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Frequently Asked Mortgage Questions
Does a lower interest rate mean that I am getting the best deal?
A lower interest rate is not always an indication of the best loan for you. Lower interest rates often mean higher fees if you plan on keeping you property for longer than it takes recoup the fees than it may be a good offer. However, many borrowers end up with inflated loan amounts and other "features" such as prepayment penalties to get those low rates. Be sure to weigh the benefits before making your final decision.
What is the difference between a Soft Pre-payment Penalty and a Hard Pre-payment Penalty?
Soft Prepay means that the mortgaged property cannot be refinanced during the Prepayment Penalty period. But, it can be sold at any time without becoming liable for a penalty.
Hard Prepay means that the mortgaged property cannot be sold or refinanced during the Prepayment Penalty period.
What Is An Escrow Account?
When you purchase a home most homeowners prefer to make your property tax, and hazard insurance payments as part of their mortgage payment. This portion of your monthly payment that is held by your lender in a special account called an escrow account. Your lender will then pay your property taxes and home insurance automatically without you being required to do anything. When you sell your home, or choose to refinance the lender will refund any monies remaining in this account directly to you.
Should I take the ARM with the lower interest rate or the 30 year fixed loan?
A somewhat complicated question best explained in detail from a mortgage professional. In general, a good determining point is what your plan is for the property. Do you plan to live in this house, or at least own it, for the entire 30 years? Do you plan to live in the home for a couple of years and then upgrade/sell? Typically, ARM's have lower interest rates than fixed products. The risk is that, at the end of the introductory fixed period, your loan turns to an adjustable interest rate. If you plan to sell or upgrade the home before the end of your fixed period, the ARM can save you considerably each month that you're there. For long term benefit and safety, take the fixed rate.
One other consideration is where the market is currently at. As rates remain incredibly low from a historical standpoint, locking in a fixed rate at this point can save you considerable money in the long run. As rates continue to rise and begin to reach relative high's and you've purchased or refinanced in the period, an adjustable rate might be the best option as you'll most likely refinance again when the rates get low.
Should I sell my home with a Realtor or on my own?
This is a very common question asked by many Americans. While the cost of utilizing a Realtor can be quite costly, using a Realtor can save you a lot of time, aggravation and money. However, there is not clear-cut easy answer to this question. Whether you decide to sell your home on your own or with a Realtor truly will depend on what you and your family decide is in your best interest and how much time and effort you are able to put into selling your house. There are many advantages and disadvantages to both ways of selling your home. The majority of people who try selling their home on their own end up listing with a Realtor though. Consult your mortgage loan officer to assist with any further questions you may have.
Why is the Interest Rate on the Truth-In-Lending different from the one I was quoted?
The rate on the Truth-In-Lending is derived from taking all the costs associated with your loan and stating them as an interest rate so borrowers can see the true cost of borrowing money.
Why is my payoff so much higher than my mortgage loan balance?
There are many reasons as to why your payoff balance is higher than your current loan balance on your mortgage statement. The first reason is that interest accrues on your mortgage loan each and every day. When you receive your monthly statement, the balance on there reflects the loan balance on the day the monthly statement was prepared. When you have a payoff prepared they take into account the interest for every day up until the mortgage loan is paid off in full. Another reason the payoff may be higher is because of certain fees your lender charges that are associated with your payoff. Some of these fees may include, but are not limited to a statement fee, unpaid late fees, recording fee, etc... Finally, one last reason your payoff may be higher that your loan balance is because you may have a pre-payment penalty associated with your current mortgage loan. If you have a pre-payment penalty and you pay your loan off before the pre-payment penalty expires you will be assessed a penalty. If you have any further questions or need any further help please contact your personal mortgage loan officer at the phone number or email listed above.
What is a Good Faith Estimate (GFE) & Truth in Lending Statement?
A good faith estimate is an estimate of the closing costs for your loan. By law, you must be provided a Good Faith Estimate (GFE), and the accompanying Truth in Lending Statement (TIL), within three days of applying for a mortgage loan.
Is an ARM the right loan for me?
Deciding if an Adjustable Rate Mortgage (ARM) is right for you will depend on your personal financial situation. Once your financial goals are decided then the terms of the ARM will also come into play with your decision.
Keep in mind that you will have to pay closing costs if you'd like to refinance that ARM into a fixed rate mortgage. If you originally bought the home with little or no money down, you may not have enough equity in your home to include the closing costs when it comes time to refinance.
It is important to compare the rates on the different types of ARM's regardless of how long you plan to be in the home. For example even if you are planning to move in 3 years, you may be able to get a better rate on a 5 year ARM than a 3 year ARM.
The advantage of an Adjustable Rate Mortgage (ARM) is that in most cases it offers a lower interest rate than its Fixed Rate conterpart. However, in some economic climates where the shorter interest rates are not lower than long term rates, such advantage is wiped out, and getting an ARM actually offers no benefits.
One of the most important things to think about when considering an ARM on your property revolves around how long you plan to keep the home. It's common now for homeowners to not plan to keep the home for more than 3-5 years. If this applies to you, taking a 3-year or 5-year ARM can significantly lower the interest rate on your home, saving you money each month over the typical 30-year fixed program.
How tolerant are you to risk? Fixed rate mortgages offer security because the payment does not adjust, but this peace of mind comes at a cost: fixed rate mortgages often carry a higher interest rate than an adjustable rate mortgage. If you are confident that you know how long you will be in your home, or if you like the idea of increased cash flow due to a lower mortgage interest rate, be sure to ask your mortgage broker if an adjustable rate mortgage makes sense for you.
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