How is the interest
rate determined?
Home loans are bought and sold daily by large
privately owned multinational corporations such as Prudential Insurance
Company, semipublic entities, as well as by quasi-governmental
organizations such as the Federal National Mortgage Association (known
as Fannie Mae) and the Federal Home Loan Mortgage Corporation (known as
Freddie Mac). These groups set a price they will pay for loans every
day, prices that can be locked in for a prescribed number of calendar
days out into the future. These are called "forward commitments," and
generally translate into rates which can be offered to individual
borrowers for "locking-in" a rate for their home loan.
Since billions of dollars in home loans are bought and sold
every day, the rate/point combinations offered by most lenders are remarkably
similar. The biggest difference occurs when one lender or another needs to
charge more to cover a higher overhead expense. Factors which negatively affect
interest rate are past credit problems of the borrower, inability or
unwillingness to prove income or assets, low equity positions, and unique
property situations.
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What are "Points?"
Points refers to percentage points of the loan amount.
Usually, one point or more is charged as a loan origination fee to compensate
the loan company and Mortgage Specialist arranging your loan. These are called
"Origination Points". Also, additional points or partial points may be paid to
lower the interest rate from the "par" rate, with "par" being the rate achieved
by paying only one "point." These are referred to as "Discount Points," since
they can lower your interest rate. When you hear the term "zero points loan,"
this refers to a loan with no discount points and with a rate about 1/4% higher
than a loan with one origination point.
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How is my monthly payment determined?
Your monthly loan payment is usually determined by using an "amortization"
table. To amortize means to gradually pay off, and all loans must eventually be
repaid. Using the loan amount, the interest rate, and the term of the loan, one
can determine the minimum monthly payment needed to pay of a loan by the end of
the term, and this what lenders do when they calculate your minimum monthly
payment.
Sometimes lenders require that you pay the monthly amount for property insurance
and property taxes along with your loan payment. This is called "impounding"
your taxes and insurance so that you won't have to come up with a large lump sum
periodically during the year, potentially causing a strain on your budget. Even
if the lender doesn't require that monthly tax/insurance payments be included
with your loan payment, you can request that this be done.
See what your
monthly payments will be.
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Will my monthly payment always be the
same?
If you have a fixed interest rate and term, your payment
will not change from month to month as long as you make payments on time.
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How do you determine the amount for
which I qualify?
We look at several factors in determining the type and
amount of loan for which you qualify. Factors include, but are not limited to,
whether or not you own a home, the amount of equity you have in your home, the
total amount of debt you carry, your income, and payment history.
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Can I receive a loan if I am
self-employed?
We offer many different loan options. You should contact one
of our loan officers to review your options.
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What does it cost to submit a loan application?
Nothing. You can submit your application and become
preapproved for a loan without incurring any charges. Later on, fees may be
incurred for a property appraisal and eventually closing costs.
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When do I apply for a loan?
Before you start looking for a home to buy. It is an
essential piece of information as part of the home-search process to determine
your affordable price range using today's interest rates.
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After I submit my loan, what happens
next?
Once your loan has been submitted, one of our loan officers
will be assigned to your account and will be calling you with information about
your loan.
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