Home Loan Frequently Asked Questions
What is an Earnest Money Deposit?
This is a sum of money given to bind the sale of real estate, or a sum of money given to ensure payment or an advance of funds in the processing of a loan.
What is Escrow?
An item of value, money, or documents deposited with a third party to be delivered upon the fulfillment of a condition. For example, the deposit of funds or documents into an escrow account to be disbursed upon the closing of a sale of real estate.
What is Equity?
The amount of financial interest in a property. Equity is the difference between the fair market value of the property and the amount still owed on the mortgage.
What is a FICO score?
FICO scores are the most widely used credit score in U.S. mortgage loan underwriting. This 3-digit number, ranging from 300 to 850, is calculated by a mathematical equation that evaluates many types of information that are on your credit report. Higher FICO scores represent lower credit risks, which typically equate to better loan terms. Click here for more information on Understanding Credit and the Credit Report.
What is an Adjustable-Rate Mortgage (ARM)?
A mortgage with an interest rate that changes during the life of the loan according to movements in an index rate. Sometimes called AMLs (adjustable mortgage loans) or VRMs (variable-rate mortgages).
What is Amortization?
The gradual repayment of a mortgage loan, both principal and interest, by installments. The Amortization Term is the length of time required to amortize the mortgage loan expressed as a number of months. For example, 360 months is the amortization term for a 30-year fixed-rate mortgage.
What is the Annual Percentage Rate (APR)?
The cost of credit, expressed as a yearly rate including interest, mortgage insurance, and loan origination fees. This allows the buyer to compare loans; however APR should not be confused with the actual note rate.
What is an Appraisal?
A written analysis prepared by a qualified appraiser and estimating the value of a property. The Appraised Value is an opinion of a property's fair market value, based on an appraiser's knowledge, experience, and analysis of the property.
What are Closing Costs?
These are expenses over and above the price of the property that are incurred by buyers and sellers when transferring ownership of a property. Closing costs normally include an origination fee, property taxes, charges for title insurance and escrow costs, appraisal fees, etc. Closing costs will vary according to the area country and the lenders used.
What is a Credit Report?
A report detailing an individual's credit history that is prepared by a credit bureau and used by a lender to determine a loan applicant's creditworthiness.
What is a Down Payment?
Part of the purchase price of a property that is paid in cash and not financed with a mortgage.
What is a Fixed-Rate Mortgage (FRM)?
A mortgage interest that are fixed throughout the entire term of the loan.
What is the Loan-To-Value (LTV) Percentage?
The relationship between the principal balance of the mortgage and the appraised value (or sales price if it is lower) of the property. For example, a $100,000 home with an $80,000 mortgage has an LTV of 80 percent.
What is Mortgage Insurance?
A contract that insures the lender against loss caused by a mortgagor's default on a government mortgage or conventional mortgage. Mortgage insurance can be issued by a private company or by a government agency.
What is a Mortgage Insurance Premium (MIP)?
The amount paid by a mortgagor for mortgage insurance.
What is the Note?
A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.
What is an Origination Fee?
A fee paid to a lender for processing a loan application. The origination fee is stated in the form of points. One point is 1 percent of the mortgage amount.
What is Pre-Qualification?
The process of determining how much money you will be eligible to borrow before you apply for a loan.
What is Principal, Interest, Taxes, and Insurance (PITI)?
The four components of a monthly mortgage payment. Principal refers to the part of the monthly payment that reduces the remaining balance of the mortgage. Interest is the fee charged for borrowing money. Taxes and insurance refer to the monthly cost of property taxes and homeowners insurance, whether these amounts that are paid into an escrow account each month or not.
What is Private Mortgage Insurance (PMI)?
Mortgage insurance provided by a private mortgage insurance company to protect lenders against loss if a borrower defaults. Most lenders generally require MI for a loan with a loan-to-value (LTV) percentage in excess of 80 percent.
What is a Rate Lock?
A commitment issued by a lender to a borrower or other mortgage originator guaranteeing a specified interest rate and lender costs for a specified period of time.
What is Recording?
The noting in the registrar's office of the details of a properly executed legal document, such as a deed, a mortgage note, a satisfaction of mortgage, or an extension of mortgage, thereby making it a part of the public record.
What is a Refinance?
Paying off one loan with the proceeds from a new loan using the same property as security.
What is Underwriting?
The process of evaluating a loan application to determine the risk involved for the lender. Underwriting involves an analysis of the borrower's creditworthiness and the quality of the property itself.
"How quickly can I get Pre-Qualified?"
The first step of getting pre-qualified is to schedule an appointment with one of our Loan Officers. Once you are in the appointment it could be as quick as an hour to get you out there shopping. To expedite this process you can also apply online here.
"What are rates looking like?"
Rates vary depending on an individuals situation, your credit score and the overall climate of the economy. For a better idea of what your rate looks like, find a Loan Officer near you.
"How fast can you close my transaction?"
The length of your transaction is determined by an individual's situation. With that said, Summit generally closes our loans within 30 days and our promise to you is that we will close on time and smoothly.
"When can I start putting offers on homes?"
Once you are pre-qualified and receive your pre-qualification letter, you can put offers on home as soon as you find the right one.