Frequently Asked Questions
Question: Can I still qualify for a mortgage if my credit isn't very good?
Answer: Yes you can. People with all types of credit can qualify for a mortgage; whether your credit is Excellent, Great, Average, Below Average, or even Poor Credit. The rates tend to increase slightly as credit scores go down, but you may still qualify for a mortgage. In addition, with a lower credit score, there may be fewer loan programs available. Conversely, if your credit score is excellent, you will find more programs available to you. You should understand that if your credit score is low, there may be compensating factors such as liquid funds in checking or savings accounts, low loan to value, retirement accounts, 401k's, investments, etc., long time on the job, low debt to income ratios or DTI’s, and lower loan terms (15 year instead of a 30 year loan) may compensate somewhat for a lower credit score and help you qualify for a little better rate.
Question: What is a mortgage loan term and what is available for me as a borrower?
Answer: Multiple loan terms are available for you. A loan term is the length of the loan as measured in years. Some of the most common loan terms are 5, 10, 15, 20, 25, 30 years and now even 40 year home loan terms. Some lenders will still allow you to pick the terms in years in between those illustrated here.The 40 year loan term is still relatively new to the market but the rest quite common. In general, the shorter the term you select, the lower the rate tends to be.The 30 year mortgage term is still the most common loan term used for mortgages.
Question: What is PMI?
Answer: PMI, or Private Mortgage Insurance, is insurance that is required on conforming loans when the borrower puts less than 20% down on a purchase or owns less than 20% equity in the property in a refinance transaction. PMI is insurance that the borrower pays for to protect the lender or bank in case you default on your loan. If your down payment is less than 20% or you own less than 20% equity in your property, your loan is considered a higher risk, therefore Private Mortgage Insurance is required before the loan can be closed.
Question: What’s the right mortgage for me?
Answer: There are many mortgage options available to the average borrower.Whatarerates.com will assess your situation and recommend the best option for you.There are multiple programs including a simple fixed rate mortgage, interest only, pay option arms, lot loans, construction, rehab, manufactured, commercial and many others that may fit your loan needs.
Question: Can I qualify even after a bankruptcy?
Answer: Yes, you may still qualify for a home loan. Speak with a loan officer to find out whether you qualify and what options might be available. You may be surprised at how many options you have. Be certain to share all details regarding the bankruptcy with your loan officer, so that they can help you acquire the right loan for you.
Question: What is APR?
Answer: APR, or Annual Percentage Rate, is the effective rate that takes into consideration the lender bank's charges and expresses the total of all these charges in the form of an interest rate. Because there are always multiple finance charges in addition to the note rate (the interest rate base on which payments are calculated), the APR is almost always higher than the note rate. The APR is one of the items required by the Truth-in-Lending to disclose to every potential borrower.
Question: What is PITI?
Answer: PITI is Principal, Interest, property Taxes, and Insurance.This is essentially the cost of living in your particular home. PITI can also be expanded to include any private mortgage insurance and homeowner’s association fees or condominium association fees.
Question: What is Lender Paid Mortgage Insurance?
Answer: The lender pays the mortgage insurance in exchange for a slightly higher rate.
Question: Does Whatarerates.com have the lowest rates available?
Answer: We have loans to fit just about every situation with rates that are competitive with everyone else. Many lenders advertise rates that are actually not available just to get you to talk to them and get you to originate a loan with them. Actually all mortgage money that all lenders lend comes from the same sources. Rather than choosing a lender based on whoever quotes the lowest rate, you should choose on the basis of the loan officer's professionalism, experience and skill in finding a loan program that would be best suited for your particular situation.
Question: What is a Good Faith Estimate?
Answer: A Good Faith Estimate is a preliminary estimate of the closing costs and fees for your mortgage. When comparing a Good Faith Estimate between mortgage brokers be sure to have the Truth in Lending form with you.
Question: What is a Truth in Lending statement?
Answer: A Truth in Lending form is used in connection with the Good Faith Estimate. A Truth in Lending shows you the total cost of a mortgage including the closing costs and fees. A Truth in Lending will allow you to determine if a higher rate with low fees is better than a lower rate and higher fees, and vice versa.
Question: What is an impound
Answer: Impounds are the part of your monthly payment that cover Home Owners Insurance and Property Taxes. Impounds are calculated by taking your annual payment and dividing by 12. From time to time, for a higher rate, the lender will allow borrowers to pay insurance and taxes themselves. However, lenders prefer to collect these in monthly installments and pay them when due. This ensures that these are paid on time and prevents tax liens or lapsing of insurance. Normally, at closing, lenders will collect whatever is currently due in addition to 2 months extra for reserves or what should have been collected since the last due date for the insurance or taxes plus an additional 2 months extra for reserves. The borrower will always have this 2 months extra in reserves for as long as the borrower has the loan. If you pay your mortgage late, this allows the lender to pay your taxes and insurance on time.
Question: I am currently self-employed or I have a steady income that is difficult to prove. Is there a mortgage for me?
Answer: Yes there is. Depending on your credit history, down payment, and several other factors your Mortgage Professional at Whatarerates.com may suggest a 'Stated Income' program for you to consider.
Question: What does “Loan to Value” mean?
Answer: Loan to Value (LTV) is the size of your loan in proportion to the value of your home. It is important to know that a lender will always use the lesser of the appraised value or the purchase price for the value. If you refinance, then the appraised value is always used.
Question: What does DTI mean?
Answer: DTI means Debt to Income Ratio. This is a ratio that will very strongly decide how much of a loan you can afford. Your Debt to Income Ratio or DTI is calculated by dividing your total monthly debts with your total monthly income.
Question: Why should I buy instead of renting?
Answer: A home is always an investment. When you rent the money is gone forever and you are basically paying your landlord's mortgage. When you are buying a home, you can deduct the cost of your loan interest from your taxes. The property taxes you pay as a homeowner are also deductible. Additionally, the value of your home may go up over the years.
Question: What is a credit report or tri-merge?
Answer: A credit report or tri-merge is a report that contains information on how you pay your bills, where you work and live, and any information that is on public record, such as a bankruptcy, judgments, tax liens and lawsuits. Your permission is required in order for a lender to order a copy of your credit report.
Question: How long will negative credit information stay on my credit report?
Answer: Most negative credit statements remain on credit reports for seven years. Some exceptions are bankruptcies, which can remain for 10 years along with certain lawsuits, which can remain on the credit report until the statute of limitations runs out.
Question: How is an index and margin used in an Adjustable Rate Mortgage (ARM)?
Answer: An index is an economic indicator that lenders use to set the interest rate for an Adjustable Rate Mortgage or more commonly called an ARM. Generally the interest rate that you pay is a combination of an index rate and a pre-specified margin.
Question: Why should I refinance my mortgage?
Answer: Refinance to pay off your 1st mortgage and reduce your mortgage rate and monthly payment, to pay off your 1st mortgage and take out some additional cash, to pay off your first and second mortgages and reduce your mortgage rate and monthly payment, you currently have no mortgage liens on your property and wish to obtain cash by applying for a 1st mortgage or you currently have a construction mortgage loan and wish to pay it off and obtain permanent financing.
