Below are a series of the most frequently asked questions we encounter.
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 up-front 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?
SECOND MORTGAGES
What is a Piggy-Back Loan?
If I am receiving a home equity line of credit,
how do I receive my funds on it?
Is the interest on a home equity loan or home equity
line of credit tax deductible?
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 up-front costs?
We don't charge an upfront application fee. However a $300 Appraisal
Fee is collected at the time you lock in your interest rate or request
an appraisal be ordered. The funds are maintained in an escrow trust
account and used to pay for your appraisal - a service performed
by an independent third party. Appraisals are generally ordered
on the first day of the loan application process and our appraisers
charge a $100 cancellation fee on any cancelled appraisals. If you
withdraw your application, this $100 cancellation fee will be paid
to the appraiser from the $300 Appraisal Fee. In the event your
loan is declined or withdrawn, any funds remaining after payment
of your appraisal costs will be refunded to you. You are entitled
to a copy of your appraisal.
What documentation do I need to provide?
You will generally be asked to support your income with a recent
paystub and the prior year's W-2 Form. Self-employed individuals
must support their income with the prior one or two years' tax returns.
Funds needed to close the transaction are supported with a copy
of a recent bank statement. 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 hours
of receipt of your supporting documentation. The approval will be
subject to our receipt and review of your appraisal and preliminary
title report.
How long does it take to close my loan?
We can close a Purchase Loan in as few as 21-30 days and a Refinance
Loan in as few as 14-21 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 volume
of quality business.
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 transactions, we work with a local appraiser,
escrow company and/or attorney. On refinance transactions, we work
with 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?
Your Loan Processor will contact you every 3-4 days with an update
on your loan, and 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?
In times of stable interest rates, most of our customers 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. For a 45 day
lock there is at least a .125 point add-on to the points and for
a 60 day lock there is .25 point add-on to the points. Trying to
time the bottom of an interest rate cycle is tricky and each month
you delay costs you in the form of carrying a higher interest rate
on your old loan. If rates fall further, you can always refinance
again.
What happens if my loan process takes longer than my lock period?
If the delay is caused by The Honest Mortgage Comapny 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 within three days
of request, delaying appraisal inspections or document signing appointments
or other actions that delay the timely processing and funding of
your loan.
In the event the lock extension must be paid for by you, a 7-Day
Lock Extension may be purchased before the original lock expiration
date by adding .125 to your points. Additional lock extensions
require that the loan be re-priced at the worse-case scenario
between the rate you originally locked into and current rates.
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?
On a Single Family Residence or PUD, there must be a minimum of
60 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
lnder program specifies it. Electing not to have an impound/escrow
account will increase loan points by .25.
What is the minimum down payment required?
We offer conforming loan programs with as little as zero down
and jumbo loan programs with as little as 5% down. However, significantly
lower rates are available with a down payment of 10% or greater.
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 customers.
Can I make a bi-weekly payment?
Many of our servicers allow you to set up bi-weekly payments.
However, you should seriously weigh the merits of this program
before setting it up. A bi-weekly 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 cancelled 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 servicer.
Generally, PMI must have been in place for at least two years
and you must have a good payment history for PMI to be cancelled
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. Keep your closing costs to
a minimum and you can refinance through us once the common areas
are complete.
MORTGAGE TERMS
What is a Three Day Right to Cancel?
On refinance transactions, Federal law mandates that you have
three days, after signing your loan documents, in which to cancel
your loan. This three day period includes Saturdays, but excludes
Sundays and holidays. Your loan will not be funded until this
period has expired.
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 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. The current conforming
loan amount limit for a Single Family Home or Condo is a loan amount
under $417,000. Anything over that is considered a jumbo loan.
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 borrowers 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 yellow pages or 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
P.O. Box 1000
Chester, PA 19022
800-888-4213
www.transunion.com
Equifax Consumer Relations
P.O. Box 105873
Atlanta, GA 30348
800-685-1111
www.equifax.com
Experian Consumer Relations
P.O. Box 2002
Allen, TX 75013
888-397-3742
www.experian.com
SECOND
MORTGAGES
What is a Piggy-Back Loan?
One of our most popular programs for purchasing a home is our Piggy-Back
loan program. With this financing structure, an 80% 1st Mortgage
and a 10%, 15% or 20% 2nd Mortgage are closed concurrently, eliminating
the need for Private Mortgage Insurance (PMI).
If I am receiving a home equity line of credit, how do I receive
my funds on it?
You may take an initial draw through the loan closing or you will
receive a set of credit line checks after the loan closes.
Is the interest on a home equity loan or home equity line of
credit tax deductible?
In most cases, the interest paid on your home equity loan or home
equity line of credit will be tax deductible up to 100% of the
value of your home. There are some restrictions, so you should
consult your tax advisor regarding your particular situation.
For more details please view A
glossary of mortgage and finance terms