Knowledge Matters. We answered a few questions for you
There are so many intricacies and nuances to mortgages and real estate acquisition that volumes could be taken up explaining everything there is to know. Here, we'll try to cover some of the most commonly asked questions on mortgage faqs, real estate faqs and other types of insurance faqs.
What is PMI?
PMI (Private Mortgage Insurance) protects the lender against losses that are incurred if a borrower should default on a mortgage. It is required on first mortgage if the borrower has a down payment of less than 20%. It is also required on refinances when the borrower has fewer than 20% equity in the property that's being refinanced. Typically, the cost of the PMI or private mortgage insurance is added to the monthly mortgage payment.
Should I Go With a Fixed-Rate or an Adjustable-Rate Mortgage?
It's up to you. They each have their advantages. With a fixed-rate loan, your payments don't change over the term of the mortgage, so if rates are low, this is usually best. If rates are high, you might want to consider an adjustable-rate loan, because the rates are low in the initial period.
How Soon Will I Get My Money?
On procurement of a mortgage, your funds become available on the day of closing. On a refinance, you normally get your funds on the fourth business day after signing. This is because federal law requires that you have a three-day period during which time you can cancel your loan if you choose.
Can I Get Pre-Approved?
Yes. Your lender can review your information, and make a decision as to whether or not you will qualify for a mortgage. That way, you can look for your new home knowing that you'll be able to arrange the financing. In addition, sellers and realtors will be more confident in dealing with you if you're pre-approved.
What are Closing Costs?
Closing costs are fees that are charged for various tasks that need to be completed before closing. They can include attorney fees, documentation fees, title insurance fees, and prepaid interest. Also, they can vary quite a bit depending on what type of mortgage you have, and where you live.
Does My Credit Have to Be Perfect?
The better your credit score, the more insurance or loan options will be available to you, and the better rate of interest you'll get. Your credit score doesn't have to be perfect, but your credit history should demonstrate that you are both able and willing to pay on time. Financial stability matters in real estate market.
Do I Need a Down Payment?
For most mortgages & real estate transactions, you will require a down payment of at least 15%, preferably 20%. There are "zero down" options available through the VA and the USDA Rural Housing loan programs. To find out if you qualify, you can visit the VA and the USDA websites.
Advantage of paying points over larger down payments:
The advantage of paying points over making large mortgage down payments is that you can make savings on interest money and an additional saving on upfront fees. You can expect a higher return rate on down payment increase. The return doesn't get affected by the amount of dollars (fixed) at the time of loan amount reduction.
Why Do I Pay Prepaid Interest?
When your insurance loan is closed, interest accrues between the dates of closing on the final day of that calendar month. This amount is added to your closing costs as pre-paid interest, instead of being included in your first monthly payment of the real estate transaction.
Should I Pay My Fees Out of Pocket?
This would only be a consideration on a re-finance. If you have the funds available to pay the insurance fees, then doing so will lower your monthly payment. If you don't, you can roll them in. Usually it doesn't make a whole lot of difference, though. Usually on a first mortgage, fees cannot be included in the loan amount.
How Can I Calculate My Equity?
In a real estate business, you can determine your equity by subtracting anything that you owe on your property from its actual value. The difference is your equity. So if you have a property worth $100,000, and you owe $80,000, your equity is $20,000. Unless you have an appraisal, you'll have to use your best guess as to the property's worth, or use a home value estimator.