Mortgage Loan FAQ
(Frequently Asked Questions)
MBA Financial Group
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Here's some of the most frequently asked Mortgage and Home buying
questions... Followed by 12 common mistakes made by new home buyers.
How much money do I need in hand to buy a house?
Usually, the purchase of a house requires a minimum down payment of 3% to
5%, plus the funds to cover closing costs, prepaids, escrow, and two payments
in reserve. In the case of a FHA Loan, the down payment must be the
borrower's own money. Closing costs, prepaids, and reserves can be a gift
or loan from a relative.
What are "closing costs" and "prepaids"?
Closing costs are the charges and fees that are paid at closing. Some of
these are paid to third parties for survey fees, courier costs, etc. Prepaid
expenses include prepaid interest,
homeowners insurance, real estate taxes and private mortgage insurance (if
the loan to value exceeds 80%). Generally, two months taxes and insurance are
also collected and placed in escrow.
How long will it take to process my loan?
Once you have given us all necessary information, you can expect to have your
loan processed in 2-3 weeks. FHA Loans, however, can take 30 to 45 days.
What happens when I lock in an interest rate?
You have the option to lock in an interest rate any time during loan
processing. If the loan
does not close and fund within the lock in period and the rates go up, you
will close at the
higher rate. If the rates go down, you will close at the locked in rate.
What is "APR" and why is it different from my interest rate?
Your interest rate, commonly called the note or base rate, is the rate used
monthly payments. The Annual Percentage Rate (APR), is the total yearly cost
of a mortgage. It is stated as a percentage of the loan amount which
includes the base interest rate, mortgage insurance, loan origination fees,
points and certain other expenses (if any).
Don't make these common homebuying mistakes.
Buying a new home can be easy as pie, but it can also seem difficult if you
don't follow all the rules. Here's a few common mistakes to avoid:
Not bringing the proper documents to closing.
Cashiers checks are required for funds needed to close. You make the cashiers
payable to the title company or the closing agent. Some lenders require the
check to be payable to yourself, to be endorsed at the closing table.
Personal checks or credit cards are NOT acceptable. You must also have proof
of home owners insurance.
Failure to document gift funds properly.
Gift funds are an acceptable source of funds, in some cases. But you MUST
document them. Get the gift funds from the donor and copy the certified check
proof of deposit into your account.
Not understanding the terms of the sales contract.
One of the benefits of working with a real estate professional is that they
can explain the
details of the contract to you. If you are not working with a real estate
attorney can explain the contract provisions that are not clearly understood.
Attempting to close the sale too soon.
Don't try to close on your loan before construction is complete when
building, or prior to
repairs being finished when purchasing an existing property. Generally, work
completed whether it's for construction or repairs. This is determined by
Failing to provide loan officer with the information they have requested in a
Loan officers and processors often have to make multiple requests for
from the borrower to complete their file. If you don't provide the documents,
it will only
extend the processing time of the loan and possibly delay the closing.
Failing to completely disclose information on the initial application.
Without a complete picture of your financial position, a lender may not able
to make a lending decision that would be in your best interest. So, fill out
the application completely. And don't be afraid to ask you loan officer for
Lacking liquid funds to close.
All funds used in a mortgage transaction must be documented and verified. No
funds are allowed, except when secured by collateral.
Making large installment/Credit purchases.
Be careful not to buy a lot of big ticket items for things such as furniture,
appliances, prior to closing. These purchases could change your financial
picture, and may
effect your ability to qualify for the home you want. Check with your loan
Not making an appointment to visit with a mortgage loan officer.
It is vital to make an appointment to visit a loan officer to insure that you
are given the best
possible service. Be prepared for the interview by reviewing the questions
you have in
advance. You may even want to make a list of question you want to ask.
Prequalify before meeting with a real estate agent.
This is an important step. It assists the real estate professional in guiding
you to homes in your price range.
Buying more home then is comfortably affordable.
Be realistic about your budget and the kind of lifestyle a higher housing
Don't shop lenders by rate only.
Request a good faith estimate so you can compare other fees between lending
And remember to ask what investor the loan going to and who will be servicing