Home Loans - General Information
Rates & Costs
Getting a Loan
Home Loans - General Information
- What should I consider when deciding to buy a home?
This decision is based on your financial situation and lifestyle choices. From a lifestyle standpoint, consider whether or not you want to commit to living at the same address for several years. Compare the cost of renting to the after-tax cost of owning to determine whether it makes financial sense for you to buy. Use our Should I Rent or Buy? calculator for a quick comparison of scenarios, including possible rent increases and potential price appreciation of a home. These may help your decision-making.
- Is there a way to determine how much house I can afford?
You can use the Affordability Calculator to get a quick estimate of how much you can spend for a house. Use your estimated down payment and monthly mortgage payment to get a 'ballpark' idea of how much you can borrow. Results from our Monthly Payment Calculator are based on your loan's terms, property taxes, and insurance premiums.
- Do I have to wait until I've found a property to apply for a loan?
No! We not only support the idea, but strongly encourage it. By getting approved now, you will know exactly what you qualify for before you begin shopping. Realtors and sellers will know you are a serious buyer because your financing is already arranged. This may be an advantage when making an offer. We take into account your current income, debt and credit history in order to approve you and determine the amount for which you qualify. Once you find a property, and sign a sales agreement, we can continue processing your loan.
- Why is an appraisal necessary? Can I use the tax value of the home?
Appraisals compare the current market value of your home to other homes in your area that have recently been sold. Tax values can sometimes be higher or lower and may not reflect the actual appraised value of the home. A current appraisal is necessary for the lender to justify the loan amount you've requested and is required by our secondary investors. You should not, however, rely on the appraisal for assurance about the condition of your home or as a guarantee of the value of your home.
- What is a Good Faith Estimate?
Required by federal law, the Good Faith Estimate (GFE) is a written list of the estimated closing costs associated with your mortgage transaction, including the lender's charges along with the local closing agent's charges and fees. It also includes estimated amounts for real estate property taxes and homeowner's insurance. Once you've been approved, you can access your GFE online from your 'My Loan Status' page.
- What is a Truth-in-Lending statement?
Required by federal Law, the Truth-in-Lending statement provides detailed information about the total charges that you will incur over the life of the loan. It includes the Annual Percentage Rate (APR), the amount of interest you'll pay, the amount financed and schedule of payments, the total of your payments, and late payment charges.
- How do I find out what my property taxes will be?
The seller and/or your Realtor should provide you with the current taxes for the property. Property taxes are reassessed from time to time, so this amount may change. If you would like to confirm what your taxes would be, you can contact the county Recording Office.
- How are my property taxes paid?
It depends on your loan program and state requirements. Generally, if your monthly mortgage payment includes money for property taxes, these funds are held in escrow by the lender and the lender pays your property taxes as they become due. Generally, if your payment does not include property taxes, you are responsible for paying them by the due date mandated by your state.
- What type of inspections do I need before I close on my home? Certain inspections may be required under your particular loan program. However, depending on the home and the location, there are a variety of inspections you may want to consider before you close on your new home even if they are not required under your program, such as:
Home Inspections Termite Inspection Water Test (for well water) Septic Tank Inspection Radon Test
- What's the difference between a fixed-rate and adjustable-rate mortgage?
Fixed-rate mortgages feature a steady interest rate, which is determined when you're approved for a mortgage. This rate remains the same for the entire term of the loan. With adjustable-rate mortgages (ARMs), the interest rate may vary over the life of the loan. Typically, the interest rate is lower the first 1 to 10 years and then adjusts or 'resets' at pre-determined intervals -- usually once a year. For example, a 5/1 ARM will offer a lower, unchanging interest rate for the first 5 years of its term before adjusting every year. Every time your ARM's rate adjusts, your monthly payments may increase or decrease depending on the current rate environment.
- How do interest only loans work?
A customer pays interest only payments for the first three, five, seven, or ten years of the loan. During the Interest Only period, the loan will be re-amortized at the remaining principal balance each month, allowing the customer to benefit from any principal curtailments made during the interest only timeframe.
After the fixed interest only period, the loan payments become fully amortized payments of both Principal and Interest for the remaining term. During this time, the interest rate adjusts every year, based on the one-year LIBOR index plus a margin.
Rates & Costs
- What are points?
A point is 1% of the loan amount. For example, 2 points on a $300,000 loan equates to 2% of $300,000, or $6,000.
- How do points work?
You may have the option to lower your home loan's interest rate by purchasing points. You will pay the point fees at closing and may be able to deduct the point amount as interest on your income tax return.
- What is PMI?
Private Mortgage Insurance, or PMI, is required when a borrower provides less than a 20% down payment on a house. PMI partially protects the lender from loss if the borrower fails to make his/her mortgage payments.
Generally, when you've paid off 20% of your loan, you may ask for the PMI requirement to be removed. Removing PMI will decrease your total monthly loan payment. Requirements for removing PMI vary according to loan program and state. Current loan customers may determine eligibility to remove PMI Insurance by accessing our Interactive Telephone Response System. Simply call 1-888-MET-6964 (638-6964) after selecting your language preference and then select option #2 for PMI information.
- What are points?
A point is 1% of the loan amount. For example, 2 points on a $300,000 house, equates to 2% of $300,000, or $6,000. The number of points charged for a mortgage varies, depending on the circumstances. Paying higher points may result in a lower interest rate, costing you less over the life of your loan. You will pay the point fees at closing, and may be able to deduct the point amount as interest on your income tax return. (Consult a tax professional.)
-Why is the Annual Percentage Rate (APR) different from the interest rate?
The annual percentage rate is intended to reflect the total cost of your mortgage loan. To calculate the APR, lenders consider the interest rate on your mortgage loan, the term of the loan, and other loan fees such as closing costs, points, etc. Your monthly payment is calculated based on the mortgage note rate, not the APR. The APR will be higher than your interest rate, especially if you are paying any points.
To be used as a valid evaluation tool the APR must be loan specific. The actual APR will show up on the Truth-in-Lending statement that you will see once you have submitted your information and reserved your funds. When comparing loan programs based on APR make sure you ask each lender their criteria for determining the APR.
- How often do interest rates change?
Interest rates change regularly with the fluctuation of the market. The interest rates we quote you on the site are good for two hours. If a quote expires, you will be prompted to resubmit to receive an updated quote. Of course, once you lock or protect your rate, it will not increase as long as you close and fund your loan on or before the rate expiration date.
- How do you determine my loan's interest rate?
We evaluate your credit history and reward your good credit with a better rate. We also take into account your loan to value or LTV, as well as your income, your assets, the purpose of the loan and how you intend to occupy the property. Naturally, all of this is impacted by the current market conditions.
- What if interest rates go down after I lock my rate?
Once you lock the rate, it cannot be changed. For that reason, it's important to consider carefully the timing of your rate lock. If you follow the market or plan to watch it closely, be sure you're comfortable with the trends you see before you lock. You may want to consider our rate protection program to help safeguard against changes in interest rates.
- What happens if my loan does not close before the rate lock expiration date?
When you lock your interest rate, you are guaranteed to receive that rate as long as you close and fund your loan by the specified expiration date. If your loan closes and funds after this date, you are no longer guaranteed your locked interest rate. Instead, you will receive the higher of the current market rate or your locked rate. Please note that you cannot receive a lower rate by allowing your lock to expire.
- If I have selected rate protection and do not exercise my one-time float down option, what will happen?
If you have not exercised your one-time option to float down, your rate will automatically be locked at the market rate, five days prior to your closing date. If the rate has gone up and over your capped rate, you will receive the capped rate. If the rate is lower than the cap, you'll be locked in at the lowest rate available to you.
- Are discount points tax deductible?
In many cases they are. Contact your tax preparer or the IRS to obtain a qualified opinion and the best expert advice.
- What is PMI?
Private Mortgage Insurance or PMI is required when a borrower provides less than a 20% down payment on a house. PMI partially protects the lender from loss if the borrower fails to make his/her mortgage payments. Generally, when you've paid off 20% of your loan, you may ask for the PMI requirement to be removed. Removing PMI will decrease your total monthly loan payment. Requirements for removing PMI vary according to loan program and state.
- What is title insurance and why is it required?
Title insurance protects the lender or you against losses from disputes over the title of a property. It ensures against the possibility that there may be an unknown lien or any discrepancies in ownership. You may want to consider purchasing a separate buyer's policy to protect your interests.
- How much title insurance do I need?
The amount of title insurance needed is based on the value of your home and the amount of your mortgage. Lenders are covered for the full value of the mortgage. This policy is required and will vary from state to state. There is a one-time fee for the policy that you pay at closing. In addition, you can obtain a separate owner's insurance policy to cover the full value of your home. However, this additional policy is not required.
- How much homeowner's insurance does a lender require?
Your homeowner's insurance policy must cover the cost to rebuild the home. The insured amount may be higher or lower than the actual purchase price as long as it meets the program requirements. The insurance company you choose can give you an actual quote based on specific information about the property.
- How do I know if I need flood insurance?
We will perform a flood hazard determination for your property. If your home is located in a Special Flood Hazard Area, federal law requires you to purchase flood insurance. Most standard homeowner's insurance policies do not cover loss due to flood. If you choose, you can obtain flood insurance coverage even if you are not required to do so by the lender.
Getting A Loan
- How does my credit score affect my loan application?
Your credit score plays a significant role when you apply for a loan. Higher credit scores allow you more loan options and lower interest rates.
- How do I improve my credit score?
You can establish or improve your credit score by following these tips:
Pay your bills consistently and on time
Check your credit report yearly and request corrections to any errors you find
Keep your spending and debt levels under control
For example, keep the number of credit cards you use to a minimum. Avoid too many credit inquiries (this happens when you apply for new credit accounts). Contact creditors immediately if you cannot make a payment on time. This may keep them from reporting a late payment to one or more credit agencies.
- What if I have little or no credit?
There are other 'non-traditional' ways to present a positive credit history. For example, an on-time history of paying your rent and utility bills may be acceptable. To do this, ask for references from your landlord and utility companies. Provide a year's worth of checks to validate consistent payments. This information will become part of your loan application.
- I'm struggling to meet my monthly credit card and rent payments. How can I improve my credit score so I can consider buying a home?
There are steps you can take to improve your financial situation. The best thing to do is seek professional counseling to help you stabilize your credit situation. National Foundation for Credit Counseling (NFCC) is a nationwide non-profit organization that provides credit counseling for freeor for a reasonable fee. This agency can help you develop a solid plan for regaining control of your finances.
- How can I ensure that the information on my credit report is correct?
Your credit report reflects the information reported to the credit bureaus by each of your creditors. The information changes each time something is added or deleted from your credit file. Paying off an account, opening several new credit accounts, or making a late payment on one of your accounts will appear on your credit record. Applying for new credit will also cause a credit inquiry to be listed on your report.
The best way to make sure that the information in your credit reports is accurate is to request copies of each one at least once a year. We should tell them how to get it free here If you identify an error, notify the appropriate credit bureau and request a correction -- you may be able to do this online.
Here is contact information for the three leading credit reporting agencies:
Equifax: 1-800-685-1111 or visit www.equifax.com Experian: 1-866-200-6020 or visit www.experian.com TransUnion: 1-800-888-4213 or visit www.transunion.com
- How much will I need for a down payment?
Most home loans require a down payment. Depending on the terms of your loan, you may be required to make a down payment between 3% and 20% of the home's sale price. Three percent is considered a low down payment. Generally, loans with down payments of less than 20% require private mortgage insurance (PMI).
If you are concerned about having enough money to purchase a home you may want to consider our options for rolling your closing costs into either your interest rate or your loan amount. You will still need to come up with money for your down payment but this will help reduce the amount of additional money that you will need to bring to close.
- If I'm short on cash, do I have options to help with my down payment and closing costs?
There are a number of options that may help you if you do not have much cash to purchase a home.
a) You can look into one of our low down payment programs. These programs may require as little as 3% for a down payment.
b) If you meet the criteria, you will be offered the option to roll your closing costs into either the loan amount or the interest rate.
c) If you choose the loan amount option, we will take the amount due at closing and add that to your loan amount. The amount due over the life of the loan will increase but the amount you need to bring to closing will decrease.
d) If you choose the interest rate option, then the rate for the life of the loan will increase, as will your monthly payment, but the amount of cash you need to bring to closing will decrease.
(e) You can also consider negative points. This means that in exchange for a higher rate, we will contribute funds toward your closing costs.
- Why do New York and New Jersey residents get a home loan pre-approval instead of an approval?
State law does not allow us to issue a home loan 'approval' until any required loan information which is beyond the borrower's control has been reviewed. One example of the type of information needed prior to issuing home loan approval in New York and New Jersey is an appraisal. Therefore, customers in these states receive a 'pre-approval,' until all such home loan information has been reviewed. Please contact us for additional information.
- What does a mortgage lender consider when making a loan decision?
A mortgage lender generally looks at three areas:
Income and Assets: To determine your ability to repay the loan. Debts and Credit History: To evaluate your buying habits and your history of repaying other financial obligations.
Property Information: An appraiser compares the home you are buying to similar homes in your area to make sure the property provides sufficient collateral for your loan.
- Can I change the loan amount, down payment or program after I've received my loan decision?
Yes, as long as you meet the criteria for the new loan amount or new program you've selected. Your personal mortgage processor can help you determine if you meet the requirements.
If you have not decided upon a rate lock option, you can make changes to your information online and resubmit for a new loan decision.
- I already put earnest money down on the property. Is this included on the Good Faith Estimate?
Yes. Any earnest money paid is listed under 'Prepaid deposit for property' on the Good Faith Estimate. Please make sure you list your earnest money.
- What documents will I need to provide to complete my loan transaction? We have included a list of some sample documents you may be required to submit. This list is not all inclusive.
A fully executed agreement of sale for the property being purchased Financial statements for bank and brokerage accounts A HUD-1 settlement statement on the property you are selling Copy of your most recent pay stub Previous W2s Copy of a rental lease Form 4506 Homeowner's insurance policy Flood insurance policy
- Can I bring a personal check to the closing?
You will need a cashier's check or certified check for closing. Since this is such a large transaction, a cashier's check provides verification that the funds are actually available.