Frequently Asked Questions
Q1: What is the best mortgage program?
Q2: Why would I want an ARM vs. a Fixed Rate?
Q3: Should I trade my ARM for a Fixed Rate? Q4: Should I refinance my current Loan?
Q5: Why would I need an appraisal? Q6: What are Credit Scores?
Q7: How can I improve my credit rating?
Q8: What if there is a mistake on my credit report?
Q9: What is involved in closing costs?
Q10: What is a rate lock?
Q11: How long will it take to apply and close a loan?
Q12: What are points and how do they work?
Q13: Why are some rates higher than others?
Q14: How do I qualify for a loan?
Q15: How do I know how much of a loan amount I qualify for?
Q16: What makes a loan a Portfolio Loan?
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Q1: What is the best mortgage program?
A1: The best loan program truly depends on your personal situation. Your decision depends on your individual needs & various factors such as: current financial goals, how your finances may change in the future, how long you intend to live in your house, & how comfortable if your mortgage payment changed. The best way to find the 'right' answer is to discuss your finances & your preferences contacting us at AmeriBest Mortgage.
Q2: Why would I want an ARM vs. a Fixed Rate?
A2: An ARM allows you to receive more money at a lower interest rate than a fixed rate loan. If you are planning to move within a few years, you can save money & avoid rising payments with a fixed rate hybrid arm.
Q3: Should I trade my ARM for a Fixed Rate?
A3: By trading your ARM for a fixed-rate loan, you will likely reduce your longterm payment & have the piece of mind that your rate will not change over the fixed time period. These Hybrid Arms are good for 3, 5, 7 or 10 year fixed periods. If you are fairly certain that you'll be moving within five years, you can save money with a five-year ARM.
Q4: Should I refinance my current loan?
A4: The decision whether or not to refinance can be complicated because much depends on costs, risks, & your individual needs. The main reason to refinance is to save money. Therefore, try this calculation (Click Here) to determine whether or not refinancing will be useful for you.
Calculate the total cost of the refinance (i.e. $3,000)
Calculate the monthly savings (i.e. $200)
Divide the results from #1 by the results in monthly savings #2 (i.e. $3000/$200). The result is called the "break even" time (i.e. 15 months). If you plan to live in your house longer than this amount of time, a refinance will save you money.
Q5: Why would I need an appraisal?
A5: The most common reason for an appraisal is if you are buying or selling a home. However, an appraisal may also be helpful for the following reasons: obtaining a loan, lowering your taxes, settling an estate, selling your home or refinancing.
Q6: What are credit scores?
A6: A credit score analyzes your credit history by considering the following factors: late payments (35%), the amount of credit established (35%), the length of time at your present residence, employment history, collections, and bankruptcies (15%). A lender will take into account your credit score when qualifying you for a loan. Lenders generally utilize an A-D (or comparable) credit ranking system. The typical breakdown is as follows:
A-MINUS CREDIT:
Contains very minor or no credit problems within the last two years, one or two 30-day late payments, & no record of collections.
B CREDIT:
This is where the majority of credit reports fall. This may include a few late payments within the last 18 months, & up to four 30-day late payments, or up to two 60-day late payments. If the late payment is a single incident, one 90-day late payment is allowed within the last 12 months.
C CREDIT:
May include several late payments in the 30 to 60 day range in the past few years, and any late mortgage payment that is in the 60 or 90 day range. It can also contain a bankruptcy or foreclosure that had been discharged or settled in the last 12-24 months.
D CREDIT:
Includes anything from open collections, charge-offs, notice of defaults, to multiple 30, 60, and 90 day or longer missed payments.
Q7: How can I improve my credit rating?
A7: There is no guaranteed cure for a poor credit score; however, the best & most efficient way to improve your credit report is to make your payments on time. In addition, do not apply for credit frequently, because a large number of inquiries on your credit report can negatively affect your rating. Try to reduce your credit card balances to less than 30% as well.
For more information, Click Here.
Q8: What if there is a mistake on my credit report?
A8: If you believe there is an error on your credit report, there are three credit bureaus that you can contact: Experian, Trans Union, and Equifax. Each bureau will give you information on how to dispute errors. It is recommended that you do not apply for credit while a dispute is pending. Investigations are typically completed within 30 days of the date the request is received. If you do this in advance of buying or refinancing a home you can complete this for free typically over a 3-4 month period. If you are currently in the process of getting a new mortgage then we can assist you in fixing the mistake in less than 30 days for a nominal fee charged to us from the credit reporting agencies.
For more information, view Click Here.
Q9: What is involved in closing costs?
A9: After your loan is approved, you will attend a closing to sign the final loan documents & pay your down payment & closing costs. Specific closing costs may vary, but they normally are categorized as recurring and nonrecurring:
Nonrecurring (one-time fees related to the transaction):
» Attorney or escrow fees
» Loan origination fee
» Recording fee
» Survey fee
» Any other documentation fees
» Title Insurance
» Loan discount points
» First payment of escrow account for future real estate taxes & insurance
» Paid receipt for homeowner's insurance policy (fire & flood if applicable)
» First premium of mortgage insurance PMI (if applicable)
» Recurring (costs that recur on a periodic basis)
Recurring Fees Include:
» Property taxes
» Prorated interest
» HOA dues
» Homeowners insurance
» Mortgage insurance (if applicable) (click Here for Top of Page)
Q10: What is a rate lock?
A10: A rate lock is a contractual agreement between the lender & the buyer. There are four components to a rate lock:
» Loan program
» Interest rate
» Points
» Length of the lock
Once you have completed a loan application, chosen a property, you can lock in your interest rate. Locking in a rate allows you to keep a certain loan program & interest rate over a specified amount of time, even if the interest rates go up during that time. Usually, rates are locked in on a 30, 45 or 60-day basis. Keep in mind, a lock usually cannot be changed, so it is important to consult your mortgage professional for advice. In addition, most lenders will not adjust your lock if rates drop, unless the drop is substantial of typically at least .375% lower than the original locked rate. If you need free advice on when to lock, click here.
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Q11: How long will it take to apply and close a loan?
A11: The average amount of time from application to close is 30 days, but this time may vary depending on your financial circumstances. We have closed loans in as little as 7 days.
Q12: What are points and how do they work?
A12: Points are fees paid to the lender at closing. One "point" is equal to 1% of the total loan amount. For instance, for a $200,000 loan, one point would equal $2,000. Most retail lenders or retail banks charge between 1 & 2 points. AmeriBest typically charges the lowest points possible.
If you want to lower your interest rate, you can pay more points up-front. This is an effective way to save money by lowering your interest rate over the life of your loan. However, if you do not have money to pay upfront, opt for fewer points.
Q13: Why are some rates higher than others?
A13: An interest rate depends upon several factors. For instance, rates will be higher if you have poor credit/credit scores, have limited amount of cash down or have a high debt-to-income (DTI) ratio. In addition, if you are going to purchase a condo, manufactured home, 2-4 units or investment property, rates will also increase.
Q14: How do I qualify for a loan?
A14: Complete a Fannie Mae Form 1003 application and contact one of our qualified loan professionals. Click Here to fill-out our short application. (click Here for Top of Page)
Q15: How do I know how much of a loan amount I qualify for?
A15: Your AmeriBest Loan Officer can tell you how much you qualify for after they review your application & pull credit. The loan amount depends on income & debt ratio. Your debt ratio is the total amount of monthly debt you pay out divided by your monthly income. The debt-to-income ratio (DTI) lets the lender know how much mortgage debt you are able to handle. Click Here for Buyer Dont's!
Pre-qualification
We will help you determine to see if you pre-qualify for a traditional, conforming or jumbo loan. However, pre-qualification does not guarantee that you will be approved for the loan.
We'll help you pre-qualify under the Fannie Mae or Freddie Mac guidelines. We will also give you mortgage options & offer strategies to qualifying such as:
» Consider FHA Financing
» Offering you an Adjustable Rate Mortgage (ARM) loan at a lower starting rate
» Lower downpayment, pay money to reduce revolving debt = improves debt ratio
(Click Here for Top of Page)
Q16: What makes a loan a Portfolio Loan?
A16: There are several factors that determine whether a loan is Portfolio Loan. For instance, if you have low credit scores & only 5% down, you would be considered a Portfolio borrower. Also, borrowers who want to purchase or refinance a home at a high loan-to-value (LTV), i.e., 96.5% - 100%, fall under a Portfolio loan or FHA loans. In addition, if a borrower is unable to verify their income, they are considered to be non-conventional.
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