General Questions
Q: What is needed at application to expedite my mortgage application?
A: Check out our helpfulMortgage Application Checklist.
Q: When mortgage lenders refer to “PITI” what exactly are they referring to?
A: PITI is Principal, Interest, Taxes, and Insurance- the components of a monthly mortgage payment.
Q: How does the annual percentage rate differ from the interest rate?
A. The annual percentage rate (APR) is the effective rate of interest for a loan if the calculation is based on the original loan amount less the closing costs. This is the rate that will appear on your preliminary Truth In Lending disclosure. Please note that the APR is higher than the interest rate on your Mortgage Note and the note rate is your true interest rate.
Q: How do I know what my interest rate will be?
A. Upon your request, a loan officer will search for the lowest rate and “lock” your rate. The “lock-in” guarantees the homebuyer a specified interest rate provided the loan closes with the buyer within a set period of time. The lock-in also specifies the number of points to be paid at closing. You and the Mortgage Lender should agree to this lock-in in writing.
Q: What is the Loan to Value (LTV)?
A: The loan to value is the loan amount divided by the lessor of the sales price or the appraised value. Example: Loan amount is $80,000. The sales price is $100,000. The appraised value is $105,000. The lessor of sales price or appraised value is $100,000. $80,000/$100,000=80% LTV.
Q: What is the Debt-to-Income Ratio?
A: A ratio used by lenders to determine whether a person is qualified for a mortgage. Debt-to-Income is the total amount of monthly debt, including house payment, credit cards and other loans, divided by the total gross monthly income.
Q: What is Private Mortgage Insurance?
A. PMI is insurance required to cover the lender should the borrower default on the loan.
Q: Why did I receive a Truth In Lending?
A. Truth In Lending’s are sent to all borrowers after loan application has been made. The Truth In Lending Act is a federal law requiring lenders to reveal all of the terms of a mortgage. The APR that appears on your Truth In Lending will be higher than the interest rate on your Real Estate Lien Note.
Q: What are annual percentage rates (APRs) on mortgages? I’ve read that APRs should be compared when searching for a loan but do not affect your monthly payment.
A. In theory, the APR is a way to reflect the total cost of a loan once all of the points, fees and other costs are taken into account. That cost is expressed as an annual percentage rate that will be higher than the interest rate on the loan and should allow borrowers to compare loans that have different interest rates and fees. The lower the APR, the better the for the customer.
Q: What determines a loan a jumbo loan? Who determines this amount – the bank or is it an industry standard?
A: Jumbo loans are mortgages too big to be bought by the two government sponsored companies that provide the great majority of the money for home loans in this country. Fannie Mae (the Federal National Mortgage Association) and Freddie Mac (the Federal Home Loan Mortgage Corp.) do that by purchasing more than 80% of the loans made by commercial banks and mortgage companies.
Questions for First-time buyers
Q: What’s possible?
A: We all have different goals. We’ll qualify your needs, finances and requirements (income and debt) to determine what you can afford and see if it fits with your comfort level. If you want to run some numbers for yourself, check out the mortgage calculator for a generic estimate.
Q: Do I need to put money down?
A: Probably. Every situation is different. Some of our loans require little to no money down. We’ll explore your capabilities and find a loan that works for you. A down payment is only one consideration. We’ll also need to factor in closing costs and an escrow account for taxes and insurance.
Q: What is Prequalification?
A. Prequalification is the process of determining what price a home can be purchased by a prospective buyer.
Q: My real estate agent recommended that I get a commitment letter. What is a commitment letter, and why should I get one?
A: A commitment letter is given by the lender stating the terms which it agrees to provide a mortgage to a homebuyer. Commitment letters help you set realistic goals while you’re house-hunting, provide the same negotiating ability as a cash buyer, and enable you to move quickly once the perfect home is found.
Q: Do I need to have a certain amount of money left after I buy my home?
A. Most loan programs require a cash reserve sufficient enough to make the first mortgage payments (PITI).
Q: Which loan will work for me?
A: Great question! It’s hard to determine until we discuss your goals. However, there are several factors to consider:
- Length of time in the home
- Amount you can, or want, to put down
- Financing of the closing costs
- Your comfort level
Q: What are the tax benefits of owning a home?
A: Since we all have differing circumstances, we recommend that you consult your tax specialist to fully answer this question. In most cases, you can deduct the interest you pay on the loan and some of the financing costs, like points.
Q: How does the mortgage process work?
A: We’ve made it simple to alleviate the anxiety that can come with purchasing a home. Alan or Jim will personally walk you through the process.
Questions for Repeat/Experienced Buyers
Q: Life changes; expanding … downsizing … what’s possible for my next home?
A: As your living arrangements change, so do your goals. We’ll revisit your goals, finances and budget and determine what you want and can afford.
Q: Is the process similar for a second home?
A: Home, mountain retreat or beachside condo; since you’re not using money gained from the sale of your first home, you may want to consider more money down or expect a larger monthly house payment. We’ll work to find a creative and manageable solution to help you meet your dreams.
Q: What financing options do you have for building a new home?
A: Relax – we’ll make this one component in the building process that provides a sense of comfort and control. You tell us what you need, we’ll look at your goals and capabilities and create a loan that works for you. If you’re working with a builder; just picking out lighting, appliances, etc, a traditional mortgage will work for you. If you are the builder, you’ll need a construction loan to pay the subcontractors during the building process.
Questions for Refinancers
Q: When is the best time to refinance?
A: It’s different for everyone and we’ll help you determine if it’s the right time for you. To have an effect, you need to lower your current mortgage loan rate by at least 1 percent. Maybe it’s just a matter of changing the length of your loan or receiving cash from the equity in your house. We’ll help you identify your goals and find a solution that works for you. Want to get an idea of the cost now? Run the numbers on our mortgage calculator.
Q: Can I reduce my monthly payment? Can I shorten the loan term? Can I get cash for an upgrade or addition to our home?
A: Possibly; it comes back to your goals and your current financial situation. We’ll help you figure it out.
Q: How much of my equity can I use?
A: We’ll help you identify how much you need and what you can afford to use. Up to 90 percent of the appraised value of your home can be used for improvements, based on the value of the home and what you currently owe, subject to applicable laws.
Q: What are the costs associated w/ refinancing?
A: Closing costs, points and processing fees can apply. You may have an option of rolling these into the loan to reduce your out of pocket expense. We’ll help you determine what solution works best for you.
Q: What if I don’t have much equity in my home?
A: ALR offers HARP, a unique refinance program that enables eligible borrowers with little to no equity in their homes to take advantage of low interest rates and other refinancing benefits. Learn more.
For any additional Questions feel free to contact us at any time at (732) 664-9624.