Frequently Asked Questions
General Questions
Buying a home can feel daunting with so many options and complex terminology. Take some time to familiarize yourself with the different types of home loans so you can proceed with assurance. Our mortgage rates calculator will help you determine rates and loan options suited to your needs.
Fixed-Rate Loans: These loans feature an interest rate that remains constant throughout the loan term, ensuring that your mortgage payments for principal and interest are stable. Fixed-rate loans are typically available in terms of 10, 15, 20, 25, or 30 years.
Adjustable-Rate Mortgages (ARMs): ARMs come in various forms, with the most common having a fixed rate for an initial period (such as 5, 7, or 10 years), after which the rate adjusts annually based on market conditions.
FHA Loans: Backed by the Federal Housing Administration, FHA loans require a lower down payment, making them accessible for many buyers.
VA Loans: Designed to assist U.S. military veterans and, in some cases, their spouses, VA loans offer the advantage of no down payment and are guaranteed by the Department of Veterans Affairs.
Jumbo Loans: These loans exceed the limits set by the Federal Government for purchase or guarantee, with the maximum amount varying by county.
There are various types of ARM loans, with the most common featuring a fixed interest rate for a set period (such as 5, 7, or 10 years), after which the rate adjusts annually based on market conditions. These ARMs are typically labeled as 5/1 ARM, 7/1 ARM, 10/1 ARM, and so on.
A Fixed-Rate Loan features an interest rate that remains constant throughout the loan term, ensuring that your mortgage payments for principal and interest remain unchanged. In contrast, an Adjustable-Rate Mortgage (ARM) usually has a fixed interest rate for an initial period (such as 5, 7, or 10 years) and then adjusts periodically based on market conditions and an index.
Closing costs are the fees incurred at the end of a real estate transaction, whether you’re buying or refinancing a home. This final step, known as closing, involves transferring the property title to the buyer. These costs are additional expenses beyond the property’s purchase price, typically borne by both buyers and sellers to finalize the transaction.
For buyers, these costs generally include underwriting fees, appraisal charges, mortgage insurance, homeowner’s insurance, and property taxes.
A point is a fee paid upfront in exchange for a lower interest rate on a mortgage. It represents a percentage of the loan amount and helps reduce the long-term cost of the loan.
PMI, or Private Mortgage Insurance, is required on conventional loans (fixed or adjustable-rate) when you borrow more than 80% of the appraised value or purchase price of the property, whichever is lower. This insurance safeguards the lender from financial loss in the event of a loan default.
Yes, you can make principal payments at any time during your loan term or pay off the loan in full. Additionally, you can either add a set amount to your monthly payments or make lump-sum payments periodically.
Purchase Home Questions
To assess how much house you can afford, experts generally recommend that you spend no more than 28% of your gross monthly income on housing expenses and keep total debt, including housing, student loans, car payments, and credit cards, under 36% of your income.
Various home loans come with different terms and rates, with some requiring lower down payments than others. Use our straightforward mortgage loan amortization calculator to estimate your payments and help determine the maximum home price that fits your budget.
Generally, if you’ve never owned a home before, you are classified as a first-time homebuyer. Additionally, if you haven’t owned a primary residence in the past three years, you may still qualify as a first-time homebuyer. First-time buyers often benefit from significant financing options and flexibility, with down payments starting as low as 3%. FHA loans are especially popular among first-time buyers due to their low down payment requirement of 3.5%.
Pre-approval involves obtaining approval for a specific loan amount before you start searching for a home. The lender reviews your loan documents and commits to a certain loan amount. Having a strong pre-approval can give you an edge, especially if other buyers are interested in the same property.
Pre-qualification is the process of estimating how much you may be eligible to borrow before you formally apply for a loan. Unlike a pre-approval letter, which carries more weight in the home-buying process, a pre-qualification letter is less influential when making an offer. Buyers are strongly advised to undergo the pre-approval process for a more substantial advantage.
Once you are under contract to purchase a home and a closing date has been set, you can choose to lock in or float your interest rate. Your loan officer will provide guidance and discuss your options at the right time.
The costs of buying a home can vary based on factors such as the home’s price, the type of mortgage, and property taxes. Here’s a summary of the costs you can expect:
- Earnest Money: To demonstrate your commitment to purchasing a home, you’ll need to provide earnest money when making an offer, typically around 1% to 2% of the purchase price.
- Down Payment: The amount required for a down payment depends on the home’s price and the loan type. Conventional loans often require 20% of the purchase price to avoid PMI, while FHA loans typically need 3.5%, and VA loans usually require no down payment.
- Professional Fees: In addition to closing costs, you might incur fees for services from realtors, inspectors, and attorneys involved in the transaction.
- Closing Costs: These generally include fees for underwriting, appraisals, mortgage insurance, homeowner’s insurance, and property taxes.
- Moving Expenses: Don’t forget to budget for the costs associated with moving into your new home.
There is no fee for obtaining a pre-approval initially. However, appraisal fees will be incurred if you decide to proceed with your loan application.
You must have a valid SSN and be a legal resident of the US. You should have a verifiable and stable income, a debt-to-income ratio below 50%, and a minimum down payment of 3.5% (which can vary based on your credit score). This down payment can be provided as a gift from a family member. The property must serve as your primary residence and be appraised by an FHA-approved appraiser, meeting specific standards.
You must pay FHA mortgage insurance, which includes both an upfront fee as part of your closing costs and a monthly premium throughout the life of the loan. The property must meet strict requirements, being structurally sound and adhering to specific standards; thus, FHA loans may not be suitable for fixer-uppers. The property must be your primary residence, as FHA loans cannot be used for vacation or investment properties. Additionally, the maximum loan amount is limited and varies depending on the property’s location.
Refinance Questions
When considering refinancing, it’s important to think beyond just securing a lower mortgage rate. You should also factor in how long you plan to stay in your home. Use our refinance break-even calculator to find out how many months it will take to recoup the costs of refinancing.
While many people consider refinancing when mortgage rates drop below their current rate, there are other compelling reasons to refinance:
- If you want to shorten your loan term and pay off the loan faster.
- If you’re currently paying private mortgage insurance (PMI) and have built enough equity to refinance without it.
- If you wish to tap into your home’s equity through a cash-out refinance.
Cash-out mortgage refinancing allows you to refinance your existing home mortgage while borrowing additional funds simultaneously. This option lets you take out more than your current loan balance, usually up to 80% of your home’s value, and receive the excess amount in cash. To qualify for a cash-out refinance, you’ll typically need to have your home appraised.
With many lenders, mortgage refinancing can take 45 to 60 days depending on the complexity of the loan. However, with our streamlined process, you can complete your refinance in as little as two weeks. A dedicated Loan Officer will be with you throughout the entire process to ensure everything goes smoothly.
For a mortgage refinance transaction, you’ll typically need to provide the following documentation: proof of income (such as W-2s or recent tax returns), verification of homeowners insurance, credit information, details of your monthly debt, total assets, and an appraisal.
VA Loans Questions
These loans simplify the home buying process for U.S. veterans and, in some cases, their spouses. VA Home Loans are offered by private lenders, such as banks and mortgage companies, and do not require a down payment. Backed by the Department of Veterans Affairs, these loans allow lenders to offer more favorable terms.
No Down Payment: Eligible VA Loan borrowers can purchase a home without making a down payment, which is a rare advantage as most home loan programs require at least a small down payment.
No Private Mortgage Insurance (PMI): Unlike conventional loans, VA loans do not require private mortgage insurance, which is typically needed when you make a down payment of less than 20 percent. This insurance protects the lender in case of default.
Lower Closing Costs: The VA sets limits on the closing costs lenders can charge VA loan applicants. Homebuyers can also request that sellers cover all loan-related closing costs and contribute up to 4 percent of the purchase price for expenses such as prepaid taxes, insurance, and judgments.
No Prepayment Penalties: VA loans do not impose prepayment penalties or early-exit fees, allowing you the flexibility to sell your home without restrictions.
Lower Interest Rates: VA loans generally offer some of the lowest average interest rates compared to other loan types.
Yes, you can refinance with a VA loan. There are two main types of VA loan refinance programs:
- Interest Rate Reduction / Streamline Refinance: This option allows you to replace your existing VA-backed home loan with a new one that has more favorable terms, helping to lower your monthly mortgage payments.
- Cash-Out Refinance: This program enables veterans with an existing VA or conventional loan to access their home equity for purposes such as home improvements or major purchases. The amount of cash you can borrow is based on the current appraised value of your property, with most VA lenders permitting a cash-out loan up to 90 percent of this value.
Have more questions? Call us at 703-801-4771
or, send your question to us using the form below.