When it comes to your credit rating, most lenders aim low.

Most Lenders will quote you your lowest credit score. This can result in a much lower (SHOULD BE higher?) interest rate than you might otherwise qualify for. At NECM we will always use the highest score our lenders allow.

What is a mortgage?

A mortgage is loan you use to purchase a home-or some other piece of property. The amount you borrow is called the principal and each mortgage payment is a combination of principal and interest. The property remains in the possession of the borrower, but it may be re-claimed by the lender if the loan and interest are not paid as agreed.

What are the terms for mortgages?

Mortgages are available with a fixed rate of interest for various terms, ranging from 10 – 40 years. We also offer variable rate mortgage options.

Why is mortgage pre-approval important?

Mortgage pre-approval is important for a number of reasons:

• It determines the maximum mortgage loan for which you qualify.
• It allows your realtor to show you a range of properties in your price range.
• It allows your realtor to make a realistic offer on your purchase, and saves time in the negotiation process.
• It holds the interest rate for a period of 60 days (90 days for new construction), guarding you against rate fluctuations.
• It provides peace of mind during the home-buying process.

What documents are required for pre-approval?

• Income confirmation. This will be used to determine how large a mortgage payment you can handle.
• Down payment confirmation. This will be used to confirm the difference between your proposed purchase price and the amount of the mortgage loan. Your down payment can include saved funds on deposit with your financial institution, a gift from an immediate family member, and/or equity from the sale of another property.
• Credit application. The credit application will provide us with information we need assess your mortgage request and net worth. It will also let us request a credit bureau check.
• Credit confirmation. We'll do a credit investigation and confirm that your credit rating is acceptable for a mortgage.

How long will it take to close my loan?

Generally it takes between 1 and 5 weeks from start to finish to close any loan or refinance.

What is the normal down payment procedure when purchasing an existing home with a 30-year fixed rate mortgage?

The primary lender will require private mortgage insurance if the loan-to-value is more than 80 percent. So a 20 percent down payment is sufficient to avoid PMI, provided the home appraisal justifies the purchase price. Homeowners hate paying PMI because it's an insurance policy to protect the lender if the homeowner defaults on the mortgage. The homeowner would rather spend money making additional principal payments.

If you can't afford to put 20 percent down, you can take out a second mortgage concurrent with the first and avoid PMI by having the primary lender loan 80 percent of the purchase price, and the secondary lender lend some fraction of the balance -- usually 10 percent. These loans are called 80-10-10 loans. The secondary loan is typically for 10-15 years and will carry a higher interest rate than the primary mortgage because of it's increased risk. (The primary mortgage gets paid off first from the proceeds on the sale of the home.)

Be careful with this approach because an 80-10-10 loan may turn out to be more expensive than a 90-10 with PMI. If you're trying to choose between the two loan programs, compare the additional interest expense of the 80-10-10 against the PMI payments. You can request cancellation of PMI when your loan-to-value reaches 80 percent, so the PMI payments won't last forever. And at NECM, we also have a variety of loan programs that don’t require ANY down payment.

What is the difference between a mortgage rate quoted and the APR? Which one should I be looking at when I am looking at lower mortgage rates?

Think of the APR on a loan as the all-in interest rate on the loan. Along with the stated interest rate on the mortgage, it includes how points and closing costs affect that interest rate. Using APRs to compare loans isn't a definitive comparison because the Truth-in-Lending Act allows lenders to estimate closing costs and permits some rounding (up to .125 percent) but it's a better measure to use when comparing loans than the stated or nominal interest rate.

How can I save money on my mortgage?

The easiest way to reduce the interest costs on your mortgage is to pay it off sooner. Here's how:

• Pay weekly or biweekly. Making your mortgage payments earlier and more frequently through weekly or biweekly payments can save on interest compared with monthly payments.
• Choose a shorter amortization period.

What are the other costs of a home purchase?

The other costs associated with the purchase of a home may include the following:

• Inspection fee-required if a professional is to inspect the house prior to the completion of the purchase
• Appraisal fee-required to ensure the property is acceptable security for the mortgage
• Legal fees-includes lawyer's or notary's fees plus any disbursements required to transfer the property and register the mortgage
• Survey certificate fee-required to ensure the house is positioned on the lot within legal restrictions
• Tax adjustments-you will be responsible for paying the taxes for the portion of the first year that you own the property
• Mortgage insurance-if the down payment is less than 25% of the purchase price, an insurance premium on the mortgage amount is required (it may be added to the mortgage amount)
• Home insurance-arranged to cover the property in the event of fire or other damage
• Mortgage protection insurance-optional, but is available to cover the mortgage amount in the event of death, disability, loss of employment, or critical illness
• Moving costs-vary depending on how far you're going and who is helping you move

How do I know if it makes sense for me to refinance?

First determine your financial mortgage related goals: i.e. are you looking to improve your monthly cash flow, reduce your mortgage term, do you need to take out cash utilizing the equity from your home? Obtaining the right mortgage for your particular needs could make sense even when rates are not at their lowest levels. First identify your goal and contact a NECM professional for suggestions on mortgage programs that would best help you meet your objectives.

What documentation will the lender typically require to process my mortgage?

The answer depends upon the quality of your credit and the amount of equity you have in your property. On a typical fully documented mortgage application (where an applicant is seeking to qualify based on an employee's salary), the lender will require: one month's current pay stubs, W-2's for the prior two years and bank and investment account statements for the prior 2-3 months. If an applicant is self-employed (has a 25% or greater ownership in a business) then additional documentation could be required (i.e. 1040's, 1165's, 1120's, P & L statement).

Why do I need to pay for another policy of title insurance when we already own the property and purchased title insurance when we bought the house?

Before closing your new mortgage, your new lender must be certain that the title to the property will be free and clear, free of prior defects and indebtedness. A new policy is needed to protect the new lender and subsequent investor of your new mortgage. Both a homeowner and prospective lender need to be certain that what is available on the property is what is referred to as a "marketable title". A title company researches the legal history of the property that entails searching public records in the offices of the county recorder. Problems with the title could threaten the mortgage, limit ones use and enjoyment of the property and could result in financial loss. A policy of title insurance protects a homeowner's title and the insurer covers the cost of any legal challenges. Be sure to ask your NECM professional how to get huge discounts on your title insurance premiums.

Which closing costs associated with my refinance are tax-deductible?

Please see the IRS link on our website where this information is outlined. Also consult with your tax advisor.

Is it best to pay points up front to reduce the interest rate?

When points are paid on a mortgage, the result is to buy down the interest rate, typically 1 point (or 1%) will buy the rate down .25%. The key to analyzing whether paying points makes financial sense is to determine: 1) How long do you anticipate remaining in the property? 2) When would the breakeven point occur? For example if you pay two points to buy your rate down from 8.00% to 7.50% on a $300,000 mortgage, the payment at 8.00% would be $2,201 and at 7.50%, the payment would be $2,098, with the difference in payment amounting to $103/month. With two points costing $6000, divided by the savings of $103/month equaling 58.25 months or 4.85 years to break even. You would want to hold the mortgage and remain in the property approximately 5 years for this to make sense. Other factors to consider are the tax implications of paying points (see the IRS website) as well as the time value of money.

What is the difference between a zero point and a no cost mortgage?

With a zero point mortgage, a borrower has opted not to pay points to buy their interest rate down but will still be paying for their base closing costs (i.e. appraisal, credit report, lender doc fees, title and escrow, etc.). With a no cost mortgage, a borrower has accepted a higher interest rate, with the trade off that the lender or broker will pay for all their non-recurring closing costs (all base closing fees except for interest, taxes and insurance due).

What is APR and how is it calculated?

APR stands for annual percentage rate and its purpose is to give borrowers a truer representation of the effective interest rate on their mortgage. APR factors in certain closing costs and fees and spreads these costs over the life of the mortgage, along with the note rate, to arrive at a more accurate annualized percentage rate than the note rate alone represents.