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Frequently Asked Questions (FAQs) on mortgages: Real Estate

  1. What are Points?

  2. What is an APR?

  3. What is a Private Mortgage Insurance (PMI)?

  4. What information will be required when I apply for a mortgage?

  5. What are the closing costs for a refinance or purchase?

  1. What are Points?
    Discount Points are equal to a percent of the loan amount.1 point are equal to 1% of the loan amount. For example: on a $100,000 loan amount that equals $1,000. Typically, if you pay points it will lower the Interest Rate.
     
  2. What is an APR?
    The Annual Percentage Rate is the cost of credit expressed as a yearly rate. The APR combines interest rate, points, and related fees.
     
  3. What is a Private Mortgage Insurance (PMI)?
    Private Mortgage Insurance is a type of insurance provided by a private mortgage insurance company, to protect the lender in the event of loan default. This type of insurance is required when a borrower has less than 20% equity in a home. Private mortgage insurance is paid monthly.
     
  4. What information will be required when I apply?
    To speed the application process, here are some of the information you should gather:
    Sales contract
    Social Security number[s]
    Gross monthly income[s]
    Name/address of each employer for past two years
    W2 forms for past two years and year-to-date earnings
    Last two monthly checking/savings account statements [if not Whitney accounts] and brokerage statement or name, address, account number and balance for each deposit account/brokerage account
    Residence address, including landlord and/or mortgagee address and account number, for the past two years
    Mortgagee name and address plus address and account number for other real estate owned
    Name, address, account number, balance and monthly payment for all outstanding debts
    If self-employed, last two years of personal and corporate tax returns, year-to-date profit and loss, business tax returns and balance sheet
    Be prepared to pay the credit report, appraisal and flood certification fees
    VA loans only: Certificate of Eligibility or DD124
     
  5. What are the closing costs for a refinance or purchase?
    Closing costs vary depending on the purchase price of your new home or your loan amount, but generally run 3-5% of your total loan. The percentage you should allow for closing costs is affected by how many points you pay. Attorney’s fees, recording fees, appraisal fees also affect it, etc. because these fees may vary. Closing costs also include “prepaids” which are the flood certification fee, underwriting fee, interim interest and the deposit for any real estate taxes and homeowner’s insurance. Some other lenders may not include these prepaids when they initially quote their closing costs, but these prepaid amounts will be due at closing. Closing costs include:

    Loan origination [varies with loan type and term]
    Discount points [optional - can be paid to lower your interest rate]
    Appraisal fee
    Credit report fee
    Flood zone determination fee
    Title insurance fee
    Deed recording fee
    Survey fee
    Pest inspection fee [if necessary]
    Underwriting/document review fee
    Interim interest [varies with the closing date]
    Tax service fee
    Attorney fee
    Additional fees may apply as warranted by your state and/or personal situation

    Many of the same fees apply to refinance loans, but closing costs can often be included in the loan amount on refinances.

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