Arizona Discount Mortgage FAQ
What is an ARM – Adjustable Rate Mortgage?
What is APR – Annual Percentage Rate?
What is a mortgage broker?
What does LTV (Loan-to-Value) mean?
Why are mortgage interest rates so unstable?
What documents will I need to supply to apply for a mortgage?
What are Escrows?
What is PMI – Private Mortgage Insurance?
How can I avoid PMI?
What is a fixed rate mortgage?
A fixed rate mortgage has an interest rate that is fixed for the entire term of the loan. Fixed rate mortgages are typically in 10,15,20 or 30 year terms.
What is an ARM – Adjustable Rate Mortgage?
An adjustable rate mortgage has an interest rate that is fixed over the initial predetermined term of the loan. Different ARM programs offer different predetermined terms, normally from 1 – 10 yrs.
An ARM will begin with an interest rate that is lower than interest rates available for fixed rate mortgages. After the fixed, predetermined term, the interest rate adjusts (normally every 6 or 12 months).
What is APR – Annual Percentage Rate?
APR is an interest rate that reflects the total cost of financing the loan. It is a combination of the simple interest rate, and discount points, and the fees paid to a lender when getting a mortgage. Factors that affect the APR are the loan size and the term of the loan. A mortgage with a 15 year term will have a higher APR than a 30 year mortgage, even if the rate and fees are the same. Also, A $100,000 mortgage will have a higher APR than a $200,000 mortgage, with the same rate and fees.
What is a mortgage broker?
A mortgage broker is a licensed independent contract that offers a selection of loan programs from various lenders they have established, licensed relationships with. Mortgage brokers can offer you a large selection of products available from a variety of different lenders. Usually banks have a limited selection of their own programs which may or my not fit your needs. Mortgage Brokers also have access to multiple lenders rates on any given day where banks only have access to their own.
What does LTV (Loan-to-Value) mean?
Loan to Value is a ratio determined by the loan amount divided by the property value. For example, if a home has a property value of $100,000 and the loan amount I s$90,000 the LTV is 90%.
Why are mortgage interest rates so unstable?
Mortgage loans are sold on the secondary mortgage market which fluctuates every day along with the world’s financial markets. For example, as mortgage bonds fluctuate up and down so will the available mortgage interest rates.
What documents will I need to supply to apply for a mortgage?
At a minimum you will need your last 2 years W2’s and your last 2 pay stubs. Often your last 2 months bank statements are also required. In the event you are self employed you may be required to supply your last two years income tax returns.
What are Escrows?
Escrows are the pre-payments of real estate taxes and homeowners insurance held in an escrow account. Escrow accounts make the annual payments to the appropriate parties by the lender.
What is PMI – Private Mortgage Insurance?
PMI is insurance which protects the lender in the event you do not pay. PMI allows borrowers to obtain higher loan amounts with lower down payments. PMI is typically required when the LTV is 80% or more. Each lender will have different PMI requirements and options.
How can I avoid PMI?
PMI is typically required if the Loan to Value is 80% or higher. Many lenders will allow you to stop paying PMI once you have either paid down your loan below 809% LTV, or your property has increased in value to the point where the new Loan To Value ratio is less than 80%. Some lenders also offer loan programs such as an 80/20 where you have a first mortgage for 80% of the LTV and then a second mortgage for the remaining 20% at a higher interest rate. Some lenders also offer a NO PMI option for qualifying borrowers. This typically raises the interest rate.
