Home    About Us    Loan Center    FAQ    Resources    Connect With Us  
 
1. What is the difference between a pre-qualification analysis and a pre-approval application? Answer
2. How do I know how much house I can afford? Answer
3. How do I know which type of mortgage is best for me? Answer
4. What documents will typically be requested when I make application for a mortgage loan? Answer
5. What does my mortgage payment include? Answer
6. How much cash will I need to purchase a home? Answer
7. How much cash will I need for closing costs? Answer
8. What is an escrow/impound account? Answer
9. What is "PMI" and how can I avoid it? Answer
10. What is a lock period? Answer
11. When is the best time to close? Answer
12. What is the difference between a fixed-rate loan and an adjustable-rate loan? Answer
13. How is an index and margin used in an ARM? Answer
14. Do you offer loans for borrowers with less than perfect credit?  Answer
15. It is possible to improve my credit scores?  Answer

Q : What is the difference between a pre-qualification analysis and a pre-approval application?
A : A pre-qualification analysis is typically the result of information shared between a mortgage broker and a potential mortgage borrower and usually does not incorporate information obtained from a credit report. The end product for a pre-qualification analysis will be a "ballpark" estimate of the maximum mortgage amount for which you may qualify. at First American Mortgage, there is no cost or commitment on behalf of either party for a pre-qualification analysis.

A mortgage loan pre-approval application typically results in a written loan decision following a complete mortgage application.  You can typically apply for a pre-approved mortgage prior to signing a purchase agreement for a home.  A pre-approval can also add to your negotiating strength when you are ready to make an offer on a home.

 
Q : How do I know how much house I can afford?
A : Generally speaking, you can purchase a home with a value of two or three times your annual household income. However, the amount that you can borrow will also depend upon your employment history, credit history, current savings and debts, and the amount of down payment you are willing to make. You may also be able to take advantage of special loan programs for first time buyers to purchase a home with a higher value. Give us a call, and we can help you determine exactly how much you can afford.
 
Q : How do I know which type of mortgage is best for me?
A : There is no simple formula to determine the type of mortgage that is best for you. This choice depends on a number of factors, including your current financial picture and how long you intend to keep your house. First American Mortgage can help you evaluate your choices and help you make the most appropriate decision.
 
Q : What documents will typically be requested when I make application for a mortgage loan?
A : The documents required will depend on what kind of loan you are applying for.  These documents are referred to as "conditions".  The conditions required for the majority of mortgage loans are: Most recent W2, paystub(s) documenting 30 days of earnings, most recent bank statements, most recent investment statements and the purchase contract on the home you are buying. Documentation requests vary by loan type and lender.
 
Q : What does my mortgage payment include?
A : For most homeowners, the monthly mortgage payments include three separate parts:
  • Principal: Repayment on the amount borrowed
  • Interest: Payment to the lender for the amount borrowed
  • Taxes & Insurance: Monthly payments are normally made into a special escrow account for items like hazard insurance and property taxes. This feature is sometimes optional, in which case the annual fees will be paid by you directly to the County Tax Assessor and property insurance company.
  •  
    Q : How much cash will I need to purchase a home?
    A : The amount of cash that is necessary depends on a number of items. Generally speaking, though, you will need to supply:
  • Earnest Money: The deposit that is supplied when you make an offer on the house
  • Down Payment: A percentage of the cost of the home that is due at settlement
  • Closing Costs: Costs associated with processing paperwork to purchase or refinance a house
  •  
    Q : How much cash will I need for closing costs?
    A : Closing costs generally range from 2% to 3% of your loan amount.  Closing costs can be divided into three main categories:

    • Lender fees.  Fees can include origination, points, underwriting, processing, administration, flood certificate, and appraisal.
    • Third-Party Fees.  These fees include the title companies closing fee, title exam, title insurance and recording.
    • Pre-paid Items.  These are items collected at the time of closing but are not really considered closing costs.  They include property taxes, hazard insurance and interest.

    We are happy to provide you with a Good Faith Estimate outlining all of the closing costs and pre-paid items.  These estimates may change if you change the product type or loan amount.   

     
    Q : What is an escrow/impound account?
    A : In addition to the principal and interest payment on your mortgage loan, you may elect to impound additional funds each month in an impound/escrow account to pay for property taxes and insurance.  With some mortgage programs, impounding for taxes and insurance may be required.

    Having an impound/escrow account allows you to put aside a small portion each month toward the costs of insurance and property taxes.  When the insurance premium and property taxes are due, the lender makes the payments from the account. 

     
    Q : What is "PMI" and how can I avoid it?
    A :

    "PMI" also know as Private Mortgage Insurance is insurance that the consumer generally pays if they choose to put down less than 20% on a conventional loan. PMI gets a bad rap these days, however there was a time that the consumer had to put down 20% on their new home or not obtain a conventional loan. PMI, like any other insurance insures the loan for the investor in the event that the borrower fails to make their payments. There are ways, however, to avoid PMI. The two most popular ways are "Piggy Back" loans known as 80/10/10 or 80/15/5. An 80/10/10 is a 80% 1st Lien, with a "piggy Back" 2nd lien of 10% & a 10% down payment. An 80/15/5 is a similar concept with only a 5% down payment and a 15% 2nd lien. The main benefit is to avoid paying Mortgage Insurance. Be aware that the rates are a bit higher on the 2nd lien, but in reality the payment is usually less than a loan with PMI and the interest paid on the 2nd lien is tax deductable. PMI is not tax deductible. There are also self insured loans, where the investor would charge a higher rate & PMI would not be required.

     
    Q : What is a lock period?
    A : A lock period refers to the amount of time prior to closing that can secure an interest rate for your loan.  Lock periods range from 30 days to more than 90 days.  Generally, the longer the lock period, the more you pay in points or interest.
     
    Q : When is the best time to close?
    A : There really is no best time to close a mortgage loan. On a purchase transaction, the loan would be closed at the specified negotiated time between buyer and seller. On a refinance, you can try to target your close date near the end of the month therefore eliminating as much prepaid interest as possible and making your closing costs that you have to come up with less than it would be if you closed mid-month or even early in the month.
     
    Q : What is the difference between a fixed-rate loan and an adjustable-rate loan?
    A : With a fixed-rate mortgage, the interest rate stays the same during the life of the loan. With an adjustable-rate mortgage (ARM), the interest changes periodically, typically in relation to an index. While the monthly payments that you make with a fixed-rate mortgage are relatively stable, payments on an ARM loan will likely change. There are advantages and disadvantages to each type of mortgage, and the best way to select a loan product is by talking to us.
     
    Q : How is an index and margin used in an ARM?
    A : An index is an economic indicator that lenders use to set the interest rate for an ARM. Generally the interest rate that you pay is a combination of the index rate and a pre-specified margin. Three commonly used indices are the One-Year Treasury Bill, the Cost of Funds of the 11th District Federal Home Loan Bank (COFI), and the London InterBank Offering Rate (LIBOR).
     
    Q : Do you offer loans for borrowers with less than perfect credit? 
    A : The answer to this question is yes. First American Mortgage offers not only your traditional types of financing which are referred as "A Paper" but those that allow for varying degrees of credit issues which can be referred to a "B Paper" or "sub prime". We have a variety of loan products available which make it possible for just about anyone to get a mortgage loan.   
     
    Q : It is possible to improve my credit scores? 
    A :

    Often the answer to this is yes. We would be happy to sit down and discuss your personal situation and set you on a path to home ownership. If you have reason to believe that your credit has been damaged, or have previously obtained a credit report that you would like to discuss, bring it to one of our mortgage consultants for counseling. We would suggest minimal inquiries be made on your credit file as this can impact your credit scores. However, if you do not know what your credit reflects, we can provide that for you as well.  We want everyone to have the chance to own their own home.