FAQ's
RatesAreHot.com Frequently Asked Questions (FAQs)
How Much House Can I Afford?
When house hunting the first thing you should do is make sure that you are pre-qualified for a certain amount of money this will not only save you time but it will also save you money. It is smart to use this website but at the same time you have to look at your own budget and your own money and ask yourself if you can afford this payment. We always tell our customers to look deep in their pockets. Make sure you can afford that payment. RatesAreHot.com will give you a magic prequalification number but you need to make sure that at the end of the month you can write that check. Don’t forget to factor in your county taxes, your fire insurance which is your homeowners insurance and any private mortgage insurance known as PMI and also maintenance. All of this can add up to an extra $300 to $400 per month on top of your principle and interest mortgage payment and this all depends on the location of where you are looking to live. Mortgage lenders and banks that lend mortgage home financing money will not want your new mortgage payment to be anymore than 28% of your gross monthly income. For example, if you make $5,000 per month (nevermind taxes) times that by 28% it is that simple. The new mortgage monthly payment (meaning principle and interest) amount in this example that you would prequalify for would be $1400.00 per month. This number will have to include principle, interest, property taxes, homeowners insurance, and sometimes PMI (private mortgage insurance) etc... Sometimes the mortgage underwriter will allow that $1400 to go slightly higher but they will need to be completely certain that you have the ability to pay it back and the file will need to be completely documented with proof that you prequalify for that amount. Another number the mortgage underwriter takes into consideration is also called the debt to income ratio but it includes the new mortgage payment along with the recurring monthly debt that you have. This is why they need to see your credit report. The mortgage underwriter will take the new monthly mortgage payment which in this case is $1400 per month and add to that your monthly credit card payments, visa, mastercard, discover, car payments, school loans, any recurring monthly that shows up on your credit report (this does not include day care, car insurance, rent or utilities) let's say you have $1,000 in monthly recurring bills (liabilities) plus your new monthly mortgage payment of $1400 that totals $2400.00 times this by your gross monthly income of $5,000 = this equals 48% this would mean that you do not pre-qualify because the ratio guidelines that the mortgage underwriter would use for this is 36% and this total debt to income ratio exceeds 35% it is 48%. We would have to go back to the drawing table and prequalify you again until that 48%
This website can help you come up with the amount that you qualify. We will tell you what really makes sense. The rest is up to you. We will also tell you if you don't pre-qualify. We give you a number that fits within your own financial criteria.
What happens after I fill out all of the forms on www.RatesAreHot.com?
After you fill out the forms on www.RatesAreHot.comyou will notice that there is enough information obtained for us to come up with a Magic qualifying number for you. That number is the number that you qualify for. With that number you go out and you look for a house. For example: If that magic number is $100,000 than you will be looking for a $100,000 dollar house. If you have $10,000 to put down than you will be looking for a house in the amount of $110,000. The more money you have to put down the more you add to that magic number.
At what point will the lenders appear so I can see what rates they have to offer?
After you have completed all of the required fields on all of the forms you will than hit the submit button at that time a box will appear with five different lenders.
The information you will see will be the interest rates for all 5 lenders. These lenders will be competing for your business. You will have access to their information such as their phone numbers and you can make the choice as to whether you want to call all five or just two. But please remember that these lenders are hand selected by www.RatesAreHot.comso you can be sure that we did everything in our power to make sure you are only dealing with reputable banks, lenders and brokers with the upmost integrity. Our lending clients are the best of the best.
What kinds of security does www.RatesAreHot.comhave so that I know my information will not be stolen?
www.RatesAreHot.comis a certified VeriSign Secure Site. You will see that sign everywhere on our site. Protecting your personal information is extremely important to us and as a sign of that you will see this sign every where. We do our best to protect you like we do ourselves. Verisign is the leading provider of Internet Trust services. With nearly 15 million registrations they are a widely recognized and trusted name in the securities industry. The Secure Server Ids issued by Verisign are based on the strongest encryption technology available. For more information please visit them at www.verisign.com
What are my options as far as low down payments?
The only options in today’s market (2008) would be an FHA or VA loan FHA stands for Federal Housing Administration and VA stands for Veterans Administration. The Federal Housing Administration is an agency of the Department of Housing and Urban Development (HUD). FHA insures loans made to all U.S. citizens, permanent residents, and noncitizens with work permits who meet their financial qualification rules. Under an FHA program if the buyer defaults on their mortgage and the lender forecloses, the FHA pays 100% of the amount insured. This loan insurance lets qualified people by affordable houses. FHA will allow for only 3% down this means if you have a $100,000 purchase on a house you will only be required to put down $3,000. This does NOT include closing costs. FHA also allows lower credit scores such as 580 and above and they also require atleast 12 months of good clean credit. For more information about FHA loans please contact one of our qualified FHA lenders.
VA stands for U.S. Department of Veterans Affairs (VA) and will finance 100% of the loan. These are available to men and women who are now in the military and to veterans with honorable discharges who meet specific eligibility rules, most of which relate to length of service. The VA doesn’t make mortgage loans, but guarantees part of the house loan you get from a bank, savings and loans, or other private lender. If you default, the VA pays the lender the amount guaranteed and you in turn will owe the VA. This guarantee makes it easier for veterans to get favorable loan terms with a low down payment. For more information please contact one of our VA lenders.
There are also programs available for first time homebuyers through local state money called the State Bond Money.
Could you explain to me what Freddie Mac and Fannie Mae are and what do they do?
Freddie Mac stands for Federal Home Loan Mortgage Corporation.
Fannie Mae stands for Federal National Mortgage Association.
Mortgages made by lenders and banks are generally sold on the secondary market to produce cash so lenders can make more mortgages, the largest purchasers on the secondary market are called Freddie Mac and Fannie Mae. These two organizations are government sponsored and were created by the government to make mortgages available to more people with low and moderate incomes, although both organizations are now privately run.
What is PMI?
PMI stands for Private Mortgage Insurance these are policies designed to reimburse a mortgage lender up to a certain amount if you default on your loan and your house isn’t worth enough to entirely repay the lender through a foreclosure sale. Most lenders require PMI on loans where the borrower makes a down payment of less than 20%. For example if you purchase a house for $100,000 and you do not put at least 20% down which amounts to $20,000 the lender will require PMI (private mortgage insurance) and the premium is paid monthly. The fee is typically around one-half of one percent of the mortgage loan. You can cancel the PMI once your equity in the house reaches 20% as long as you have a good monthly mortgage payment history with the lender.
What is better? An adjustable rate mortgage or a fixed rate mortgage?
www.RatesAreHot.comonly recommends a 10, 15, 20, 25, or 30 year FIXED loans.
If you plan on only staying in your home for 5 years it would be ok to obtain a 5 year adjustable as long as the loan adjusts after the 5 year period and that there is NO prepayment penalty.
What are Points and Should I pay them?
Paying points is a way to reduce your interest rate when you purchase or refinance your home. You are paying points up front to get a reduction on your interest rate to reduce your monthly payment over the life of your loan term. One point is equivalent to one percent of your loan amount, one point on a $100,000 loan amount is equal to $1,000.
As a general rule of thumb it really doesn’t make sense to pay over 1% or 1-1/2% in points to reduce your interest rate.
What does Loan to Value Mean?
Loan to Value refers to the amount of the loan as a percentage of the current market value of your home. You can calculate your LTV fairly by dividing your existing loan amount by current value of your home. If you borrow $100,000 and your home is worth $200,000 your loan to value is 50%. This is an extremely important calculation in the mortgage underwriting process. If your loan to value exceeds 80% you will be required to pay PMI. See PMI..
What is a rate lock?
What is a rate A rate lock is a lenders guarantee of an interest rate for a set time period. A lock period ranges between 12 to 90 days. During this time period if your loan officer locks your loan you will be protected from market driven rate fluctuations.
What is a reverse mortgage?
A reverse mortgage is a home loan that you do not have to pay back for as long as you live in your home. It can be paid to you in one lump sum, as a regular monthly income, or at the times and in the amounts you want. The loan and interest are repaid only when you sell your home, permanently move away, or die. All homeowners must be at least be 62 years old, at least one homeowner must live in the house most of the year. Eligible homes are single family, one unit dwellings, two to four units, owner occupied dwellings and some condominiums. Please check with one of our qualified lenders or more information.
What is an Agreement of Sale?
A contract signed by buyer and seller stating the terms and conditions under which a property will be sold.
What is Mortgage Amortization?
An amortization is the repayment of principal from scheduled mortgage payments that exceed the interest due. The scheduled payment less the interest equals amortization. The loan balance declines by the amount of the scheduled payment, plus the amount of any extra payment.
What is an Annual Percentage Rate?
The Annual Percentage Rate, which must be reported by lenders under the Fair Truth in Lending regulations. It is a measure of credit cost to the borrower that takes account of the interest rate, points, and flat dollar charges by the lender. The charges covered by the APR also include mortgage insurance premiums, but no other payments to third parties, such as payments to title insurers or appraisers. The APR is adjusted for the time value of money, so that dollars paid by the borrower up-front carry a heavier weight than dollars paid in the future. However, the APR is calculated on the assumption that the loan rums to term, and is therefore potentially deceptive for borrowers with short time horizons.
How do I know what my credit scores are and where can I pull my credit?
A Credit is what is known as the best credit rating. With an A credit rating you should have no problem getting a house that you qualify for. With A credit you will be entitled to the best rate that any lender has to offer.
You can go to www.experian.com, www.equifax.com, www.transunion.com
To see what your score are.
What if I need to talk to www.RatesAreHot.com
If you need to contact ratesarehot.com you can email info@ratesarehot.com
What do I do if I have trouble filling out a section of the online forms?
