What are closing costs? And how do I find out what they consist of?
Closing costs are the costs associated with the purchase of a home. They may include fees charged by the Lender, Title company, or Government. You can find all closing costs associate with your purchase on your Good Faith Estimate.

What are prepaids?
Prepaids are items required by your lender to be paid in advance. They include daily interest, up front mortgage insurance, hazard insurance and your escrow account.

What is a GFE?
GFE stands for Good Faith Estimate. The GFE is an estimate of all fees included in the purchase of a home. It will tell you an estimated payment and an estimate of what it will cost to purchase the home.

What is a the Truth-in-Lending disclosure and Why is it important to me?
Your disclosure statement provides information which Federal law requires us to give to you. The purpose of the statement is to give you information about your loan and help you shop for credit.

What is the Annual Percentage Rate?
The Annual percentage rate, or A.P.R., is the cost of your credit expressed in terms of an annual rate. Because you may be paying “points” and other closing costs, the A.P.R. disclosed is often higher than the interest rate on your loan. The A.P.R. can be compared to other loans for which you may have applied and give you an fair method of comparing price.

Why is the Annual Percentage Rate different from the interest rate for which I applied? And Why is the Amount Financed different?
The Amount Financed is lower than the amount you applied for because it represents a net figure. If someone applied for a mortgage of $50,000 and their prepaid finance charged total $2,000, the amount financed would be shown as $48,000, or $50,000 minus $2,000.
The A.P.R. is computed from this lower figure, based on what your proposed payments would be. In a $50,000 loan with $2,000 in prepaid finance charges, and an interest rate of 14%, the payments would be $592.44 (principal & interest) on a loan with a thirty year loan term. Since the A.P.R. is based on the net amount financed, rather than on the actual mortgage amount, and since the payment amount remains the same, the A.P.R. is higher than the interest rate. It would be 14.62%. If this applicant’s loan were approved he would still receive a $50,000 loan for thirty years with monthly payments @ 14% or $592.44.

What is the Finance Charge?
The Finance Charge is the cost of the loan. It is the total amount of interest calculated at the interest rate over the life of the loan, plus prepaid finance charges and the total amount of mortgage insurance charged over the life of the loan. This figure is estimated on the disclosure statement given with you’re application.

What is the Amount Financed?
The amount financed is the mortgage amount applied for Minus prepaid finance charges and any required deposit balance. Prepaid finance charges include items such as loan origination fees, commitment or placement fee, adjusted interest, and initial mortgage insurance premiums. The amount financed represents a net figure used to allow you to accurately assess the amount of credit actually provided.

How do I know what loan is best for me?
There are many different types of loans and this can be a confusing task. Your loan officer will explain your options and give advice based on your personal situation.

What is PMI / MI? And do I have to have it?
Private mortgage insurance is required on conventional loans and Mortgage Insurance is required on FHA loans. The insurance policy insures a lender in case a borrower should default. Private Mortgage Insurance is not required when your loan-to-value is 80% or less. Mortgage Insurance is required on all FHA loans for at least the first 5 years of the loan. Once you reach a 78% loan-to-value and are at least 5 years into the Mortgage you may be able to avoid Mortgage Insurance.

What are Discount points & Origination?
These are percentages of the loan amount that you and your loan officer discuss regarding your rate and the total cost of originating your mortgage loan.

What is the difference between a pre-qualification and a pre-approval?
A pre-qualification is when a loan officer reviews your income, credit and down payment to estimate what your can afford. A pre-approval is achieved by verifying income and assets through documentation by an authorized agent to approve your loan.

What is meant by locking my interest rate?
Loans must be locked with investors for different commitment periods. The commitment periods are 15-30-45-60 (days) etc. This means that if your loan is locked for 30 days you must close on the loan by the 30th day to insure your interest rate. There may be different interest rates for different commitment periods. Usually the shorter the lock the better the interest rate will be.

Once I have signed a Loan Application do I have to close on the loan?
No. The loan application is for the purpose of disclosing to you the particulars of the loan. You are not obligated to the loan until you sign all the appropriate documentation at the Title company and the loan has funded.