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SUE ELLIOT
Mortgage Loan Agent
Santa Clara Valley Morgage
3880 S. Bascom Avenue
Suite 115
San Jose, CA 95124
Office: (831) 429-9126
Cell:
(408) 888-9865
Fax: (831) 429-9103
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Frequently Asked Questions
Whenever loans are discussed, they talk about
APR What is it?
The APR (Annual Percentage Rate) is the cost of the loan in percentage
terms. These are various loan charges that include loan discount points,
origination fees, prepaid interest, and document and underwriting fees.
These charges are spread over the life of the loan.
I see that various lenders charge different points. What are points and
why do they differ from loan to loan?
Points are costs a mortgage company charges a borrower to obtain the
loan. Each point is equal to one percentage point of the principal amount
of the loan. For example, one point on a $200,000 mortgage would equal
$2,000.00. The number of points charged for a mortgage depends on the
circumstances. Sometimes it is advantageous to pay higher points and
get a lower interest rate so as to end up paying less over the life of
your loan. Points are paid at the time of closing and can be deducted
as interest on your income tax return. Be sure to talk to your tax professional!
I was told I needed PMI, but my friend didn’t. What is PMI, and what
is the difference in our loans?
When borrowers make less than a 20% down payment on a house, they must
have PMI (Private Mortgage Insurance). This is required by lenders
to partially protect their loss if the borrower fails to make the mortgage
payments. Depending on your loan program, but generally when you’ve
paid
off 20% of your loan and/or when your LTV (loan-to-value) ratio is
80% or below, you may ask for the PMI requirement to be removed which
will
result in decreasing your total monthly loan payment. PMI deletion
requirements vary according to loan program and state requirements.
What is the difference between fixed
rate and adjustable rate mortgages?
Great for the borrower who plans on staying in the home for many years, fixed
rate mortgages have an interest rate that does not change, determined when one
is approved for a mortgage and remaining the same for the term of the loan. Adjustable-rate
mortgages (ARMs) have an interest rate that may vary over the course of the loan.
Typically, the interest rate is lower the first year, then increases at predetermined
intervals, meaning that payments will increase as well. These mortgages are good
for
the borrower who plans on moving within three to five years.
Is it better to be pre-approved?
It is to the buyer’s advantage to be pre-approved. Pre-approval is credit
approval by a lender to an applying borrower, prior to a property being
identified. The buyer’s maximum borrowing power is established, which
may result in a stronger negotiating position when bidding on homes.
This conditional approval is subject to a satisfactory title review and
appraisal of the property that will secure your loan, and no substantial
changes prior to closing in the information you provide.
How long does it take before my loan closes?
Loan approval can be obtained in as little as 24 - 48 hours. However,
it may take longer depending on the particulars of the loan package.
What is the difference between obtaining a loan through a bank
and a mortgage broker?
A bank provides mortgage financing with its own
funds and those of investors.
A broker is a company (or individual) with access to many wholesale
mortgage bankers and banking institutions, rather than using the company's
own
funds.
What if I have less than perfect credit?
There are various loan products for borrowers with less than perfect
credit history. They may cost more, but we can still help you obtain
financing for your home.
How much interest is saved on a 15-year loan versus a 30-year
loan?
The amount saved is dependent upon the amount borrowed and the interest
rate charged, but on average, the savings can be up to 60%! For example,
interest charged on a $350,000 loan for 30 years at 8.0% would be
$574,543, but the interest charged on a $350,000 loan for 15 years at
8.0% with
an interest total of $252,060, a savings of approximately 44%.
What is the length of the interest rate lock and what does it do
for me?
There are many options available for lengths of time to locking in a
rate. These depend on your need for convenience, and your security
and protection. The least amount of lock time, the lower the cost. Commonly
priced in 15-day increments, (15, 30, 45, 60, etc.) the pricing difference
is usually an extra 0.125 to the points per additional 15 days. For
example, if the loan points for an interest rate of 7.5% were 1.0 at a 15-day
price, then to secure that same rate for 45 days, they would be 1.25
(extra 0.25 for 30 extra days).
I’ve heard that bi-weekly payment plans help save money? If so, how
do they work?
Bi-weekly payment plan programs set a system to pay one additional payment
per year. Every two weeks, one-half of the mortgage payment is automatically
withdrawn from an established account, giving 26 one-half payments,
equaling 13 full monthly payments. This will cut approximately 6 - 7 years
off of a standard 30-year fixed rate mortgage, therefore saving time on
the
loan and interest.
Why do interest rates fluctuate?
Interest rates are tied to inflation and the reaction of the financial
markets. When inflation increases, mortgage rates will rise because
lenders pool loans into securities and then sell them in the secondary market,
competing with the entire pool of worldwide investment opportunities.
Inflation causes the value of fixed-rate securities to go down, so
mortgage
rates go up.
How can I ensure that the information on
my credit report is correct?
Each of your creditors reports information regarding your various accounts to
the credit bureaus who then compile the report. The information changes each
time something is added or deleted from your credit file. For instance, 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.
The best way to make sure that the information in your credit file is
correct is to periodically request copies of your credit report. If you
think an entry is in error, notify the appropriate credit bureau and
ask that the error be corrected.
Here is contact information for the three leading credit reporting agencies:
How will my credit score affect my loan application?
Your credit score plays a significant role when you apply for a loan.
People with higher credit scores are eligible for more loan options
and better interest rates. If you've had credit difficulties in the past,
you may still qualify for some mortgage programs, but these usually
cost more, depending on the severity of your credit problems.
How can I improve my credit score?
Your credit score is based on the credit data supplied by your creditors
to the credit-reporting agency on the day the score is requested
by a lender. To improve your credit score follow these tips:
- Pay your bills consistently and on time.
- Check your credit report and work to correct any errors.
- Keep your spending and debt under control.
- Maintain only a reasonable amount of unused credit.
For example, keep the number of credit cards you use to a minimum.
Avoid too many credit inquiries. Contact creditors immediately
if you cannot
make a payment on time. This may keep them from reporting
your delinquency to a credit agency.
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 For
the kind of service that accomplishes what you want and need
to accomplish - with experience and expertise backing it up
- and for answers to today's real estate financing questions
and opportunities, call today!
"The
key consideration for people pondering an ARM is how long they
intend to remain in a house. Some popular ARMs carry a fixed
rate during their first three, five, seven or ten years, making
them a good choice for homeowners who plan to move in a relatively
short period. These so-called hybrid ARMs generally aren't
a good idea if you plan to stay put. Other ARMs adjust every
year or less, making borrowers more vulnerable to short-term
swings in interest rates." [Ruth Simon, The Wall Street
Journal Sunday]
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