Frequently Asked Questions
How frequently do rates change?
Rates can change multiple times each day.
How can I lock in a Rate?
As soon as you have a preliminary approval you should be able to lock in the rate. Because rates fluctuate it is up to you to decide whether to lock in now or to wait and float the rate. Talk with your mortgage consultant to decide what you feel comfortable doing.
Why is the APR different from my interest rate quote?
This is an excellent question. The Annual Percentage Rate is another way to calculate a rate that factors in the closing costs. The APR is always higher than the Note rate, because it is weighted for the costs and allows a consumer to compare one company's costs vs. another's costs. A higher APR does not alter the monthly payment. Rather, the APR is derived using the same monthly payment you were quoted. It's a benchmark figure all mortgage companies and banks are required to disclose and helps to inform the borrower about the real cost of the mortgage.
What is Private Mortgage Insurance and do I need it?
PMI is necessary for conforming loans above 80% Loan to value and on all FHA loans. This insurance protects the lender in the event of a default. Subprime mortgages do not require PMI above 80%, but the rate is definitely higher to offset the extra risk. An FHA loan charges about an extra half point of interest for the PMI. However conforming loans have a sliding scale for their PMI. The higher the loan to value ratio, the higher the PMI monthly payment. Once your mortgage balance falls below 80% of the home's value, you can either request your PMI be removed, or refinance with no PMI.
How much of a down payment will I need to buy a home?
That depends on your credit, whether you can prove income or not, and current market conditions. Presently, the smallest down payment is offered through an FHA loan and that is 3%. Conforming loans like Fannie Mae and Freddie Mac will require at least a 10% down payment now. And remember, closing costs must also be covered by either you or the seller.
How long does the refinance process take?
Typically a refinance takes anywhere from 2 - 4 weeks to complete. It depends on how quickly the borrower gets their documentation to the mortgage consultant and how fast the appraisal is done.
If I have bad credit will I still qualify for a mortgage?
That depends. Your exact credit score along with your debt ratio, assets, loan to value requested, judgments or liens, assets, length of time at work, will all factor into the approval process. The best thing to do is talk with Envision Home Mortgage to see what your options are. Envision Home Mortgage can also talk to you about credit repair.
If I have a bankruptcy can I get approved?
It depends on how recently your bankruptcy was discharged and what kind of bankruptcy it is. Generally, if your bankruptcy was discharged 4 years ago or more, you should be fine if you have re-established good credit. FHA only requires a bankruptcy be discharged at least 2 years or more.
How are closing costs paid?
You can either pay your closing costs out of pocket, but more commonly borrowers choose to roll them into the mortgage. It depends on if you have enough equity in your home.
Why is my payoff always larger than my balance I see on my statement?
That is because all mortgages are paid "interest in arrears." This means that when you make your mortgage payment for August, you are really paying the interest for July. You use your home for a month, then you pay the bill. So when your lender orders a payoff, your current mortgage company has to calculate the additional interest per diem to get you caught up. This should add about another month's payment to your payoff.
Impounds - what are these?
Impounds are taxes, homeowners insurance and private mortgage insurance, also called "escrows." If you choose to let the mortgage company pay your taxes and insurance for you, they will set up an escrow account. This is basically an account where monthly pro-rations of taxes and insurance are collected with the mortgage payment and deposited into escrow. When the bill comes due for taxes and insurance, the mortgage company promptly pays escrows and relieves the customer of this task.
Is it possible for me to pay my own taxes and insurance?
Yes, however most lenders will require your loan to be under 80% loan to value and they will raise your rate slightly to offset the risk. There is additional risk for lenders because if a homeowner falls behind on their property taxes, the tax bill can quickly become a lien which will pre-empt payoff of the mortgage in the event of a default. This happens frequently in areas that have high tax rates.
How do I close?
You can either go to the title company or you can choose to have a notary come to your home with the paperwork. The signing typically takes about 30 minutes.