Loan FAQ

Reputable lenders will find out more about you before throwing out loan options. You wouldn’t expect a doctor to suggest surgery before she assessed your medical situation, would you? Choose a lender who gathers enough information from you before she suggests a certain type of loan.

The annual percentage rate (APR) is derived by a complex calculation that includes the interest rate and the other related lender fees divided by the loan’s term. However, bear in mind that:

• It does not account for early payoffs
• It does not compute properly for Adjustable Rate Loans
• Some lenders do not compute the APR correctly

Each “point” is equal to 1 percent of the loan amount. Therefore, 2 points on a $100,000 loan cost $2,000.

• Points buy down the Interest Rate
• Points are Tax deductible

Origination Fees are charged by a lender to pay for underwriting, processing, or government fees that are required to close the loan.

All the costs of a loan include not only fees that the lender requires to write your loan but also related third-party fees such as:

• Appraisal
• Credit report
• Lender’s title policy
• Pest inspection reports
• Escrow (where applicable) Insurance and Taxes)
• Government Recording fees
• Government Taxes
• Survey

According to the Real Estate Settlement and Procedures Act (RESPA), lenders have three days after you’ve applied for a loan to give you the Good Faith Estimate and Truth in Lending, containing all the costs of your loan. Points to consider:

• If your lender refuses to stand behind its GFE – go elsewhere. Several items on the GFE are guaranteed by federal law to be “good” for 10 days, (not to include interest rate, unless you have “locked”) but it will a 10 day guarantee of the Service related charges for closing the loan.

Interest rates fluctuate and change daily. If you have reason to believe that interest rates are moving up, you might want to lock your loan. Lenders typically charge zero to one point to lock a loan rate and points. Rate lock fees are typically required, as the lender is reserving a portion of money on your behalf, essentially taking it away from another potential borrower. Most rate lock fees are refundable if due to uncontrollable circumstances.

• Ask: How long is the rate lock?
• Can I get that in writing?

In some states, prepayment penalties are no longer allowed, so ask. Typically, prepayment penalties let the lender collect an additional six months of “unearned interest” if you pay the loan off early through a refinance of sale of the property. Be sure to ask:

• How much is the prepayment penalty?
• What are the terms of prepayment?
• Can I refinance in 2-5 years – will that affect any prepayment?

Underwriters review loans and issue conditions before approving or rejecting a loan. VA and FHA loans typically take longer to process, but some lenders meet government requirements to automatically approve or disapprove a loan without sending it to the VA or FHA. Ask if a lender can handle its own underwriting. **Morgan Financial offers in house underwriting.

The average loan processing time periods falls between 21 and 45 business days. To properly write a purchase contract, you will need to include a closing date, and that date should be coordinated with your lender. By not coordinating with your lender, you may lose valuable time and money.

If your loan officer is receiving a yield spread premium (YSP), a commission paid directly by the lender to your representative, this fee will be disclosed on your settlement statement at closing. YSP is not a “bonus”. It is a commission earned as payment for lending and financial services. Reputable lenders will disclose their YSP, if in fact is will be earned, when you sign the Good Faith Estimate.

Finally, just give us a call. We want to earn your business by providing the most accurate and timely market information, the best service and good old fashioned honest treatment.

Astelin