Mortgage FAQ

What is PITI?

The total monthly payment made on a house: principal, interest, taxes and insurance

What is a lock in?

This is a guarantee of a specific interest rate for a certain period of time.

What is underwriting?

The process of analyzing a loan application to determine the amount of risk involved in making the loan. It includes a review of the potential borrower’s credit history and a judgment of the property value.

What does an origination fee cover?

This is a fee that some lenders charge to cover the costs of making the loan and is calculated by multiplying the total loan amount by the percentage shown. The fee is typically 1% or lower , but can be influenced by the current market conditions and the type of loan being sought.

What does Prepaid Interest Mean?

This is the interest paid on a new loan from the day of closing through the end of the month and is typically paid at the closing.

How Long Does the Loan Process Take?

This can vary from a few days to 45 or more days from the date the application is submitted. Factors affecting the timing include type of loan, whether an appraisal is required, and if the title is clear. Delays can occur if outside sources or the borrowers do not provide documents promptly to the lender.

What is an escrow account?

This is a separate account into which the Lender puts a portion of each monthly mortgage payment. An escrow account provides the funds needed for property taxes, homeowners insurance, mortgage insurance, etc. Having an escrow account is optional but recommended.

Can I Pay My Own Taxes and Insurance?

The mortgage documents specify the escrow conditions. This is a standard practice on all mortgages, including FHA, VA and conventional mortgages. On a occasion the collection of escrow may by waived by the FRFCU at closing, if the member has a minimum 20% equity position in the property.

How Can I Avoid Private Mortgage Insurance?

The easiest way is to put down 20% for a down payment.

What is My Credit Score ?

This is a number representing the possibility that a borrower may default. It is based upon credit history and is used to determine ability to qualify for a mortgage loan.


What Should I Be Asking My Mortgage Broker?

1. Do you have a variety of loan programs to fit my cash flow and expected length of ownership needs?

If you’re going to live in your new home for less than five years, you may want to consider an adjustable rate mortgage or “ARM.”

With an ARM your payments will be lower, but they will go up according to the terms of the loan.

If you’re going to live in your new home for over five years, a traditional fixed-rate mortgage may be a better plan.

2. Do you offer written mortgage pre-approvals, not just pre-qualifications?

A “pre-qualification” is usually a Lender’s opinion of your eligibility for a loan.

If you ask to be pre-approved, the Lender will actually submit your job and credit history to an underwriter and get a conditional approval for a loan and a loan commitment.

The advantage of having a pre-approval is that it will make your offer to buy a home stronger and it will usually allow you to close on the home faster.

3. Do you have the ability to handle difficult credit history?

Many Lenders will only work with you if you have perfect credit, and if a problem comes up, they won’t help you. Make sure your Lender has reviewed and received approval for you and your specific credit history.

4. Is the rate that you quoted me the rate I will get at closing?

Many Lenders advertise their rates in the paper and in homes magazines. These are what are called “Teaser Rates” in the industry. The name says it all.

After they’ve got you committed to using them, many Lenders then tell you what the “real” rate will be. By this time, it’s too late for you to do anything about it.


How Do I Qualify For A Home Mortgage?

1. Reduce your long term debt

2. Wait until you have a higher income

3. Add someone else to the mortgage to help qualify

4. Use financing that requires a lower down payment