A point is a percentage of the loan amount. 1 point = 1% of the loan. 1 point on a $100,000 loan is $1,000. Points are either origination points or discount points. Origination point fees are paid directly to the originating company, broker or lender, as a fee the company charges to complete your transaction. Discount point fees are used to lower the interest rate on a mortgage loan or to buy the rate down.
It depends on how long you plan to stay in the home or keep the new loan. We'll show you break-even analysis to determine when it makes sense to pay discount points to buy the rate down. Paying discount points to lower the loan's interest rate lowers your monthly loan payment, and possibly increases the loan amount you can afford to borrow. However, if you plan to stay in the property for only a year or two, your monthly savings may not be enough to recoup the cost of the discount points that you paid up-front.
The annual percentage rate (APR) is an interest rate reflecting the cost of credit. This rate is likely to be higher than the stated note rate because it takes into account points and other credit costs. The APR prevents lenders from advertising a low rate and hiding fees.
The APR does not affect your monthly payment. Your monthly payments are strictly a function of the interest rate and the term of the loan.
Because APR calculations are affected by the various different fees charged by lenders, a loan with a lower APR is not necessarily a deal. The best way to compare loans is to ask the loan officer for a LOAN ESTIMATE or LE. The LE is an estimate of loan costs on the same type of program (e.g. 30-year fixed) at the same interest rate. Pay attention to the loan fees. The lender that has lower loan fees has a cheaper loan than the lender with higher loan fees.
The following fees are generally included in the APR:
The following fees are normally not included in the APR:
Mortgage rates change day to day and sometimes change multiple times a day depending on market volatility. Lenders allow the borrower to "lock-in" the interest rate guaranteeing that rate for a specified time period. Rate locks are generally available for 30, 60, 90 days. Longer locks are available and require a deposit from borrower up-front.
Below is a list of documents that are required when you apply for a mortgage. However, every situation is unique and you may be required to provide additional documentation. So, if you are asked for more information, be cooperative and provide the information requested as soon as possible. It will help speed up the process.
If self-employed or receive commission or bonus, interest/dividends, or rental income:
If you will use Alimony or Child Support to qualify:
If you receive Social Security income, Disability or VA benefits:
Source of Funds and Down Payment
Debt or Obligations
Credit scoring is a system creditors use to help determine whether to give you credit. Information about you and your credit experiences, such as your bill-paying history, the number and type of accounts you have, late payments, collection actions, outstanding debt, and the age of your accounts, is collected from your credit application and your credit report. Using a statistical program, creditors compare this information to the credit performance of consumers with similar profiles. A credit scoring system awards points for each factor that helps predict who is most likely to repay a debt. A total number of points -- a credit score -- helps predict how creditworthy you are, that is, how likely it is that you will repay a loan and make the payments when due.
The most widely use credit scores are FICO scores, which were developed by Fair Isaac Company, Inc. Your score will fall between 350 (high risk) and 850 (low risk).
Your credit report is an important part of many credit scoring systems, it is very important to make sure it's accurate before you submit a credit application. To get copies of your report, contact the three major credit reporting agencies: Equifax, Experian, Trans Union. OR you are entitled to receive one free credit report every 12 months from each of the credit reporting agencies. This free credit report may not contain your credit score and can be requested from https://www.annualcreditreport.com
Credit scoring models are complex and often vary among creditors and for different types of credit. If one factor changes, your score may change -- but improvement generally depends on how that factor relates to other factors considered by the model. Only the creditor can explain what might improve your score under the particular model used to evaluate your credit application.
Nevertheless, scoring models generally evaluate the following types of information in your credit report:
To improve your credit score, concentrate on paying your bills on time, pay down outstanding balances to improve utilization ratio, and don't apply for or add new debt.
An Appraisal is an opinion of a property's fair market value. It's a document generally required (depending on the loan program) by a lender before loan approval to ensure that the mortgage loan amount is not more than the value of the property. The appraisal is performed by an "Appraiser" - a state-licensed professional who is trained to render expert opinions concerning property values, its location, amenities, and physical conditions.
On a conventional mortgage, when your down payment is less than 20% of the purchase price of the home mortgage lenders usually require you get Private Mortgage Insurance (PMI) to protect them in case you default on your mortgage.
The property is officially transferred from the seller to you.
At closing, the ownership of the property is officially transferred from the seller to you. This may involve you, the seller, real estate agents, your attorney, the lender’s attorney, title or escrow firm representatives, clerks, secretaries, and other staff. Closing can take anywhere from 30 minutes to an hour, or more. Typically, refinances take about 30 minutes and purchases take about 1 hour.
Prior to closing you should have a final inspection, or "walk-through" to ensure requested repairs were performed, and items agreed to remain with the house are there such as drapes, lighting fixtures, etc.
The settlement is completed by a title or escrow firm. You provide required funds due at closing in the form of a cashier's check or wire so the firm can make the necessary disbursement. We'll make sure you know exactly what you need (cashier's check/wire and amount) before closing.