Home Loan Frequently Asked Questions
Here are some of the most frequently asked questions we get at LoanAction.
- What is a rate lock?
- What is an impound account?
- What is equity?
- What is the difference between a fixed rate and adjustable rate loan?
- What is an A.P.R.?
- What documents will I need to give the lender before closing a loan?
- What’s included in closing costs?
- How do I start?
1. What is a rate lock?
Because interest rates on most loan programs change on a daily basis, a lender requires you to lock or commit to an interest rate prior to closing your loan. Rate locks can be for 15, 30, 45 or 60 days. Some loan programs allow you to lock your interest rate up to 90 days or more before closing your loan.
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2. What is an impound account?
An impound account (or sometimes referred to as an escrow account) is an account setup by a lender to pay the property taxes, homeowners insurance premiums and mortgage insurance premiums (if needed) when they are due.
The borrower will pay the property taxes and homeowners insurance each month (prorated over 12 months) instead of paying each item in full when they are due. Government insured loans such as VA, FHA and CalVet loans require borrowers to have impound accounts with their loans.
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3. What is equity?
Equity is the difference between the amount a home would sell for (market value) and the balance still owed on the mortgage. This important difference represents the homeowner’s financial interest or equity in the home. A homeowner can therefore borrow against the equity in their home and use it for virtually any purpose, such as debt consolidation or home improvements. Because this is a mortgage loan, the interest paid on this loan can be tax deductible (consult your tax specialist).
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4. What is the difference between a fixed rate and adjustable rate loan?
An adjustable (or variable) rate mortgage has an interest rate that adjusts periodically on the basis of changes to a specified index. Typically adjustable rate mortgages (ARM) start out at somewhat lower rates than do fixed rate mortgages. They however can fluctuate up, raising the monthly payment or fluctuate down, lowering the monthly payment depending on the movement of the index to which it is tied to.
A fixed rate loan, on the other hand, has an interest rate that remains the same throughout the entire loan term. Please call (800) 734-3772 and speak with a loan consultant to discuss the advantages of both types of mortgages to help you decide which loan is best for you.
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5. What is an A.P.R.?
These three letters stand for Annual Percentage Rate which is the total cost, on a yearly basis, in interest as a percentage of the loan amount. This figure includes such items as the base interest rate and any loan origination fees. A LoanAction Loan Consultant would be glad to answer any questions about Annual Percentage Rates and how they are calculated.
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6. What documents will I need to give the lender before closing a loan?
With LoanAction’s tremendous variety of loan programs, the documents you will need to provide vary by loan program. Some common documents that you might need to provide are:
- Income Documentation – Two years income history such as Paystubs, W-2 forms and 1040 Tax Returns
- Asset Verification – Bank Statements, Retirement Account Statements, Mutual Fund Statements, etc.
- Legal Identification – Driver License and Social Security Card
- Insurance Coverage – Proof of Homeowner’s Insurance
Your LoanAction Loan Consultant will let you know what documents you need to provide in order to close your loan quickly and efficiently.
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7. What’s included in closing costs?
In order to simplify this answer, closing costs can be divided into three categories:
- Lender Fees – this includes points (if applicable), appraisal report, credit report, underwriting, processing, document, tax service and flood certificate
- Settlement Fees – this includes title insurance, escrow/settlement fees, city/county/state taxes, recordation and other possible settlement related costs
- Pre-paid Expenses – this includes pre-paid interest, property taxes and homeowner’s insurance premiums
Your LoanAction Loan Consultant can give you a detailed breakdown of all closing costs that would apply to your specific loan.
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8. How do I start?
It couldn’t be easier. Just click here to Apply Online or call us at (800) 734-3772 and speak with one of our friendly Loan Consultants and let them answer any questions you might have.
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