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Joyce Conlin
Stefanie Pearsall-
PMI or Private Mortgage Insurance is normally required when you buy a house with less than 20% down. Mortgage insurance is a type of guarantee that helps protect lenders against the costs of foreclosure. This insurance protection is provided by private mortgage-insurance companies. It enables lenders to accept lower down payments than they would normally accept. In effect, mortgage insurance provides what the equity of a higher down payment would provide to cover a lender's losses in the unfortunate event of foreclosure. Therefore, without mortgage insurance, you might not be able to buy a home without a 20% down payment.
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A FICO score is a credit score developed by Fair Isaac & Co. Credit scoring is a method of determining the likelihood that credit users will pay their bills. Fair, Isaac began its pioneering work with credit scoring in the late 1950s and, since then, scoring has become widely accepted by lenders as a reliable means of credit evaluation.
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To understand why mortgage rates change we must first ask the more general question, 'Why do interest rates change?' It is important to realize that there is not one interest rate, but many interest rates!
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A pre-qualification is normally issued by a loan officer, who, after interviewing you, determines the dollar value of a loan you can be approved for. However, loan officers do not make the final approval, so a pre-qualification is not a commitment to lend. After the loan officer determines that you pre-qualify, he/she then issues you a pre-qualification letter. This pre-qualification letter is used when you are making an offer on a property. The pre-qualification letter indicates to the seller that you are qualified to purchase the house you are making an offer on.
Pre-approval is a step above pre-qualification. Pre-approval involves verifying your credit, down payment, employment history, etc. Your loan application is submitted to an underwriter and a decision is made regarding your loan application. If your loan is pre-approved, you are then issued a pre-approval certificate. Getting your loan pre-approved allows you to close very quickly when you do find a house. A pre-approval can help you negotiate a better price with the seller, since being pre-approved is very close to having cash in the bank to pay for the house! -
You cannot close a mortgage loan without locking in an interest rate. There are four components to a rate lock:
1. Loan program.
2. Interest rate.
3. Points.
4. Length of the lock.
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Your loan can be sold at any time. There is a secondary mortgage market in which lenders frequently buy and sell pools of mortgages. This secondary mortgage market results in lower rates for consumers.
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The most common reason for refinancing is to save money. Saving money through refinancing can be achieved in two ways:
By obtaining a lower interest rate that causes one's monthly mortgage payment to be reduced.
By reducing the term of the loan, thus saving money over the life of the loan. For example, refinancing from a 30-year loan to a 15-year loan might result in higher monthly payments, but the total of the payments made during the life of the loan can be reduced significantly.
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If you're like most people, purchasing a home is the biggest investment you'll ever make. If you're considering buying a home, you're likely aware of the complexity of the endeavor. Because of the numerous factors to consider when purchasing a home, it's important to prepare as best you can. Some common home-buying principles and caveats are presented here for your consideration.
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The Department of Veterans Affairs, Federal Housing Administration (FHA) and Freddie Mac and Fannie Maw have raised their loan limits. Effective immediately, the VA guaranty will increase to $83,425, thereby allowing borrowers to purchase homes valued up to $333,700 and borrow a maximum of $359,650; the Freddie/Fannie conforming limit was increased to $359,650; and the FHA will insure single-family home loans to $312,895 in high-cost areas.
For more info, visit www.faniemae.com, www.homeloans.va.gov, and www.hud.gov/offices/hsg/sfh/ins/singlefamily.cfm.
From: California Real Estate, March 2005
