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What documents do I need for my loan application?

There are many different documents that may be requested before and during your closing process, most pertaining to the property and your finances. You can review our Application Checklist for a full list of common documents requested; however, please note that you may be asked for additional documentation outside of the checklist or more current copies of what you have already provided throughout the closing period.

What is PMI (Private Mortgage Insurance)?

When a loan is issued with a down payment under 20%, PMI is a fee wrapped into the loan total that serves as an added layer of protection for the loan provider in the event you can no longer make your mortgage payment.

What is an APR?

The APR, or Annual Percentage Rate, is a finance charge expressed as an annual rate. The APR of a mortgage loan not only considers interest but also other fees and points as well. The APR is seen as a representation of the “true cost of a loan”—it prevents lenders from offering low-interest rates but high, hidden fees.

What are points?

A point is a percentage of the loan amount, so 1-point is the equivalent of 1% of the loan. For example, one point on a $200,000 loan is $2,000. Points are an easy way for the lender to keep track of the costs that the borrower must pay to the lender to get mortgage financing under specified terms.

Discount points, on the other hand, are a point-based representation of fees paid up-front to lower the interest rate on a mortgage loan. Lenders often refer to these fees in terms of “basic points” that are measured in hundredths of a percent. So, 1 basic point = 0.01% of the loan OR 100 basic points = 1 point = 1% of the loan amount.

Should I pay points to lower my interest rate?

Yes, if you plan to stay in the property for a least a few years. Paying discount points to lower the loan's interest rate is a good way to lower your required monthly loan payment, and possibly increase the loan amount that 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 you paid up-front.

What does it mean to lock the interest rate?

Interest rates for mortgages can change daily based on the current market, so to keep the rate from jumping on the day you sign, lenders often “lock in” the rate currently in effect when you apply for the loan. This interest rate is guaranteed only for a certain time—usually 30 to 60 days—enough to cover the closing process so the borrower can enjoy the interest rate that drew them into the loan process.

What is an appraisal?

An appraisal is a review and estimate of a property’s fair market value. An appraisal is conducted by a state-licensed professional, an “appraiser”, who has specific training and education to evaluate a property and provide a value for a property based on its physical condition, amenities, and location.

What happens at closing?

At closing, the sale of the property is officially completed and the rights to the title are transferred to the buyer and the funds to the seller. If the home is being financed, the loan servicer will hold the title until the loan is paid off in full.

Typically, the buyer and the seller will meet with the mortgage lender, their realtor, and a title company (or attorney) separately from one another to complete a bit of paperwork. The paperwork seals the transfer and completes the sale. An escrow account may be established for the transfer of funds for the sale, closing costs, and/or future fees like property taxes or homeowner’s insurance costs. This process can last from an hour to several hours depending on the type of sale, loan, and other aspects involved in the purchase.

When should I refinance?

Refinancing is most beneficial to borrowers who have a high-interest rate or have a current interest rate that is 2% higher (or more) than the current rate. If your interest rate will not improve by more than 2%, then refinancing may not be a cost-efficient process as it may not save you much in the overall monthly payment to make the new loan closing costs or fees worth the effort.
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