(A) Without PMI, most banks would not would not offer loans with less than 20% down payment. PMI is an instrument that has been giving people the ability to buy a home much sooner than they could without it. The PMI payments cease when you have over a 20% equity position in your home, so depending on your mortgage type, you may only have PMI for a couple of years. (Source: MGIC Brochure)
(Q) What is Title Insurance?
(A) Title insurance is your policy of protection against loss if any problems results in a claim against your ownership. If a claim is made against your property, title insurance will, in accordance with the terms of your policy, assure you of a legal defense and pay all court costs and related fees. Also, if the claim proves valid, you will be reimbursed for your actual loss up to the face amount of the policy. (Source: www.insbuyer.com/titleinsurance.htm)
(Q) Why do I need Title Insurance?
(A) Because land is permanent and can have many owners over the years, various rights in land may have been acquired by others (such as mineral, air, or utility rights) by the time you come into possession of it, even if the land has never before been built upon. So in order to transfer a clear title to a piece of land, it is first necessary to determine whether any rights are outstanding. A title search is a detailed examination of the historical records concerning a property. These records include deeds, court records, property and name indexes, and many other documents. The purpose of the search is to verify the seller's right to transfer ownership, and to discover any claims, defects and other rights or burdens on the property. A title search can also show a number of title defects and liens, as well as other encumbrances and restrictions. Among these are unpaid taxes, unsatisfied mortgages, judgements against the seller and restrictions limiting the use of the land. (Source: www.insbuyer.com/titleinsurance.htm)
(Q) What part of my mortgage is tax deductible?
(A) There are three parts of a mortgage that are tax deductible. The first tax deduction is your real estate taxes. The full amount of annual real estate (also called property taxes) is a permissible income tax deduction for all homeowners. The next is any points that you had to pay to the lender for the use of their money. The last and largest deduction of all is mortgage interest payments. You can claim any interest payments as an income tax deduction along with any prepayment penalties that you may incur by paying off your mortgage early. (Source: "Mortgage Information Booklet" - Rochford Associates)
(Q) What are FHA, Fredie Mac, and Fanny Mae?
(A) FHA Stands for the Federal Housing Administration, which is a division of the Department of Housing and Urban Development (HUD). Its main activity is the insuring of residential mortgage loans made by private lenders. It sets standards for construction and underwriting.
The term Freddie Mac refers to the Federal Home Loan Mortgage Corporation, which is a private corporation authorized by Congress. It sells participant sales certificates secured by pools of conventional mortgage loans with the principal and interest guaranteed by the federal government through Freddie Mac. It also sells GNMA bonds to raise funds to finance the purchase of mortgages.
Fannie Mae is an acronym for the Federal National Mortgage Association, which is tax paying corporation created by Congress to support the secondary mortgage market. It purchases and sells residential mortgages insured by FHA and guaranteed by VA, as well as conventional home mortgages.
(Q) What do I need to gather for you to make this process go smoothly?
(A) At the time of application, I will need to have a copy of the following:
Sales Contract (if purchase)
Pay stubs for most recent 30 days and W2's for past two years (if salaried or hourly)
1040's for past two years (if self-employed or commissioned)
Schedule E's for the last two years or Rental Agreements (if rental income is used)
Divorce Decree/Separation Agreement (if applicable)
Bank Statements for last three months (all accounts)
Gift Letter (if applicable)
Check for Appraisal and Application Fee (except pre-approval)
(Q) If I lock a rate and then rates go down, can I take the lower rate?
(A) No. The purpose of locking the rate is to prevent yourself from the rates going up. Locking a rate depends on how much you are willing to gamble. If you are willing to "float" the rate, hoping that they will go down, that is up to you. I always let the client decide when to lock the rate. My advice is always the same, if you are comfortable with the current rate, why take the chance of losing it over a couple dollars a month. Rates go up a lot faster than they go down, so remember that when you are deciding whether or not it is time to lock in or remain "floating." It may take two weeks to see a quarter point drop in the rates while it can take four hours to jump a quarter point.
New York State Banking Department
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