Mortgage FAQs

How do I know how much house I can afford?
The amount that you can borrow will be based upon your employment history, credit history, current savings and debts, and the amount of down payment you are willing to make. You may also be able to take advantage of special programs for first time buyers including down payment assistance to purchase a home with a higher value. Please contact us, and we can help you determine exactly how much you can afford. You can also get your estimated monthly payments using our financial calculator..
How much cash will I need to purchase a home?
The amount of cash that is necessary depends on a number of items. Generally speaking, though, you will need to supply:

 

  • Earnest Money: The deposit that is supplied when you make an offer on the house
  • Down Payment: A percentage of the cost of the home that is due at settlement
  • Closing Costs: Costs associated with processing paperwork to purchase or refinance a house, unless the contract negotiates the seller to pay for these costs.
Can the seller pay my down payment?
Mortgage loan programs do not allow the seller to pay for your down payment. However, the down payment can be a gift from a relative. Most loan programs permit the seller to pay a percentage of your closing and escrow costs (the seller is not required to pay anything toward your costs).

 

The total seller assist limit is based on the type of mortgage and the down payment percentage. However, the rules allow the seller to pay a percentage of the buyer's closing costs if agreed to by the sales contract. Each mortgage "type" has their own seller assist guidelines. Talk to one of our mortgage loan officers for more information.

When will my interest rate be locked in?
Your loan is eligible to lock in the interest rate once the offer is accepted on your home and the appraisal is complete. Locking in a rate on a home that you are not sure will qualify for financing is not advisable. Once your appraisal comes back, it will give both your processor and underwriter a better glimpse of the eligibility.
Why get Pre-Qualified or Pre-Approved?
Normally, Pre-Qualifying is the fastest way to find out what price range your agent should be searching for. It will save both you and your agent time. A mortgage loan officer will base the Pre-Qualification off the verbal information or initial application, which does not require proof of income up front.

 

Pre-Approval is another option. Depending on who you ask, they will say that it's either a must or not that important. The reason for this is that your Pre-Qualification form, which used to be called an "LSR," has sections that will be checked off depending on how much information you have provided to your mortgage loan officer. So having your Pre-Qualification form in-hand should be more than sufficient proof for your agent and sellers that you have been qualified for a mortgage loan.

How long does my Pre-Qualification last?
Your Pre-Qualification is valid for 90 days. At that point, your mortgage loan officer will contact you for permission to refresh your credit report. It is a simple process and will extend your Pre-Qualification for another 90 days.
What is the difference between a fixed rate loan and an adjustable rate loan?
With a fixed rate mortgage, the interest rate stays the same during the life of the loan. With an adjustable rate mortgage (ARM), the interest changes periodically, typically in relation to an index it is associated with. While the monthly payments that you make with a fixed-rate mortgage are relatively stable, payments on an ARM loan will likely change. There are advantages and disadvantages to each type of mortgage, and the best way to select a loan product is by talking to us.
How do I know which type of mortgage is best for me?
There is no simple formula to determine the type of mortgage that is best for you. This choice depends on a number of factors, including your current financial picture and how long you intend to keep your house. We can help you evaluate your choices and help you make the most appropriate decision. You can also use our financial calculator.
What does my mortgage payment include?
For most homeowners, the monthly mortgage payments include three separate parts:

 

  • Principal: Repayment on the amount borrowed
  • Interest: Payment to the lender for the amount borrowed
  • Taxes & Insurance: Monthly payments are normally made into a special escrow account for items like the homeowner's insurance and property taxes. This feature is sometimes optional, in which case the fees will be paid by you directly to the County Tax Assessor and property insurance company.
What is Private Mortgage Insurance (PMI)?
PMI is required by the lender in the event the loan-to-value ratio is greater than 80%, which is considered a high-risk scenario. That means less than 20% down payment on a purchase or less than 20% equity on refinance transactions. Mortgage insurance protects the lender in case the borrower defaults on the mortgage, while benefiting the borrower by allowing very little down payment or equity. Mortgage insurance, associated with the loan, should not be confused with homeowner's insurance, which protects the borrower's house in cases of fire and natural disasters.
What is APR?
Annual Percentage Rate (APR) reflects the yearly cost of a loan, including the interest, mortgage insurance and lender and third-party fees. APR is expressed as a percentage and it involves a complicated mathematical calculation. Always higher than the nominal rate (used to calculate your payment), APR serves as informational or comparative purposes and it can be found on the Loan Estimate and Closing Disclosure.
How is an index and margin used in an Adjustable Rate Mortgage (ARM)?
An index is an economic indicator that lenders use to set the interest rate for an ARM. Generally the interest rate that you pay is a combination of the index rate and a pre-specified margin. Three commonly used indices are the One-Year Treasury Bill, the Cost of Funds of the 11th District Federal Home Loan Bank (COFI), and the London InterBank Offering Rate (LIBOR).
Can closing costs be rolled into my loan if I refinance?
If you have sufficient equity, we can roll in all of your closing costs and pre-paids into your new loan.
Why should I refinance?
There are several reasons you may want to consider refinancing, including take out a loan against the equity in your home, to lower your interest rate, extend or shorten your term, or to remove a borrower from the loan.
What is the difference between down payment and earnest money?
Your Real Estate agent will ask for "earnest money" or an "earnest deposit" from you when your offer is accepted. This is a good faith deposit that will be applied to the amount you will need to bring to closing. The amount you will need to bring to closing will consist of down payment and closing costs.
How important is having good credit?
Some programs require a minimum credit score but there are programs that consider situations such as hardships as an explanation. Talk to one of our mortgage loan officers for further information.