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Down Payments and Private Mortgage Insurance
Fair Lending is Required By Law
Credit Problems?
Glossary
Definitions

Down Payments and Private Mortgage Insurance

Some lenders require 20 percent of the home’s purchase price as a down payment. However, many lenders now
offer loans that require less than 20 percent down--sometimes as little as 5 percent or even no down payment on conventional loans. If a 20 percent down payment is not made, lenders usually require the home buyer to purchase
Private Mortgage Insurance (PMI) to protect the lender in case the home buyer fails to pay. Services are available, that may make the down payment requirements substantially smaller. Ask about the lender’s requirements for a down payment, including what you need to do to verify that funds for your down payment are available. Ask your lender about special programs they may offer.

If PMI is required for your loan,
Ask what the total cost of the insurance will be.
Ask how much your monthly payment will be when including the PMI premium.
Ask how long you will be required to carry PMI.

Here at Advantage Insurance and Mortgage Group, we specialize in 100 percent financing options, which allow our clients the luxury of not having to provide any down payment toward the purchase of their new home. In fact, many times the closing cost can be rolled into the loan amount or paid by the seller. Also, at Advantage, we will utilize our expertise to find the best Mortgage Programs which does not require any (PMI) Private Mortgage Insurance, which in return, reduces the overall cost for our clients.

Fair Lending is Required By Law

The Equal Credit Opportunity Act prohibits lenders from discriminating against credit applicants in any aspect of a credit transaction on the basis of race, color, religion, national origin, sex, marital status, age, whether all or part of the applicant’s income comes from a public assistance program, or whether the applicant has in good faith exercised a right under the Consumer Credit Protection Act.

The Fair Housing Act prohibits discrimination in residential real estate transactions on the basis of race, color, religion, sex, handicap, familial status, or national origin. Under these laws, a consumer cannot be refused a loan based on these characteristics nor be charged more for a loan or offered less favorable terms based on such characteristics.

At Advantage Insurance and Mortgage Group, we pride ourselves on working with the utmost honest and ethical business practices. We believe in following the written laws and regulations to the highest standards, thus creating a sense of reassurance for our clients, their families, and friends.

Credit Problems?

Don’t assume that minor credit problems or difficulties stemming from unique circumstances, such as illness, divorce, or temporary loss of income, will limit your loan choices to only high-cost lenders. If your credit report contains negative information that is accurate, but there are good reasons for trusting you to repay a loan, be sure to explain your situation to the lender or broker. If your credit problems cannot be explained, you will probably have to pay more than borrowers who have good credit histories. But don’t assume that the only way to get credit is to pay a high price. Ask how your past credit history affects the price of your loan and what you would need to do to get a better price.

Whether you have credit problems or not, it’s a good idea to review your credit report for accuracy and completeness before you apply for a loan. At Advantage, we will review and analyze your credit situation, to help you get back on track if you have had credit problems in the past. To order a copy of your credit report, contact:

Advantage Insurance and Mortgage Group: (704) 262-3758
Equifax: (800) 685-1111
TransUnion: (800) 888-4213
Experian: (888) 397-3742

Glossary

Adjustable-rate loans, also known as variable-rate loans, usually offer a lower initial interest rate than fixed-rate loans. The interest rate fluctuates over the life of the loan based on market conditions, but the loan agreement generally sets maximum and minimum rates. When interest rates rise, generally so do your loan payments; and when interest rates fall, your monthly payments may be lowered.

Annual percentage rate (APR) is the cost of credit expressed as a yearly rate. The APR includes the interest rate, points, broker fees, and certain other credit charges that the borrower is required to pay.

Conventional loans are mortgage loans other than those insured or guaranteed by a government agency such as the FHA (Federal Housing Administration), the VA (Veterans Administration), or the Rural Development Services (formerly know as Farmers Home Administration, or FmHA).

Escrow is the holding of money or documents by a neutral third party prior to closing. It can also be an account held by the lender (or servicer) into which a homeowner pays money for taxes and insurance.

Fixed-rate loans generally have repayment terms of 15, 20, or 30 years. Both the interest rate and the monthly payments (for principal and interest) stay the same during the life of the loan. The interest rate is the cost of borrowing money expressed as a percentage rate. Interest rates can change because of market conditions.

Loan origination fees are fees charged by the lender for processing the loan and are often expressed as a percentage of the loan amount.

Lock-in refers to a written agreement guaranteeing a home buyer a specific interest rate on a home loan provided that the loan is closed within a certain period of time, such as 60 or 90 days. Often the agreement also specifies the number of points to be paid at closing.

Mortgage, a document signed by a borrower when a home loan is made that gives the lender a right to take possession of the property if the borrower fails to pay off the loan.

Overages are the difference between the lowest available price and any higher price that the home buyer agrees to pay for the loan. Loan officers and brokers are often allowed to keep some or all of this difference as extra compensation.

Points are fees paid to the lender for the loan. One point equals 1 percent of the loan amount. Points are usually paid in cash at closing. In some cases, the money needed to pay points can be borrowed, but doing so will increase the loan amount and the total costs.

Private mortgage insurance (PMI) protects the lender against a loss if a borrower defaults on the loan. It is usually required for loans in which the down payment is less than 20 percent of the sales price or, in a refinancing, when the amount financed is greater than 80 percent of the appraised value.

Thrift institution is a general term for savings banks and savings and loan associations.

Transaction, settlement, or closing costs may include application fees; title examination, abstract of title, title insurance, and property survey fees; fees for preparing deeds, mortgages, and settlement documents; attorneys’ fees; recording fees; and notary, appraisal, and credit report fees. Under the Real Estate Settlement Procedures Act, the borrower receives a good faith estimate of closing costs at the time of application or within three days of application. The good faith estimate lists each expected cost either as an amount or a range.

Definitions

Abstact Of Title
A history and compilation of legal documents pertaining to a parcel of land.

Adjustment Interval
On adjustable rate mortgages, the period of time between changes in either the interest rate or monthly payment (for example one year). Intervals vary depending on the type of loan and lending institution.

Amortization
Schedule of repayment of a loan, including principal and interest, by a series of regular installment payments. Home loans are typically amortized over a period of time between 10 and 30 years.

Annual Percentage Rate(APR)
The cost of a loan expressed as a yearly rate, after it has been adjusted for certain fees. Use the APR to compare various loan programs, as all lenders are required to use the same guidelines in determining APR.

Application Fee
Often non refundable, this is a fee charged by the lender to cover a portion of the costs of processing the loan application.

Appraisal
An expert's written estimate of the current value of a home.

Assessed Value
Value placed on a property by the tax assessor for property tax purposes.

Assumption
A loan feature that permits transfer of a mortgage to a new buyer under certain circumstances.

Ballon Loan
A balloon mortgage has periodic installments of principal and interest that does not fully amortize the loan. The balance of the mortgage is due in a lump sum at a specific date, usually at the end of the term.

Closing
Usually the last step in buying a home. Documents are signed, the balance of the loan costs are calculated, and funds are disbursed and the transaction is completed.

Closing Cost
One time costs such as loan fees, title fees, appraisal fees, etc., that are paid by the buyer, the seller, or shared by both, depending on the terms of the purchase agreement. The lender should provide the buyer with an estimate of closing costs prior to closing.

Condominium
A structure in which the interior living spaces are individually owned and the balance of the property (both land and all structures) is owned in common by all the owners of the individual units.

Convertable Arm Loan
For a fee and after an initial waiting period, you can convert an ARM to a fixed rate loan. Conversion features and availability of this type of loan may very from lender to lender.

Discount Point(s)
Amount paid to the lender when a loan is originated to allow the borrower to obtain a lower rate than would otherwise be available. Points may be paid by either the buyer or the seller, depending on the written agreement between them. Each point is equal .

Earnest Money
A deposit of money accompanying an offer to buy a property to show good faith; generally credited to the buyer at closing.

Equity
The market value of a property minus the amount of existing home loans or liens.

Escrow Account
A separate account for accumulating the portion of the monthly payment that will be used to pay future taxes, insurance, fees assessment and so forth. In some cases an escrow account may not be required.

Escrow Agent
A third party appointed to act as custodian for documents and funds during the transfer from seller to buyer. Generally this person is an attorney experienced in real estate matters.

Index
An agreed upon basis for making interest rate changes on an adjustable rate mortgage. An example of the index is the weekly average yield on U. S. Treasury securities adjusted to a constant maturity of one year.

Interest Rate Cap
Limit on the amount an adjustable rate mortgage may increase or decrease during a specific interval and over the life of the loan. This safeguard protects the buyer from dramatic changes in monthly payments.

Jumbo Loan
A loan that exceeds the statutory size limit eligible for purchase or securitization by quasi federal agencies such as Fanny Mae or Freddie Mac. At this time, the loan amount is $240,000.

Origination Fee
A fee charged by the lender for making a real estate loan usually one percent of the loan amount. Not to be confused with an application fee.

PITI
The total amount of the monthly payment that includes principal and interest on the home loan and escrowed amounts for property taxes and hazard insurance.

Preapproval
The lender has reviewed the borrower's credit history and verified income and has issued a loan commitment based on a maximum amount qualified for subject to an acceptable appraisal of the property.

Prequalification
The borrower has received a statement from the lender that they will likely be able to obtain a loan contingent upon verification of information provided by the borrower. This is NOT a guarantee of a loan commitment as information is unverified.

Private Mortgage Insurance (PMI)
Insures repayment of the loan balance to the lender in the event of default by the borrower. It is similar to insurance issued by the federal government on FHA loans (MIP) except that it is issued by a private company. Usually it is required when a borrower has less than 20% downpayment.

Rate Lock
The lender's guarantee that the interest rate in effect the day of lock in will be the final interest rate at closing assuming the loan closes during the lock in period. This period can extend up to six months from the date of initial lock in.

Refinance
To replace an existing loan with a new one to get a lower rate, extend or reduce the term, switch to another type of loan program, or convert equity to cash.

Term
The number of years before a loan is paid in full. The most common terms are 15 and 30 years, although other terms are available.

Title
The evidence of ownership of property.

Titile Insurance
Title insurance protects the lender's exposure by providing a corporate guarantee against insured defects, paying all legal expenses to eliminate any title defects, paying any claim arising from errors in title examination and recording, and paying any loss from hidden defects in title and defects not of record. The owner of the property may also be protected with tile insurance.

Underwriting
The process by which credit and economic factors are used to determine whether a borrower qualifies for a loan.

Warranty Deed
A legal document used to convey title.

This information provided by the Federal Deposit Insurance Corporation.