Mortgage Questions and Answers from IMG Mortgage Greensboro

Darrell Boan: 336.209.8819 NMLS #86127

Kerrie Currie: 336.601.2201 NMLS #70427

Brandy Barnes: 336.508.8877 NMLS #105988

When it comes to getting a new home loan, there is a lot of information to digest. If you have questions not listed here, call us! We will be happy to help.

How do I qualify for a mortgage? After reviewing your application information, an underwriter examines your credit history, the value of the property and your debt-to-income ratio. These are the primary factors wthat describe the risk a mortgage lender is willing to take. This perceived level of risk determines your loan decision and has effect on your interest rate and other elements of the loan. What will my mortgage rate be? Mortgage rates are based on a variety of factors. including the reason for the loan, your credit history and ability to repay, the value of the collateral, and the loan amount. All of these factors play a role in your final rate determination. What amount can I qualify for? If approved, the amount you are approved for is based on your debt-to-income ratio, the amount of equity you would have in your home, your personal history and your credit rating. To calculate your debt-to-income ratio, write down all of your monthly debts and divide that amount by your monthly gross income. The underwriter will take a look at the results and determine what you can afford to pay per month. Do I need perfect credit to qualify for a mortgage? If your credit score is good, you may receive better rates and have more options available, but this doesn't mean you can't get a mortgage if you have a few spots on your credit record. Credit is only one factor in the overall underwriting process; however, your credit history does need to demonstrate the willingness and ability to repay loans on time. What are the differences between a home equity loan and a home equity line of credit? Both products use your home as collateral, but have different payback terms. The home equity line of credit is accessible for a long–term draw period, usually by check or online banking. Once you pay down your balance, you then have more money available to spend again if necessary. A line of credit has a variable interest rate, and has a payment that can change every month. This is because the balance changes (increases if you spend more; decreases if you pay down what you owe) or the interest rate changes because of the Prime Rate changing. A home equity loan disburses all funds at once when the loan term starts and you cannot access any further funds without refinancing. A home equity loan has a fixed rate, and payments that don't change. Do I need a fixed rate or an adjustable rate? Fixed-rate loans have interest rates that remain the same over the life of the loan. Adjustable-rate loans have rates that can change over time. When deciding on which may be best for you, you will need to consider factors like the length of time you plan to stay in your home. What is an interest-only loan? Interest-Only loans allow you flexibility on monthly payments when your cash flow does not permit a full loan payment. The minimum loan payment covers the interest portion of the loan only, so your principal only decreases if you pay above and beyond the interest. You have the flexibility to decide how much principal you pay each month, so you can pay little or none if times are tight, or a lot if you have extra that month. Can I finance my rental property? While this is allowed, the interest rate on rental properties may be higher since there's more risk for the bank when lending on a property that's not the customer's primary residence. Why should I refinance? When interest rates are low, many people choose to refinance their home loan. Here are some reasons: To lower monthly payments To lower their current interest rate To switch from an adjustable to a fixed rate To refinance for a higher amount in order to pay off other debts or get cash Whatever your needs, IMG Greensboro can help you decide what would fit best in yoiur particular situation.	Do I need a home appraisal? Sometimes appraisals are not necessary; other times we require a full inspection and appraisal. Only after reviewing your specific application and collateral will we be able to decide what is required. How fast will I get my money? Usually, the funds you are approved for are available on the day you close your loan. With a refinance, funds are usually disbursed on the fourth business day after you sign your loan documents. This is because federal regulations require a 3-day right of recission (a cooling off period) giving you the right to cancel your loan should you change your mind. What are points? Points are fees that a borrower pays to lower the interest rate. One point equals one percent of the final loan amount. What's the difference between interest rates and APR? The interest rate is the actual cost to borrow the money in the loan. The APR is the total cost of the loan over its life, including all costs, points and fees. Why do I pay pre-paid interest? When closing your loan, interest accrues between the closing date and the last day of that calendar month. That amount is usually added to the closing costs for your loan. Should I pay my fees out of pocket? If you are refinancing, you can either pay fees in advance or add them to your closing costs. There are some loan types that allow fees to be included in your loan amount. Contact us for more details. What are closing costs? Closing costs include appraisal fees, attorney fees, pre-paid interest, documentation fees and others. The actual costs are different for each customer due to many differences in the types of mortgage, the location and several other factors. You will receive a good faith estimate, also referred to as a GFE, of your closing costs in advance of your closing date. What is included in my monthly payments? Monthly mortgage payments are split between loan principal and interest. Interest-only mortgage payments include only the interest that is due on the outstanding principal balance. If your mortgage carries mortgage insurance, a portion of your payment will pay this, unless the lender has paid your mortgage insurance for you or you have paid your mortgage insurance up front. If you have set up an escrow account, a portion will also go toward taxes and homeowners insurance and association fees if applicable. What is PMI? Private Mortgage Insurance (PMI) protects lenders against losses when a borrower defaults (stops paying) on a mortgage. PMI is usually required on mortgages when the borrower has less than a 20% down payment. Likewise, it is required on first mortgage refinancing when the borrower has less than 20% equity in the property being refinanced. PMI fees are typically added to your monthly mortgage payment. How much of a down payment do I need? Down payments usually amount to 3-20% of the sales price of the home. Zero down loans are also available, but on a very limited basis. The bigger the down payment the better off you will be. If you have a small down payment, you will qualify for fewer types of mortgages and may also be charged a higher interest rate. Remember that the more you are able to put down, the more banks will be willing to loan. How do I figure out how much equity I have? To determine the amount of home equity you have, write down your home's current value (tax values are not always accurate) and subtract all amounts that are owed on the property. The difference is the amount of "equity" your home has. What are the advantages of using home equity? The equity in your home can be used to improve your property, consolidate high-interest debt, finance important life events, or even cover unexpected emergencies. The interest you pay can be tax deductible. Consult a tax professional for more information.

How do I qualify for a mortgage?

After reviewing your application information, an underwriter examines your credit history, the value of the property and your debt-to-income ratio. These are the primary factors wthat describe the risk a mortgage lender is willing to take. This perceived level of risk determines your loan decision and has effect on your interest rate and other elements of the loan.

What will my mortgage rate be?

Mortgage rates are based on a variety of factors. including the reason for the loan, your credit history and ability to repay, the value of the collateral, and the loan amount. All of these factors play a role in your final rate determination.

What amount can I qualify for?

If approved, the amount you are approved for is based on your debt-to-income ratio, the amount of equity you would have in your home, your personal history and your credit rating.

To calculate your debt-to-income ratio, write down all of your monthly debts and divide that amount by your monthly gross income. The underwriter will take a look at the results and determine what you can afford to pay per month.

Do I need perfect credit to qualify for a mortgage?

If your credit score is good, you may receive better rates and have more options available, but this doesn't mean you can't get a mortgage if you have a few spots on your credit record. Credit is only one factor in the overall underwriting process; however, your credit history does need to demonstrate the willingness and ability to repay loans on time.

What are the differences between a home equity loan and a home equity line of credit?

Both products use your home as collateral, but have different payback terms.

The home equity line of credit is accessible for a long–term draw period, usually by check or online banking. Once you pay down your balance, you then have more money available to spend again if necessary. A line of credit has a variable interest rate, and has a payment that can change every month. This is because the balance changes (increases if you spend more; decreases if you pay down what you owe) or the interest rate changes because of the Prime Rate changing.

A home equity loan disburses all funds at once when the loan term starts and you cannot access any further funds without refinancing. A home equity loan has a fixed rate, and payments that don't change.

Do I need a fixed rate or an adjustable rate?

Fixed-rate loans have interest rates that remain the same over the life of the loan. Adjustable-rate loans have rates that can change over time. When deciding on which may be best for you, you will need to consider factors like the length of time you plan to stay in your home.

What is an interest-only loan?

Interest-Only loans allow you flexibility on monthly payments when your cash flow does not permit a full loan payment. The minimum loan payment covers the interest portion of the loan only, so your principal only decreases if you pay above and beyond the interest. You have the flexibility to decide how much principal you pay each month, so you can pay little or none if times are tight, or a lot if you have extra that month.

Can I finance my rental property?

While this is allowed, the interest rate on rental properties may be higher since there's more risk for the bank when lending on a property that's not the customer's primary residence.

Why should I refinance?

When interest rates are low, many people choose to refinance their home loan. Here are some reasons:

To lower monthly payments
To lower their current interest rate
To switch from an adjustable to a fixed rate
To refinance for a higher amount in order to pay off other debts or get cash

Whatever your needs, IMG Greensboro can help you decide what would fit best in yoiur particular situation.

Do I need a home appraisal?

Sometimes appraisals are not necessary; other times we require a full inspection and appraisal. Only after reviewing your specific application and collateral will we be able to decide what is required.

How fast will I get my money?

Usually, the funds you are approved for are available on the day you close your loan. With a refinance, funds are usually disbursed on the fourth business day after you sign your loan documents. This is because federal regulations require a 3-day right of recission (a cooling off period) giving you the right to cancel your loan should you change your mind.

What are points?

Points are fees that a borrower pays to lower the interest rate. One point equals one percent of the final loan amount.

What's the difference between interest rates and APR?

The interest rate is the actual cost to borrow the money in the loan. The APR is the total cost of the loan over its life, including all costs, points and fees.

Why do I pay pre-paid interest?

When closing your loan, interest accrues between the closing date and the last day of that calendar month. That amount is usually added to the closing costs for your loan.

Should I pay my fees out of pocket?

If you are refinancing, you can either pay fees in advance or add them to your closing costs. There are some loan types that allow fees to be included in your loan amount. Contact us for more details.

What are closing costs?

Closing costs include appraisal fees, attorney fees, pre-paid interest, documentation fees and others. The actual costs are different for each customer due to many differences in the types of mortgage, the location and several other factors. You will receive a good faith estimate, also referred to as a GFE, of your closing costs in advance of your closing date.

What is included in my monthly payments?

Monthly mortgage payments are split between loan principal and interest. Interest-only mortgage payments include only the interest that is due on the outstanding principal balance. If your mortgage carries mortgage insurance, a portion of your payment will pay this, unless the lender has paid your mortgage insurance for you or you have paid your mortgage insurance up front. If you have set up an escrow account, a portion will also go toward taxes and homeowners insurance and association fees if applicable.

What is PMI?

Private Mortgage Insurance (PMI) protects lenders against losses when a borrower defaults (stops paying) on a mortgage. PMI is usually required on mortgages when the borrower has less than a 20% down payment. Likewise, it is required on first mortgage refinancing when the borrower has less than 20% equity in the property being refinanced. PMI fees are typically added to your monthly mortgage payment.

How much of a down payment do I need?

Down payments usually amount to 3-20% of the sales price of the home. Zero down loans are also available, but on a very limited basis. The bigger the down payment the better off you will be. If you have a small down payment, you will qualify for fewer types of mortgages and may also be charged a higher interest rate. Remember that the more you are able to put down, the more banks will be willing to loan.

How do I figure out how much equity I have?

To determine the amount of home equity you have, write down your home's current value (tax values are not always accurate) and subtract all amounts that are owed on the property. The difference is the amount of "equity" your home has.

What are the advantages of using home equity?

The equity in your home can be used to improve your property, consolidate high-interest debt, finance important life events, or even cover unexpected emergencies. The interest you pay can be tax deductible. Consult a tax professional for more information.

Contact us today to get started! Call 336-218-6422 or email us at info@IMG-Greensboro.com

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