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How
long will the approval take?
This varies, depending upon the complexity
of your loan file, the length of time
an appraiser may take, and several other
factors. This is also determined by current
economic market conditions. We'll give
you our best estimate when you apply.
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questions
What
if rates change after I apply but before
my loan closes?
Sudden changes in interest rates are
common. To prevent surprising increases,
some lenders offer a rate guarantee for
a specific period, typically 30, 60 or
90 days. An up-front fee may be required
for this protection.
Without a rate lock-in, your interest
rate floats up and down with the rates
in the mortgage market. Many borrowers
prefer to float the rate with the hope
that rates will fall before closing.
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questions
What
will be included in my monthly payment?
Your monthly payment will include regular
installments of principal and interest,
and if an escrow account is maintained,
one-twelfth of your annual property tax
bill and one-twelfth of your annual hazard
insurance premium. Premiums for mortgage
insurance (for loans with low down payments),
flood insurance, if your property is located
in a flood hazard zone or mortgage life
insurance, if you select it, may also
be included.
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questions
What
are the components of a monthly payment?
Your monthly payment is the sum of four
factors, commonly referred to as PITI
(Principal, Interest, Taxes, Insurance).
You may also be required to pay PMI on
a monthly basis.
Principal - The amount of the
payment that is applied to the loan balance.
Interest - The charge paid for
borrowing money.
Taxes - Property taxes. May also
be paid separately to your local government.
Insurance - Lenders require you
to maintain adequate insurance to protect
your home. This may also be paid separately.
PMI (Private Mortgage Insurance)
- For a detailed explanation of PMI, consult
the question about Private Mortgage Insurance
in this section, or see Mortgage Insurance
in the Glossary.
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questions
What
is Private Mortgage Insurance (PMI) and
why would I need it?
In most cases, if your first mortgage
amount is greater than 80% of the property's
value, the lender will obtain Private
Mortgage Insurance (PMI) to safeguard
its investment against the possibility
of default. PMI premium is collected monthly
along with the mortgage payment. Within
three days after your loan application
is submitted you'll be sent an estimate
projecting the amount of the monthly PMI
premium. As your equity increases, you
may qualify to have PMI removed. There
may be ways to finance your home so that
PMI is not required. Your loan consultant
can provide you with more information.
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questions
What
is an impound/escrow account?
Instead of paying large, lump sums to
cover the costs of homeowner's insurance
and property taxes, these payments are
divided into installments which are paid
to the lender monthly along with your
loan principal and interest. The lender
will hold the money in an impound/escrow
account and make the payments from the
account when they are due. Impound/escrow
accounts may be optional, or they may
be required by the lender, depending on
the location of the property, the size
of the loan in relation to the value of
the property, and the loan type.
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questions
What
is homeowner's insurance?
Homeowner's insurance is designed to
protect your home. It is also known as
hazard insurance, or fire insurance. While
the lender requires this coverage, you
determine which insurance company will
carry the policy. Homeowner's insurance
premiums are either paid directly to the
insurance agency or by your lender through
an impound/escrow account.
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questions
What
is negative amortization?
This can occur with flexible-payment
loans which allow you, at times, to choose
to make a payment that is lower than the
monthly interest you incur. The difference
in interest is then added to your loan
balance. This is called negative amortization.
If the value of your home does not increase,
the amount of equity you have in the home
decreases. However, this type of loan
allows you to qualify for more home because
the initial payments are substantially
lower than those associated with a fixed-rate
mortgage.
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questions
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