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1.
Is
the interest on my home loan tax deductible?
Yes, in most cases the interest on a home loan is tax deductible. However,
it is always best to seek the opinion of someone who specializes in this
area. We strongly recommend you speak with your accountant, tax preparer,
or directly with the IRS.
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2.
What
items make up my total mortgage payment?
Mortgage payments are made up of 4 basic components - Principal, Interest,
Taxes, and Insurance - commonly referred to as PITI. The P&I portion
of your payment is based on your loan amount, interest rate, and loan
term. Taxes are based on 1/12th of the annual property taxes (calculated
at fully assessed value for new properties.) Insurance is based on 1/12th
of the annual premium for your homeowners insurance.
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3.
What
is the right type of mortgage for me - a fixed rate or adjustable rate?
With a Fixed Rate Loan, the Principal and Interest portion of your payment
will always remain the same for the life of the loan. With an Adjustable
Rate Loan, the Principal and Interest portion of your payment will change
periodically depending on whether interest rates are increasing or decreasing.
Fixed rate mortgages are the most common type selected by borrowers. Most
borrowers like the stability of a fixed principal and interest (P&I)
payment when planning their budget. Your Loan Officer can explain the
products available and help you select the one that is best for you.
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4.
When
should I lock my loan?
When you lock your loan, you should allow enough time for the loan to
be processed before closing or settlement, but should not lock so far
in advance that the lock period will expire before the house is built.
The standard lock period is between 10 to 60 days before the completion
of your home. We also have lock periods greater than 60 days. These extended-locks
generally require an Extended Rate Lock fee. We always suggest you seek
advice from our team members at Solutions Mortgage about when to lock.
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5.
What
is a FICO score?
The FICO credit scoring method (which was developed by the Fair, Isaac
Company) applies a mathematical equation to information on the borrower's
credit report. This calculation produces a number that represents the
borrower's credit risk. FICO scores range from 300 (higher risk) to 850
(lower risk). The score takes into account payment history, amounts owed,
length of credit history, new credit, and types of credit accounts being
used. FICO scores are calculated by the credit reporting agency, which
means that each credit agency may arrive at a different FICO score depending
on the data contained in their credit files. The FICO credit score is
just one of the factors a lender uses when deciding whether the borrower
qualifies for the loan program requested.
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6.
What if there is an error on my credit report?
Any errors in your credit record should be reported directly to the appropriate
credit agency. There are three main credit reporting agencies.
Equifax (800) 378-2732
Experian (888) 397-3742
Trans Union (800) 888-4213
All of these agencies have procedures for correcting information. You
should also notify your lender of incorrect information in your credit
report.
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7.
What is the difference between pre-qualifying and pre-approval?
Pre-qualification gives the prospective borrower an idea of the loan amount
for which he or she can qualify. In order for the lender to make this
calculation, the prospective borrower needs to provide the lender with
information about his or her credit, assets, debts and income. Because
the borrower does not provide supporting documentation and the lender
does not verify the information, the pre-qualification is not accompanied
by a commitment to lend. You can use our mortgage calculators to estimate
pre-qualification information.
Pre-approval is a step beyond pre-qualification. In order to be pre-approved,
the borrower submits a full loan application to the lender with all of
the required supporting documentation. The loan application is processed
in the usual manner where borrower information and credit is verified,
and the loan application is submitted to the lender's underwriting department
for approval. If the lender issues a pre-approval, it constitutes an agreement
to lend the home buyer a specified amount of money on specific terms,
usually subject to a satisfactory review of the property and no change
in the borrower's financial condition.
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8.
What is PMI and how can I avoid paying it?
Private Mortgage Insurance (PMI) is an insurance policy provided by private-mortgage
insurance companies that protects the lender against loss in the event
the borrower defaults on the loan. A borrower is normally required to
pay PMI when his or her loan amount is greater than 80% of the value of
the house. Once the equity you have in your house reaches 20% or more,
you may contact your lender to request cancellation of PMI. In most cases,
this will require an appraisal, which you may be required to pay for.
You can also obtain a second mortgage or Home Equity Line of Credit to
reduce your loan-to-value to 80%.
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