Frequently Asked Questions
When does it make sense for me to refinance my mortgage?
Start by determining how many months it will take for you to “break even” on the costs of the loan. Do this by dividing the costs of the loan by the monthly savings. The result is the number it will take to recuperate your costs. If you plan on being in your home for longer than the number of months that it takes to recuperate your costs, then it may be a good idea to refinance your loan. If you can lower your rate, even an eighth, and it is a no cost loan, DO IT! This is only one reason to refinance. There many other reasons like taking out cash or converting an adjustable to a fixed loan. Also, switching from a 30 year to a 15 year often will lower your rate and save thousands over the term. Let one of our experienced professionals help you determine whether you should refinance.
I am a first time buyer and do not have a lot of money saved, can I buy a home?
There are many first time buyer programs available. VA loans, FHA loans to name a few. There are also opportunities to receive down payment assistance through some city or county programs. Our representatives are here to help you find the easiest and least expensive route to home ownership. Ask about our 0.50% down payment loan. You may be able to buy at $300,000 home for as little as $1,500.00 down.
How does an ARM loan work?
An Adjustable Rate Mortgage (ARM) is loan that does not have a fixed interest rate for the full term of the loan. Instead, it has an interest rate that can “adjust” periodically. This adjustment can be down or up and is based on various market conditions. For example, a 5/1 ARM will have an interest rate that is fixed for the first 5 years of the loan. After that period, it may adjust once per year for the remaining term of the loan. The ARM rate is made up of an “Index” and a “Margin”. The Margin is the portion of the ARM rate that stays constant while the Index is the portion that may adjust. The two added together make up your ARM rate. There are benefits to both ARM and Fixed Rate loans. Consult with one of our representatives to determine which is right for you.
What determines whether I qualify for a loan?
Credit, Property Value, Income/Assets: These are the three main considerations that we look at while determining whether you qualify for a loan. Credit History – lenders need to see that you have a history of meeting your credit obligations. Property Value – lenders need to see that there is equity in your home. This assures the lender that if the loan is not paid based on the agreed upon terms, that they will not lose all of the money they lent out if a default occurs and foreclosure becomes necessary. Income/Assets – Can you afford the loan? We need to see income history and predict your future income to determine whether you have enough money to meet the obligation of the new mortgage. Assets (money in the bank or other institutions) also help assure a lender that the payment will be made by the borrower.
What is the “Back to Work” loan program?
FHA is now allowing refinances and/or purchases after short sales or foreclosures in as little as 12 months. The negative credit item must have been caused by a verifiable Economic Event that resulted in significant loss of household income. Call for more details.
When is my interest rate “locked”?
Locking your rate in is something that you and our representatives will discuss throughout your loan process. It will depend on the type of loan and how loan it is estimated that it will take to close your loan. Generally speaking, a loan can be locked for 15 to 90 day periods. Rates can be extended at a cost in some cases. It also depends on whether you or your representatives expect interest rates to rise or fall during the process of your loan. The rate must be locked in prior to you signing your final loan documents. Borrowers receive Ladera Lending’s Rate Lock Policy as part of our disclosures.
How does an appraiser determine the value of a home?
The appraiser plays a very important part in the refinance process. They must establish whether there is equity in the property which allows a lender to loan against that equity. An appraiser must do significant research in the sales in your immediate area (usually within a 2.5 mile radius) to determine what a reasonable or expected value of your home would be if you were to sell it. This is what is known as “market value”. In order for a certain value to be reached, an appraiser must verify that other homes in your area, that are comparable to your home, have sold for at least that value. An appraiser has strict requirements on how to determine this value and must justify his/her opinion of value through the appraisal report.
What is a HARP loan?
Home Affordable Refinance Program (HARP) is a government program created in March of 2009 to help those affected by the housing bust in 2006. As home values decreased, it became more difficult for homeowners to refinance. This loan program allows refinances with no equity, even loans that are upside down up to 200%. This loan also allows the LTV to be greater than 80% without having to pay mortgage insurance (MI). It has relaxed credit, income and appraisal requirements. The loan to be refinanced must have been securitized prior to June 1, 2009 and be currently owned by FNMA or FHLMC (Fannie or Freddie)
What is HARP 2.0?
It is the version of HARP that we are currently using.
What is HARP 3.0?
HARP 3.0 has not been approved yet. Some of the changes that have been discussed and are expected are: Removing the June 1, 2009 requirement. Allow loans that are NOT Fannie or Freddie. Allow larger loan sizes. Consolidate Second mortgages along with the first.
If you would like to be kept up to date on HARP 3.0 please contact us.
How do I know if I am eligible for HARP?
Go to: https://knowyouroptions.com/loanlookup
Fannie is about twice as big as Freddie, but be sure to check both.
What is Mortgage Insurance?
There are two different kinds of Mortgage Insurance; PMI, which is Private Mortgage Insurance and MMI, which is Mutual Mortgage Insurance. PMI is aptly named. There are Private Mortgage Insurance companies that will insure lenders when the loan to value is greater than 80%. The borrower pays the insurance company and they insure the lender in case of default. Mutual Mortgage Insurance is required on most FHA loans. The insurance premium is paid to HUD as part of the monthly payment and they insure the lender through FHA.
How do I get a copy of my DD-214?
Go to: http://www.archives.gov/veterans/military-service-records
How do I get a copy of my Social Security Card?
Go to: http://www.ssa.gov/ssnumber
What is the Maximum FHA loan for my area?
Go to: https://entp.hud.gov/idapp/html/hicostlook.cfm
What is the Maximum conforming loan for my area?
Go to: https://www.fanniemae.com/singlefamily/loan-limits
(Fannie and Freddie have the same loan limits)
What can I do to make sure my loan process goes quickly and smoothly?!?!
Submit your documents quickly and in an organized fashion.
Quickly check your disclosures for accuracy, sign and return.
Be available as soon as the appraiser can see your house.
Make sure we have the best number to call your employer when we verify your employment.
Don’t change jobs, let anyone else run your credit, finance anything new, run up your credit cards or significantly reduce your assets in the bank.
Do send your paystubs and bank statements as you get them in the process.
Be decisive about your loan amount and term.
Trust your Mortgage Banker’s expert advice.
Request to speak with a Team Leader if you are unhappy with the process or your Mortgage Banker.