What is a fixed rate mortgage?
With this
type of mortgage your interest rate will remain fixed
for the entire life of the loan. This type of loan will
provide you with the same payment amount every month
until the loan is paid off
What is an adjustable rate mortgage?
An adjustable rate mortgage is a loan in which the
interest rate can move either up or down over the life
of the loan. With this type of mortgage the interest
rate will generally start low and increase the longer
you have the loan.
What is a prepayment penalty and should I have one?
A prepayment penalty allows the lender to charge the
borrower a fee if they close their loan within a certain
period, usually the first five years of the loan. This
fee is usually equal to about six months worth of
interest payments on a loan. In some cases you may be
able to get a lower rate if the lender includes a
prepayment penalty, but it is usually better to try and
avoid it.
What is the difference between pre qualification and
pre approval?
Pre
qualification is when a prospective buyer discloses,
either verbally or by providing documentation of, their
income, assets and credit so that a lender can determine
how much a borrower will be likely to afford in loan
payments. A pre approval involves an underwriter and is
a more formal review of your credit and income. A
prequalification will commonly only provide you with an
idea of what you can afford while a pre approval will
actually guarantee you a loan of a certain amount.
Am I required to get financing from the lender that
my real estate agents recommends?
A recommendation is just that, a suggestion, you are
never required to choose the lender that anyone suggests
to you. The best way for you to find a lender is to shop
around and compare deals.
What are points?
Also called discount
points, a point is 1% of the amount of the loan. Points
are a one-time fee added to your closing costs and
generally results in a slightly lower interest rate on
your loan.
What is a good faith estimate?
A Good Faith Estimate is an estimate that outlines the
costs you will incur during the mortgage process. This
is provided to you when you apply for your loan.
What is an Escrow Payment?
The portion of your monthly payment that is held by the
lender to pay for taxes, hazard insurance, mortgage
insurance and other items as they become due is known as
an escrow payment.
What is amortization?
Amortization is the period it would take you to pay off
your mortgage in full. As long as you maintain the same
terms and payment periods of your loan your amortization
period will be whatever the term of your mortgage was
when it was first taken out.
What is the advantage of weekly payments over monthly
payments?
By making weekly payments you will make one extra payment per year. Though the amount of money you will be paying will not be severe doing this will lower the period in which your mortgage is paid off.