Eugene Mortgages Frequently Asked Questions

Should I refinance?

Determine if you are able to save money by refinancing your active loan at current interest rate levels.

Although a lower rate of interest will mean lower payments each month and less total interest, a refinance will also result paying closing costs and, in a few cases, points. If the savings each month surpasses these closing costs, refinancing is a great option. To find out how many months it will take to break even with closing costs, enter your loan information into our Refinance Calculator.

What is a FICO score?

A FICO score is a credit score formulated by Fair Isaac & Co. Credit scoring is a process of ascertaining the likeliness that credit users will pay their bills. Credit scoring is recognised by lenders as a dependable way of credit rating.

Credit scores break down a borrower's credit history looking at a lot components such as:

• Late payments
• The amount of time credit has been established
• The amount of credit utilized versus the amount of credit available
• Duration of time at present residence
• Bad credit information such as bankruptcies, charge-offs, collections, etc.

To get a copy of your credit report, contact any of these credit-reporting agencies:

• Experian, www.experian.com
• Trans Union LLC, www.transunion.com
• Equifax www.equifax.com

How can I increase my credit score?

Though it's hard to increase your score over the short-term, here are a few tips to increase your score over a period of time:

• Pay your bills on time. Tardy payments and collections may have a serious affect on your score.
• Don't apply for credit often. Receiving numerous of inquiries on your credit report may decline your score.
• Trim down your credit-card balances. If you're "maxed" out on your credit cards, this will impact your credit score negatively.
• If you have fixed credit, get additional credit. Not having ample credit may negatively affect your score.
  

What if there is an mistake on my credit report?

To rectify any mistakes on your credit report, you must write to the credit card company and explain the mistake.

If the creditor agrees that an mistake has happened, the credit card company must report and rectify the mistake to the credit-reporting agency.

Why do interest rates change?

Rate of interest movements are supported the simple concept of supply and demand.

If the call for for credit (loans) rises, so do interest rates. Because there are a lot of buyers, and so sellers may command a better price, i.e. higher rates.

If the call for for credit cuts back, then so do interest rates. Because there are more sellers than buyers, so buyers can ask for a lower better price, i.e. lower rates.

When the economy is thriving there's a greater requirement for credit, therefore rates move higher; whereas when the economy is slowing up, the requirement for credit diminishes and so do interest rates.
Inflation forces interest rates

Loftier inflation is associated with a growing economy. When the economy matures too rapidly, the Federal Reserve increases rates of interest to slow the economy down and cut back inflation. Inflation results from costs of goods and services increasing.

When the economic system is secure, there's more call for for goods and services, so the manufacturers of those goods and services may increase prices. A secure economy results in higher real-estate prices, higher leases on apartments and higher mortgage rates.

What is the difference between being pre-qualified and pre-approved?

Pre-qualification is usually determined by a loan officer. After questioning you, the loan officer ascertains the possible loan amount for which you could be approved. The loan officer does not issue loan approval; so, pre-qualification isn't a commitment to lend.

After the loan officer ascertains that you pre-qualify, he/she then writes out a pre-qualification letter. The pre-qualification letter is utilised when you submit a bid on a property. The pre-qualification letter informs the seller that your financial situation has been examined by a professional, and you'll probably be authorised for a loan to buy the home.

Pre-approval is a even better pre-qualification. Pre-approval requires confirming your credit, down payment, employment history, etc. Your loan application is presented to a lender's underwriter, and a decision is made concerning your loan application.

Once your loan is pre-approved, you obtain a pre-approval certificate. Getting your loan pre-approved lets you to close really quickly once you do find a home. Pre-approval may also assist you negotiating a better price with the seller.

Can my loan be sold?

Your loan may be sold at any time. There's a secondary mortgage market in which lenders often buy and sell pools of mortgages. This secondary mortgage market results in lower rates for consumers. A lender buying your loan accepts all conditions and terms of the original loan.

As a result, the only thing that modifies when a loan is sold is to whom you send your payment. In the case your loan is sold you'll be advised. You will be advised about your new lender, and where you should send your payments.

What is a rate lock?

A rate lock is a lender's promise to "lock" a narrowed down rate of interest and a determined number of points for you for a given time period while your loan application is processed.

During that time, rates of interest may shift. But if your interest rate and points are locked in, you should be shielded against increases. Conversely, a locked-in rate may also keep you from taking advantage of price decreases.

There are four components to a rate lock:

1. Loan program
2. Interest rate
3. Points
4. Length of the lock period

The longer the duration of the lock period, the higher the points or the interest rate will be. This is because lengthier the lock, the bigger the risk for the lender offering up that lock.

What's the difference between a conventional loan and an FHA loan?

Loans where the borrowers' down payment is less than 20% usually require mortgage insurance, which can be offered privately or publicly.

Conventional loans calling for MI are insured by private mortgage insurance. FHA loans are those whose MI is furnished by the Federal Housing Administration, a public, government program backed by taxpayers.

Both mortgage insurance selections have premiums, frequently paid by the borrower. Each program has advantages and disadvantages depending upon your unique situation.

What documents will I need to have to secure a loan?

This checklist outlines the principal documents and information that are commonly needed to complete the application. Further documentation might be needed, depending on the circumstances of your loan. By having the information accessible, you'll save time and avoid delays.

• Copy of Purchase Sales contract or Offer to Purchase and all addenda (signed by buyer and seller)
• Past 2 years' tax returns and W-2s
• Past 2 years' employment history
• Last 3 consecutive paycheck stubs (5 if paid weekly)
• Name, address, and phone for past 2 years' residence(s) and landlord(s) (if renting, evidence of 12 months' rent payments)
• Last 3 months' statements for savings, checking, CD, money market accounts, etc.
• Recent statement on retirement accounts (IRA, 401k, 403-B, Annuity, etc.)
• Monthly payments and balances on all open accounts
• Proof of all additional income
• Divorce Decree (if applicable)
• Bankruptcy schedules/Discharge papers (if applicable)

More information that may be required:

• Estimated market value of assets, such as autos, furniture, personal belongings, etc.

Be ready to talk about where the income for closing will come from, including down payment and closing costs

How will my monthly payments be calculated?

How much you will pay every month will depend a lot on the condition of your loan. That's, how long do you plan on paying the loan back. Most mortgages are either 30-year or 15-year terms. Longer term loans need less to be paid back each month; whereas shorter terms need bigger monthly payments, but pay off the debt more quickly.

Most monthly payments are based on four factors: Principal, Interest, Taxes and Insurance, commonly referred to as PITI.

• Principal: This is the amount originally borrowed to purchase a home. A share of each monthly payment goes to compensating this amount back. In the beginning, only a small fraction of the monthly payment will be put on to the principal balance. The amount applied to principal will then increase until the last years, when nearly all of the payment is applied toward repaying the principal.
• Interest: To take on the risk of lending money, a lender will charge interest. This is recognised as the interest rate, and it bears a very direct affect on monthly payments. The higher the interest rate is, the higher the monthly payment.
• Taxes: While real estate taxes are owed once a year, several mortgage payments include 1/12th of the anticipated tax bill and collect that amount along with the principal and interest payment. This amount is set in escrow until the time the tax bill is owed. Borrowers may be able to opt out of escrowing this amount, which would reduce the monthly payment, but leave them responsible for paying taxes on their own as well.
• Insurance: Insurance refers to property insurance, which covers damage to the home or property, and, if applicable, mortgage insurance. Mortgage insurance protects the lender in the case of default and is often needed in cases where borrowers have less than 20% equity in the home.
• Like real estate taxes, insurance payments are frequently collected with each mortgage payment and posted in escrow until the time the premium is owed. Once again, borrowers may be able to opt not to escrow the insurance amount, instead paying the total amount due in one lump sum on their own.
  

Should I pay points?

The best way to determine whether you had better pay points or not is to execute a break-even analysis:

1. Calculate the cost of the points. Example: 2 points on a $100,000 loan is $2,000.
2. Calculate the monthly savings on the loan as a result of incurring a lower interest rate. Example: $50 per month
3. Divide the cost of the points by the monthly savings to come up with the number of months to break even. In the above example, this number is 40 months. If you intend to keep the home for longer than the break-even number of months, then it adds up to pay points, otherwise it does not.
   

What is an Annual Percentage Rate (APR)?

The Annual Percentage Rate is the actual cost of the mortgage, based on the mortgage interest rate and factoring in additional costs, including points paid and underwriting and processing fees

The Federal Truth-in-Lending law demands mortgage companies to divulge the APR when they advertise a rate. Typically the APR is found next to the rate.