This is a fee that lenders may charge for services involved in creating the mortgage loan. Generally expressed as a percentage of the loan amount, the fee is usually no more than 1% of the total amount borrowed. Not all rates quoted will include this fee.

3. What is a discount point?

Discount points refer to a payment the buyer makes in addition to the origination fee, and actually represent pre-paid interest on the loan. This payment allows the lender to offer a lower rate because the borrower has “bought down” their rate by paying the interest upfront. Discount points are calculated as a percentage of the loan amount, and vary daily based on the fluctuating interest rates offered by our investors.

4. What are lender fees?

Lenders, which vary from lender to lender, may be charges in order to cover the cost of preparing, processing and underwriting the loan application. At IMC, we only charge for services rendered, and pride ourselves in providing first class service without charging our customers “junk fees” to increase our profit on the loan.

5. How are rates determined?

Mortgage interest rates can fluctuate daily based on a variety of market conditions. There is no clear correlation between a particular index such as the S&P 500 or another stock market indicator. Each mortgage company sets its own interest rates daily based on a number of factors, including the 10-year and 30-year T-bills, as well as other market data available. There is no industry standard for interest rates, and thus they can vary from company to company. You will find that rates, points and fees vary by company.

6. What’s the difference between a “floating” rate and one that’s “locked”?

To lock in your interest rate, you must specifically notify your loan officer that you want to do so. Until you do, the interest rate “floats” with the daily fluctuations in the market. Once you lock in your rate, however, you are guaranteed to receive that rate when you go to settlement.

7. When can I lock in, and how long does it last?

Generally, rate locks last for 50 days. Therefore, it’s smart to make sure that your loan will close within 60 days from the date that you lock in your rate. Otherwise, the lock could expire, and you would have to accept the current prevailing rate for your loan. There are programs that allow you to “extend” a lock up to 75 days, and these programs vary by investors — so please consult your loan officer for associated details and costs.

8. How can I compare rates and fees when mortgage shopping?

When shopping for a loan, a smart borrower should compare points, fees and the Annual Percentage Rate (APR). The APR includes all of the fees included in your loan, and sometimes, these fees may be significant. Therefore, the APR is a good way to compare lenders equally. Most importantly, you should feel comfortable with the products, services and answers that your lender provides throughout the loan process.

9. What is the difference between the Annual Percentage Rate (APR) and my interest rate?

The APR is the cost of your loan expressed as an annual rate. It includes interest, points and finance charges associated with the loan, and is helpful when comparing different types of mortgages. The interest rate, in contrast, is the actual rate at which you are borrowing your money, and is used to calculate the interest payment on the loan.

10. Why is the APR on the Truth-in-Lending disclosure higher than the rate shown on my mortgage note?

The APR includes other costs associated with securing your loan, which can include: interest, loan origination points, discount points, and other finance charges. The APR is expressed as a percentage to allow you to compare different loans using a standardized means of comparison.

11. What are the minimum down payments for conventional, FHA, and VA loans?

Among the various types of conventional loans programs range from requiring 20% down to as little as no money down. The most common conventional loans require between 5% and 10% down and still eliminate the need to pay Private Mortgage Insurance (PMI). An FHA loan requires a total of 3.5% down, but does require mortgage insurance which is built into your closing costs and new loan payment. A VA loan requires no down payment but the borrower must be an eligible veteran. Ask your loan officer for details on any of these programs. (For information on PMI, see question #12 below)

12. What is the difference between a Conforming and Jumbo loan?

A Conforming loan conforms to Federal guidelines that state that the loan amount cannot exceed the Conforming loan limit, set by the Federal Housing Finance Board. The current limit on a Conforming loan is $417,000 and the Jumbo Conforming limit is $625,500. This limit is reviewed annually and adjusted as necessary. A ‘Super Jumbo’ loan is any loan that exceeds the Conforming loan limit, and is sometimes referred to as a “Non-Conforming” loan.

13. What is Private Mortgage Insurance (PMI)?

PMI is insurance issued by a private mortgage insurance company that protects the lender in case the borrower defaults on the loan. It is generally required if the borrower does not have 20% of their own money invested in the property. This requirement can now be avoided by utilizing a second trust, allowing the borrower to make a down payment of as little as 5%. Ask your loan officer for details.

14. What is an 80/10/10 or an 80/15/5?

These terms refer to loan programs that have an 80% first trust (mortgage) and a second trust (mortgage) of either 10% or 15%. The remaining 10% or 5% is the borrower’s down payment and, in most cases, must come from the borrower’s own funds.

15. What is title insurance?

Title insurance provides the lender with coverage in case there are claims against the title of the property. The borrower may also purchase an owner’s title insurance policy to protect their interest; however, this is not required. In cases where land and property have been bought and sold over time, there is always the possibility an error has occurred in the recording of one of these transactions. If an error has occurred, it may be that someone else may still hold title to or has an interest in the property. Title insurance protects lenders (and owners, if they have owner’s policies) against any possible claims that may result. If such a claim should take place and you do not have title insurance, you could lose your investment in your home. All lenders require “lender’s coverage” to protect their interest.

16. What is an escrow account?

An escrow account is money that is aside each month from the borrower’s mortgage payment to pay the real estate taxes and hazard insurance on the property. Every time a mortgage payment is made, a portion of the payment is put into an escrow account. When the taxes or insurance bills come due, the lender pays the bills with the money from the escrow account. The establishment of an escrow account is not always required, but it’s often recommended so that the money is available to pay the taxes and insurance when the bills come due.

17. What is a Good Faith Estimate?

This is an estimate of fees that you will be required to pay at closing. This is an “estimate” prepared in “good faith” by the lender, and may not be exactly correct. Although every attempt is made to give accurate figures to the borrower, the settlement attorney prepares the final settlement statement (called the HUD-1 document) and is ultimately responsible for the exact settlement figures.

18. What is a balloon mortgage?

A balloon mortgage is a loan that has equal monthly payments that last for a specified period. At the end of that period, the loan is not fully paid off and the remaining balance is due in one “balloon” payment. This is commonly used today with second trust mortgages, which are called 30/15 balloons. This arrangement amortizes the loan over 30 years but sets a payment schedule for 15 years. At the end of the 15 years period the remaining balance comes due.

19. What are ratios, and how do they affect my ability to get a loan?

There are generally two types of qualifying ratios: “front ratio” and “back ratio.” The “front ratio” is calculated by dividing your monthly housing expense (PITI) by your gross monthly income. The result is expressed as a percentage, usually no more than 28%-33%. The “back ratio” is calculated by dividing the borrower’s total fixed monthly debt by their gross monthly income. The fixed monthly debt includes your PITI as well as car loans, student loans, credit card payments and installment loans. This ratio is expressed in a percentage that usually cannot exceed approximately 38%. These ratios give the lender a better picture of a borrower’s ability to afford a particular payment. Using today’s automatic underwriting guidelines, these ratios are somewhat flexible. Ask your loan officer for more details.

20. What are the steps involved in approving my loan?

Loan approvals can happen much more quickly today than in the past. The ability to do more and more work utilizing computers and the Internet has enabled the mortgage industry to expedite the processing of loans. Even with new and improved systems and methods for loan processing and approval, the following steps must be completed:

A. Formal loan application must be made with your loan officer. This is the beginning of a positive loan experience. The better prepared you are to give your loan officer all the necessary information required for the loan application, the smoother the loan processing will go. To make sure you understand what will be required of you during a formal loan application, please see the borrower checklist of “Items required for loan application” on our Download Forms page.

B. Required documentation is collected or ordered by the loan processor. Your loan officer or the loan processor will order a credit report, appraisal and other necessary documents required for your particular loan. These may include such things as VOE (Verification of Employment), VOD (Verification of Deposit), etc. Required documentation will depend on your particular situation and the loan program you and your loan officer choose.

C. The processor submits the loan for underwriting review. This submission is usually handled through one of the automated underwriting programs now available to mortgage lenders. In most cases, the loan is approved in a matter of hours from the time of submission. After the loan has been approved and any conditions for the approval have been satisfied, the loan is reviewed once more by an underwriter who verifies that the electronic submission was accurate and that all conditions have been met. Once this is completed, the loan has reached final approval.

D. Closing documents are prepared. The closing documents are prepared by our closing department in coordination with the settlement attorney. The settlement attorney prepares the final HUD-1 form, which is a detailed accounting of the entire financial transaction. At this time, the borrower can be told how much money they will need to bring to closing. The HUD-1 form is signed at settlement along with a number of other papers.

E. Settlement and funds disbursement. Both parties involved in the transaction must sign all the necessary documents to finalize the deal. Once this takes place, the funds are dispersed to the selling party to satisfy the sale (except in the case of a refinance, where there is a 3-day right of rescission period before funds can be dispersed).

F. Recordation of the transaction. The settlement attorney notifies all appropriate authorities that there has been a settlement on your property and that a note and deed have been executed. These documents serve as security for the lender for the mortgaged property.

G. Payments are made. You will receive information from the lender either at settlement or shortly thereafter outlining the ways in which you may make payments on your loan. Alternatives include via a payment coupon book, monthly billing statement, or through automatic withdrawal from your bank account.

21. I am self-employed. Can I still get a loan?

Yes. Self-employed borrowers can apply for a loan by providing two years of tax returns that verify their annual earnings. There are also various programs available that do not verify income or assets that you may be able to use. Generally a two-year verifiable job history in the same line of work will be required.

Purchase Questions

1. How can I find out how much I can qualify for when looking to buy a house?

2. What is a pre-approval?

3. How can I accumulate money for a down payment?

4. What can I do to maximize my buying power?

5. Are there financial actions I should avoid taking while undergoing the loan approval process?

1. How can I find out how much I can qualify for when looking to buy a house?

Your loan officer will evaluate your income, your current debts and estimated down payment. Based on this information, they can usually determine the maximum mortgage amount for which you could qualify within minutes. You may also access our payment calculator to make your own preliminary evaluation, of your ability to make monthly payments, based on various loan amounts. This process is frequently referred to as a “pre-qualification analysis.” In some cases, your loan officer may give you advice on ways in which you can improve your overall financial stability to better qualify to purchase a home. You may also choose to have your loan officer perform a pre-approval, which will require a more detailed analysis. (see below)

2. What is a pre-approval?

When you talk with your loan officer for a pre-approval, he/she will evaluate your income, your current debts, estimated down-payment and your credit report. Using this information, they will be able to perform a more in depth analysis of your financial picture and issue a pre-approval letter. The pre-approval letter is not a guarantee of loan approval, but rather an approval based on conditions that will need to be met once a formal loan application is performed. Many Realtors now require a prospective home buyer to be “pre-approved” before they will submit a contract on a home. Check with your Realtor for details or ask your loan officer.

3. How can I accumulate money for a down payment?

For many potential homebuyers, the money necessary for a down payment is often the biggest deterrent to home ownership. Here are several ways you can acquire enough money for a down payment.

A. Have your parents or a relative give you money as a gift. Although all gifts need to be documented, this is an easy way to come up with funds necessary for a down payment. Consult your loan officer for details on gifts and your particular loan program.

B. Ask the seller to pay all or part of your closing costs. Many loan programs allow seller contributions. Ask your Realtor or loan officer if this is an option for you.

C. Consider taking a “zero point loan” to help lower your closing costs. In many cases you can even take a slightly higher interest rate in exchange for a credit back from your lender at settlement. Ask your loan officer for details.

D. Borrow money from a retirement plan such as a 401K or Thrift Savings Plan (TSP). You may even consider borrowing money from the available cash value of a life insurance policy. Consult your tax or insurance advisor regarding these options.

E. You may consider selling an asset to raise cash for your down payment, such as a car or boat.

4. What can I do to maximize my buying power?

There are several factors that your loan officer and the underwriter will consider when qualifying you for a loan. The most significant factors are your income, debts and your down payment. In order to maximize the amount of money you can borrow, you need to consider the following things:

A. You should try to pay off or consolidate your long-term debt. A large amount of long-term debt can cause a lender concern about your future ability to pay your mortgage. Consult your loan officer about the best way to handle your current debt.

B. In addition to excessive debt, you may have other credit problems that are hurting your credit scores and therefore affecting your ability to borrow. Your loan officer can help you evaluate your credit report and offer suggestions that may help repair your credit and enable you to qualify. It is not always the best idea to pay off all your credit cards. Consult your loan officer.

C. If your income is too low to qualify, you should make sure you are reporting all of your income from other sources such as bonuses, overtime, rental income, alimony, etc. You can also ask your loan officer about other programs that may be available that require less down payment.

5. Are there financial actions I should avoid taking while undergoing the loan approval process?

A. Do not make any major purchases. Any major purchases or increase in your current debt can have an adverse affect on your ability to close on your loan. Try to hold off on any new purchases until you have moved in to your new home.

B. Do not pay off debt or close accounts. Borrowers will often make the mistake of paying off or closing accounts assuming that will help their credit scores or their credit worthiness. It can actually hurt your ability to secure a loan if you close too many accounts. Your loan officer can help you evaluate your credit report and advise you on the best options for paying off debt or closing accounts.

C. Do not change jobs. Most loan programs require the lender to verify your employment. If you change jobs prior to making loan application or during the loan process, this can cause delays or even hinder your ability to secure a loan. The biggest problem occurs when your new job is in a different line of work. This can create delays or even a loan denial due to lack of stability in your job.

D. Do not switch bank accounts or move money between accounts. Most loan programs also require that the funds in your bank accounts be verified. If your account is brand new or has shown excessive activity including large deposits or withdrawals, this will cause delays while the activity is verified. It is best to leave your bank accounts stable until your loan is completed and closed.

Refinance Questions

1. Why should I refinance my current mortgage?

2. What factors should I evaluate when considering refinancing?

3. Can I take cash out of my house when I refinance?

1. Why should I refinance my current mortgage?  

There are a number of reasons you may want to consider refinancing your current mortgage.

A. Lower your interest rate, thus lowering your monthly payment.

B. Maximize your cash flow with lower payments for a longer term.

C. Convert an adjustable rate mortgage to a fixed rate mortgage.

D. Pull cash out of the equity in your house to use for other things, such as paying off debt, home improvements, college education, etc.

E. Consult your loan officer to see if refinancing is right for you.

2. What factors should I evaluate when considering refinancing?

Consider the following factors when making your decision:

A. What is the difference between your current rate and the new rate?

B. How long do you plan to be in the home?

C. What are the costs associated with the refinance?

D. What is your break-even point for the refinance?

E. Do you feel comfortable with the new payment?

F. Do you need to pull out equity from your house?

These are just some of the questions you should ask yourself. Your loan officer can help you decide if refinancing is right for you.

3. Can I take cash out of my house when I refinance?

Yes. There are limitations on the amount of cash you can take out, but some programs allow cash out with loans totaling as high as high 100% of the total value of your home. We also have a Home Equity Line of Credit available that will allow you to have a credit line available up to 100% of the value of your home that you can draw on at any time. Your loan officer can give you details on the various options available to you.

Credit Score Questions

1. What are credit scores and how can they affect my ability to secure a loan?

2. Can I get a loan if I have had a bankruptcy?

3. What can I do if I am young and don’t really have much established credit?

4. What can I do to raise my credit scores?

1. What are credit scores and how can they affect my ability to secure a loan?

Credit scoring is a statistical means of assessing how likely a borrower is to pay back a loan. It is not dependent on income, assets, or any other non-credit factor. Credit scores range from 375 to 900 points. Most loan programs require a credit score above 660. Scores below 660 can cause some problems, and scores below 620 will often create significant problems for the borrower to secure a loan. Conversely, scores above 700 usually open the door for a borrower to be eligible for most any loan program. Credit scoring is based on payment history, outstanding debt, age of accounts, whether you have pursued new credit accounts, and the types of credit accounts in use. Your loan officer can help you evaluate and understand your credit report and will use it to determine which loan program is best for you.

2. Can I get a loan if I have had a bankruptcy?

Yes. It generally will have to be at least 3 years since the discharge of the bankruptcy. You need to have re-established credit and have NO late payments since the discharge. This is somewhat flexible depending on the amount of down payment, job history and other factors. We also have options available for borrowers who are willing to take a higher rate in order to get a loan. “B” paper loans can often help a borrower whose credit is damaged, by giving them a loan with a higher interest rate to reflect the amount of risk associated with the loan. Your loan officer can help you with these situations.

3. What can I do if I am young and don’t really have much established credit?

Having established credit is very helpful when you are seeking a loan. This helps lenders evaluate your ability to handle debt and make payments on time. You can start to establish credit by securing a credit card, car loan or other type of loan. Then make timely payments on all your bills. Keep records of payments for phone and utilities and even rent payments. This will help to document your credit worthiness. Don’t make the mistake of thinking that the more credit cards you have, the better your credit will be. One or two established accounts are better than a lot of accounts. Too many accounts can be considered too much of a risk as well because it would be too easy to put yourself in debt by running up the balances on your credit cards.

4. What can I do to raise my credit scores?

There are a number of things that can be done to raise your credit scores.

A. You can pay off or pay down large balances.

B. After paying off balances it may help to close some accounts. Your loan officer can help you decide which accounts are better off closed and which ones you should leave open. As a rule of thumb, an older account with a good payment history and a low balance is better than a new account.

C. Often, a phone call or letter of explanation written to the credit card company, business or the credit bureau directly can help explain an unusual circumstance that caused a late payment on an account. If there are multiple late payments on an account, sometimes the only way to repair that credit history is time and patience, coupled with discipline to keep the balance low and the payments on time.