Frequently Asked Questions:                                                                        

* What causes interest rates to change?..Interest rates are based on the simple rule of...(continued)

* Are there any 'No Income Verification' or 'No Documentation' loans?

Stated income and no documentation loans are special types of loans that allowed borrowers to obtain a mortgages without providing the lender with income documentation. No pay stubs, W-2s or tax returns were necessary. In the past, these types of loans were an excellent time saving option especially for business owners with weighty tax returns. However, this type of simplified financing opened the door to fraud and greed. In 2007, we saw lender guidelines for stated income and No-Doc loans change considerably. The federal government has determined that a borrower must provide proof to the bank that he has the ability to repay the home loan. Limited documentation loans are almost non existent save for some hard money lenders.

*What is a 'Hard Money' loan?

Hard money loans are extremely high cost loans based more on the lender's interest in the property than on the borrower's ability to pay. These are typically the loan of last resort.  Hard Money lenders require sufficient equity in properties they loan on to lesson their risk from the borrower's default. You could say they price and approve loans based on the assumption the borrower will default.

* What if I don't want to pay points?..calculate the cost and then decide..(continued)

* Does a true "No Cost" loan really exist?..the way this works is based on rebate pricing..(continued)

* What is an interest only mortgage?

Normally an interest only mortgage has a fixed period that is set for a number of years and then becomes a fully amortizing loan at the end of the term. Most popular are three, five, seven, and ten year interest only ARMs. 30 year fixed rate mortgages with interest only periods of 10 to 15 years are also popular. Interest only payments are considerably less than fully amortizing payments so borrowers who choose interest only mortgages have lower initial monthly payments. The drawback is the borrower making just interest only payments will not see any reduction in the mortgage loan balance. If the borrower continued to pay just interest only, when the loan converts to a fully amortizing payment there will likely be a significant payment increase.

* My Credit score is 650 is that good or bad?

FICO scoring was developed by Fair Isaac & Co. in the late 1950s and has become accepted by lenders as a reliable means of credit evaluation..(continued)

* What is PMI? Can I get rid of the PMI on my loan?

PMI (Private Mortgage Insurance) is normally required when you purchase a house with less than a 20% down payment. Mortgage insurance protects lenders against the costs of foreclosure. With PMI, lenders can accept lower down payments than they normally would otherwise. Your PMI premium is typically added to your monthly mortgage payment. The actual amount you put down and your credit rating will be the main factors in determining the cost of mortgage insurance.

It is now possible to write off PMI payments along with mortgage interest on your federal tax return. Please contact your tax adviser for more information.

The decision on when to cancel PMI does not depend solely on the amount of your equity in the home. The final say on terminating PMI is reserved by your lender and any investor who may have purchased an interest in your mortgage. However, in most cases, the lender will allow cancellation of PMI when the loan is paid down to 80% of the original property value. Some lenders may require that you pay PMI for one or two years before you can apply to remove it. FHA requires mortgage insurance to be paid for a minimum of five years.

The APR, Annual Percentage Rate, is calculated by subtracting the lender's loan fees from the loan amount and then recalculating the interest rate. Should you use just the APR to compare loan programs? There are many reasons that the APR can vary. One way it varies is the prepaid interest estimate. For example: If you close your loan in the middle of the month you will pay about two weeks of prepaid interest. Prepaid interest is part of your APR calculation. However if you close on the last day of the month then your APR will be lower because you did not have to pay the extra two weeks of interest up front. Does that mean you save money by closing at the end of the month? No, because your first mortgage payment will simply be due two weeks sooner. If one just looked at the APR it would appear that closing on the last day of the month would save money. Make sure the loans you are trying to compare are estimated equally.  Adjustable Rate Mortgage loans are more difficult to compare using APR because various ARM loans will have different margins over different indexes. The index that the loan is based on can change monthly over the term of the loan so it is not reasonable to compare different types of ARM loans strictly by APR comparison. However, It is reasonable and advisable to compare mortgage loans of the same type, margin, index, loan amount, and term using the APR.