Q What is unique about a first time home buyer (FTHB) loan?
A Homeownership is encouraged and promoted through all levels of government.
Subsidies have been created to provide lower interest rates and down payment assistance for FTHBs. The Colorado Housing and Finance Authority or CHFA is the largest administrator of federal subsidy loans in Colorado.
Q What should I watch for with a first time home buyer loan?
A Not every lender offers bona fide subsidy loans for FTHBs because there is more
work required of the lender and less profit for the lender. Some lenders will label an
ordinary loan as a FTHB loan, when in fact these loans are more expensive for the
borrower. This is a form of predatory lending, it is very common and many
borrowers become victims. If you have any questions about a particular loan that you
have heard about, call one of our loan officers for an opinion.
Q How do I qualify for a first time home buyer loan?
A These loans are intended for low to moderate income borrowers who are buying their
first home. The rule generally states that you cannot have owned a home in the past
three years and that your income cannot exceed certain limits, depending upon your
family size.
Q How useful is a Good Faith Estimate (GFE) and how is it used when comparing
lenders?
A Every lender is required to give you a GFE, which states the estimated interest rate,
monthly payment, and upfront fees and prepaid expenses. It is only an estimate,
however, and is only as reliable as the lender who provides it. At Unifirst Mortgage,
our estimated costs and fees are guaranteed. If the total fees (including third party
fees) exceeds our estimate, we will pay the difference.
Q What is the Annual Percentage Rate (APR)?
A The stated interest rate or your note determines your monthly payment, but it does
not reflect the fees you pay up front. The net proceeds you receive from
your loan is actually less because of your up front fees. For example, if you borrow
$100,000 and pay fees of $2,000, you really received $98,000. When this figure is
used to recalculate your interest rate, the new figure, the APR, is somewhat higher
than your note rate.
Q What is the purpose of the APR?
A It is required by law for disclosure purposes. It can be used to compare loan quotes
from different lenders. When interest rate and fees vary, this gives one number to
look at for a comparison.
Q Is APR a good tool for comparing loans?
A The disadvantage of the APR is it assumes you will pay your loan off as
scheduled, usually in 30 years. If you pay your loan off sooner, (the average is
less than 10 years) then your actual APR is greater than the quoted APR. In other
words, higher up front loan fees will lead to a disproportionately higher APR than
what was stated. This complicates the situation and makes the lower rate, higher
fee loans appear more attractive than they are.
Q Is a no fee loan a good deal?
A Its a trade off. Any lender can reduce or eliminate your fee in exchange for a higher
interest rate. A general rule is for every increase of 1% in upfront costs, your interest
rate can be lowered by .25% (a 4 to 1 ratio).
Q How can I buy down my interest rate?
A Refer to the question above. With an approximate 4 to 1 ratio,
you can get a Ό % interest rate reduction for every 1% you wish to pay up front,
usually called discount points. Sometime the seller of the property will agree, under
the terms of your sales contract, to pay discount points so that you can get a lower
interest rate.
Q What is a temporary rate buy down?
A You can have your interest rate and corresponding monthly payment reduced by 2%
for the first year and 1% during this second year (called a 2-1 buy down) by having
your seller pay upfront discount points of around 2.26%. A 3-2-1 buy down cost
about 4.44% and a 1-0 buy down cost .78%.
Q How is a temporary rate buy down beneficial?
A It allows you to qualify for a high loan amount since your qualification payment is
based on your first year payments.
Q What is better, a fixed rate or an adjustable rate mortgage (ARM)?
A Fixed rate loans are safer because the rate can never go up, but if rates drop, you can
always refinance to a lower interest rate. ARM interest rates start off lower than fixed
rates because you are taking the risk that the rate could increase on the adjustment
dates.
Q How about the loan that is fixed for three or five years and then becomes adjustable
annually?
A This loan usually carries a lower initial rate than the thirty year fixed loan and is a
good option if you plan to sell your home or otherwise pay off your loan before the
initial fixed period expires.
Q Should I lock in my interest rate at application?
A Interest rates change daily and most lenders will allow you to lock in your rate as
soon as you apply. Since future interest rates are no more predictable than the stock
market, you are usually better off to lock in early and avoid the anxiety of watching
interest rates every day.
Q What is the lowest down payment I can make?
A In recent years, loans with no money down have become available. These can be
either 100% loans with private mortgage insurance or combination loans with an
80% first mortgage and a 20% second mortgage.
Q Are private mortgage insurance (PMI) and FHA mortgage insurance premiums
(MIP) deductible for income taxes?
A Beginning with loans closed on January 1, 2007, the PMI and MIP premiums, both
up front and monthly, are deductible along with interest on loans for your primary
residence.
Q What happens when I lock in my interest rate with a lender?
A When a lender locks in your rates, they will make a commitment in the secondary
market to deliver your loan at that rate. If rates go up in the meantime, you are
guaranteed your loan rates, as long as your loan closes by the expiration date. If rates
go down, your lender is still committed to that rate, and is unable to lower it for you.
Q What is a float down lock?
A With a float down lock, you can lock in your interest rate, but are still able to lower it
if rates should later drop. Of course nothing is free. The rate is higher with the float
down option to cover the lenders risk.
Q Why should I refinance?
A There are three common reasons to refinance:
1) If rates are lower than your current note rate. This is called an interest rate
reduction or IRR.
2) If you need cash for debt consolidation, college, etc; a refinance is often your
best option.
3) If it is to your advantage to get out of your current loan because of ARM
adjustment coming up or some other factor.
Q When should I take a rate reduction refinance?
A Some borrowers will refinance every time the interest rate drops as little as 1%.
There are a number of factors to consider and any of our loan officers would be
happy to assist with your decision.
Q Who should I refinance with?
A If you are happy with the lender that made you the loan, always give them first
consideration when refinancing. You will get many solicitations to refinance,
including those from your loan servicer. Some lenders will buy a list of mortgages
that are of public record, send you a solicitation, and sometimes use our name so
that you think that the offer is coming from us. (Unifirst never makes your
information available to outside parties who are not part of the transaction.)
Q What is Lenders One?
A Lenders One is the largest cooperative of independent mortgage lenders in the
Country. As a Lenders One member, Unifirst has access to the best loan programs
and the best rates, the latest software programs, and educational opportunities for our
staff.
Q What employment opportunities exist at Unifirst?
A Our philosophy since our inception in 1987 has been to hire at the entry level
and promote from within. Nearly all of our officers were trained at every job within
the company before becoming a loan officer. We encourage anyone interested in a
career with Unifirst Mortgage to leave us a resume for reference whenever a position
might open.