Frequently Asked Questions:

 

1. WHY DO OTHER ONLINE SITES QUOTE VERY LOW RATES?
2. HOW DO I KNOW IF I'M READY TO BUY A HOME?
3. HOW DOES THE LENDER DECIDE THE MAXIMUM LOAN AMOUNT THAT I CAN AFFORD?
4. WHAT IS A MORTGAGE?
5. WHAT IS A LOAN-TO-VALUE (LTV) RATIO? HOW DOES IT DETERMINE THE SIZE OF MY LOAN?
6. WHAT TYPES OF LOANS ARE AVAILABLE AND WHAT ARE THE ADVANTAGES OF EACH?
7. WHEN DO ARMs MAKE SENSE?
8. WHAT ARE THE ADVANTAGES OF 15 AND 30 YEAR LOAN TERMS?
9. ARE THERE SPECIAL MORTGAGES FOR FIRST-TIME HOMEBUYERS?
10. HOW LARGE OF A DOWN PAYMENT DO I NEED?
11. WHAT IS INCLUDED IN A MONTHLY MORTGAGE PAYMENT?
12. WHAT FACTORS AFFECT MORTGAGE PAYMENTS?
13. HOW DOES THE INTEREST RATE FACTOR IN SECURING A MORTGAGE LOAN?
14. WHAT HAPPENS IF INTEREST RATES DECREASE AND I HAVE A FIXED RATE LOAN?
15. HOW ARE PRE-QUALIFYING AND PRE-APPROVAL DIFFERENT?
16. HOW DO I CHOOSE THE BEST LOAN PROGRAM FOR ME?
17. WHAT IS RESPA?
18. WHAT IS A GOOD FAITH ESTIMATE, AND HOW DOES IT HELP ME?
19. BESIDES RESPA, DOES THE LENDER HAVE ANY ADDITIONAL RESPONSIBILITIES?
20. WHAT IS MORTGAGE INSURANCE?
21. DO I NEED MORTGAGE INSURANCE? HOW DO I GET IT?
22. WHAT IS PMI?

WHY DO OTHER ONLINE SITES QUOTE VERY LOW RATES?

When other companies quote a very low rate that seems too good to be true, it probably is.  If you notice, those companies will put an asterisk by the rate that they quote.  That's because in the fine print they must tell you that the rate is only good for a limited time, usually 30 days, and that your rate may actually be higher.  And because of their amortization schedule, the loan has the potential for reverse amortization.  Which means, in a short time, YOU'LL POTENTIALLY OWE MORE THAN YOU BORROWED!   At MatchLoan, we only allow lenders to quote real rates and disclose real costs.   Our lenders are seasoned professionals that will educate you on the best loan program for your personal needs. At MatchLoan, you'll find trusted lenders from your area competing for your loan.

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HOW DO I KNOW IF I'M READY TO BUY A HOME?

The mortgage industry has an array of products to meet and exceed personal and financial needs. From no income loans, stated income, non-traditional, to mention a few, there is a product to help finance your dream. Below is the traditional approach in the mortgage lending industry.

You can find out by asking yourself some questions: 

• Do I have a steady source of income (usually a job)? Have I been employed on a regular basis for the last 2-3 years? Is my current income reliable?
• Do I have a good record of paying my bills?
• Do I have few outstanding long-term debts, like car payments?
  
• Do I have money saved for a down payment?
• Do I have the ability to pay a mortgage every month, plus additional costs?

If you can answer "yes" to these questions, you are probably ready to buy your own home.

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HOW DOES THE LENDER DECIDE THE MAXIMUM LOAN AMOUNT THAT I CAN AFFORD?

The lender considers your debt-to-income ratio, which is a comparison to your gross (pre-tax) income to housing and non-housing expenses. Non-housing expenses include such long-term debts as car or student loan payments, alimony, or child support. According to the FHA, monthly mortgage payments should be no more than 29% of gross income, while the mortgage payment, combined with non-housing expenses, should total no more than 41% of income. The lender also considers cash available for down payment and closing costs, credit history, etc. when determining your maximum loan amount.

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WHAT IS A MORTGAGE?

Generally speaking, a mortgage is a loan obtained to purchase real estate. The "mortgage" itself is a lien (a legal claim) on the home or property that secures the promise to pay the debt. All mortgages have two features in common: principal and interest.

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WHAT IS A LOAN-TO-VALUE (LTV) RATIO? HOW DOES IT DETERMINE THE SIZE OF MY LOAN?

The LTV ratio is the amount of money you borrow compared with the price or appraised value of the home you are purchasing. Each loan has a specific LTV limit. For example: with a 95% LTV loan on a home priced at $50,000, you could borrow up to $47,500 (95% of $50,000), and would have to pay $2,500 as a down payment.

The LTV ratio reflects the amount of equity borrowers have in their homes. The higher the LTV ratio, the less cash homebuyers are required to pay out of their own funds. So, to protect lenders against potential loss in case of default, higher LTV loans (80% or more) usually require a mortgage insurance policy.

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WHAT TYPES OF LOANS ARE AVAILABLE AND WHAT ARE THE ADVANTAGES OF EACH?
Fixed Rate Mortgages: Payments remain the same for the life of the loan

Types

• 15-year
• 30-year

Advantages

• Predictable
• Housing cost remains unaffected by interest rate changes and inflation

Adjustable Rate Mortgages (ARMs): Payments increase or decrease on a regular schedule with changes in interest rates; increases subject to limits

Types

• Balloon Mortgage – usually offers very low rates for initial period of time (usually 5, 7, or 10 years); when time has elapsed, the balance is due or refinanced (though not automatically)
• Two-Step Mortgage - Interest rate adjusts only once and remains the same for the life of the loan
• ARMS linked to a specific index or margin

Advantages

• Generally offer lower initial interest rates
• Monthly payments can be lower
• May allow borrower to qualify for a larger loan amount

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WHEN DO ARMs MAKE SENSE?

An ARM (Adjustable Rate Mortgage) may make sense if you are confident that your income will increase steadily over the years or if you anticipate a move in the near future and aren't concerned about potential increases in interest rates.

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WHAT ARE THE ADVANTAGES OF 15 AND 30 YEAR LOAN TERMS?

30-Year:

• In the first 23 years of the loan, more interest is paid off than principal, meaning larger tax deductions.
• As inflation and costs of living increase, mortgage payments become a smaller part of overall expenses.

15-Year:

• Loan is usually made at a lower interest rate.
• Equity is built faster because early payments pay more principal.

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ARE THERE SPECIAL MORTGAGES FOR FIRST-TIME HOMEBUYERS?

Yes. Lenders now offer several affordable mortgage options which can help first-time homebuyers overcome obstacles that made purchasing a home difficult in the past. Lenders may now be able to help borrowers who don't have a lot of money saved for the down payment and closing costs, have no or a poor credit history, have quite a bit of long-term debt, or have experienced income irregularities.  This is typically state specific.

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HOW LARGE OF A DOWN PAYMENT DO I NEED?

There are mortgage options now available that only require a down payment of 5% or less of the purchase price. But the larger the down payment, the less you have to borrow, and the more equity you'll have. Mortgages with less than a 20% down payment generally require a mortgage insurance policy to secure the loan. When considering the size of your down payment, consider that you'll also need money for closing costs, moving expenses, and - possibly - repairs and decorating.

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WHAT IS INCLUDED IN A MONTHLY MORTGAGE PAYMENT?

The monthly mortgage payment mainly pays off principal and interest. But most lenders also include local real estate taxes, homeowner's insurance, and mortgage insurance (if applicable).

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WHAT FACTORS AFFECT MORTGAGE PAYMENTS?

The amount of the down payment, the size of the mortgage loan, the interest rate, the length of the repayment term and payment schedule will all affect the size of your mortgage payment.

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HOW DOES THE INTEREST RATE FACTOR IN SECURING A MORTGAGE LOAN?

A lower interest rate allows you to borrow more money than a high rate with the same monthly payment. Interest rates can fluctuate as you shop for a loan, so ask lenders if they offer a rate "lock-in" which guarantees a specific interest rate for a certain period of time. Remember that a lender must disclose the Annual Percentage Rate (APR) of a loan to you. The APR shows the cost of a mortgage loan by expressing it in terms of a yearly interest rate. It is generally higher than the interest rate because it also includes the cost of points, mortgage insurance, and other fees included in the loan.

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WHAT HAPPENS IF INTEREST RATES DECREASE AND I HAVE A FIXED RATE LOAN?

If interest rates drop significantly, you may want to investigate refinancing. Most experts agree that if you plan to be in your house for a least 18 months and you can get a rate 2% less than your current one, refinancing is smart. Refinancing may, however, involve paying many of the same fees paid at the original closing, plus origination and application fees.

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HOW ARE PRE-QUALIFYING AND PRE-APPROVAL DIFFERENT?

Pre-qualification is an informal way to see how much you may be able to borrow. You can be "pre-qualified" over the phone with no paperwork by telling a lender your income, your long-term debts, and how large a down payment you can afford. Without any obligation, this helps you arrive at a ballpark figure of the amount you may have available to spend on a house.

Pre-approval is a lender's actual commitment to lend to you. It involves assembling the  financial records and going through a preliminary approval process. Pre-approval gives you a definite idea of what you can afford and shows sellers that you are serious about buying.

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HOW DO I CHOOSE THE BEST LOAN PROGRAM FOR ME?

Your personal situation will determine the best kind of loan for you. By asking yourself a few questions, you can help narrow your search among the many options available and discover which loan suits you best

• Do you expect your finances to change over the next few years?
• Are you planning to live in this home for a long period of time?
• Are you comfortable with the idea of changing mortgage payment amount?
• Do you wish to be free of mortgage debt as your children approach college age or as you prepare for retirement?

The lender you choose can help you select your answers to questions such as these to decide which loan best fits your needs.

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WHAT IS RESPA?

RESPA stands for Real Estate Settlement Procedures Act. It requires lenders to disclose information to potential customers throughout the mortgage process. By doing so, it protects borrowers from abuses by lending institutions. RESPA mandates that lenders fully inform borrowers about all closing costs, lender servicing and escrow account practices, and business relationships between closing service providers and other parties to the transaction.

For more information on RESPA, visit the web page at http://www.hud.gov/fha/res/respa_hm.html or call 1-800-217-6970 for a local counseling referral.

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WHAT IS A GOOD FAITH ESTIMATE, AND HOW DOES IT HELP ME?

It's an estimate that lists all fees paid before closing, all closing costs, and any escrow costs you will encounter when purchasing a home. The lenders who will be competing for your loan will provide you with a Good Faith Estimate so that you can make accurate judgments when shopping for your loan.

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BESIDES RESPA, DOES THE LENDER HAVE ANY ADDITIONAL RESPONSIBILITIES?

Lenders are not allowed to discriminate in any way against potential borrowers. If you believe a lender is refusing to provide his or her services to you on the basis of race, color, nationality, religion, sex, familial status, or disability, contact HUD's Office of Fair Housing at 1-800-669-9777 (or 1-800-927-9275 for the hearing impaired).

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WHAT IS MORTGAGE INSURANCE?

Mortgage insurance is a policy that protects lenders against some or most of the losses that result from defaults on home mortgages. It's required primarily for borrowers making a down payment of less than 20%.

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DO I NEED MORTGAGE INSURANCE? HOW DO I GET IT?

You need mortgage insurance only if you plan to make a down payment of less than 20% of the purchase price of the home. The FHA offers several loan programs that may meet your needs. Ask your lender for details.

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WHAT IS PMI?

PMI stands for Private Mortgage Insurance or Insurer. These are privately-owned companies that provide mortgage insurance. They offer both standard and special affordable programs for borrowers. These companies provide guidelines to lenders that detail the types of loans they will insure. Lenders use these guidelines to determine borrower eligibility. PMI's usually have stricter qualifying ratios and larger down payment requirements than the FHA, but their premiums are often lower and they insure loans that exceed the FHA limit.

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The FAQ’s above are for informational purposes only and MatchLoan LLC does not warrant its content.