What is a mortgage?
A mortgage is a secured loan that uses your property as collateral to secure repayment of your loan. When you settle your loan, the lender will place a lien against the value of your property. A property cannot be sold unless all liens have been satisfied. Mortgages are used to purchase a home, while a refinance mortgage allows you to use your equity to renew your original mortgage at a different rate and/or a different term, or to use the proceeds for any purpose you desire.
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What is a Home Equity Loan?
A Home Equity Loan allows homeowners to borrow against the equity in their property. Equity is the value of a homeowner's interest in real estate. Homeowners often apply for this type of loan to make home improvements or to pay college tuition or pay off debt. Home Equity Loans (also known as second mortgages) typically have a fixed-rate. If you have equity in your property, the lower rate of an equity loan may be preferable to an unsecured personal loan.
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What is a Home Equity Line of Credit?
This is a secured, variable-rate loan that allows you to borrow against the available equity in your home. A Home Equity Line of Credit (HELOC) can be used for expenses such as home improvements, education, a vacation or even a down payment for a second home. Checks are available if you wish to write a check against your line of credit.
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How do I figure out how much equity I have in my property?
Equity is determined by subtracting any outstanding liens against the property and the remaining balance on your mortgage from the fair market value of the property. Equity increases as the balance of the mortgage loan decreases or as the property appreciates in value.
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Should I refinance my existing mortgage?
Refinancing to a lower rate can save you money. Refinancing makes sense when current interest rates are at least one to two percentage points below your existing loan rate. You can better determine if it pays to refinance by comparing your current payment to the reduced payment of the new mortgage and comparing these savings to the cost to close the loan. By dividing the closing costs of your refinance by the difference in these two payments you can see how many months it will take you to recover your closing costs in payment savings.
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How long will it take to process my Mortgage or Equity Loan application?
You should hear back from us with a lending decision within one business day. You will be asked to provide us with some information and some documentation. We will have your home's value determined by a state-licensed appraiser or a property valuation model and title insurance will need to be obtained. We can settle your loan once these things are done. Our goal is to close your mortgage loan in 35 days from the date of application and close your home equity loan in 21 days from the date of application.
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What are the components of a monthly payment?
The monthly payment is determined by the loan amount, the term of your loan, and the interest rate. The components of a monthly payment are the following:
Principal: The portion of your loan that is being repaid with this payment.
Interest: A portion of the amount of finance charge you are paying us for the use of the funds borrowed.
Insurance: This is the portion of your payment that will be held for payment of homeowners' insurance premiums when they come due. (This is known as Homeowner Insurance Escrow.) In some cases we allow you to pay your own taxes and insurance, however there is a fee for waiver of Tax Escrow. Ask your
Outlet Mortgage Group Mortgage Advisor about waivers of escrows.
PMI: Primary Mortgage Insurance is required when your loan exceeds 80% of the value of your property.
(Some loans may require Flood Insurance.)
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How do I know what type of loan to get?
The type of loan you want depends on how long you plan on living in your home and what your desired monthly payment is. We offer several types of loans, including fixed and adjustable rate mortgages (ARMs). We even have a 0% down payment loan that enables you to purchase a home without any down payment required.
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What are points?
One point is equal to one percent of your loan amount. Points are essentially prepaid interest. By paying points at settlement, you reduce the interest rate you pay on a loan. Paying more points at closing, will lower your mortgage loan rate and monthly mortgage payment.
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How long do you plan to stay in your home?
Can I afford the loan payment if the interest rate on the ARM loan increases?
ARM's offer lower interest rates than a fixed-rate mortgage in the early years of the loan. This provides lower monthly payments that are especially attractive to first time home buyers and home owners looking to buy a larger home.
A fixed-rate mortgage has an interest rate that will never change during the term of your loan. An ARM offers a lower initial interest rate than fixed-rate loans, however the loan rate and monthly payment will adjust higher or lower depending upon market conditions. The frequency of the interest rate and payment changes are stipulated in the mortgage contract. The amount of the first change for the ARM is based on an index (usually a treasure security) and a margin (a percentage over the start rate). Both are included in the loan note. Ask an advisor about how these adjustments work.
After the initial fixed-rate period, the rate can change annually. There is also a lifetime interest rate cap that gives you peace-of-mind because you will know your maximum interest rate. For the 3 and 5-year ARMs, the initial interest rate can increase or decrease up to 2% annually, with a lifetime interest rate cap of 6% higher than the initial rate. The 7 and 10-year ARMs can adjust up or down by 5% in the first year after the fixed-rate period. In subsequent years, the rate can increase or decrease up to 2% each year, with a lifetime cap of 5% higher than the initial mortgage rate.
If you have additional questions about ARMs as compared to fixed-rate mortgages, an
Outlet Mortgage Group Mortgage Advisor can help you choose the mortgage product that is right for you.
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How do I know what my loan rate will be?
Your loan rate will vary based on the type, term and purpose of the loan, your credit history, loan amount, value of the property, the number of points you are willing to pay and our current mortgage rate, which may change several times daily.
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Closing:
What is closing?
Closing is the day when the sale or purchase of a home is complete, or when you receive the proceeds of your refinance loan. This is also known as settlement day.
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What are closing costs?
Closing costs are expenses that are paid during closing or settlement that are in addition to your down payment, pre-paid property tax and homeowner's insurance. Closing costs vary, please speak with a Mortgage Advisor for more details. The borrower usually pays closing costs associated with a Mortgage. Some purchase mortgages allow for the seller to pay some portion of the closing costs. There are closing costs associated with both purchase and refinance mortgages.
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How does closing work?
Closing, also known as settlement, is when a property's purchase is complete or the mortgage refinance is funded. During closing, the buyer typically pays for the home and closing costs in one lump sum. Once the buyer and seller sign the documents, the deed is recorded in the new owner's name and the mortgage loan officially begins.
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What is the Good Faith Estimate?
After you apply for a loan, the lender will disclose an estimate of the fees and costs associated with that loan, whether you are buying a home or refinancing. This estimate will include the fees you will be expected to pay at closing.
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What is Private Mortgage Insurance? When do I need to pay it?
Private Mortgage Insurance (PMI) is required when your loan exceeds 80% of the value of your property. This insurance protects the lender against loan default. You are provided disclosures regarding PMI when you apply.
Outlet Mortgage Group also has a "No PMI" mortgage product, which offers members a cost-effective way to bypass private mortgage insurance, with even as little as a 0% down payment.
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Title insurance protects the lender and homeowner against any loss resulting from a title error or dispute. Title insurance protects the homeowner until the property is sold. A title search is a search of public records to confirm the property's owner and to find out if there are any liens against the property.
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