FAQ
What is the difference between pre-approval and pre-qualification?
"The pre-approval process is much more complete than pre-qualification. For pre-qualification, the loan officer asks you a few questions and provides you with a pre-qual letter. Pre-approval includes all the steps of a full approval, except for the appraisal and title search. Pre-approval can put you in a better negotiating position, much like a cash buyer. "
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When does it make sense to refinance?
"Usually people refinance to save money, either by obtaining a lower interest rate or by reducing the term of the loan. Refinancing is also a way to convert an adjustable loan to a fixed loan or to consolidate debts. The decision to refinance can be difficult, since there are several reasons to refinance. However, if you are looking to save money, try this calculation:
Calculate the total cost of the refinance
Calculate the monthly savings
Divide the total cost of the refinance
(#1) by the monthly savings (#2). This is the ""break even"" time. If you own the house longer than this, you will save money by refinancing."
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What is a rate lock?
"A rate lock is a contractual agreement between the lender and buyer. There are four components to a rate lock: loan program, interest rate, points, and the length of the lock."
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What does APR mean?
"The cost of a mortgage stated as a yearly rate; includes such items as interest, mortgage insurance, and loan origination fee (points)."
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How much can I qualify for?
"Visit our mortgage calculator to find out how much you can qualify for How much can I afford?."
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How long does it take to close a loan?
"While most loans close within 3 weeks, some loans take a little longer and others can be done within a week. Let us take a look at your situation and we can give you an idea on how long it will take?"
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What is a truth-in-lending statement?
This is one of the most common questions asked in the lending business. Shortly after receiving your loan application, the lender will send you a good-faith estimate of your closing costs and your payment. This information will be based on the actual loan amount and interest rate along with estimated costs incurred with your loan.
By law, Princeton Capital must enter all of these actual figures, along with some of the costs you pay (such as your loan origination fee, discount fees and prepaid interest), into a computer and show you the annual percentage rate (APR) based on all of these numbers. The statement you will receive is the computer's rendition of your true cost amortized over the term of your mortgage.
The good news is that at closing your note will state the actual "note" rate (which your payment is based on), and your fees will once again be separated and charged as your good-faith estimate indicated.
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What are some qualifying tips for a relocating buyer?
The number one tip— do not pack your personal papers! Mortgage loans are very precise and require documentation furnished by the borrower. Keep your financial records with you until your loan closes.
You may also be prepared by knowing the exact details of your relocation package. These are a few of the items that are essential:
Will your company buy your present home or issue an equity advance?
If your home does not sell, will your company make the payments for you until it does sell?
Will your company pay your closing costs on your purchase? If so, will they advance the funds or reimburse you after closing?
It is important to keep copies of any advance checks you may receive as well as all documentation on your move. It is much easier to keep extra unused paperwork than to try to find additional paperwork when you are trying to close.
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Can my parents co-sign for my home loan?
In the mortgage industry, we use co-borrowers more often than co-signers. This means that your parents will go through a full application procedure and qualify along with you. Each investor has a different policy on this practice. It would be wise to consult with your Princeton Capital Loan Officer to make sure you will fit the guidelines
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Can a recent college graduate buy a home?
Most investors are very interested in financing recent graduates. Many will use your college credits in your chosen field to determine your experience. In most cases, they also expect that you have established very little credit. This is acceptable as long as the credit you have established is good.
The one loan type that is a little more stringent in guidelines is the Veteran Loans. The VA wants you to be through your initial probationary period with your new company and would actually prefer that you had six months on your new job prior to buying your home.
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Are loans for condominiums different from other home loans?
When the economy goes through tough times, condominiums (condos) and townhomes seem to decrease in value more than single-family residences.
Because of this past performance, investors have special requirements. Most investors will want the units to be at least 70 percent owner-occupied. The reason for this requirement is the belief that owners will maintain the complex better than renters and the homeowners' association will be stronger. Lenders will also be wary of lending in any condo complex that has any litigation as it pertains to construction defects.
Once you find the unit you like, you will need to research the following:
Is the project FNMA / FHLMC approved? (These are the easiest to finance.)
What is the percentage of owner-occupancy? (The higher the percentage, the better.)
Does any one entity own more than 10 percent of the units? (If so, this usually makes it hard to finance.)
Is the homeowners' association financially sound and owned totally by the individuals in the complex?
When you go shopping for a condo or town home, it takes a little more research and knowledge about your selection, which is not necessarily a bad thing.
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Is it a law that we must have a tax and insurance escrow account?
It's not a law— just different investor "rules." Have you ever heard the phrase "He who has the gold makes the rules?" FHA and VA require escrow accounts for all loans they insure and guarantee. There are so many different conventional investors and they vary as to their individual wants and needs. Some will automatically waive the requirement of holding your escrow account if you have a large down payment (usually 10 to 20 percent), others may actually provide pricing incentives to establish impound accounts.
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Why do mortgage interest rates go up and down so dramatically?
Many years ago, savings and loan institutions made the majority of home mortgage loans. They would often set a rate for new home loans for long periods of time— up to a month or so.
As the lending industry has evolved, the buying and selling of mortgages has become very sophisticated and there are many different investors making home mortgage loans. The easiest indicator you can follow in watching the direction of interest rates is the bond market. Although interest rates usually have long periods of decline or increase, there are many days when rates may jump up or down dramatically— just as the bond market can. These are often referred to as "hiccups."
When rates begin to go higher permanently, it will be (as history has proven) a slow, steady increase. It is the trend you will want to follow. Is the overall trend up or down? Don’t let the daily "hiccups" alarm you.
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What are points?
One point is equal to 1% of the loan amount. This amount, like the interest rate, can vary. You can "buy" the interest rate down to a lower rate by paying more points.
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What is a "no-closing-costs" loan?
If advertisements said "Higher Interest Rate– You Pay No Closing Costs," they would be more accurate. One of the choices you have when selecting your mortgage is the option of financing the cost to obtain your loan by paying a higher interest rate for the life of your loan and letting your lender write the check at closing to pay the fees.
As an example, if you select a $100,000 mortgage with an interest rate of 8.5%, the costs involved with the closing will be approximately $2,500. With a 30-year mortgage, each month you will pay principal and interest payments of $768.92. If you selected the "no-cost" program, your lender would pay the $2,500 at closing and your interest rate is 9.5%. The principal and interest payment would be $840.86 per month.
As you can see, either you pay now ($2,500 at closing), or later ($71.94 per month in your payment).
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What is a mortgage loan buy-down?
There are two types of buy-down loans. One is permanent and the other is temporary.
The permanent buy-down is the most common. The interest rate for your loan will be bought down by the use of points at closing. As an example, if the market rate today is 9% with no points, you could pay 2 points at closing and receive an interest rate of 8.5% for the entire term of your mortgage.
With the temporary buy-down, there will be an escrow account collected at closing to subsidize the mortgage payments during the early years. After these funds are used, the payment will go to the actual note rate. With a note rate of 9%, you could have a temporary buy-down of 7% during the first year and 8% during the second year. At the end of the second year you would make the payments at the full note rate of 9% for the remainder of the term of the loan– 2% below the note rate the first year and 1% below the note rate for the second year.
The most common reason for the use of the temporary buy-down is to help with qualifying. Some loans use the initial payment rate (7% in the above example) to determine your qualifying ratios.
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What is a float or lock option?
These terms are mortgage loan terms for "are you a gambler?" When you make application you will be asked to make the decision if you want the rate offered at that time– that is, the lock rate– or gamble on whether the future will offer lower rates– that is, the float rate.
If you lock your loan and rates increase, you are protected. Once you lock, if rates decrease, you will not get the lower interest rates. If you think rates are going lower and you don’t mind the risk, you would want to float. This means you are at the mercy of the market until you lock. You can usually lock at any time and must do so eventually so that you can close on your transaction.
Some important tips on floating and locking:
If you are the nervous type– lock.
Once you lock, your lender promises you that rate. Make sure you ask your Loan Officer for confirmation in writing, so you won't have any misunderstandings later.
If you choose to float, you are responsible for watching what interest rates are doing, and must let your lender know when you want to lock.
Be aware of your sales contract. You must at all times know what the seller has agreed to pay in the way of points, if any, and he or she will not be responsible for your gamble.
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