Your Real Estate Network

Frequently Asked Questions

What is Pre-Qualification?

Pre-Qualification starts the loan process. Once a lender has gathered basic information about a borrower’s income and debts, an opinion can be made as to how much the borrower should qualify for in purchasing a house. Since loan programs vary between credit, debt and down payment requirements, borrowers should get pre-qualified for each loan type that they qualify for and are considering.

Being pre-qualified is only a limited analysis and does not hold a lot of weight when it comes to negotiating a contract or reassuring a seller. There are many aspects to fully qualifying that could change a borrowers ability to qualify for a mortgage. Some of these things are: credit, length of employment, type of income, debt, liens or judgments, or other issues that will be cleared up during the approval process.

Although it is tempting to start your home search prior to getting an approval, we suggest that you get that step completed sooner than later so that you are armed with the knowledge of your real shopping budget and the power to negotiate the best deal.

What is a Pre-Approval?

Being Pre-Approved lets you know your price and term limitations, and therefore removes some of the stress of finding the perfect home.

Being pre-approved also empowers you during the negotiation process. It gives the seller confidence in knowing that your finances are one less aspect of the transaction that they need to worry about.

A Pre-Approval (for the adequate amount) gives the seller assurance that you can afford their home and therefore your offer is given serious attention. This is achieved after the lender has verified all information you have submitted in the application process.

Is there a Cost to Apply?

Generally no, but occasionally the cost of a credit report will be charged. All other up-front fees, such as an appraisal or application fee that may apply, will be disclosed to you as part of the application process and collected following your receipt of the early Truth-in-Lending disclosure and your approval to continue with the application.

How Long will the Loan Process take?

The loan approval and funding time frames vary depending on the type of transaction and the complexity of your personal finances. The process can take as little as 10 days, and sometimes up to 45 days.

What is a Lock-In Rate?

The lock-in rate represents the interest rate you choose and will be the interest rate used to factor your monthly payment. The lock-in secures the interest rate during the process of your loan approval, as long as your loan is processed and closed prior to the rate expiration date. This date is given to you when you lock-in the rate.

When can I Lock-in my Rate?

You can lock-in your interest rate once you have an accepted offer on a property. Your loan officer will discuss these options with you upon taking your loan application.

How Long is my Rate Lock valid?

Depending on the type of transaction and the time you need, lock periods can be valid anywhere from 15 days to 180 days.

Can I Pay my Loan off early or Pay Extra each month?

Yes, you can make principal payments at anytime during your loan term or pay the loan off in full. You can also pay a set amount each month above the normal payment due or make lump sum payments periodically. Refer to your loan documents or ask your SNMC loan consultant if a pre-payment penalty exists.

What is an Escrow Account?

An escrow account is maintained by the lender to collect funds from the borrower in order to pay the taxes and property insurance due on the loan.

What is PITI?

PITI represents the accounts your money is applied to when you make your monthly mortgage payment and include:

P – Principal
I – Interest
T – Taxes
I – Insurance

It can also be referred to as PITIM, which includes Mortgage Insurance as well.

How do I Know Which Loan is Best for Me?

Review your current situation and future goals with your SNMC loan professional, answering these questions to help determine the route you may want to take:

How long do you expect to stay in the house?
Which is more important: low monthly payments or low closing costs?
Will my income increase or decrease in the next three years?
How comfortable are you with your monthly payment potentially increasing?

CLICK HERE to see a description of different loan products that we offer.

What is the Difference between a Fixed Rate and Adjustable Rate Mortgage?

With a fixed rate mortgage, the interest rate and payment remains constant over the life of the loan. With an adjustable rate mortgage, the interest rate can either increase or decrease, based upon the terms of the loan and the index that it is based upon. This could cause the monthly payments to increase in order to have the loan paid in full by maturity.

What is a Balloon Mortgage?

A balloon mortgage loan has a fixed rate payment for the first five to seven years of the loan, then a lump sum payment is due on the balance of the loan at a specified date when it matures.

What is a Conventional Loan?

A conventional loan is a loan that is secured by a mortgage or deed of trust and is not guaranteed by VA or insured by FHA, FMHA or State Bond agencies.

What is a Jumbo Loan?

A jumbo loan is a conventional loan that exceeds the maximum agency (Fannie Mae, Freddie Mac) mortgage amount guidelines for a conventional loan.

What is PMI?

PMI stands for Private Mortgage Insurance. On a conventional loan, PMI is required if you borrow over 80% of your appraised value. This protects the lender against financial loss if the loan is defaulted.

What is Mortgage Life Insurance?

Mortgage life insurance would pay the balance owed on your mortgage home loan in the event of your death during the term of the mortgage. Mortgage life insurance is not required to obtain financing.

What is Hazard Insurance?

Hazard insurance protects your investment in your home, providing compensation to the insured in case of property loss or damage.

What are Points?

Points represent an origination fee charged by the lender and loan discount points sometimes charged on the note rate to lower the interest rate.

What is a Buy-Down?

A buy-down is a fee paid to lower the interest rate on a mortgage. The buyer, seller or any other interested party may pay it. A permanent buy-down would lower the rate for the entire term of the mortgage, while a temporary buy-down lowers the rate for a specified shorter term, generally three years or less.

What is an Origination Fee?

Lenders charge origination fees, typically 1% of the loan amount you borrow. It’s used to cover expenses during the process of the loan.

What are Closing Costs?

Closing costs are fees and expenses that both buyer and seller must pay at closing. They generally include:

Origination fee
Discount point(s)
Appraisal fee
Credit report
Title search
Recording fees

You will receive a Good Faith Estimate that outlines these fees for your proposed loan.

Should I Refinance?

Deciding to refinance takes careful consideration. There are several factors to consider, and your SNMC loan professional can help you adequately weigh these complex issues.

Even a modest reduction in the interest rate can trim your monthly payment. The significance of such savings in any scenario will depend on your income, budget, loan amount, closing costs, and the change in interest rate. A SNMC loan professional can help calculate the different scenarios for you in order for you to determine if this would be financially advantageous. Consulting your tax advisor is also encouraged, as your personal tax situation may affect your decision.

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 "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 different lenders calculate APRs differently, 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.

The following fees ARE generally included in the APR:

Points - both discount points and origination points
Pre-paid interest. The interest paid from the date the loan closes to the end of the month
Loan-processing fee
Underwriting fee
Document-preparation fee
Private mortgage-insurance

The following fees are SOMETIMES included in the APR:

Loan-application fee
Credit life insurance (insurance that pays off the mortgage in the event of a borrowers death)

The following fees are normally NOT included in the APR:

Title or abstract fee
Escrow fee
Attorney fee
Notary fee
Document preparation (charged by the closing agent)
Home-inspection fees
Recording fee
Transfer taxes
Credit report
Appraisal fee

What is an Appraisal?

Appraisal is a document that gives an estimate of a property's fair market value. An appraisal is generally required 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 who is typically a state-licensed individual trained to render expert opinions concerning property values. In an appraisal, consideration is given to the property, its location, amenities as well as its physical conditions and it’s relative value in the current market.

What is RESPA?

The Real Estate Settlement Procedures Act (RESPA) contains information on the settlement or closing costs you are likely to face.

Within 3 days of the time you apply for the mortgage, your lender is required to provide you with a "good faith estimate of settlement costs," based on his or her understanding of your purchase contract. This estimate should give you a good idea of how much cash you will need at closing to cover pro-rated taxes, first month's interest, and other settlement costs.

The act also requires lenders to give you an information booklet, Settlement Costs and You, written by the U.S. Department of Housing and Urban Development, which discusses how to negotiate a sales contract, how to work with various professionals (attorneys, real estate agents, lenders), and your rights and responsibilities as a home buyer.

One business day before you close, you are entitled to see a copy of the Uniform Settlement Statement with your figures reflected, so you will know just how much the final costs will be.

What is "Truth in Lending"?

Mortgage lenders are required to give you a Truth in Lending (TIL) statement containing information on the annual percentage rate, the finance charge, the amount financed, and the total payments required. For adjustable rate loans, the "total payments" figure is estimated as a "worst case" scenario. The figure represents the payments you would make if your loan adjusted upward to the maximum rate allowed by annual and lifetime caps and then stayed there for the duration of the loan.

The TIL statement may also contain information on security interest, late charges, prepayment provisions, and whether the mortgage is assumable. If you have an adjustable rate loan, it may outline the limits on the adjustments (annual and lifetime caps) and give an example of what your next year's payment might be, depending on interest rates.

What is Foreclosure?

When a borrower is unable to make principal and/or interest payments on his or her mortgage, the lender has the right to legally seize and sell the property as stipulated in the terms of the mortgage contract.

If you are behind on your mortgage payments, working with an experienced professional will help you weigh your options and the potential affects of a foreclosure or short-sale.

If you are having problems making your payments, call or write to your lender's Loss Mitigation Department. Explain your situation to them. Be prepared to provide them with financial information, such as your monthly income and expenses. You should not ignore the lender's letters or phone calls. Ignoring the problem won't make it go away.

Where do I Close and Sign for my Loan?

Typically, your closing will take place at a title closing agent’s office. When all parties agree upon a closing date, SNMC will provide you with the exact location and time of your loan closing.

What Documents will I Receive at Closing?

At closing, you’ll review, sign and receive copies of all legal documents that are recorded for the property you’re purchasing or refinancing. You’ll also receive all pertinent information regarding your mortgage payment and servicing information for your new loan.

Can I still get a Home Mortgage if I’ve Experienced Credit Challenges?

Obtaining a home loan is possible even with poor credit. If you have had credit problems in the past, a lender will consider you to be a risky borrower to lend to. To compensate for this added risk, the lender will charge you a higher interest rate and usually expect you to pay a higher down payment on your home purchase (typically 20-50% down). The worse your credit is, the more you can expect to pay for an interest rate and a down payment. Not all lenders choose to lend to risky borrowers, so you may have to contact several before finding one that will. Contact us to get an objective opinion on your credit and financial situation. Whether your situation calls for a short-term solution or a long-term strategy, we will give you options that will empower you to make an educated decision.