1st Advantage Mortgage

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What do the various loan purpose options mean?

A purchase is just that, it means you need this loan to purchase a home. If you are refinancing you typically are doing so to get a more favorable rate and/or to adjust the term of your loan, hence "rate & term". Additionally, though, if you are refinancing, you may be able to take cash out of the equity in your home, hence "Cash Out".

What should I enter for the loan amount?

For purchases, enter the amount of money you will need to purchase the property minus the amount of your down payment. If you are doing a rate and term refinance, then enter your current mortgage balance. If you are doing a cash out refinance, then enter your current mortgage balance plus the amount of cash your wish to take out.

How do I determine my property value?

You can get an estimated value of your home from a variety of online property valuation sites, click here to see. This value, however, is merely to get you a quote for your mortgage loan. The actual value will be determined by an appraisal after your application is accepted and adjustsments to your loan, including the rate, may need to be made.

Why do you need my zip code?

Loan programs and rates vary state-to-state, county-to-county. By giving us the zip code of the property you are purchasing or refinancing, we can give you a more accurate quote.

Why is the type of property relevant?

Some loan programs are limited to specific types of properties. Additionally, certain property types have additional underwriting restrictions.

Why is there more than one rate for each loan program?

It comes down to how much money you are willing pay for upfront. You have the option to pay discount points which essentially means you wish to "purchase" a rate that is below the current market price. This may be a good option if you plan keeping the loan for a longer period.

There is also the question of closing costs. Essentially, your closing costs are the same no matter which rate you pick, but should you elect to pay them upfront you will get a lower interest rate because should you decide to pay less (or nothing) upfront and instead pay them over the life of the loan, you'll pay for them by paying more in interest, hence the higher interest rate.

What are points or discount points?

Points are an upfront cash payment required by the lender as part of the charge for the loan, expressed as a percent of the loan amount. For example, 2 points, means a charge of 2% of the loan amount. Many borrowers elect to pay points to purchase a rate than is lower than the current market average.

Why is the APR different than the rate?

The Annual Percentage Rate (APR) is not what your monthly payment is calculated with. The APR shows you what the cost of the loan is, expressed in a percentage format, over the entire life of the loan. Pre-paid finance charges and closings costs, title company charges and pre-paid interest on your loan are included in calculating the APR.

How is the monthly payment calculated?

The monthly payment listed is the amount of principal and interest you'll pay each month over the life of the loan. You may also need to pay taxes and mortgage insurance on top of this amount depending on your situation.

Why are the closing costs higher with a lower rate?

Essentially your closing costs are the same across any rate you select. The rate increases as you elect to pay less upfront because you are essentially putting the closing costs into the loan and paying for them by adjusting the rate (paying more in interest). Additionally, should you elect to pay points, this cost is added into your closing costs as well.

Loan Progams

What is a fixed rate mortgage?

This type of loan carries a fixed interest rate over the entire life of the loan. These types of loans are the most common and ideal for those borrowers looking to have a predictable principal and interest payment each month.

What is an adjustable rate mortgage (ARM)?

This type of loan will carry a fixed interested rate for a certain period in the beginning of the loan. After this initial period expires the interest rate will adjust each year based on the stated terms of the loan.

What is a conventional loan?

Conventional loans can be either conforming and non-conforming loans, which are explained below.

What is a conforming loan?

A loan eligible for purchase by the two major Federal agencies that buy mortgages, Fannie Mae and Freddie Mac.

What is a non-conforming loan?

A loan eligible for purchase by bank or lending institution, so it does not need to"conform" to the guidelines established by Fannie Mae and Freddie Mac.

What is a government loan?

A loan that is backed by the United States government through either the FederalHousing Administration (FHA) or the Department of Veterans Affairs (VA).

What is a jumbo mortgage?

A mortgage larger than the maximum eligible for conforming purchase by the two Federal Agencies, Fannie Mae and Freddie Mac.

Loan Application

How does the occupancy of my property affect my application?

Second homes and investment properties are seen as higher risk and will carry additional loan underwriting guidelines and interest rate adjustments.

How does my credit score affect my loan application?

The higher your credit score the more favorable your interest rate will be. Giving us an accurate score upfront will allow us to give you a more accurate rate quote. Additionally, many loan programs will have a minimum credit score to qualify.

Why is how I'm employed important?

How you get your income is just as important as what your income is. Self-employed persons will require different verifications than someone working for a company.

How does my monthly income and debt affect my application?

These numbers are used to calculate your debt-to-income ratio (DTI). All loan programs have maximum DTI ratios you need to be under to qualify. This ratio is used to determined how much money you can safely pay back each month, the higher the ratio, the higher the risk you are seen to have. A higher DTI can also affect the interest rate you are offered.

What are cash reserves for?

Some loan programs require you have to a certain number of months worth of your monthly income set aside in savings. This is mainly used for second homes and investment properties.

Why do you need to know how many properties I own?

Many loan programs restrict the number of properties you may own to qualify for the loan.

What is a pre-qualification?

This is the process of determining whether a client has enough cash and sufficientincome to meet the qualification requirements set by the lender on a requestedloan. A pre-qualification is subject to verification of the information provided bythe applicant. A pre-qualification is short of approval because it does not takeaccount of the credit history of the borrower.

What is a good faith estimate?

It is the list of settlement charges that the lender is obliged to provide theborrower within three business days of receiving the loan application.

What are closing costs?

These are the various costs associated with the actual processing of your loan application. These costs are above and beyond the price of the property itself.

What is a rate lock?

A rate lock is a contractual agreement between the lender and buyer. There are fourcomponents to a rate lock: loan program, interest rate, points, and the length of thelock.

Why does my rate lock have an expiration date?

By locking a rate lenders are telling the buyer of your loan (either a bank or governmentagency) that you are interested in taking out your loan at the current rate. Becausemortgage rates move up and down daily (and sometimes hourly), the lender must putan expiration on your rate lock to avoid potential loss of money should rates changesignificantly after you lock your rate. The longer the length of the lock, the higher thepoints or the interest rate. This is because the longer the lock, the greater the risk for thelender offering that lock. If rates move higher during your lock period, they are forcedto give you the original rate at which you locked. However If rates move lower, you arecontracted to accept your original, higher rate. If you let your lock expire, lenders canagain lose money because the buyer was expecting to purchase your loan and may chargefees to lender for the loss.