes. Using these and other factors, the appraiser provides an analysis and conclusions about your property's value. An appraisal inspection provides the Lender with the market value of the property to ensure the property being used as collateral is sufficient to secure the mortgage loan.
What does loan-to-value (LTV) ratio mean?
Loan-to-value, commonly referred to as the LTV, is the amount of the loan divided by the lower of the home sales price or appraised value. LTV is important when you buy a home or refinance because it determines how risky your loan is.
The more you borrow compared to your home’s value, the riskier it is for lenders, which is the reason all mortgage programs have a maximum LTV. The maximum LTV is equivalent to the maximum amount of funds you can borrow.
For example, under the FHA loan program the minimum required down payment is 3.5%, and therefore, the maximum LTV is 96.5% — in other words if you make a 3.5% down payment, the most you can borrow is 96.5% of the home price.
What are discount points?
Discount Points are a loan fee that you pay to get a certain interest rate. Discount points can be financed into the loan in some circumstances.
Will I save money going directly to a bank?
Not necessarily. In fact, if you are a reasonably astute shopper, you will probably do better dealing with a mortgage broker. Mortgage brokers do not add any net cost to the lending process, because they perform functions that would otherwise have to be done by employees of the bank. Furthermore, because mortgage brokers deal with multiple investors on the secondary market — they can shop for the best terms available on any given day. In addition, they can find investors who specialize in various market niches that many banks avoid, such as loans to applicants with less than perfect credit, loans to borrowers who do not intend to occupy the property, loans with minimal or no down payment.
How long will it take to close my loan?
Our goal is to have your loan clear to close as soon as possible! During the Pre-Approval process we request all the documentation we will need upfront, so that once you have an executed sales contract, we will be able to submit a full loan package to the Underwriter. After the point of submission, third-party services such as the appraisal and the title work will be ordered. Being that these are outsourced services, these items can generally take 10-14 business days to be processed and provided to the Lender for review. Keep in mind that even though we are submitting a full loan package upfront, upon review the Underwriter may request additional loan condition documents from you in order to issue final loan approval. It is important that you submit the condition documents requested by the Underwriter as soon as possible to avoid any delays. If you are purchasing a new home, we’ll do our best to meet the date you and the seller have agreed upon. Generally, you can expect your loan to be closed within 30 days or less.
What does debt-to-income (DTI) ratio mean?
Debt-to-income, commonly referred to as the DTI, is derived by dividing your monthly debt payments by your monthly gross income. This ratio is expressed as a percentage, and lenders use it to determine how well you manage monthly debts -- and if you can afford to repay a loan.
What is a rate lock?
The rate lock is a contractual agreement between the lender and buyer. There are 4 components to a rate lock: loan program, interest rate, points, and the length of the lock. Your interest rate will “float”, meaning the rate can adjust with the market until you “lock” the interest rate, at which time the locked rate is set at your chosen rate for a specific number of days (i.e. 15 days, 30 days, 45 days).
