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What does it cost to submit a loan application? Answer |
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After I submit my loan, what happens next? Answer |
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I'm a little confused about adjustable rate mortgages. How does an adjustable rate mortgage differ from a fixed rate mortgage? Answer |
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How is the rate determined on each change date? Answer |
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What is the "start rate" on an ARM? Answer |
| 6. |
Can I convert my ARM to a fixed-rate mortgage later? Answer |
| 7. |
What is a no-income-verification loan? Answer |
| 8. |
What is a no-ratio-verification loan? Answer |
| 9. |
I have had credit problems in the past. Will this affect my ability to obtain a mortgage loan? Answer |
| 10. |
My credit problems occurred more than three years ago. Will this affect my ability to obtain a mortgage loan? Answer |
| 11. |
I recently filed bankruptcy. Will this affect my ability to obtain a mortgage loan? Answer |
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What does it cost to submit a loan application? |
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There are no costs associated with submitting an application for credit approval. If we reach agreement to process your loan, you will be required to pay an application fee to cover the cost of the appraisal and credit report. Later on, when the loan closes you will incur closing costs. |
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After I submit my loan, what happens next? |
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I'm a little confused about adjustable rate mortgages. How does an adjustable rate mortgage differ from a fixed rate mortgage? |
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Understanding the complexities of adjustable rate mortgages is no easy task. Unlike a fixed rate mortgage on which interest is paid at the same rate throughout the life of the mortgage, the rate of interest charged on an adjustable rate mortgages will change at least once, and usually many times over the life of the loan. The most common ARMs will provide for interest rate changes every 6 months or once every year. The rate changes periodically on a date known as the "change date", which is typically 45 days before the anniversary date of the loan. |
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How is the rate determined on each change date? |
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On each change date, the interest rate which will be charged until the next change date under the terms of the mortgage note is determined by adding a number called the "margin" to an "index" which is commonly published in periodicals such as the Wall Street Journal. On permanent mortgage loans, the most commonly utilized indexes are the yield on the "one year Treasury Bill" and the "6 month LIBOR" (London Interbank Offered Rate).
On the change date of the ARM the margin will be added to the index to determine the new interest rate. Margins on ARMs typically range from 2.50% to 3.00%. Thus, if the change date were on January 27th, the margin on an ARM were 2.75% and the index was 5.5%, the new rate would be 8.25% (5.50% + 2.75%). The rate which results from sum of the index and the margin is referred to as the "fully indexed rate". |
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What is the "start rate" on an ARM? |
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What is the "start rate" on an ARM?
A. As if the procedure of determining the indexed rate were not complicated enough, there are other factors which can result in a different rate than that derived from the above-described formula. It is not uncommon for ARMs to have a start rate or beginning interest rate that is considerably less than the fully indexed rate.
For example, the note which had a fully indexed rate of 8.25% might have a start rate of 4.250%, far below the fully indexed rate. |
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Can I convert my ARM to a fixed-rate mortgage later? |
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On some adjustable rate mortgages you can elect a "conversion option" which will allow you to convert the ARM to a fixed-rate mortgage (at the prevailing 30 year interest rate at the time of the conversion) for a nominal conversion fee. The option must typically be exercised between the 13th and 60th month of the mortgage. |
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What is a no-income-verification loan? |
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Under conventional, FHA and VA underwriting guidelines an applicant's income must be verified by obtaining direct verification of employment and income from the applicant's employer, or obtaining copies of the applicant's paystubs and W-2's and copies of the applicant's tax returns in some situations. With No Income loan programs, ("NIV" or "Stated Income"), the applicant is qualified from employment that is verified on his application, and from income that is stated on his loan application but not verified. |
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What is a no-ratio-verification loan? |
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Under No Ratio programs, several alternative verification methods can be employed. Employment can either be stated and verified, or left completely blank on the application and not be stated or verified. If the employment is not verified, the application should make no mention of the applicant's employment. In either case, the income section of the application is left blank, without reference to the applicant's income. |
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I have had credit problems in the past. Will this affect my ability to obtain a mortgage loan? |
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In evaluating an application for a mortgage loan an applicant's credit history will be considered as one element in determining the applicant's qualification for the requested loan. Negative credit histories or a lack of previous credit experience can adversely affect an applicant's ability to obtain a requested loan. More recent credit information will be weighed more heavily than older information. Also, some types of credit histories may be given greater weight than others. Generally, the applicant's previous payment history on a mortgage loan is given the greatest weight, followed by major installment accounts such as auto loans, followed then by major credit card accounts such as MasterCard and VISA accounts, and finally followed by minor revolving charge accounts such as departments stores and finance companies. |
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My credit problems occurred more than three years ago. Will this affect my ability to obtain a mortgage loan? |
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In evaluating a loan application Independent Mortgage will look most closely at information occurring in the past two years. Generally, a few late payments occurring on installment loans or credit-card accounts more than two years ago will not affect an applicant's ability to obtain maximum financing (with minimum equity or downpayment) as long as the late payments were isolated and an adequate statement has been provided explaining why the credit problems occurred. |
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I recently filed bankruptcy. Will this affect my ability to obtain a mortgage loan? |
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An applicant may be able to qualify for maximum financing at the best available interest rates with a previous bankruptcy provided that the discharge date is more than four years ago, the applicant has re-established and maintained a positive credit history on at least four accounts with a 12 month history, since the date of the bankruptcy discharge, and the applicant provides an acceptable explanation for the reason the bankruptcy was filed. Chapter 13 bankruptcy plans (which provide for a restructuring of debt and repayment of all or a portion of the debt over a 3 to 5 year period) must have been fully completed for a two year period to obtain maximum financing at the best available interest rates. However, Independent Mortgage offers special loan programs at higher interest rates which allow more recent bankruptcies. These special programs typically require higher downpayments or equity positions than our conventional loans (between 10% to 35%) depending on how recent the bankruptcy. |
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