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Action Mortgage has passed a rigorous and independent certifiaction process and has emerged as a California leader in customer satisfaction - 96% of our clients said they will return to Action Mortgage for their next loan! Why take a chance? Give us a call today! Click the Diamond Certified logo (above) link to learn more...
1. How much house can I afford? Answer
2. What is the difference between a fixed-rate loan and an adjustable-rate loan? Answer
3. How are an index and margin used in an ARM? Answer
4. How do I know which type of mortgage is best for me? Answer
5. What does my mortgage payment include? Answer
6. How much cash will I need to purchase a home? Answer
7. What are points? Answer
8. What is an "APR"? Answer
9. How do I know if it is appropriate to refinance? Answer
10. If I refinance my home and the appraised value is higher than my original purchase price, will my property taxes go up? Answer
11. What is the first step in purchasing a new home? Answer
12. What things should I bring to my appointment with the lender? Answer
13. What is the overall process of getting a home loan? Answer
14. Can I see a glossary of common terms? Answer
15. Can you show me a diagram of the home purchase process? Answer
16. What does Diamond Certified mean? Answer

Q : How much house can I afford?
A : Generally speaking, you can purchase a home with a value of two or three times your annual household income; however, the amount that you can borrow will also depend upon your employment history, credit history, current savings and debts, and the amount of down payment you are willing to make. You may also be able to take advantage of special loan programs for first time buyers to purchase a home with a higher value. Give us a call, and we can help you determine exactly how much you can afford.
 
Q : What is the difference between a fixed-rate loan and an adjustable-rate loan?
A : With a fixed-rate mortgage, the interest rate stays the same during the life of the loan. With an adjustable-rate mortgage (ARM), the interest changes periodically, typically in relation to an index. While the monthly payments that you make with a fixed-rate mortgage are relatively stable, payments on an ARM loan will likely change. There are advantages and disadvantages to each type of mortgage, and the best way to select a loan product is by talking to us.
 
Q : How are an index and margin used in an ARM?
A : An index is an economic indicator that lenders use to set the interest rate for an ARM. Generally the interest rate that you pay is a combination of the index rate and a pre-specified margin. Three commonly used indices are the One-Year Treasury Bill, the Cost of Funds of the 11th District Federal Home Loan Bank (COFI), and the London InterBank Offering Rate (LIBOR).
 
Q : How do I know which type of mortgage is best for me?
A : There is no simple formula to determine the type of mortgage that is best for you. This choice depends on a number of factors, including your current financial picture and how long you intend to keep your house. Action Mortgage can help you evaluate your choices and help you make the most appropriate decision.
 
Q : What does my mortgage payment include?
A : For most homeowners, the monthly mortgage payments include three separate parts:
  • Principal: Repayment on the amount borrowed
  • Interest: Payment to the lender for the amount borrowed
  • Taxes & Insurance: Monthly payments are normally made into a special escrow account for items like hazard insurance and property taxes. This feature is sometimes optional, in which case the fees will be paid by you directly to the County Tax Assessor and property insurance company.
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    Q : How much cash will I need to purchase a home?
    A : The amount of cash that is necessary depends on a number of items. Generally speaking, though, you will need to supply:
  • Earnest Money: The deposit that is supplied when you make an offer on the house.
  • Down Payment: A percentage of the cost of the home that is due at settlement (closing).
  • Closing Costs: Costs associated with processing paperwork to purchase or refinance a house.
  • You may also be asked to pay for inspection reports related to the value and condition of the home.
    		•
     
    Q : What are points?
    A : One point is one percent of the loan amount. A borrower may elect to pay one or two "points" in order to get a lower interest rate loan. For example, on a loan of $200,000.00 one point would be $2000.00 added to the closing costs. Two points would be $4000.00.
     
    Q : What is an "APR"?
    A : "APR" is an abbreviation for "annual percentage rate," the cost of credit expressed as an annual rate. An APR is higher than the interest rate alone because it also includes many of the closing costs of your mortgage. Each lender's APRs include different costs, so be sure to find out what an APR includes in order to compare apples with apples.
     
    Q : How do I know if it is appropriate to refinance?
    A : Some people refinance to pay off a balloon loan, auto loan, student loans, or other consumer debts. Others may wish to take cash for the equity in their home to remodel or invest in other property.

    If you merely wish to lower your monthly payment, and your existing home loan is under $175,000.00, the general rule is that your interest rate should decrease by 2.0%. Since the cost to refinance a house can vary from $2000.00-$6500.00, your monthly savings on principal and interest should repay your costs within a two to three year time frame, depending in part on how long you intend to own the property.
     
    Q : If I refinance my home and the appraised value is higher than my original purchase price, will my property taxes go up?
    A : Property taxes are assessed at the time property ownership passes from one party to another, such as when a home is sold. In a refinance transaction there is generally no change of ownership so the tax rate will remain the same. In fact, it can be possible to add or remove one or more names on the deed of ownership without increasing the property tax rate. An example is when one single homeowner marries and wishes to add the new spouse to title as a part owner.
     
    Q : What is the first step in purchasing a new home?
    A : Before you take the real estate agent's time looking at homes in the wrong price range, you should meet with a lender. The lender can evaluate your income and debts, the funds you have available for a down payment and your credit rating to give you a suitable price range. Even better, ask the lender to submit your information to a loan underwriter for approval. In an active real estate market, homebuyers who are pre-approved get preference from sellers over those who are not.
     
    Q : What things should I bring to my appointment with the lender?
    A : In most cases, when you meet with a loan broker you will be asked to bring copies of your pay-stubs for the last 30 days, your current bank statements, your last two tax returns, and W-2s. The lender will discuss your finances with you and inform you of any other information you need to provide.
     
    Q : What is the overall process of getting a home loan?
    A : Here are the steps:

    PREQUALIFICATION
    This is often the first step in getting a  home loan. This is an interviewing and analyzing process done by the loan agent that determines whether your income and credit can meet the requirements set up by the lender. A Prequalification letter is sent to the seller on your behalf stating that based on the belief that you have filled out your application factually and you have a good credit report, you can qualify for your loan. This letter is based on the condition that all the information you have supplied can be verified. The first level of prequalification can be accomplished within 2 - 24 hours.

    APPLICATION
    The borrower's statement and presentation of all facts required by the lender (foundation on which the file is submitted to the lender)

    1. List of basic required documentation

      1. Completed Application
      2. 2 years tax returns and W-2's
      3. Current and 2 years 1099's and Profit and Loss statements if
        self employed.
      4. Payroll stubs showing last 30 days.
      5. Proof of all sources of income (ie; rentals, alimony, child
        support, investment income, retirement, or social security)
      6. If your home is under construction there may be additional
        documentation.
      7. Purchase agreement if you have selected your new home.



    PREAPPROVAL
    The second level of prequalification (more often referred to as the Preapproval or Credit Approval) is when the lender has approved you as meeting their requirements. This is accomplished when all verifications and necessary documentation have been submitted to the lender and have been analyzed. This level is more in-depth and is completed when the lender and the lender's insuring company have approved you. (Verifications and credit reports need to be updated after 90 days. This does not include the underwriter's evaluation of the appraisal, contract and preliminary title report. In the event that your home purchase transaction is not completed within that period of time, we will resubmit all verifications to keep than current to meet the lender's requirements. You may incur the expense of an additional credit report.)

    PROCESSING
    Document gathering and investigation process to build your file. (This takes approximately 2 weeks after the loan agent receives the application and all necessary documentation)

    1. Order Credit Report

      1. Note: We will work with you to update this report

    2. Order Preliminary Title Report
    3. Verify statements you made on application

      1. Writing to your employer to verify your job status and income.
      2. Contacting your banks, savings, investments, etc. to verify the
        balances in your asset accounts.

    4. Order the appraisal (Timed according to the final stages of
      closing your loan)
    5. Obtain any documentation that is special to your circumstances.

      1. Divorce papers
      2. Bankruptcy papers
      3. Financial statements if self employed
      4. Required letters of explanation
      5. Other documentation (ie; legal documentation, proof of payment, financial
        tracking)

    6. Submit your file, meeting all requirements, to the lender.


    UNDERWRITING AND SUBMISSION
    Presenting your completed loan package to the lender. This is the first stage of analysis to determine the approval or rejection of your loan based on established guidelines for specific programs under which you applied. (Thoroughly processed application and well presented package)

    1. Approval and underwriting time (Lender, Investor, and MI approval)

      1. Underwriting 2-3 days
      2. Jumbo loan 2-5 days

    2. Most lenders impose some conditions. Allow time to satisfy and
      remove these conditions.
    3. Doc Prep (Preparation of all legal documents)

      1. 2 days for Doc Prep

    4. Escrow prepares escrow instructions and settlement statements for
      signatures (2 days)
    5. Funding - back to lender's funding department review and final
      approval (24-48 hours)
     
    Q : Can I see a glossary of common terms?
    A : Terms defined:

    Amortization (Also see Negative Amortization). The calculation used to determine the amount of equal principal and interest payments needed to pay off a loan within a certain specified period of time. Most first mortgages are amortized over 15 - 30 years.

    Annual Percentage Rate (APR). The total amount of the finance charge--including interest, points and all loan fees (ie; escrow, processing, etc.) - calculated as a percentage of the borrowed amount and expressed as a yearly rate.

    Application Fee. This is the fee which may be charged by the lender to cover the costs of processing your loan application. It is usually charged at the beginning of the loan process.

    Appraisal. An estimate of the fair market value of a property prepared by a qualified real estate appraiser.

    Appraisal Fee. The fee you have to pay to have a property appraised.

    Appraiser. A professional hired to give an opinion of value.

    Assessor. Establishes the value of a property for tax purposes.

    Assumability (Assumption of a mortgage or Deed of Trust). Agreement by a buyer to assume liability under an existing agreement between seller and lender. Not all loans or loan terms are "Assumable." The lender typically must approve the new borrower.

    Assumption Fee. The fee you pay the lender in order to assume someone else's mortgage loan.

    Condominium. A structure or structures with a homeowner's association and with some areas, including walls, owned in common. The interior (air space) is owned by individuals. See PUD.

    Conveyance. 1)Transfer of Title 2) The document, such as a deed, by which title is officially transferred.

    Debt-to-Income Ratio. The percentage derived by dividing total debts of a household by total gross income. Used by lenders in determining a buyer's ability to re-pay mortgage debt.

    Deed. Instrument giving ownership of property.

    Deed of Trust. Similar to a mortgage. Instrument which transfers ownership of a property from the borrower to the lender until the debt is paid in full.

    Escrow. An account held by a neutral party who is given instructions for disbursement of funds on transfer of ownership of a property.

    Equity. The market value of a property minus the total amount of any existing liens.

    Earnest Money. A deposit made as an indication of good faith when presenting an offer to buy a property.

    Good Faith Estimate. An estimate made by the lender to the borrower of anticipated loan fees and closing costs.

    Hazard Insurance. An insurance policy to reimburse the owner/lender damages to a property by fire, flood, etc.

    Impound Account (called Escrow Account in some states). This is an account held by the lender for payment of taxes, insurance and other periodic debts against a property. The borrower pays a specific amount over and above the monthly loan payment, and the lender pays the bills with the accumulated funds. Some lenders require an impound account for certain types of financing.

    Index. A published interest rate composite used by lenders. Its movements determine interest adjustments on adjustable rate loans.

    Lien. A claim against a property in satisfaction of a deed. It can be voluntary (such as a mortgage) or involuntary (such as a lien for back taxes).

    Loan Commitment. A commitment from a lender to provide a loan to a home buyer at a specific rate, for a specific period of time and for a specific property. (Same as loan approval.)

    Loan-to-Value Ratio. The amount of a loan divided by the value of the property. Used by lenders as a measure of risk.

    Margin. The margin is the difference between the ARM index and the rate the lender charges. Example: an index rate of 8% plus a margin of 2.5% could result in a home loan rate of 10.5%. in some areas, the margin is referred to as the factor. The fixed margin over the index covers the lender's operating expenses and profit margin.

    Market Value. The current value of real estate that a buyer is willing to pay and a lender is willing to accept.

    Mortgage. A mortgage is evidence of the security for a loan. It is the document, signed by the borrower, which gives the lender the right to the property if the borrower fails to live up to the loan arrangement.

    Mortgage Insurance. An insurance policy purchased by the borrower to insure the lender against loss in event of the borrower's default on the loan payments.

    Negative Amortization (Also see "Amortization"). This happens when the minimum monthly payment on an adjustable rate mortgage is no longer large enough to cover the full amount of interest that is due. The difference between interest owed and interest paid may then be added to the loan's principal balance, at the option of the buyer.

    Non-recurring Closing Costs (NRCCs). The one time costs associated with purchasing a home, for example: title insurance, escrow fees, points, underwriting, processing, appraisal, etc.

    Origination Fee(s) (Also see "Points"). Also called a Loan Fee, this is a fee assessed by the lender for processing the loan. Most lender charges are based upon the amount of the loan, and one point equals one percent of the loan amount. These fees are normally paid by the seller or shared by both parties. Also, the lender may allow these charges to be deducted from the mortgage amount.

    Payment Cap. This cap places an annual limit on the amount that a monthly payment can increase. This feature is offered by some ARM lenders instead of an annual interest rate cap.

    Planned Unit Development (PUD). A structure or structures with a homeowner's association and with some areas owned in common. Individuals own the building and the land the home sits on. It is not possible to know by looking at a unit whether it is a condominium or a PUD. To find out, consult the legal description of the property or the homeowner's association covenants, conditions and regulations.

    Points. A point is one percent of the loan amount. Points are paid to the loan originator and to the funding lender at close of escrow.

    Pre-approval. A loan underwriter has reviewed the loan application, credit report, income and asset documentation, and approved the loan.

    Pre-paid Costs. Costs of purchasing a home that will continue after the close of escrow when all sales transaction funds are disbursed. For example: interest, insurance, taxes.

    Prepayment Penalty. Some lenders may charge this fee if the loan is prepaid prior to maturity.

    Pre-qualification. A lender's initial evaluation of the home buyer's ability to purchase a home. This should be based on actual review of the buyer's employment, income, savings and debt records.

    Private Mortgage Insurance (PMI). This is the mortgage default insurance designed to pay the lender a portion of the outstanding balance of a loan in the event that the homeowner defaults. PMI may be required on certain types of loans. If so, the initial premium is usually one of the closing costs, usually subsequent payments are included in the borrowers monthly payments. Usually applies to loans with only 10% down.

    Property Inspectors. Contractors, energy raters and pest inspectors who are licensed professionals hired to give an opinion of the condition of a home.

    Qualifying Ratios. A percentage comparison of the cost of owning a home and the buyer's income (front-end ratio). Also, a percentage ratio of the buyer's total debts and income (back-end ratio).

    Rate Cap. The rate cap defines rate limits, either from one adjustment period to the next or over the life of the loan.

    Recording and Transfer Fees. These are the charges for recording documents with public agencies. These may also be included in the borrower's closing costs. A document tax is charged in some states on real estate transactions.

    Refinance. The securing of a new loan either to pay off an existing lien or mortgage on the property or to access your equity.

    Survey. This may be required by the title company to insure that the house is properly situated on the property. A survey is intended to reveal if the house, fence, pool, or patio are built on or too near adjoining property or utility easements. Fees, if any, are normally paid by the borrower.

    Title. Ownership or proof of ownership to real property.

    Title Company (See Title Insurance). A company which issues title insurance. In some areas, title companies also perform escrow functions.

    Title Insurance. Insurance policies purchased at the time a home is bought to protect the buyer and lender against loss resulting from defects in the title.

    Underwriting. These are the standards set by the lender which the borrower must meet in order to qualify for the loan.
     
    Q : Can you show me a diagram of the home purchase process?
    A : Click here for the Loan Process Flow Chart
     
    Q : What does Diamond Certified mean?
    A :

    Action Mortgage has passed a rigorous and independent certifiaction process and has emerged as a California leader in customer satisfaction - 96% of our clients said they will return to Action Mortgage for their next loan! Why take a chance?

     


    Action Mortgage

    Ph: 707-571-2008