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Mortgage FAQs

What is Mortgage Insurance? Why is it Required?

What is Mortgage Insurance? Why is it Required?

Mortgage Insurance helps protect a lender against taking a financial loss in the event the borrower stops making payments. Mortgage insurance may be required when a down payment is less than 20%.

What's the difference between the Interest Rate and the Annual Percentage Rate(APR)?

The interest rate is the rate you agree to pay for the life of the loan. The APR is the annual rate that is charged for borrowing (or made by investing), that represents the actual yearly cost of funds over the term of a loan. The APR reflects the interest rate, any points, mortgage broker fees, and other charges that you pay to get the loan.

What is a Rate Lock?

A rate lock is a contractual agreement between the lender and buyer. Your interest rate won't change between the offer and closing, as long as you close within the specified time frame and there are no changes to your application. There are four components to a rate lock: loan program, interest rate, points and the length of the lock.

What are Closing Costs?

Closing costs are fees and expenses you pay when you secure a loan for your home. They typically range between 3-5% of your purchase price. You can find your closing costs broken down in your Closing Disclosure, provided by your loan officer at least 3 days before your expected closing date. The buyer and seller are both responsible for paying different costs at closing.

Closing costs paid by the buyer:

  • Property related fees- Appraisal, home inspection

  • Loan related fees- Application, attorney, prepaid interest, loan origination, discount points, mortgage broker fee

  • Mortgage insurance fees- Mortgage insurance application fee, upfront mortgage insurance

  • Property taxes, annual fees and insurance- Property taxes, annual assessments (if your condo or homeowners association requires an annual fee)

  • Title related fees- Title search fee, lender's title insurance, owner's title insurance

Closing costs paid by the seller:

  • Half of title and escrow fees

  • Commissions- Typically sellers pay both the buyer's and seller's agents

Buyers can also ask for seller concessions as part of your offer on a house. Seller concessions are closing costs that the seller has greed to pay. You can ask the seller to cover home improvements/repairs and closing costs.

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