FAQ - New Home Lending


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 is the process of obtaining a loan

  1. The loan application (link) is completed and all pre-approval checklist (link) items are collected.
  2. The credit report is ordered and any documents that the lender still does not have are gathered.
  3. The completed loan file is submitted to the lender/underwriter for pre-approval.
  4. The appraisal, title report and mortgage are ordered.
  5. The lender reviews all the remaining conditions prior to final loan approval.
  6. The loan documents are prepared and delivered to the mortgage company.
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Q. What is the difference between prequalified and preapproved

A prequalification letter estimates what you can afford based on the basic information that you have provided. It is a helpful outline to how much you can afford but is not an in-depth look into your finances or a guarantee that you can be approved.

Getting preapproved is written confirmation to finance your home purchase for a specific amount. A preapproval means that there has been a detailed look into your financial background and there is a commitment to lend a certain amount of money pending property details. A preapproval does involve a credit check and is more powerful than being prequalified.
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Q. Why should I get preapproved

A. Being preapproved offers numerous advantages:
  • Knowing exactly how much you can afford.
  • Shop as a “cash buyer” and take advantage of the buying and bargaining power that comes with being a “cash buyer.”
  • Overcome any qualification problems early in the process versus when you try to close on a contract.
  • As a first-time homebuyer it provides the seller with a guarantee that you will be able to get the necessary loan for a home purchase.
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Q. How do I get Preapproved

A. Submit your financial information to Wichita Mortgage Place. (You can start the process right now!) We will review your loan application and, if you qualify, we will provide a preapproval letter for a mortgage amount that includes down payment (if there is one) and interest rate. The loan commitment will be finalized after specific property information has been obtained.
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Q. How much money will you need for a down payment and closing costs to purchase a home

A. Lenders usually expect you to be able to make a down payment of at least five percent of the house's price and to pay closing costs, which are often three to four percent of the loan amount. If you make a down payment as little as five to twenty percent, the lender will require you to pay for private mortgage insurance (PMI). If you make a down payment over twenty percent, you will not be required to pay for private mortgage insurance. (Requirements for VA or FHA loans may differ.) Under the Federal Real Estate Settlement Procedures Act (RESPA), lenders must provide you a Good Faith Estimate that will outline all fees and explain any closing costs that you will be paying.
If you can’t put 5% down there are still plenty of programs to help you get into a home.

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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. 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 Paymen
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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 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 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 is Private Mortgage Insurance (PMI or also called Mortgage Insurance Premium (MIP))

A. PMI is normally required when you buy a house without putting 20% down. This insurance helps protect lenders against the cost of foreclosure. The protection against foreclosure is generally provided by the down payment of 20% but PMI allows lenders to accept lower down payments. The cost of your PMI decreases as your down payment increases.

If you are interested in getting rid of your PMI or getting into a house with less than 20% down we have programs to help.

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Q. What is the difference between a zero point and no-cost mortgage

A zero point mortgage is when a borrower is not paying any points to buy their interest rate down but is still paying closing costs (appraisal, credit report, document fees, title, escrow etc…)

A no-cost mortgage is when a borrower accepts a slightly higher rate but the lender or broker will pay for the non-recurring closing costs (not including the interest, taxes and insurance.)

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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. What is an FHA or VA mortgage

A. Federal Housing Administration (FHA) or Veteran's Administration (VA) mortgages are loans insured by the respective government agencies. FHA programs enable lenders to arrange financing for the borrower with a minimal down payment. Similarly, VA programs (available to veterans only) can be made to a borrower who has little or no down payment. When borrowing under these programs, you will pay a Mortgage Insurance Premium (MIP) for an FHA Loan or a Funding Fee for a VA Loan to insure the mortgage. This is similar to private mortgage insurance on a conventional loan. These insurance premiums may be paid out-of-pocket at the time of closing or financed by increasing the mortgage amount.

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