- What
is an Origination Fee?
- It
is the fee charged to a borrower for the processing
and closing of the loan at an agreed upon interest
rate. The origination fee is customarily 1% of the
value of the loan amount. Does every loan have one?
No. As the interest rate increases, the origination
fee decreases.
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-
- What
is a credit score or FICO score?
- It
is a computer generated score, developed by Fair
Isaac & Company, that calculates the likelihood
that a borrower will pay his or her bills. Widely
accepted by lenders as a means of credit evaluation,
the credit score, or FICO score, condenses a borrowers
credit history into a single number. Some of the
factors used to determine a borrowers credit history
are:
-
The length of a borrowers credit history
- Any
previous late payments the amount of credit used
versus the amount of credit that is available
- Work
history Length of time at the current residence
- Any
past negative credit information, such as collections
or bankruptcies
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- Why
do interest rates change?
- Interest
rate changes are based on the basic economic concept
of supply and demand. If the demand for credit increases,
so do the interest rates, as sellers can command
a better price for lending their money. Conversely,
if the demand for credit decreases, then the interest
rates drop, because with more sellers than buyers,
the buyers can borrow money at a better, lower price.
The strength of the economy also plays a factor
in changing interest rates. In a strong, growing
economy, that may also include higher inflation,
there is more demand for credit, so interest rates
are higher. In a slow, floundering economy, the
demand for credit decreases, so interest rates will
be lower.
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- What
is the difference between pre-qualifying and pre-approval?
- Pre-qualification
is a process where an Alpha Mortgage representative,
following the completion of a brief pre-qualifying
form, determines the dollar value of a loan
that you would probably qualify for. This provides
a good starting point to begin the home shopping
process.
-
- Pre-approval
is when the potential home buyer is formally approved
for the loan based on the verified credit, assets
and information submitted to Alpha Mortgage on a
completed Fannie Mae 1003 application
form.
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- What
is a rate lock?
- It
is a specific interest rate that your are guaranteed
to receive on your mortgage at the time of closing.
Interest rates are normally locked in within 30,
45 or 60 day periods, which means you must close
on your property within 30 days of committing to
a loan for a 30-day lock, within 45 days for a 45-day
lock, etc.
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- Can
my loan be sold?
- Your
loan can be sold. Lenders often buy and sell mortgages
to a secondary mortgage market. The lender assumes
all the terms and conditions of your loan. The only
thing that changes is who you mail your payment
to.
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-
- What
do I do if my lender goes out of business?
- You
still must make your payments even when your lender
goes out of business. Your loan will likely be sold
to another lender in this case, and that lender
is obligated to honor the terms and conditions of
the original loan. Even if there is period between
the date your original lender goes out of business
and when the new lender purchases your loan, you
must continue making payments to the old lender
until you receive instructions from your new lender.
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-
- What
is PMI?
- Private
Mortgage Insurance, or PMI, is usually required
when you purchase a home with less than 20% down.
It is a guarantee that helps protect lenders against
the costs of foreclosure. While PMI is an additional
expense, you normally would not be able to purchase
a home without a 20% down payment unless you had
PMI. As the percentage of down payment on your home
decreases, the cost of your PMI will increase. The
PMI premium is usually included in the monthly mortgage
payment.
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- Can
I cancel the PMI on my loan?
- While
many lenders will allow cancellation of the PMI
when the loan is paid down to 80% of the original
value, the final decision on terminating the PMI
is jointly reserved for the lender and any investor
who may have purchased an interest in the mortgage.
Some lenders may stipulate that you must pay the
PMI for one or two years before any cancellation
is considered. Many times, an appraisal on the home,
which the borrower may have to pay for, is required
to determine if your loan is paid down to 80% of
the values. Refinancing your loan without PMI is
another way of canceling it.
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- What
is an APR?
-
The annual percentage rate, or APR, is an interest
rate that is different than the note rate, and is
generally used to compare the loan programs offered
by different lenders. While the APR is very confusing,
it generally prevents lenders from advertising a
low interest rate while hiding other fees. Rather
than compare competing lenders based on their APR,
it is much better to acquire good-faith estimates
from a few lenders to compare costs.
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-
What is a Good Faith Estimate and when can I
expect to see it?
-
Good Faith Estimate is the form that discloses all
the costs related to your loan. All disclosures,
including the Good Faith Estimate, will be sent
to you within 2-4 days of Alpha Mortgage's receipt
of your completed loan application.
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