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| Frequently Asked Questions - The Honest Mortgage Company - Nothing hidden in the fine print |
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Below are a series of our most frequently asked questions. If you have ANY other question, or need further clarification just call and we'll be happy to help. GENERAL QUESTIONS Should I obtain a pre-approval before finding a property? Is there an application fee or any upfront costs? What documentation do I need to provide? How quickly will my loan be approved? How long does it take to close my loan? Can I use The Honest Mortgage Company if I'm not located in San Diego? How can I check the status of my loan? When is the best time to lock? What happens if my loan process takes longer than my lock period? How soon after I sign loan documents will my loan close? If my loan is closing around the 1st of the month, should I still pay my current lender? If I'm receiving cash out at the end of the transaction, how will I receive my proceeds? Does my homeowners insurance need to be current at the time my loan closes? MORTGAGE GUIDELINES Can I select my own title and escrow company? Do all loans have prepayment penalties? Do I have to have an impound/escrow account for the payment of my taxes and insurance? What is the minimum down payment required? Do you lend on Mobile Homes or Manufactured Homes? Can I make a bi-weekly payment? If my loan requires Private Mortgage Insurance (PMI), when can I have it removed? Can I close my loan in the name of a Trust? When is paying off my current second mortgage considered cash out? Can I get a loan on a condo without all common areas being completed? MORTGAGE TERMS What is a Three Day Right to Cancel? What is a FICO score? What are loan points? Are loan points tax deductible? What are loan fees? What is Private Mortgage Insurance (PMI)? What is the difference between a conforming loan and a jumbo loan? What is prepaid interest? What is the difference between the rate and the APR? How is APR calculated? What is a subordination agreement? What is Title Insurance? CREDIT REPORTS How can I obtain a Free Credit Report? Where can I turn for help cleaning up my credit? How do I dispute an item on my credit report? Should I obtain a pre-approval before finding a property? A common mistake would be to begin the process of looking for a home, find one and fall in love with it, and then find out that you can't afford it. If this happens, it may be difficult to find another home you like as much since you're already emotionally connected to the more expensive home. So it's always a good idea to know the amount of financing you qualify for before you begin shopping for a home. Additionally, having a lender pre-approval in hand will strengthen your offer in the eyes of the seller. Our pre-approval process will quickly help you determine the monthly payment you can afford and the amount of cash required to close the transaction. Is there an application fee or any upfront costs? We don't charge an upfront application fee. What documentation do I need to provide? You will generally be asked to support your income with recent paystubs and the past 2 year's W-2 Forms. Self-employed individuals must support their income with the prior two years' tax returns. Funds needed to close the transaction are supported with a copy of a recent bank statements/401ks/ROTH/IRA/Stocks etc. If proceeds from the sale of another property are being used for the down payment, an estimated closing statement on that transaction will be required to support the necessary funds to close. Some transactions may require additional documentation. How quickly will my loan be approved? Your loan application will generally be approved within 48 -72 hours of receipt of ALL your supporting documentation and completion of your online application. The complete approval will be subject to the underwriter reviewing the appraisal and preliminary title report, and other supporting information. How long does it take to close my loan? We can close a Purchase Loan in 30 days and a Refinance Loan in as few as 15-21 days. Additionally, the third party service providers we work with, such as appraisers and title insurance companies, prioritize our orders because we provide them with a high number of loans. Can I use The Honest Mortgage Company if I'm not located in San Diego? The Internet, fax machines, overnight mail, and companies like Fed Ex, services have eliminated the need for proximity to process and close a loan. We use The Honest Mortgage Company preferred appraisers in your area. On purchase or refinances, we work a local appraiser, escrow company and/or attorney and utilize a professional signing service (notary) to bring the loan documents to your home or business for signing. How can I check the status of my loan? You can always check the status of your loan 24 hours a day 7 days a week online at www.TheHonestMortgageCompany.com web site. When is the best time to lock? Many of our clients lock between 15 and 30 days before their scheduled close of escrow. Locking for a period longer than 30 days increases the cost of the loan slightly but is sometimes a good idea if rates are volatile. What happens if my loan process takes longer than my lock period? If the delay is caused by The Honest Mortgage Company or a third party service provider selected by us, we will extend the lock at no cost (if the lender allows it). However, if you cause the delay, you will be required to pay for the cost of the lock extension. Examples of delays caused by you are incomplete information submitted on your application, requesting subordination of an existing second mortgage, not supplying supporting documentation in a timely manner, delaying appraisal inspections/document signing appointments or other actions that delay the timely processing and funding of your loan. How soon after I sign loan documents will my loan close? On purchase and refinance transactions the loan will typically close within three days (one day to review the docs, one day to fund the loan, and one day for the loan to record). If my loan is closing around the 1st of the month, should I still pay my current lender? We always recommend that you make your payment to avoid any late charges. If I'm receiving cash out at the end of the transaction, how will I receive my proceeds? Escrow will issue a check and mail it to you. You can also arrange for escrow to wire the proceeds directly into your bank account. Does my homeowners insurance need to be current at the time my loan closes? It depends on the lender but generally on a Single Family Residence or PUD, there must be a minimum of 90 days of coverage remaining on your policy from the time of funding. On a condo, your association Home Owners Insurance policy must be current. MORTGAGE GUIDELINES Can I select my own title and escrow company? By law, you have the right to select your own provider for these services. Over time we've selected a few providers that work very accurately and efficiently. If you wish to use a different provider and agree to pay the fee charged by them, please advise us and we'll be happy to work with them. Do all loans have prepayment penalties? Not all loans have prepayment penalties, meaning you have the ability to prepay your loan and refinance if rates fall. If a loan program with a prepayment penalty is offered to you, you will also be offered the same loan without a prepayment penalty so you can compare rates and decide which option is best for you. Do I have to have an impound/escrow account for the payment of my taxes and insurance? You are not required to have an impound/escrow account unless the lender program specifies it. What is the minimum down payment required? We offer conventional loan programs with 20% down, and VA programs with zero down. Do you lend on Mobile Homes or Manufactured Homes? No. By offering financing only on traditional 1-4 family residential properties, we are able to be more efficient and offer the best possible pricing to our clients. Can I make a biweekly payment? Many of our lenders allow you to set up biweekly payments. However, you should seriously weigh the merits of this program before setting it up. A biweekly payment program pays off the mortgage early by making 13 payments each year (52 weeks in a year divided by 2 equals 26 half-payments or 13 full payments). By simply paying an extra 1/12 of a payment each month, you will pay your mortgage off faster and avoid any possible administration fees associated with the biweekly payment program. If my loan requires Private Mortgage Insurance (PMI), when can I have it removed? On a 1-unit primary residence or second home, federal regulations require that PMI be automatically canceled when your loan balance reaches 78% of the original property value at the time the loan was secured. Depending on the loan program, you may be able to request in writing that PMI be removed sooner, based on an increase in the property value as determined by a new appraisal to be ordered by the lender. Generally, PMI must have been in place for at least two years and you must have a good payment history for PMI to be canceled under this scenario. Can I close my loan in the name of a Trust? Loans may not be closed in the name of a Trust. Escrow will prepare a grant deed removing the property from the trust prior to recording your new loan. When is paying off my current second mortgage considered cash out? If your current second mortgage was not obtained in conjunction with purchasing your home, then paying it off with a new mortgage is considered cash out. Can I get a loan on a condo without all common areas being completed? All common areas for the subject phase of a condominium complex must be completed to qualify for any of our loan programs. Your builder will have a program to finance your purchase of a condo without all common areas completed. MORTGAGE TERMS What is a FICO score? A FICO score is computed based upon a statistical analysis of your credit history and patterns. What are loan points? Points are paid to reduce the interest rate you pay on a loan. Each loan "point" is equal to one percent of the loan amount. Your decision on whether or not to pay points depends on how long you plan to keep the loan, your tax situation, and other factors. Are loan points tax deductible? For most taxpayers, points paid on purchase loan transactions are tax deductible in the year the home is purchased and points paid on refinance transactions are tax deductible over the life of the loan. Tax consequences vary depending on the specifics of the transaction and the taxpayer. We encourage you to consult your tax advisor/CPA regarding your tax situation. What are loan fees? Loan fees are fees paid in conjunction with closing a mortgage loan. There are other fees paid to third parties such as Appraisal, Escrow and Title Insurance. Your Good Faith Estimate (GFE) of Closing Costs will itemize all fees. What is PMI? Private Mortgage Insurance is charged on loan amounts exceeding 80% of the purchase price or appraised value of a home. The mortgage insurance protects the lender against loan default. What is the difference between a conforming loan and a jumbo loan? A conforming loan is one that is less than the maximum loan amounts set by Fannie Mae and Freddie Mac. Jumbo loans are loans which exceed these limits. The loan amounts are revised each year to reflect the change in the national average cost of a home. What is prepaid interest? Prepaid interest is paid at the time of closing of your loan to cover the interest that will accrue on your new loan for the remaining days of the month. What is the difference between the rate and the APR? The note rate is used to calculate your interest payment each month. The APR (Annual Percentage Rate) is a calculation based on standardized federal regulations. In addition to the interest rate, it factors in other finance charges such as certain loan fees, to show the total cost of the financing over the scheduled life of the loan. The APR is designed to help borrowers fairly compare different lenders and loan options. Please note that the loan amount will influence the APR calculation, with higher loan amounts reporting lower APR calculations. To get a true comparison, the same loan amount must be used. How is APR calculated? Federal regulations define Annual Percentage Rate (APR) as the total cost of your credit calculated as an annual rate. The APR will almost always be higher than the Interest Rate (with some exceptions on ARM loans). For purposes of the APR calculation, points, lender fees and prepaid interest amounts collected at closing are known as "Prepaid Finance Charges." The Loan Amount minus the Prepaid Finance Charges is known as the "Amount Financed." On a fixed rate loan, the APR can be calculated using a simple financial calculator. By inputting the Loan Amount, Term and Interest Rate, one can solve for the Monthly Payment. By then inputting the Amount Financed, Term and Monthly Payment, one can solve for the APR. For example, on a $100,000 Loan Amount, a 30-year Term and a 5% Note Rate, the Monthly Payment is calculated at $536.82 (principal and interest). Assuming $2,000 in Prepaid Finance Charges, using the $98,000 Amount Financed, same 30-year Term and same Monthly Payment of $536.82, the APR is calculated at 5.178%. So, the 5.178% APR is the cost of your credit based on the $98,000 Amount Financed and the 5% Interest Rate is the actual interest rate to be paid on the Loan Amount of $100,000. By law, lenders are required to disclose both Interest Rate and APR to you. What is a subordination agreement? A subordination agreement is a document prepared by a second mortgage lender agreeing to remain in second position when a first mortgage is refinanced. Without such an agreement, the second mortgage holder would move into a first lien position when the existing first mortgage was paid off. The second mortgage lender usually charges a fee to process the subordination agreement, which is incurred by the borrower. Additionally, this process often increases the amount of time necessary to process a first mortgage refinance transaction, potentially jeopardizing a borrower’s lock. What is Title Insurance? Title insurance protects you and your mortgage lender by insuring that no individual or government entity has any right, lien, claim or encumbrance to your property. Once a title policy is issued, if any claim which is covered under the title policy is ever filed against your property, the title company will pay the legal fee involved in defense of your rights, as well as any covered loss arising from a valid claim. CREDIT REPORTS How can I obtain a Free Credit Report? The Fair and Accurate Credit Transaction Act of 2003 (FACTA) provides that every consumer is entitled to a free credit report every 12 months from each of the three national repositories: Equifax, TransUnion and Experian. Customers may obtain their personal credit report through the following website: www.annualcreditreport.com Where can I turn for help cleaning up my credit? Call us and we can direct you to several non-profit agencies that offer free counseling to assist you in this regard. Or you can consult the Internet under the heading Credit Counseling Services to find a counseling service in your area. How do I dispute an item on my credit report? You must contact the credit agencies directly and dispute the reported item. Following is the information on how to contact the agencies: Transunion Consumer Relations For more details please view A glossary of mortgage and finance terms |
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