FAQs
Should I refinance?
Whether or not it is worthwhile to refinance depends on many variables. The questions you need to ask yourself are, first, how long will you be in your home, second, how does the interest rate you're paying today compare with market rates.
The most common reason for refinancing is to save money. Saving money through refinancing can be achieved in two ways:
1. By obtaining a lower interest rate that causes one's monthly mortgage payment to be reduced.
2. By reducing the term of the loan, thus saving money over the life of the loan. For example, refinancing from a 30-year loan to a 15-year loan might result in higher monthly payments, but the total of the payments made during the life of the loan can be reduced significantly.
People also refinance to convert their adjustable loan to a fixed loan. The main reason behind this type of refinance is to obtain the stability and the security of a fixed loan. Fixed loans are very popular when interest rates are low, whereas adjustable loans tend to be more popular when rates are higher. When rates are low, homeowners refinance to lock in low rates. When rates are high, homeowners prefer adjustable loans to obtain lower payments.
What is PMI?
Private mortgage insurance, or PMI, insures the lender against a default. It is required when the borrower is making a cash down payment of less than 20 percent of the purchase price.
PMI costs vary from one mortgage insurance firm to another, but premiums usually run about 0.50 percent of the loan amount for the first year of the loan. Most PMI premiums are a bit lower for subsequent years. The first year's mortgage insurance premium is usually paid in advance at the close of escrow, and there is usually a separate PMI approval process.
What is an ARM?
An adjustable rate mortgage (ARM) is a loan where the rate is fixed for a certain term, usually 1, 3, 5, or 7 years and can change up or down after the fixed period. The rates on ARMs are usually lower than fixed rate mortgages.
What documents are required to process my loan?
Required documents will vary based on the loan program. Below are some of the documents that may be required:
- Year-to-date pay stub
- Most recent W-2
- Previous 3 months' bank statements for all accounts
- Addresses of employers
- Name and address of previous landlords (2 year period)
- Divorce decree or separation agreement, if applicable
- Sales contract
- Note: Other items may be required based on your loan program
What is a FICO score?
A FICO score is a credit score developed by Fair Isaac & Co. Credit scores are calculated by using scoring models and mathematical tables that assign points for different pieces of information which best predict future credit performance.
Can I make extra principal payments so I can pay off the loan more quickly?
Depending on the loan, and what your state permits, it is feasible for you to make extra payments on the loan. Extra payments will have an effect on the amortization schedule over the remaining term of your loan.
Do I get a tax advantage from having a mortgage?
You should consult a tax attorney or accountant for specific details, but interest on a mortgage is usually tax deductible. Interest on credit cards or automobile loans is not normally tax deductible.
How do I know how much equity I have in my property?
Equity is the value of a homeowner's interest in real estate. Equity is computed by subtracting the total of the unpaid mortgage balance and any outstanding liens or other debts against the property from the property's fair market value. A homeowner's equity increases as he or she pays off his or her mortgage or as the property appreciates in value. When a mortgage and all other debts against the property are paid in full, the homeowner has 100% equity in his or her property.
How do I know what my loan rate will be?
Rates vary primarily based on the type and purpose of the loan, your credit history and income, loan amount, value of the property, and the number of points you are willing to pay.
What are points and how many do I have to pay?
Generally speaking, points are fees added on to loans. One point is equal to 1% of your loan amount. Points are paid when the loan closes, not at the time you apply for the loan.
What is the difference between an Equity Line of Credit and another type of second mortgage?
An Equity Line of Credit is money in an account that can be used as you need it. You can use any portion of it at any time and pay it back at any time. The interest rate is usually variable and is tied to the prime rate. Other types of second mortgages, such as the Home Equity
Loan, 110% Reward, and 125% Freedom loans are simple interest products. You borrow a lump sum and pay it back over a period of yearswith interest. The interest rate for these products is fixed. | 
