It's generally a good time to refinance when mortgage rates are 2% lower than the current rate on your loan. Depending on your loan size, it may be a viable option even if the interest rate difference is only .50% or less. Any reduction can trim your monthly mortgage payments. Example: Your payment, excluding taxes and insurance, would be about $770 on a $100,000 loan at 8.5%; if the rate were lowered to 7.5%, your payment would then be $700, now you're saving $70 per month. Your savings depends on your income, budget, loan amount, and interest rate changes. A good rule of thumb is that you want to be able to save at least $ 100/mo. on your monthly payment.
A Discount Point (Point) is money that a borrower pays up front to get a lower interest rate. One point is 1% of the loan amount so one point on a $100,000 loan is $1,000. Points may be charged in increments - like a quarter point or a half point.
It depends. It depends on how long you plan to keep the property. 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. I will help you determine whether or not it's in your best interest to pay points.
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.
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 homeowner's 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.
The following fees are generally included in the APR:
The following fees are normally not included in the APR:
Interest rates are a moving target - they are always subject to change without notice, just like the stock market. 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, lenders allow the borrower to "lock-in" the loan's interest rate, guaranteeing that rate for a specified time period, usually for periods of 30-60 days. Rate locks are tied to the property address. When you lock in an interest rate it will not change, regardless of whether rates go up or down. Until your rate is locked, it's considered "floating" and rates are subject to change without notice.
Below is a list of documents that are typically required when you apply for a mortgage. However, every situation is unique and you may be required to provide additional information or documentation. If you are asked for more information or documentation, please provide the information requested as soon as possible so that we can ensure that you will have a smooth transaction.
Your New Property
Your Income & Identification
If self-employed or receive commission or bonus, interest/dividends, or rental income:
If you will use Alimony or Child Support to qualify:
If you receive Social Security income, Pension, Disability or VA benefits:
Source of Funds and Down Payment
Debt or Obligations
Credit scoring is a system creditors use to help determine whether or not to extend 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.
The most widely use 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.
You are entitled to receive one free credit report every month 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. It's a good way to find out if there is any derogatory information on your report before you apply for a mortgage.
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.
Nevertheless, scoring models generally evaluate the following types of information in your credit report:
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.
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 independent, third party appraiser who is a state-licensed professional who is trained to render expert opinions concerning property values, its location, amenities, and physical conditions.
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. To avoid this expense, a borrower would need to make a 20% down payment or opt for a "Piggy-Back" loan.
Not all Buyers are able to save enough money for a 20% down payment. Using conventional financing, such buyers must purchase Private Mortgage Insurance (PMI) which increases the monthly payment. These days, PMI has become much less expensive and is still a good option. Sometimes, if a Buyer can invest either 5 or 10% for their down payment, they can get a 2nd lien for the remaining 20%. In this case, you would get a traditional lien for 80% of the sales price and get a 2nd lien for either 10 or 15% of the sales price. The second lien interest rates are considerably higher than first lien rates and it's important to note that the interest rate on the first lien will be .125% higher than it would if you opted for PMI. The piggy-back loan may or may not be your best option. I'll be here to help navigate that for you.
The property is officially transferred from the Seller to you at "Closing" and "Funding".
At closing, Buyers will typically go to the office of the title company who is handling the transaction. Buyers and Sellers will both sign required documents. After all parties have executed their documents, the title company will typically fax the required executed documents to the lender for their approval. As soon as the Lender approves, they will authorize the title company to "disburse funds". When that happens, the loan is considered "funded". The transaction is now complete, and you can get the keys to your new home. You should allow one hour to attend closing. We try really hard to have closing documents sent to our clients at least a day before closing so you can review them ahead of time.
Before you go to closing, we will tell you exactly how much money you will need to bring to complete the transaction. You may pay with either a cashier's check or you may wire funds if you prefer.
How and when to transfer funds for closing:
In our office, we try really hard to tell you exactly how much money you'll need for closing at least 3 days before closing. Sometimes that just isn't possible. In that case, we'll give you a very close estimate of how much you should need for closing. If we give you a number that is too high, the title company will issue you a refund for the difference. If we give you a number that is too low, most title companies will accept a personal check as long as it's less than $1100.
Funds for closing can be transferred in one of two different ways -- either with a Cashier's Check from your bank or by wiring funds:
If you elect to pay with a cashier's check from your bank, most title companies require that you deliver the check to them at least one business day before closing so that they can verify funds.
If you elect to wire funds, you will need to call the title company at the phone numberwhich is published on their website and ask them to send you wiring instructions. After they send them to you, it's very important that you call the title company back and ask them to verify the instructions before you wire funds. There are internet scams which intercept emails and unsuspecting buyers unknowingly wire their funds to Nigeria. We don't want you to be one of them!