FAQ About Mortgages & Home Loans   FAQ about Mortgages
                      (Frequently Asked Questions)

What is the difference between pre-qualification and pre-approval? 

  • Pre-qualification is a lender's opinion of your ability to purchase a home, and is based on your income, employment history and available down payment.
  • Pre-approval is a lender's underwriting decision that you are qualified, subject to the conditions noted in your pre-approval, and is based upon the lender's review of your completed application, credit check, appraisal and home inspection. 
  • When it comes to writing an offer for a home, a pre-approval letter contains stronger language to the seller and the listing agent than a pre-qualification. You, the buyer, have the increased negotiating leverage of cash buyer status, because the mortgage is already in place.  A pre-approval can often be a determining factor in winning the contract in a competitive bid situation.
 
What is the difference between APR and the interest rate?
APR - the Annual Percentage Rate will be outlined on your Truth In Lending disclosure - also known as the TIL - that you receive after your application.
The APR is often higher than the quoted interest rate, or note rate.
The APR is different than your note rate, or the rate that you were quoted, because the APR includes, in addition to interest, some of the additional costs of obtaining your financing. This is a common practice in mortgage lending.
Simply stated, if there were no costs in obtaining financing, your note rate and the APR would be the same.
What are points?
  • A point equals one percent of the loan. Points are usually paid at closing. If your loan amount is $100,000, then one point would equal $1,000 or one percent. 
  • Discount Points are fees paid by the buyer to the lender to reduce the loan's interest rate. If you plan to keep the residence for five or more years, it may be worthwhile to pay discount points to reduce your monthly payment and achieve greater savings over the life of the mortgage.  The number of discount points required to buy down your interest rate will vary based on loan type. Consult your mortgage consultant for details on your specific transaction. Generally speaking, points are tax deductible when you are buying a primary residence, however we recommend you consult your tax advisor for information on limitations to tax deductibility.
What is meant by the term "locking my interest rate"? And then, when and how do I lock my interest rate?
  • When a lender "locks" your interest rate, this means you are guaranteed a specific interest rate for a specific period of time. That period of time is called the lock period. 
  • The lock guarantees your rate as long as your loan closes and funds prior to the expiration date of your lock. If your closing is delayed beyond your lock expiration date, you could be exposed to higher market rates. It is good advice to lock for a period longer than you need, or a period beyond your actual closing date. This will protect you in case unforeseen circumstances arise.
  • Typical lock periods are 15, 30, 45 and 60 days. In a stable rate environment, shorter lock periods provide you the potential for a better interest rate. However, the market can be volatile and rates move with market activity, up and down. Let's look quickly at the four possibilities for rates:  1) Rates can go up slightly.  2) Rates can go down.  3) Rates can stay the same.  or
    4) Rates can go way up.
  • If you believe rates may go up slightly, you might benefit by waiting to lock because of the shorter lock commitment period. If you believe rates will go down, you would definitely benefit by waiting to lock. If you believe rates will stay the same, you may also do better to wait. Of the four scenarios, you benefit from a longer lock only when rates go up significantly after you lock. For that reason, and generally speaking, we advocate shorter lock periods.
  • If you have a feeling that rates are going to go up significantly, by all means, call us and let's lock your rate.
  • The bottom line is this: Your mortgage consultant works for you and will do exactly what you wish concerning your rate lock. Advice is always readily available, but the final decision is yours.
  • If you have not locked in when you receive your application, you may notice that the rate on the application is somewhat higher than the market interest rate. You are not committed to that interest rate. Your mortgage consultant has intentionally used a higher rate with which to qualify you in the event that rates do go up prior to locking in.
  • You are still approved, and we do not have to re-approve you, so you are not exposed to any more paperwork.
  • Once you have a property under contract, you can then lock your rate by simply requesting a lock term. We will fax or e-mail a confirmation to you and request you sign and return the document within 24 hours.
Is it okay to use Internet statements, instead of actual hard copy bank statements, to verify my bank and investment accounts?
  • Currently Internet statements are not allowed because they have not yet been proven as a reliable source of unalterable financial documentation by the agencies that govern lending. Also, an important side note: Bank and investment statements always designate the number of total pages. For instance, your statement may say one of three, or one of five pages.
  • Please include all pages for each statement, even if there is nothing on the last page, and even if the first page is an advertisement. We do need back portions of any statements when printed on. Standard mortgage guidelines require all pages of a statement to verify accounts. If you have applied for an FHA or VA loan, we will need original bank statements. Copies are not acceptable. Missing pages always present a problem - even if you think the information is not relevant! Please include ALL pages! This will avoid unnecessary delays and frustration.
  • Getting partial statements is probably the greatest reason mortgage companies have to come back to clients and ask for additional documentation.
Who orders the appraisal and survey, and when is it ordered?
Normally your mortgage consultant orders the appraisal, and the attorney or title agent orders your survey. You will receive a copy of the appraisal at closing. Surveys determine whether there has been an encroachment to the property lines, building lines, or easements. If your home is new construction, the builder may order the survey just after completion, or just before closing. Although we recommend all buyers purchase a survey, they are not required on most mortgage products. 

When is the appraisal and survey ordered?
Most mortgage consultants order your appraisal within 48 hours of your loan application unless you request otherwise. On conventional and FHA mortgages, the appraiser has 10 business days to return the appraisal to your mortgage company. On VA loans, appraisals can sometimes take up to three weeks.
How will I be kept updated on the status of my loan?
  • This is a great question to ask your mortgage consultant.  However, at most mortgage companies either the loan consultant or a Customer Service Specialist will make an introductory call to you within 48 hours of your application and will be available to answer questions throughout the process. The Customer Service Specialist works in conjunction with your mortgage consultant and you will be normally dealing with one service specialist throughout your transaction. If any of the qualifying information you submitted to mortgage company changes, please let your service specialist know immediately.
  • In most cases you are always welcome to contact your mortgage consultant who took your application directly especially if your question is related to interest rates, but your customer service specialist's may be responsibility to keep you updated on the status of your appraisal, your survey, your loan approval, homeowners insurance and title insurance. So feel free to call your customer service specialist at any time.
Once I sign my application, am I committed to borrow the money?
Some people feel like once they have signed the application, they are obligated to borrow. That is absolutely not the case. In fact, none of the documents you have received are contractual until you are actually at closing and sign your note.
In general all your mortgage consultant is doing with your application is approving you and putting you in a position to make an offer, purchase a home and close a mortgage loan. You are not obligated for the loan transaction until you sign your closing documents.  However you may be responsible for any a loan application fee and if ordered, the appraisal.  Check with your loan officer to determine what costs you may be liable for.
What key items help ensure a smooth closing?
  • There are several key items you need to have addressed to ensure a smooth closing.  Homeowners Insurance, or Hazard Insurance, is coverage that compensates for physical damage to the property by fire, wind or other natural causes. It is very important for you to obtain your Homeowners Insurance at the earliest possible date so that there are no delays in your closing or in obtaining the necessary closing funds.
  • The Declaration Page of your Homeowners Insurance policy with proof of payment must be sent to your Banks Customer Service Specialist at least 5 days prior to your closing date.
  • The responsibility to order and produce a clear Termite Certification depends on the terms in your contract. Check with your HomeBanc mortgage consultant for details. Before closing, original documents which were requested must be received by your bank.
Where will I be closing? How much do I have to bring to closing, and can I bring a personal check?
  • Closing costs are the other charges the buyer must pay to obtain a loan. These usually included taxes, which are charged in most states, and title insurance. When applying for your mortgage, your bank's mortgage consultant will provide you with a Good Faith Estimate of the closing costs as part of the application package you receive. Normally, your customer service specialist will call you within 72 to 24  hours of your closing date, and will provide you with a preliminary Settlement Statement or a HUD-1 indicating the required cash to close. This ensures that you have ample time to arrange for the necessary funds.
  • At closing, you will be required to have certified funds in the form of a cashier's check. Although we don't anticipate any variation from the HUD-1, you should bring your personal checkbook to closing in case there are last minute adjustments. If you are due a refund at closing, the attorney or title agent will issue you a check.
  • Closing will typically take place at an attorney or title agent's office. The attorney or title agent represents the lender - not the seller, real estate agent or you - the buyer. You will be given instructions on where the closing will be conducted, along with a phone number and a fax number for the closing attorney in case you have any questions you wish to direct to them. All borrowers associated with the mortgage loan transaction will be required to bring Picture Identification to closing3;driver's license, passport, etc. are suitable.
Does my bank sell their loans? Who do I send my payment to?
  • Many clients ask if their bank will sell their loan. Another way of asking that question is, who services my loan? The answer is, your bank originates loans - they process, underwrite, close and fund your loan. That gives your bank total control of the transaction and a greater ability to help you through the process. There are no excuses for anything going wrong with your loan.  Other banks and/or mortgage brokers may process your loan but they must find someone else to  process, underwrite, and close on your loan.
  • If for some reason you do not receive a statement, your payment should be mailed to the following address. Please be sure to include your loan number on the check if you are mailing a payment without a coupon.
  • Within several weeks after you close your loan, you may receive a "Notice Of Assignment, Sale, Or Transfer Of Servicing Rights" letter indicating that your loan has been sold. The letter will include loan payment instructions, payment due dates and customer service contact information in the event you need to speak with your new loan servicer directly. The letter will also include information related to your rights as a loan customer under the Real Estate Settlement Procedures Act (RESPA). Please read this transfer notice carefully and contact us if you have any questions.
FAQs about Closing
The closing (or settlement) is the meeting at which you sign the paperwork and pay all expenses to take official ownership of your home. If you're looking for a day to celebrate buying your new home, circle this one on your calendar.  Although the closing process varies from place to place, many activities are standard. You'll be required to sign certain documents and pay closing costs. You will also be advised as to how to make your payments.
How much will your closing costs be?
Prior to the closing meeting, the Title Company, Escrow Company or attorney will review with you a copy of the HUD-1 Settlement Statement. This document will provide the final total for your closing costs. It establishes the total funds you must bring to closing. You'll need to obtain a certified or cashier's check for this amount. Personal checks usually aren't accepted.
What happens at closing?
Many of the people involved with the purchase of your new home will attend your loan closing. This includes you, the seller(s), their attorney (if they have one), both real estate agents, and, of course, the closing agent. The meeting usually takes about 1 hour and is held at the closing agent's office. In that case, either an escrow, closing agent or attorney processes all the paperwork, arranges for all documents to be signed, and collects and disburses the required funds.  The steps below explain what happens during and after closing:
  1. Closing agent reviews settlement sheet with you. Both you and the seller sign the settlement sheet.
  2. Signatures are collected for loan documents, such as the mortgage or deed, note and Truth-in-Lending statement. Evidence of required insurance and inspections is presented.
  3. If everyone agrees papers are in order, you submit a certified or cashier's check to cover your down payment and closing costs. (Or, in some proceedings, it is drawn from an escrow account established for your home purchase.)
  4. Lender provides check covering the home loan amount to the closing agent.
  5. If your monthly payments are to include property taxes and insurance, a new escrow account (or reserve) is established.

IMPORTANT:  In NC you do not actually own the home until the deed has been recorded at the court house.  Therefore, you may not recieve the keys until the deed has been recorded. 


A few of the key closing documents you receive:

  • HUD-1 Settlement Sheet ... Itemizes the services provided and the charges to the buyer and the seller. You should be allowed to review this form a minimum of 24 hours before your closing meeting so you know your closing costs in advance.
  • Truth-in-Lending (TIL) Disclosure ... You should be mailed your initial TIL disclosure within 3 business days after applying for a home loan. It outlines the costs of your loan and discloses the APR and other terms of the loan, including the finance charge, the amount financed, the payment amount, and the total payments required. Since it's possible that the annual percentage rate (APR) calculated at your loan application will change a little before closing, your lender is required to give you the final version of your TIL disclosure at or prior to the closing meeting.
  • Deed of Trust or Mortgage (also Security Deed)...Documents conveying a lien on your property as security for repayment of your home loan. (If you default on your loan, your lender has the right to foreclose your ownership interest and take possession of the property.)  Remember, in NC you do not own the home until the deed has been recorded.
  • The Note...The mortgage (or promissory) note is a legal "IOU." The note represents your promise to pay the lender according to the agreed terms, including the dates on which your home loan payments must be made and the location to which payment must be sent.

 

If you have any additional questions, send them to [email protected] 
We will respond as soon as possible.  Our goal is to make you an informed homebuyer.