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How much of a mortgage loan can I qualify for?
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You can usually obtain a mortgage valued at between two and three times your annual household income, assuming you have an average debt load.
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What if I have had credit problems?
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You will need to explain the circumstances. If you have overcome the problem and kept up with your obligations on a timely basis for a year or more, most lenders will accept your mortgage application.
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What is "private mortgage insurance"?
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Private mortgage insurance may allow you, even if you do not qualify for an FHA-insured or VA-guaranteed loan, to purchase a home for as little as 5% down. Such coverage requires a monthly insurance fee to be paid.
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Who are "Fannie Mae," "Freddie Mac" and "Ginnie Mae"?
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Instead of asking "Who are" you might ask "What are."
"Fannie Mae" is the colloquial term for the Federal National Mortgage Association, an institute incorporated by Congress which buys and sells conventional residential mortages, as well as FHA-insured and VA-guaranteed mortgages.
"Freddie Mac" is the Federal Home Loan Mortgage Corporation, an agency that purchases mortgages from insured savings institutions and HUD-approved mortgage bankers.
The government National Mortgage Association -- "Ginnie Mae" -- funds residential mortages insured through the FHA or guaranteed by the VA.
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What is the difference between fixed rate mortgages and adjustable rate mortgages?
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The differences are that fixed rate mortgages are offered with an interest rate that remains unchanged for the term of the loan. Adjustable rate mortgages, sometimes referred to as ARMs and also called variable rate mortgages, have rates that change at predetermined intervals during the term to reflect general interest rates.
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What is a "convertible mortgage"?
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This is a mortgage that allows a borrower to convert from an adjustable rate to a fixed rate during specified time periods. An additional fee usually applies.
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What is an "adjustable interval"?
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This is the time between changes in the interest rate and/or the monthly payment on an adjustable rate mortgage.
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What is "amortization"?
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Amortization is the division of principal and total interest charges into equal payments that will result in the complete payment of the debt by the end of a fixed period of time.
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What are "points"?
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Points (sometimes called "loan discount points") are pre-paid interest on your mortgage, charged at closing. Each point is equal to 1 percent of the mortgage amount.
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What does "APR" stand for?
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This stands for Annual Percentage Rate and reflects the annual cost of the mortgage, taking into account points and other credit costs. The APR can be used to compare the annual cost of different types of mortgages.
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What is an "index"?
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An "index" is a financial reference rate on which a lender bases mortgage and other loan rates. Typical indices include the rate of return on 1-, 3- or 5-year U.S. Treasury bills or the monthly average interest rate on loans closed by savings and loan associations. As this rate goes up or down, so too, will your mortgage rate.
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What is a "buy-down"?
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A "buy-down" occurs when a lender lowers the interest rate on a mortgage -- for a fee -- for the first few years of the loan.
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What are "caps"?
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"Caps" are limits that are placed on the changes allowed in the interest rate and/or monthly payment on an adjustable rate mortgage.
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What is "locking-in"?
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"Locking-in" means that - - for a fee -- your lender will guarantee the interest rate on your mortgage for a limited period, regardless of fluctuations in market rates. If you are concerned that rates will go up between the time you apply and the time the loan closes, you should lock-in.
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What is "PITI"?
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It is simply "Principal, Interest, Taxes and Insurance" -- the components of your monthly mortgage payment.
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What is an appraisal?
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An estimate of the value of the property you intend to buy or reference.
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What is closing?
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"Closing" is the date set when the buyer, seller and lender, or their agents, agree to legally transfer the property and all associated funds, or reference the property.
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What happens at closing?
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This is also called the "settlement". The buyer, seller and lender, or its agents, meet and legally transfer the property and all associated funds.
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What is "escrow"?
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"Escrow" is the process wherein a neutral, third-party is responsible for carrying out the buyer's and seller's instructions and paperwork relating to closing. Escrow can also refer to an account set up by the mortgage lender into which a portion of each mortgage payment is deposited to cover insurance and taxes, or an account set up to hold funds for needed repair.
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What are "closing costs"?
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"Closing costs" are those costs that include the mortgage broker's fee, discount points, appraisal and title search fees, insurance charges, survey fees and other charges associated with the legal transfer of the property. These costs typically amount to between 2 percent and 3 percent of the mortgage amount.
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How often do I make mortgage payments?
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This depends on the lender you choose as you may select from monthly, bi-weekly or weekly payments.
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What happens if I am late with a payment or miss a payment?
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Continued delinquency (late payment) or defaulting on mortgage (failing to make one or more payments) can lead to foreclosure, or judgment against you on the note for the amount owed.
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What if I want out of my mortgage?
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You may pay off the loan prior to the end of the term. Some mortgages do have a prepayment penalty, but many do not. Ask your lender about the program for which you are applying for.
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