Frequently Asked Mortgage Questions
Click on any of the following questions to view the answer to the frequently asked question.
1. What are closing costs?Arbor Mortgage makes the closing cost process simple, we charge less fees at a lower rate. Instead of charging multiple “junk” fees like administration, application, lender, underwriting, etc, we charge only a $650 processing fee. Discount and origination points may vary, depending on the type of loan program and terms you choose.
An estimate of closing costs is commonly referred to as a Good Faith Estimate (GFE). Reading through a Good Faith Estimate can be daunting, since there are so many different types of costs that can be incurred during a mortgage transaction. When a lender prepares a Good Faith Estimate, they estimate the charges for all parties involved with the mortgage loan, including costs that will be charged by the appraiser, credit reporting agency, title company, insurance company, and county and local governments. These other types of charges are often referred to as “third party” costs. When comparing Good Faith Estimates, it’s important to compare only the costs actually charged by the Lender and not those third parties. These costs will always be in the first section of your Good Faith Estimate or Origination charges.
Origination and Discount Points
A point on a mortgage loan is equal to a percentage of that loan. One point is 1% of the loan amount. Discount points are used to purchase a lower interest rate. The more points paid, the lower the interest rate.
Appraisal
The appraisal fee is paid directly to the appraiser to perform an appraisal on your property.
Credit Report
The credit report fee is paid directly to the credit reporting company in order to obtain your tri-merged credit report.
Processing Fee
The processing fee offests the charges incurred when processing your loan.
Title Insurance
Title insurance ensures that you have a clear title on your home. It is also required by any mortgage lender to ensure that their new mortgage loan will have first lien position. Title insurance costs can vary depending on whether or not you are purchasing your home or refinancing.
Recording Fees
Recording fees are paid to the county to record your new mortgage.
Interim Interest
Since mortgage loans are generally due on the first of the month, interim interest is paid for the days between closing and the end of the month.
Mortgage Insurance Premium
Mortgage Insurance Premiums are collected up front for government loans and are financed into the cost of the loan. This is the premium that the lender has to pay to the government agency to insure your loan.
Hazard Insurance Premium
Hazard Insurance is often referred to as Homeowner’s Insurance. This is the cost paid to your insurance company to insure your home.
Reserves Deposited with Lender
Reserves Deposited with Lender is also referred to as Escrow Account set-up. The amount collected is used to begin your escrow account so sufficient funds will be available when your first tax or insurance bill is due.
This is a basic list of documents you should prepare for your loan officer. Having these documents handy will greatly speed up your loan process. You may need additional documentation depending on your specific scenario.
- 2 years W2’s, 1099’s, or full Tax Returns (if self employed)
- 1 months worth of pay stubs
- 2 months bank statements
- Driver’s License
This is a basic list of documents you should prepare for your loan officer. Having these documents handy will greatly speed up your loan process. You may need additional documentation depending on your specific scenario.
- 2 years W2’s, 1099’s, or full Tax Returns (if self employed)
- 1 months worth of pay stubs
- 2 months bank statements
- Driver’s License
- Home Owners Insurance Declaration Page
Arbor Mortgage has a Preferred Partner network that can pair you will a top Real Estate Agent in your area to help begin the search for a new home. Your agent will search homes in your area with your specified criteria and negotiate on your behalf to get you the best possible price on a home.
5. Why should I get pre approved?The first step to home buying is always getting pre-approved for financing. By getting pre-approved for your new home loan, you are now armed with the knowledge needed to choose the right home for your family and get the best possible deal. With a Smart Buyer pre-approval, you’ll also be a much more attractive buyer to any prospective seller, since you’ll have Arbor Mortgage financing standing strong behind you.
6. What credit score do I need?To be eligible for any of Arbor Mortgage programs a minimum 620 middle credit score is required. There are many other factors that go into qualifying for a mortgage loan and having a 620 credit score does not guarantee you will be approved for a loan. We encourage you to complete our online form or give us a call at 877-90 ARBOR to go over all the details in your unique situation to see if you qualify for the loan you need.
7. How much do I need for a down payment?Arbor Mortgage does not have a minimum down payment requirement and offers a variety of mortgage programs with different down payment options. Contact one of our representatives today to discuss all your options by completing our Smart Buyer form or calling 877-90 ARBOR.
8. What types of loan programs do you offer?Arbor Mortgage offers a variety of loans for all situations. Some common loan products that we offer are:
Conventional Loans
A conventional loan is any loan which is not insured by the federal government, such as Federal Housing Administration (FHA) and Veterans Administration (VA). Typically Conventional loans follow the guidelines established by Fannie Mae or Freddie Mac.
FHA Loans
FHA loans are insured by the Federal Housing Administration. Lenders must follow the guidelines set by the Department of Housing and Urban Development in order to provide these loans. Arbor Mortgage is a HUD approved Direct Endorsement lender. Unlike conventional loans that may have Private Mortgage Insurance (PMI), FHA requires what is referred to as Mortgage Insurance Premium (MIP)and is paid both up front and on a monthly basis.
USDA Rural Development Loans
The United States Department of Agriculture provides a loan program for rural areas and low to moderate income borrowers. USDA Rural Development loans have property and income restrictions. There is no monthly mortgage insurance with this type of loan.
9. What is mortgage insurance?Mortgage insurance, commonly known as PMI (private mortgage insurance), is insurance for the lender in case you are unable to continue making your payments. If your loan becomes defaulted, mortgage insurance will reimburse the lender for their loss. Mortgage insurance is required on any conforming loan with a balance of more than 80% of the value of the home. FHA loans have mortgage insurance premium or MIP on each loan, which is similar to PMI, but the insurance is provided directly by HUD (Department of Housing and Urban Development).
10. What is APR?“APR” stands for Annual Percentage Rate. The APR is very different from the interest rate. The interest rate is how your payment is calculated, while the APR is used to measure the total cost of the loan. The APR takes into account various closing costs associated with the loan including rate, origination costs, discount points, lender fees, prepaid interest, mortgage insurance, and other fees related to obtaining the mortgage loan. It does not take into account all costs included in the loan. APR can be a useful tool in comparing mortgage offers. The larger the difference between the APR and the interest rate, the higher the costs associated. The Federal Truth in Lending Act requires that all lenders disclose both the interest rate and APR.