In general a mortgage pre-approval proposal will be valid for 60-90 days after issue. Lenders feel that this is sufficient time to find a home to purchase and make an offer. Because financial information can change quickly, mortgage brokers only extend the period for a short time to ensure that you will actually still qualify. There is no limit to how many times you can pre-qualify for a mortgage, so if your offer expires, apply again to the lender. Just keep in mind that this is a credit application process and to many requests for credit will show negatively on your credit report.

Does a pre-approval mean I will get the mortgage when I want to buy?

Generally speaking, when you are pre-approved for a mortgage the lender is stating they are ready to work with you when you are ready to purchase a home. There are events that can cause the lender to withdraw their offer. If the home is greatly overpriced compared to market value you probably will not get the mortgage. If, upon inspection, it is found that the house has severe structural damage, hazardous contamination or is deemed unsafe the offer will be withdrawn.

Can a pre-approval help me buy a home?

A pre-approval on a mortgage is beneficial in many ways. It can help you, when looking for a home, determine a price range. Sellers will feel more confident negotiating with a buyer that is pre-approved. Sellers often have their hopes let down as negotiations proceed and the buyer is then unable to get a mortgage. Pre-approval will also help you move fast on a home purchase if the market starts to change. Pre-approved status will move you through the paperwork process quickly.

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It comes as a surprise to some people that something such as a no-cost mortgage exists in today’s financial world. For many people, this idea seems far-fetched, since everything in the loan world comes with high associated costs. The fact of the matter is that there are no-cost mortgages out there. So what is a no-cost mortgage? It is a mortgage type that comes with no closing costs and comes without the lender fees normally attached to the process. This is something worth considering for those people who do not want to cut a big check for closing costs right when buying a home.

What is a no-cost mortgage and what does it mean to buyers?

A no-cost mortgage is basically a new offering from some of the lenders that are seeking to gain more market share in today’s real estate world. They want to get more customers, so they are offering loans with no costs. What people see with these types of loans is that they can provide a very real and immediate financial benefit. When signing the loan and supposedly getting the home, you would typically have to pay big costs to the lender. A no-cost mortgage takes away those up front costs.

How is this accomplished?

In some cases, a no-cost mortgage is possible because individuals are required to have inspections done for themselves. This means that they get to choose the inspector and they can save money on the process. In some cases, the lender is just waiving the closing cost fee altogether, which is a better deal for people who want to buy. These types of deals have long been rare in the mortgage market, but they are becoming more and more common lately.

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In order to answer the question of what is a prime mortgage, one has to look towards credit scores and the ability to pay back loans. What is a prime mortgage in today’s lending world? It is a mortgage loan that is handed out to a premium type of customer. The idea behind a prime mortgage is that it carries much less risk than a typical mortgage, since the person taking out the loan is quite likely to be able to pay back the loan on time and without any incident. This is a valuable thing for mortgage lenders, especially in today’s financial world where people are losing their homes to foreclosure.

What is a prime mortgage and how is it defined?

Typically, a prime mortgage can be defined as a lower rate mortgage that’s given to someone who is financially stable and has a credit score of over 700. These people are seen as the folks that lenders want to work with, so they are given the most agreeable rates and they are given the best loan terms, too. When one qualifies for a prime mortgage, they are able to save lots of money when compared to a sub-prime mortgage.

The other mortgage types

If you have been paying attention to the financial world, then you have heard talk of “sub-prime” mortgages. These are basically loans that were given out to people who were too risky. Lenders jacked up the rates and hoped to make money off of these loans, but they ended up getting burned in a big way when individuals failed to pay back their loans. The idea behind giving out more prime mortgages is that you are limiting your risk as a creditor, so it is a win-win situation for all involved.

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Benefits of a good faith estimate for a home mortgage

A good estimate for a home mortgage is a tool for comparing what lenders have to offer. Because the purpose of the good faith estimate is to provide information about the various fees charged by a lender, a wise borrower can compare the estimate with what other lenders are offering. This can help savvy borrowers negotiate the best mortgage deal.

What is included in a good faith estimate for a home mortgage?

In a reviewing the good faith estimate for a home mortgage, expect to see the amount of interest to be paid on the loan and any discount points to be paid. Discount points can help reduce the interest and the monthly payments. Discount points are paid at closing. Examples of fees included in the good faith estimate for a home mortgage are appraisal fees, mortgage broker fees, title fees, fees to lock in interest rates and insurance costs.

Caution–good faith estimates can change

While the government requires lenders to provide good faith estimates, there is no law against these estimates changing. A lender should also provide a Truth-in-Lending statement that states what the APR or annual percentage rate will be. However, a borrower should not be surprised to learn that the fees and rates could increase substantially by closing. It is a good idea to ask a lender to lock-in the fees and interest rates to prevent an increase in these amounts before closing.

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There are many individuals out there asking the question, “Can my interest rate adjust on my home mortgage?” The answer to that question is that your interest rate can most certainly adjust and this can happen for a couple of reasons. Some people get loans that allow for adjustable rates. There are many advantages to these adjustable rate mortgages, especially if you have an expectation of average home mortgage rates going down in the not so distant future.

Can my interest rate adjust on my home mortgage at any time?

With an adjustable rate mortgage, the rate will only adjust at stated times in your loan agreement. You are not going to wake up each and every morning to a different interest rate. Instead, it will adjust each year or after a period of six months. This will be determined by your lender and it can be hashed out when putting together a loan agreement. These are deals that can really work if you are getting a mortgage at a time when interest rates are high. In the future, your loan might get cheaper with a loan of this type.

Can my interest rate adjust on my home mortgage for any other reason?

If you want it to, the rate can adjust. Perhaps you see an opportunity to re-finance your home, in which case you would almost certainly see an adjustment in the rate. Additionally, if you get behind on your mortgage or you start missing payments completely, some lenders have the right to bump up your rate slightly. This does not happen with large loans nearly as often as it happens with smaller consumer loans, but this is still a very real concern for folks out there who have issues with debt.

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For may homebuyers, selecting an ARM home loan is often an attractive option. This is because the initial interest rate is much lower than traditional mortgages. While adjustable mortgage can become much more expensive over time, there are still many caps limiting the future interest rate.

First Adjustment Cap

The first cap for an ARM home loan is a first adjustment cap. When receiving an adjustable rate mortgage, the interest rate will be fixed for an initial period of time, which usually ranges from 1 to 7 years. After the initial fixed interest period, the interest rate will adjust to reflect market mortgage rates. Since mortgage interest rates tend to fluctuate greatly over a few year period, this could be quite expensive for the borrower. Luckily, adjustable rate mortgages come with a first adjustment cap of 1% to 2% over the initial rate. Therefore, a 5% mortgage will come with a first adjustment cap of 6% to 7%.

Following Adjustment Cap

The next cap for an ARM home loan is a following adjustment cap. After the first adjustment, the interest rate on a mortgage can adjust multiple more times throughout the life of a mortgage. This following adjustment cap refers to all interest rate adjustments following the first one. This cap is similar to the first adjustment cap and is normally limited to 1% to 2% over the preceding mortgage interest rate.

Lifetime Cap

The last cap for an ARM home loan is a lifetime cap. A lifetime cap places a cap on how much the adjustable rate mortgage can increase over the life of a mortgage. A lifetime mortgage cap on an ARM is normally between 5% and 6%. Therefore an ARM home loan which starts with an interest rate of 5% cannot ever exceed 10% to 11%.

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When going through the mortgage application process, many borrowers feel that mortgage lenders are unwilling to customize interest rates.  While lenders have tightened their lending restriction, there are still ways to customize your interest rate.  The following steps can be taken to customize your mortgage interest rate.

Purchase Points

The first way you can customize your mortgage interest rate is to pay points.  “Points” are fees which are paid at closing to pay down the mortgage interest rate.  Each point costs 1% of the mortgage balance and pays down the interest rate by 0.25%.  For a $200,000 mortgage, if the borrower chooses to pay 1 point, they would be charged a $2,000 fee, but their monthly payment would drop about $35 per month.  Because the fee is so high, points are only recommended for people who plan to keep the mortgage for 5 or more years.

Select Different Terms

Another way you can customize your mortgage interest rate is to select a different term.  Depending on the term or amortization schedule for the loan, the initial interest rate can fluctuate greatly.  For example, a 30 year mortgage often comes with a higher interest rate than a 15 year mortgage.  A borrower can select any amortization schedule they want which will adjust the interest rate.  Also, adjustable rate mortgages can be used to customize interest rates.

Negotiate

The last way you can customize your mortgage interest rate is to negotiate.  The best way to negotiate an interest rate with a lender is to acquire multiple mortgage bids from other lenders.  If a lender wants to keep you as a customer, they will be willing to customize an interest rate if they fear losing your business to a competing bank.

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What is the percentage?

The computed percentage is probably the simplest thing to figure out. It simply states what the percentage rate would be if there were no fees charged at all. Since this directly affects your monthly payment, you should definitely look at it in order to get your true APR calculated. For instance, a $200,000 loan at 5% interest. Your monthly payment on a 30-year loan, if there were no closing costs, would be $1,073.64.

Why Is The APR Different From The Interest Rate On My Home Mortgage?

The APR was added by the government in the name of disclosure. It also helps you in understanding fees and how much more they can add to the loan. Suppose the fees were $3,000. They now take the new loan amount, along with the interest rate, and calculate a new payment. In the above example, the payment is now $1,089.75. They use this payment against your original mortgage amount of $200,000 and compute your APR which is now marked higher, at 5.13%.

So I should look for the lowest APR when I apply for a mortgage?

Not necessarily. There are more questions you should ask in addition to looking at the APR. When you ask “Why Is The APR Different From The Interest Rate On My Home Mortgage?” you should also ask how comprehensive the given APR is. For instance, appraisal fees, credit report fees and inspection fees may not be counted. In addition, a lower APR may come with a higher prepayment penalty. The more ethical the banking company, the more disclosure they will give you on your loan, so be ready to ask more than just “Why Is The APR Different From The Interest Rate On My Home Mortgage?”

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Most homeowners do not truly understand all of the ins and outs of their home mortgage, but the good news is that there is a very important document that is required by law to be reviewed and it is called a truth in lending statement. In looking over a truth in lending statement, there are several important components that must be paid attention to.

Interest Rate and APR Must Be Included on Truth in Lending Statement For a Home Mortgage

While it is important to understand what the interest rate is on a home mortgage, it is necessary to realize that the APR is actually a reflection of the cost of the loan. In contrast to the interest rate, the APR is higher and includes loan fees, closing costs, and any other additions.

Total Amount of Payments Must Be Included on Truth in Lending Statement For a Home Mortgage

The majority of borrowers are shocked when they realize how much money must actually be paid back, and this is an important component of the truth in lending statement.

Interest Rate Type Must Be Included on Truth in Lending Statement For a Home Mortgage

Although many homeowners are accustomed to paying attention to what rate of interest they will be paying on their home mortgage, few understand that it is important to know whether the rate is fixed or adjustable. Adjustable rates may increase significantly and a truth in lending statement will disclose this possibility when applicable.

A loan closing is often an exciting process and many people view the truth in lending statement as another piece of paper that must be signed, but smart consumers will take the time to review the various components in an effort to truly understand their new home mortgage.

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The transfer of mortgage borrowings without any kind of penalty is known as portable mortgage or portability. This facility is very useful for all those people who are availing mortgage with a tie-in or lock-in period with Early Repayment Charges. Lock-in period applies where the mortgage program comes with capped, fixed or discount rate. It is important to bear in mind that there is a huge difference between portable and ordinary mortgages. Most of the times, in ordinary mortgages, Early Repayment Charges have to be paid off on switching the lender or when moving by remortgaging.

Mortgages on the Move

July 2003 saw a remarkable change in the traditional mortgage programs when E Trade introduced “ Mortgage on the Move”. This program introduced a new concept of portable mortgage, which saved borrowers from time spent on obtaining a mortgage by benefiting from fixed interest rates. Moreover, by availing portable mortgage, borrowers could cut down closing costs on the purchase of new mortgage loans. Mortgage transfer is only possible if the amount of loan obtained is $ 60,000 to $ 1 million.

How does Portable Mortgage help?

Portable mortgages are very helpful if the borrower moves home before the period of fixed mortgage rate is over. For instance, lets assume that a borrower takes a fixed mortgage loan at the rate of 4 percent annually with Early Repayment Charges incorporated throughout the tie-in period of those years. If the borrower is using a portable mortgage program and decides to move his home during the first year due to any reason, then his mortgage program will continue to stay the same for the remaining period with the original fixed rate of 4 percent with similar underwriting terms. However, if the borrower does not have portable mortgage, then Early Repayment Charges would be due at the time of sale and a new mortgage plan will be decided upon considering new home requirements. Hence, the borrower would not only have to pay Early Repayment Charges but also 4 percent annual preferential rate for the remaining period. If, in case, the interest rate rises, the borrower will have to pay a huge compounded amount.

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