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Charleston SC Mortgage Guidelines – Real Estate

Charleston SC Mortgage Guidelines – Real Estate

By on Aug 25, 2008 in Charleston SC Real Estate, Mortgage | 0 comments

MORTGAGE GUIDELINES


Do all loans have prepayment penalties?

Not all loans have prepayment penalties, meaning you have the ability to prepay your loan and refinance if rates fall. If a loan program with a prepayment penalty is offered to you, you will also be offered the same loan without a prepayment penalty so you can compare rates and decide which option is best for you.

Do I have to have an impound/escrow account for the payment of my taxes and insurance?
You are not required to have an impound/escrow account unless the lnder program specifies it. Electing not to have an impound/escrow account will increase loan points by .25.

If my loan requires Private Mortgage Insurance (PMI), when can I have it removed?
On a 1-unit primary residence or second home, federal regulations require that PMI be automatically cancelled when your loan balance reaches 78% of the original property value at the time the loan was secured.

Depending on the loan program, you may be able to request in writing that PMI be removed sooner, based on an increase in the property value as determined by a new appraisal to be ordered by the servicer. Generally, PMI must have been in place for at least two years and you must have a good payment history for PMI to be cancelled under this scenario.

When is paying off my current second mortgage considered cash out?
If your current second mortgage was not obtained in conjunction with purchasing your home, then paying it off with a new mortgage is considered cash out.

MORTGAGE TERMS

What is a Three Day Right to Cancel?
On refinance transactions, Federal law mandates that you have three days, after signing your loan documents, in which to cancel your loan. This three day period includes Saturdays, but excludes Sundays and holidays. Your loan will not be funded until this period has expired.

What is a FICO score?
A FICO score is computed based upon a statistical analysis of your credit history and patterns.

What are loan points?
Points are paid to reduce the interest rate you pay on a loan. Each loan “point” is equal to one percent of the loan amount. Your decision on whether or not to pay points depends on how long you plan to keep the loan, your tax situation, and other factors.

Are loan points tax deductible?
For most taxpayers, points paid on purchase loan transactions are tax deductible in the year the home is purchased and points paid on refinance transactions are tax deductible over the life of the loan. Tax consequences vary depending on the specifics of the transaction and the taxpayer. We encourage you to consult your tax advisor regarding your tax situation.

What are loan fees?
Loan fees are fees paid in conjunction with closing a mortgage loan. There are other fees paid to third parties such as Appraisal, Escrow and Title Insurance. Your Good Faith Estimate (GFE) of Closing Costs will itemize all fees.

What is PMI?
Private Mortgage Insurance is charged on loan amounts exceeding 80% of the purchase price or appraised value of a home. The mortgage insurance protects the lender against loan default.

What is the difference between a conforming loan and a jumbo loan?
A conforming loan is one that is less than the maximum loan amounts set by Fannie Mae and Freddie Mac. Jumbo loans are loans which exceed these limits. The loan amounts are revised each year to reflect the change in the national average cost of a home. The current conforming loan amount limit for a Single Family Home or Condo is a loan amount under $417,000. Anything over that is considered a jumbo loan.

What is prepaid interest?
Prepaid interest is paid at the time of closing of your loan to cover the interest that will accrue on your new loan for the remaining days of the month.

What is the difference between the rate and the APR?
The note rate is used to calculate your interest payment each month. The APR (Annual Percentage Rate) is a calculation based on standardized federal regulations. In addition to the interest rate, it factors in other finance charges such as certain loan fees, to show the total cost of the financing over the scheduled life of the loan. The APR is designed to help borrowers fairly compare different lenders and loan options. Please note that the loan amount will influence the APR calculation, with higher loan amounts reporting lower APR calculations. To get a true comparison, the same loan amount must be used.

How is APR calculated?
Federal regulations define Annual Percentage Rate (APR) as the total cost of your credit calculated as an annual rate. The APR will almost always be higher than the Interest Rate (with some exceptions on ARM loans). For purposes of the APR calculation, points, lender fees and prepaid interest amounts collected at closing are known as “Prepaid Finance Charges.” The Loan Amount minus the Prepaid Finance Charges is known as the “Amount Financed.” On a fixed rate loan, the APR can be calculated using a simple financial calculator. By inputting the Loan Amount, Term and Interest Rate, one can solve for the Monthly Payment. By then inputting the Amount Financed, Term and Monthly Payment, one can solve for the APR. For example, on a $100,000 Loan Amount, a 30-year Term and a 5% Note Rate, the Monthly Payment is calculated at $536.82 (principal and interest). Assuming $2,000 in Prepaid Finance Charges, using the $98,000 Amount Financed, same 30-year Term and same Monthly Payment of $536.82, the APR is calculated at 5.178%. So, the 5.178% APR is the cost of your credit based on the $98,000 Amount Financed and the 5% Interest Rate is the actual interest rate to be paid on the Loan Amount of $100,000. By law, lenders are required to disclose both Interest Rate and APR to you.

What is a subordination agreement?
A subordination agreement is a document prepared by a second mortgage lender agreeing to remain in second position when a first mortgage is refinanced. Without such an agreement, the second mortgage holder would move into a first lien position when the existing first mortgage was paid off. The second mortgage lender usually charges a fee to process the subordination agreement, which is incurred by the borrower. Additionally, this process often increases the amount of time necessary to process a first mortgage refinance transaction, potentially jeopardizing a borrower’s lock.

What is Title Insurance?
Title insurance protects you and your mortgage lender by insuring that no individual or government entity has any right, lien, claim or encumbrance to your property. Once a title policy is issued, if any claim which is covered under the title policy is ever filed against your property, the title company will pay the legal fee involved in defense of your rights, as well as any covered loss arising from a valid claim.

CREDIT REPORTS

How can I obtain a Free Credit Report?
The Fair and Accurate Credit Transaction Act of 2003 (FACTA) provides that every consumer is entitled to a free credit report every 12 months from each of the three national repositories: Equifax, TransUnion and Experian. Customers may obtain their personal credit report through the following website: www.annualcreditreport.com

How do I dispute an item on my credit report?
You must contact the credit agencies directly and dispute the reported item. Following is the information on how to contact the agencies:

Transunion Consumer Relations
P.O. Box 1000
Chester, PA 19022
800-888-4213
www.transunion.com

Equifax Consumer Relations
P.O. Box 105873
Atlanta, GA 30348
800-685-1111
www.equifax.com

Experian Consumer Relations
P.O. Box 2002
Allen, TX 75013
888-397-3742
www.experian.com

SECOND MORTGAGES

What is a Piggy-Back Loan?
One of our most popular programs for purchasing a home is our Piggy-Back loan program. With this financing structure, an 80% 1st Mortgage and a 10%, 15% or 20% 2nd Mortgage are closed concurrently, eliminating the need for Private Mortgage Insurance (PMI).

If I am receiving a home equity line of credit, how do I receive my funds on it?
You may take an initial draw through the loan closing or you will receive a set of credit line checks after the loan closes.

Is the interest on a home equity loan or home equity line of credit tax deductible?
In most cases, the interest paid on your home equity loan or home equity line of credit will be tax deductible up to 100% of the value of your home. There are some restrictions, so you should consult your tax advisor regarding your particular situation.

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