- 1) Should I refinance?
- 2) Should I pay points?
- 3) What is a FICO score?
- 4) Can my loan be sold?
- 5) What is PMI? Can I get rid of PMI on my loan?
- 6) What is APR?
- 7) Your rates are the best in the market place, how do you do this?
- 8) Why are your fees much less than your competitors?
- 9) If mortgage rates get better will you lower my interest rate?
- 10) What products are available for me?
1. Should I refinance?
The answer to that question is … it depends.
While refinancing lowers mortgage payments through lower interest rates or longer terms -- and there are plenty advantages to refinancing -- there are certain considerations to make before doing so.
When interest rates drop, there is always an influx of borrowers hoping to capitalize on the lower rates. Even a ¼ percentage point reduction will save you money in the long run as long as you keep your home long enough to see the savings after paying points, fees, etc.
Some reasons you should consider when deciding to refinance are:
- to change from an Adjustable Rate Mortgage (ARM) to a Fixed Rate Mortgage (FRM) because rates are low.
- the new rates are at least two percent lower than your current rate
- you would like to cash out some of the equity in order to eliminate or consolidate your debts
- you need cash for renovations
- to remove the PMI (Private Mortgage Insurance) once you've reached 20% equity in your home
- to combine first and second mortgages into one mortgage and one payment
However, not everyone benefits from refinancing. Sometimes an owner might end up paying more than if they kept their original loan.
Because refinancing your home loan has certain fees inherent to the process, it may not be in your best interest to refinance at this time. Additionally, if your existing loan includes a prepayment penalty, this could negate the benefits of refinancing. Also, if you haven't built up enough equity in your home, consider waiting a while before refinancing.
If the advantages of refinancing outweigh the disadvantages, give us a call. We can even help you decide if it's better to refinance now or wait a while.
2. Should I Pay Points?
To answer that question you will need to decide if you want to pay money now or later.
A point is a fee - equaling one percent of the loan amount - that reduces your monthly interest rate and total interest due over the life of the loan (sort of a prepayment of interest).
As a rule of thumb, each "point" adds about 1/8 to ¼ of each percentage to the interest rate. Typically, the lower the interest rate, the higher the points are. So some companies will offer refinancing with no points but their interest rates will be higher.
To help you decide what combination of rate and points is right for you, you should balance the amount you can pay upfront by the amount you want to pay monthly. And, the less time you keep the loan, the more expensive points become. What we're saying is, if you plan to stay in your home for a long time, it would be worthwhile to pay additional points to lower the interest rate.
We can help you figure out the cost of loan points and how long it will take to recover your loan points. Just give us a call.
3. What is a FICO score?
The Fair, Isaac System, known as FICO, was developed in the 1980s to help predict the credit risk of consumers based on their credit report.
Scores range from 300 to 850, with the best scores being closer to 850. The majority of consumers' scores fall in the 600-700 range. The way lending institutions see it, the higher your score, the lower your credit risk is for them.
These scores may change from month to month, depending on the data changes reported by a credit reporting company.
The factors taken into consideration to arrive at your score are your:
- credit history
- income
- outstanding debt
- use of credit
- access to credit
- other indicators of financial behavior
A typical "cutoff point" for loans is 620. Below that you may fall into the subprime market that has higher interest rates.
We can help you access your credit score and provide you with as many options as possible to get the best rates and lowest fees available. Just give us a call and let's see what we can do to get you a mortgage that's right for you.
How can I increase my score?
The most effective ways to improve your credit may take some time but will be well worth the effort. You should
- make sure to pay your bills on time
- try to reduce your debt
- have some credit to show you are credit worthy (but not too much, you don't want your debt-to-income ratio to increase)
- not apply for credit often. The number of inquiries can negatively affect your credit
What if there is an error on my credit report?
First of all, get an updated credit report. "The Fair Credit Reporting Act (FCRA) requires each of the nationwide consumer reporting companies - Equifax, Experian, and TransUnion - to provide you with a free copy of your credit report, at your request, once every 12 months."
If you notice errors, report those to the three major credit bureaus
- Equifax (800) 685-1111
- TransUnion (800) 916-8800
- Experian (800) 397-3742
Follow their procedures to correct the erroneous information. Doing so will get you on your way to getting an accurate credit score and improving your chances of getting a great rate on your mortgage loan.
4. Can my loan be sold?
In a word, yes. Your loan can be sold to another lender. However, this is not cause for concern.
Mortgage companies close more than half of all home loans and they always sell the loans because that's the nature of their business. They are in business to originate loans for sale.
Depository institutions such as banks and credit unions usually sell their fixed-rate mortgages. They view ARMs as a better fit for their short-term deposits.
So even though your loan might be sold, the conditions of your loan will remain the same.
5. What is PMI? Can I get rid of PMI on my loan?
PMI stands for Private Mortgage Insurance. It is generally required for borrowers who put less than 20% down on their homes.
You can initiate the process to cancel the insurance once your loan's balance has been paid down to at least 78% of your home's value with the lender's approval.
Once your loan reaches 80% loan-to-value ratio, the Homeowners Protection Act of 1998 applies and lenders are required to cancel coverage, if asked. The key is, you must request the cancellation. If you forget to ask, the law requires that the lender cancel the coverage once the loan balance reaches 78% of the home's value at the time it was purchased or its current value, depending on the lender.
We can help you determine if you've met the criteria for cancellation of your PMI. Just give us a call and we'll let you know.
6. What is APR?
The Annual Percentage Rate or APR is the interest rate charged for a loan. The generally accepted process is to add the one-time costs to the loan amount then calculate a monthly payment for that amount at the loan's "note rate," then calculate what interest rate would have to be applied to the face amount of the loan in order to equal the calculated previously mentioned monthly payment.
The APR is intended to make it easier to compare lenders and loans.
What fees are included in the APR?
The fees included in the APR can vary but generally speaking, the following are included:The fees included in the APR can vary but generally speaking, the following are included:
- points
- prepaid interest
- loan processing fees
- underwriting fees
- document preparation fees
- Private Mortgage Insurance
The APR can be a complex calculation, so we use a software program to arrive at the correct APR for your loan. Give us a call and let us get that information for you.
7. Your rates are the best in the market place, how do you do this?
Armed with your loan amount and your closing date, we go to the marketplace and price your loan based upon this information. We then tailor your rates for the best rate for you. Because mortgage brokers and banks don't have this option, they have to price your loan based on the standard 15-, 30-, 60-day scenarios. We can tailor your quote for one day to 180 days.
8. Why are your fees much less than your competitors?
We charge you only the fees associated with your loan. Your fees will be tailored to match your loan product and will be the lowest in the industry. We have the ability to raise your rate and not charge you any fees, this being a no-closing cost option or we have the ability to charge you fees and give you a very competitive interest rate.
9. If mortgage rates get better will you lower my interest rate?
Yes, if mortgage rates have dropped at least ¼ percent at your loan amount with us, for a small fee we can get you the most competitive interest rate.
10. What products are available for me?
Capital Mortgage Corporation offers products from six-month ARMs to 40-year mortgages. We offer small loans to loans in excess of $1,000,000. No matter what your situation, we have the ability to go into the marketplace and fit a product to your exact requirements.
Complete our prequalification form to get started or contact us using our no-pressure contact form. We'll help you get the mortgage that's right for you.
