FAQ - Debt Consolidation


Q. How can I use my home to consolidate debt?

You can reduce your interest rate charges (especially the high interest rates of credit cards) or pay off an account that is outstanding by consolidating all of your debt using your home equity loan.
Typically, this is beneficial because home equity loans have a much lower interest rate than other unsecured loans and, if the loan is a fixed rate, you know exactly how much you will have to pay every month. The other big advantage to consolidating debt using a home equity loan is that the interest may be tax deductible, possibly saving you even more money.
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Q. How much equity do I need in my home to consolidate debt?

The more equity you have the more you are able to borrow. It depends on your situation, but even if you do not have enough equity to consolidate all of your debt, it still might be to your advantage to consolidate the debt with the highest interest rate.

Give Wichita Mortgage Place a call to discuss your individual situation and the different options that you have.

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Q. What is a Mortgage Broker?

A. A Mortgage Broker is an independent real estate financing professional that specializes in the origination of commercial and/or non-commercial mortgages. Mortgage Brokers normally pass on the actual funding and servicing of the loans to capitol sources who act as “wholesalers.” There are approximately 20,000 mortgage brokerage operations across the nation that originates 70% of all residential mortgage loans in the US.

A. Mortgage Broker is also an independent contractor working on average with 40 wholesale lenders at any one time. By combining professional expertise with direct access to hundreds of loan products, a broker offers the most efficient and cost effective method of offering suitable financing options tailored to the consumers’ specific financial goals.

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Q. How do I shop for a mortgage?

A. The two most important things to look for when shopping for a mortgage are the interest rates and the lender. When you are comparing interest rates you will be comparing the Annual Percentage Rate (APR) (link) that lenders provide. This is considered the “bottom line” and includes all the costs of credit (interest, points, fees and any other charges). Unfortunately, the way APR is calculated can vary and you can’t be sure each APR is completely accurate. RESPA requires the lenders provide a Good Faith Estimate that includes a line-by-line explanation of any fees, points and other costs of a loan. With a Good Faith Estimate in hand you can compare one lender to the next and choose the loan that is best for you.

Second, you need to choose a lender. Many lenders can provide great rates, but you have to be comfortable with the person you choose. If you get a really low rate but your lender doesn’t offer advice, doesn’t try to help you achieve your goals and doesn’t follow-through by making sure you have the lowest rate 5 years from now then the $5 a month that you save may not be worth it.

Find a lender that you trust and are comfortable with and also offers great rates.
 
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Q. What are Wichita Mortgage Place’s interest rates?

A. This is an important question.

Here is why we don't post our rates on-line: Interest rates fluctuate on a daily basis and positioning of lenders in the marketplace changes. Also, interests rates are based partly on your credit. Not everyone qualifies for the same rate and program. Everyday we shop interest rates and discount points with dozens of lenders online. This ensures that we are able to offer you the best overall price on a large variety of products with numerous lenders. Wichita Mortgage Place’s lending network makes comparison shopping easy. Not only can you skip checking rates with multiple banks and mortgage companies, but we help you select from among thousands of mortgages, the one that is right for you

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Q. What are the required documents for loan approval?

A. The items needed to process and approve a mortgage loan can vary from lender to lender. Here are the minimum items needed to obtain a credit approval. Additional documentation may be requested upon a review of these items:
  1. Last 2 Paycheck Stubs
  2. Last 2 Bank Statements
  3. If Self-employed, Last Two Years Tax Returns
  4. Documentation of Down Payment
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Q. What are the steps for a successful mortgage closing

  1. We will contact you to arrange a convenient appointment to sign the loan documents.
  2. We prepare your closing statement, go over it with you and let you know how much money you will be expected to bring to closing.
  3. You select a homeowners insurance company. Ask your agent to contact us (link) ten days prior to closing.
  4. You make arrangements to wire funds or bring a cashier's check to the mortgage company to cover your closing costs.
  5. The day of the closing you will review all documents and sign them.
  6. The loan closing could be delayed if closing documents are signed incorrectly, or if the final closing conditions are not satisfied.

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Q. What is the difference between locking and floating my interest rate?

A. When the borrower chooses to "lock" the interest rate, the borrower is securing an interest rate and guaranteeing what their interest rate will be, regardless if rates rise or fall. The advantage is that your interest rate can’t go any higher. The disadvantage is that if rates fall the rate that you locked will not go any lower.

When you “float” an interest rate you don’t lock it in. Instead you are waiting to see what happens in the market before you lock your rate. The advantage of this is if rates fall you will receive a lower rate, but if rates rise you will get a higher rate.

Rates change every day and the market can be difficult to read. You need an experienced consultant to explain your options and give you sound advice that is best for achieving your goals.

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Q. Is it possible to use a no cost mortgage to refinance my mortgage?

A. Yes

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Q. What is Annual Percentage Rate (APR)?

A. APR stands for annual percentage rate and reflects the interest rate charge on the loan plus other finance charges that could include private mortgage insurance premiums, points, fees and other financing costs you pay when obtaining the loan. The APR does not affect your monthly payments.

The Federal Truth in Lending law requires an APR to be disclosed with every advertised rate.

The idea behind the APR is to give you an equal way to compare the “true cost of a loan.” Unfortunately, APR is a very confusing number. There isn’t one set way to calculate this number and you can’t really use it to equally compare rates from one company to the next because the lowest APR does not guarantee you the lowest monthly payments.

We will provide you with a Good Faith Estimate that you can use to truly compare our interest rate with other lenders to decide what is best for you.
 
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Q.Why is the annual percentage rate (APR) different from the interest rate?

A. The Annual Percentage Rate (APR) is the cost of credit expressed as an annual rate. Because you may be paying loan discount "points" and other "prepaid" finance charges at closing, the APR disclosed is often higher than the interest rate on your loan.

The APR is computed from the amount financed not the actual loan amount. The APR is based on what your proposed payments will be on the actual loan amount credited to you at settlement. In a $50,000 loan with $2,000 Prepaid Charges, a 30-Year term and a fixed interest rate of 12%, the payment would be $514.31 (this payment only includes principal and interest). The APR is based on the amount financed ($50,000 - $2,000 (prepaid charges) = $48,000), while the payment is based on the actual loan amount given ($50,000), the APR (12.5553%) is higher than the interest rate.

The APR can also be effected by an Adjustable Rate Mortgage (ARM). For example, a One- Year ARM may have a first year interest rate of 6.0%, but will adjust yearly based on the index. The APR attempts to predict an average rate over 30 years. The APR is also increased if the loan has Private Mortgage Insurance (PMI). PMI is required on most loans that do not have at least a 20% down payment. The PMI is considered a "prepaid" finance charge when calculating the APR.
 
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Q. What are “points?”

A. Points are also called origination fees. These fees are charged by the lender to pay for certain expenses incurred in connection with the processing of the real estate loan and to lower interest rates. One point is equal to one percent (1%) of the amount of the loan. (On a loan of $100,000 one point would cost $1,000)

Deciding if you should buy points or not is a complicated decision. There are many factors that go into this decision. Such as: how long you will stay in the home, cash flow, tax breaks and current and future interest rates.

At Wichita Mortgage Place we will go through all the advantages and disadvantages of buying points and if it is right for you.

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Q. What is an ARM loan and how does it work?

A. ARM stands for Adjustable Rate Mortgage. This means your interest rate changes periodically. Initially, you will get a very competitive rate with an ARM (the so-called teaser rate). Depending on your program, your interest rate will be adjusted after a predetermined period, which can be as short as 1 month or as long as 10 years. Your rate will be determined by adding two key figures: the index plus the margin. The index is the value that will change and make your rate either go up or down. Your index could be the 1 Year T-Bill, LIBOR: London Inter-Bank Offered Rate, or a different index. Your margin is fixed for the life of the loan and determined when your interest rate is locked (2.5, 2.75 etc.). When your interest rate adjusts it will be figured by adding the current value of your index with the margin.

Most ARM loans, but not all, will have yearly and lifetime rate caps to protect you from wild increases or decreases.

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Q. When refinancing my home do I need to pay for another policy of title insurance even though I own the property and already purchased title insurance when I bought the house?

A. A new policy is needed to protect the new lender and subsequent investor of your new mortgage. A title company will research the legal history of your property through public records. If there were any problems, it could threaten the mortgage, limit use of the property and could result in financial loss. A policy of title insurance will protect you, the lender and any investor and cover the cost of any legal challenges.

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Q. When refinancing investment or rental property, what is the difference in rate for non-owner occupied vs. owner occupied financing?

A. Conforming non-owner occupied rate are usually 3/8% higher than owner occupied interest rates. Also, the equity requirement is usually higher by 20-30%.
 
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