A standardized method of calculating mortgage cost, at a yearly rate, which includes mortgage interest, mortgage insurance and mortgage points associated with the loan.
Annual Percentage Rate (APR)
A written report by a qualified appraiser estimating the value of a property.
Balloon Mortgage/Balloon Payments
A Balloon Mortgage loan offers lower monthly payments for a specific period of time, which usually between three and ten years. After that time period is over, borrowers pay off the principal balance in a single lump sum, or balloon payment.
Many borrowers either sell their homes or refinance the loan before the balloon payment due date.
Closing costs are collective expenses incurred by buyers and sellers when transferring ownership of a property.
Closing costs normally include the mortgage origination fee, attorney’s fee, taxes, escrow payments, title insurance and sometimes discount points. We provide good-faith estimates of closing costs to prospective home buyers.
Collateral is property and/or assets held to secure debt. If the borrower fails to repay the loan, the lender may gain ownership of the collateral and sell it to recover the funds.
The down payment for a mortgage is an amount of a property’s purchase price which the buyer pays in cash and does not finance with the mortgage.
Most mortgages require between five and twenty percent of the purchase price for the down payment, however, we do have loan products which allow for zero down (depending on the borrower, property and qualifications).
Private Mortgage Insurance may be required with lower/zero down payment mortgages.
An escrow account is a bank account which is held by a neutral/third party. The mortgage escrow account holds funds in a real estate transfer until all conditions of a sale are met.
Also, an account in which money for property taxes and insurance is held until paid, funds are added to the account every time a mortgage payment is made.
Fixed Rate Mortgage
A fixed rate home mortgage is financed with an interest rate which will remain the same through the life of the loan, most often 15 year or 30 year mortgages.
The risky alternative is an adjustable rate mortgage (ARM), where the interest rate and monthly payment may increase at any given time.
Good Faith Estimate (GFE)
A good faith estimate is a written estimate of expected closing costs that we provide any prospective home buyer within three days of the home buyer submitting a mortgage loan application. All brokers and lenders are required by law to make as accurate as possible.
Home Owners Insurance
Home owners insurance is a specific type of insurance policy that includes hazard coverage, covering loss or damage to property, as well as coverage for personal liability and theft.
Loan Documents Needed
This checklist outlines the principal documents and information that are generally required to complete the application. Additional documentation may be required, depending on the circumstances of your loan. By having the information available, you will save time and avoid delays.
- Copy of Purchase Sales contract or Offer to Purchase and all addenda (signed by buyer and seller)
- Past 2 years’ tax returns and W-2s
- Past 2 years’ employment history
- Last 3 consecutive paycheck stubs (5 if paid weekly)
- Name, address, and phone for past 2 years’ residence(s) and landlord(s) (if renting, evidence of 12 months’ rent payments)
- Last 3 months’ statements for savings, checking, CD, money market accounts, etc.
- Recent statement on retirement accounts (IRA, 401k, 403-B, Annuity, etc.)
- Monthly payments and balances on all open accounts
- Proof of all additional income
- Divorce Decree (if applicable)
- Bankruptcy schedules/Discharge papers (if applicable)
Additional information that may be required:
- Estimated market value of assets, such as autos, furniture, personal belongings, etc.
Be prepared to discuss where the money for closing will come from, including down payment and closing costs
Points are factored into the mortgage APR, a point equals 1 percent of a the mortgage loan. Some lenders charge “origination points” to cover expenses of making a loan and some borrowers pay “discount points” to reduce the loan’s interest rate.
Private Mortgage Insurance (PMI)
PMI is yet another type of insurance policy that protects the lender against default on loans by providing a way for mortgage companies to recoup the costs of foreclosure. Private mortgage insurance is typically required if the down payment is less than 20 percent of the sale price.