||What fees will I
have to pay?
||Closing costs, prepaid fees (i.e. taxes and insurance) and
title fees are all associated with most loan transactions. A
good faith estimate is provided to you once you have executed a
loan application, which lists all of your fees.
||Do I have to put
any money down when purchasing a home?
||Usually a buyer must put 3-5% down when purchasing a home,
but Franklin Mortgage Company does offer a few 100% loan
programs. In general, these programs are offered to first-time
homebuyers who have excellent credit.
||How long will my
refinance take? How soon can I close?
||Generally, a refinance takes approximately 2-4 weeks from
the time you sign your loan application to the time you close.
Once we have received your application and any additional
documentation (i.e. bank statements, paystubs, tax returns),
your loan is submitted for approval. Once approval is received,
your loan documents will be drawn and sent to the title company
for you to sign. If you are refinancing your primary residence,
keep in mind there is a three-day right of recission before your
loan can close.
||What are the
basic types of mortgages?
||Please see Loan Programs.
||What is the
difference between a mortgage banker and a mortgage broker?
||Mortgage bankers originate, and "fund," the mortgages that
they sell, meaning they put up the money and handle the closing
for the loans. Mortgage brokers are middlemen who shop different
originators to find the deal that best suits their customers.
Franklin Mortgage is both a banker and a broker, which means we
are able to find the best loan on the market to suit your
individual financing needs.
||What documents do
I have to provide?
||The answer depends upon the loan program you seek, the
quality of your credit and the size of the down payment you will
be making. On a typical fully documented loan application (where
an applicant is seeking to qualify based on an employee's
salary), the lender will require: one or two current paystubs,
W-2s for the prior two years and bank and investment account
statements for the prior 1-2 months. If an applicant is
self-employed (has a 25% or greater ownership in a business)
then additional documentation could be required (i.e. 1040's,
1165's & 1120's,).
||How much loan can
I qualify for?
||The amount of a loan for which you qualify is based on two
different calculations. Using what are known as qualification
ratios, lenders evaluate your income and long-term debts to
determine a "safe" amount for your mortgage payments. A fairly
standard ratio is 33/38. This means, 33% of your gross monthly
income for your house payment and 38% of your GMI for your house
payment and other obligations (i.e., auto payments, student
loans and credit cards). Certain mortgage plans sometimes use
more liberal ratios.
||What are points?
||In the special vocabulary of mortgage lending, "points" are
a type of fee that lenders charge (the full term to describe
this fee is "discount points"). Simply put, a point is a unit of
measure that means 1% of the loan amount. So, if you take out a
$100,000 loan, one point equals $1,000.
Discount points represent additional money you can pay at
closing to the lender to get a lower interest rate on your loan.
Usually, for each point on a 30-year loan, your interest rate is
reduced by about .25 of a percentage point for 1 discount point
(1% of the loan amount).
TIP: Usually, the longer you plan to stay in your home, the more
sense it makes to pay discount points. We will be happy to
discuss the pros & cons with you to help you make your decision.
||What is an
||A fee charged to the borrower by the same lender for making
a mortgage loan. The fee is usually computed as a percentage of
the loan amount. 1% origination fee = 1% of the loan amount.
||What is PMI
(private mortgage insurance)?
||If you put less than 20% down on most loans, you'll be asked
to protect the lender by carrying private mortgage insurance (PMI).
Carrying PMI ensures that the debt is repaid if you default on
the loan. This charge adds approximately an extra half a percent
onto the loan. If you have reached 20%, you can contact the
lender to see about dropping PMI. In most cases, the lender will
not consider dropping PMI until you have owned your home for 2
years. However, once you have reached 22% equity, the lender is
required by law to drop PMI.
||What is mortgage
interest? What is a 1098 form?
||Mortgage interest is calculated based on your interest rate
on an annual basis. You will receive a 1098 mortgage interest
statement in January each year, which totals the amount of
interest you have paid on your loan for that year. Lenders are
only required to report mortgage interest if you have paid $600
or more in interest. This means that in most cases, you will not
receive a 1098 if you have paid less than $600. The good news is
that mortgage interest is tax deductible.
||What is the
difference between locking and floating an interest rate?
||Locking a rate means that you have agreed on an interest
rate with your loan officer, at which time he/she will make a
formal agreement with the broker or correspondent that your loan
will be serviced by. Floating an interest rate is used when the
market is volatile and your loan officer believes that the rates
could improve. Basically, your loan will be registered in the
system, but your rate has not been locked.
||What is the
difference between conforming and non-conforming loan amounts?
||The term "conforming," as opposed to "nonconforming," is
used to classify loans that fall within the guidelines as set
forth by Fannie Mae and Freddie Mac. These are the two private,
congressionally chartered companies that buy mortgage loans from
lenders, thereby ensuring that mortgage funds are available at
all times in all locations around the country. These loans
generally offer the most attractive rates.
Conforming loans amounts are $333,700 and below. Non-Conforming
loans amounts are above $333,700. These loans are usually called
a "JUMBO" loan.
||What are FICOs?
||FICO stands for Fair, Isaac Corporation, which developed the
formula for credit scoring. The term also applies to the credit
score itself. A FICO score can range from 300 to 850. In
general, the higher the score, the more credit-worthy a borrower
is in the eyes of the lender. A score of at least 680 indicates
the borrower is very creditworthy. See ways you can
improve your credit score.
pre-qualification different from pre-approval?
||A Pre-Qualification consists of a credit check and an
estimation of what you can afford based on the information you
tell them. The underwriter (The person who has the authority to
approve your loan) usually has not seen your application at this
point. This is not a commitment to lend to you, but you have
passed the first test.
A Pre-Approval is a commitment to lend to you. This is based not
on what your tell them, but on a review of your W2's, paystubs,
tax returns, bank statements etc. An underwriter has seen your
loan application and has given the lender approval to lend you
Pre-approval makes you a strong buyer, welcomed by sellers. With
most other purchases, sellers must tie the house up on a
contract while waiting to see if the would-be buyer can really
||Should I choose a
fixed or an adjustable rate mortgage?
||You can choose a mortgage with an interest rate that is
fixed for the entire term of the loan or one that changes
throughout. A fixed-rate loan gives you the security of knowing
that your interest rate will never change during the term of the
loan. An adjustable-rate mortgage (called an ARM) has an
interest rate that will vary during the life of the loan, with
the possibility of both increases and decreases to the interest
rate and consequently to your mortgage payments.
Adjustable rates start lower than fixed rates but depending on
the market at the time of "Adjustment" could wind up higher than
a fixed rate. But sometimes, and the past 10 years have been
reflective of this, the ARMs stay below the fixed rates
consistently. However, there are no guarantees. So the question
of whether to go with a fixed or an adjustable is a personal
decision that you have to make based on your tolerance for risk.
||What is APR
(annual percentage rate)?
||This is an interest rate index reflecting the cost of a
mortgage as a yearly rate. It is not the rate your payments are
based on but a combination of the interest rate, points and
other lender fees. Because of this, the APR is almost always
higher than your interest rate.
The APR is supposed to allow homebuyers to compare different
types of mortgages based on the annual cost for each loan.
However, because not all lenders include all their fees in the
APR calculation like they are supposed to, the comparison of
APR's is almost useless. It is far easier and more accurate to
request a "Good Faith Estimate" from all lenders when you are
shopping for a loan. A Good Faith Estimate will show all points,
lender fees and the interest rate. Simply add up all the lender
fees and count the total cost in dollars, not the APR. Franklin
Mortgage Company will happily fax or mail a Good Faith Estimate
for free at your request.
||Can I use a gift
for a down payment?
||Yes. Certain loans allow a relative or close friend to
provide 100% of the down payment as a gift, but the lender will
ask that a "Gift" letter be signed by the donor stating that the
gift funds are not expected to be repaid. The donor will also
have to show a bank statement or other paperwork proving the
gift came from their account. Some loan products require a 20%
down payment if the source of the down payment is exclusively
from gift funds.
||Can I borrow
funds for a down payment?
||Yes. It is possible to borrow against an asset that you
currently own for the down payment. For example you can borrow
against your 401(K), assuming that your company plan permits it,
and you could also borrow against your current residence to
purchase a new one (i.e. a bridge loan or an equity line). You
may also borrow against your fully invested stock portfolio,
avoiding the tax consequences of selling prematurely. Some loan
programs allow you to borrower unsecured personal loans to help
with the costs.
||Homeowner's insurance protects both the owner as well as the
lender against the occurrence of physical damage to the property
(i.e. fire or burglary). Some perils are not generally covered
by the standard homeowner's polices, for example floods and
|| What is
||If your property is located in a flood zone, you may be
required to obtain flood insurance. The appraiser will research
the area and determine if the property is in a flood zone. Also,
A flood certification is executed at closing, which will
determine whether you will need flood insurance.
||What is title
insurance and why do I need it?
||Before you purchase a property or close on a new loan, it's
essential to know that the title to the property will be free
and clear, free of prior defects and indebtedness. A homeowner
and prospective lender need to be certain that what is available
on the property is what is referred to as a "marketable title".
A title company researches the legal history of the property,
which entails searching public records in the offices of the
county recorder. Problems with the title could threaten the
mortgage, limit ones use and enjoyment of the property and could
result in financial loss. A policy of title insurance protects a
homeowner's title and the insurer covers the cost of any legal
challenges. All lenders require a title insurance policy before
they will fund your loan.
||What is a loan
||A prepayment penalty on a loan allows the lender to charge a
borrower additional interest, typically six months worth, when a
loan is repaid during the penalty period, which is usually
somewhere in the first three to five years of the loan. If a
loan does have a prepayment penalty, this is clearly stated
within the mortgage disclosures, mortgage note or prepayment
penalty rider to the note. The advantage of taking a loan with a
prepayment penalty is that it could carry a lower rate of
interest or you may be permitted to take a loan without paying
for non-recurring closing costs.
||Will I receive a
copy of my appraisal once I close?
||Yes. Franklin Mortgage will send you a copy of the appraisal
either via email or regular mail. Just let us know which is more
convenient for you.