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Frequently Asked Questions

What is PMI?

Since 1999, lending institutions have been obligated to cancel a borrower’s Private Mortgage Insurance (PMI) at the point his mortgage balance (for loans made past July of ’99) goes down below seventy-eight percent of the price of purchase, but not at the point the borrower’s equity climbs to more than twenty-two percent. (This legal obligation does not cover some higher risk mortgages.) But if your equity rises to 20% (no matter what the original purchase price was), you have the legal right to cancel the PMI (for a mortgage that past July 1999).

What is Escrow?

To finalize the sale of the home a neutral, third party (the escrow holder, a.k.a. escrow agent) is engaged to assure the transaction will close properly and on time. The escrow holder ensures that all terms and conditions of the seller’s and buyer’s agreement are met prior to the sale being finalized, including receiving funds and documents, completing required forms, and obtaining the release documents for any loans or liens that have been paid off with the transaction, assuring you clear title to your property before the purchase price is fully paid.

What is a "rate lock period"?

Freezing the Rate

A rate “lock” or “commitment” is a lender’s promise to lock in a particular interest rate and a particular number of points for you for a specified period during your application process. This protects you from getting through your entire application process and finding out at the end that the interest rate has gotten higher.

Rate lock periods can be various lengths of time, between 15 to 60 days, with the longer spans typically costing more. A lender will agree to lock in an interest rate and points for a longer span of time, such as 60 days, but in exchange, the rate (and sometimes points) will be more than that of a rate lock of a shorter period.

More Ways to Save on Interest

In addition to choosing a shorter lock period, there are more ways you can score the best rate. A bigger down payment will result in a better interest rate, because you’ll have more equity at the start. You may choose to pay points to bring down your rate for the loan term, meaning you pay more up front. One strate

Can I Eliminate Private Mortgage Insurance?

Since 1999, lending institutions have been obligated to cancel a borrower’s Private Mortgage Insurance (PMI) at the point his mortgage balance (for loans made past July of ’99) goes down below seventy-eight percent of the price of purchase, but not at the point the borrower’s equity climbs to more than twenty-two percent. (This legal obligation does not cover some higher risk mortgages.) But if your equity rises to 20% (no matter what the original purchase price was), you have the legal right to cancel the PMI (for a mortgage that past July 1999).

Keep a record of payments

Analyze your statements often. Pay attention to the prices of other houses in your neighborhood. If your mortgage is under five years old, chances are you haven’t made much progress with the principal � it’s been mostly interest.

The Proof is in the Appraisal

Once your equity has reached the required twenty percent, you are just a few steps away from cancelling your PMI payments, once and for all. Call your lender to ask for cancellation of your PMI. The lending institution will require proof that your equity is at 20 percent or above. Most lenders require a state certified appraisal documented on the form: URAR-1004 (Uniform Residential Appraisal Report) to determine your equity and eligibility for cancelling PMI.

How do I get the best possible mortgage?

The reason I suggest this is simple, due to the mess congress has put the mortgage business in with recent laws such as the HVCC and the MDIA are killing loan processing times. Lenders are being forced to use 60 day rate locks to ensure they can complete the loan process before the rate lock expires. Mortgage rate lock periods offer different pricing for different lock terms. For instance a 60 day lock which most companies are currently offering cost much more than a 15 day lock. Often as much as .250% in rate. To make it simple if the pricing on a 60 day lock is 5.375% at application the 15 day rate would often be as low as 5.125% for the same loan saving the borrower thousands in interest over the life of the loan.

Rates move up and down in cycles much like a roller coaster. You don’t want to lock in at the high point in the ride you want to hit the bottom in the cycle to lock in. Floating the rate at application gives you the best chance to archive this as well as getting the cheapest lock in price. Don’t worry about missing a low rate as I stated rates move in cycles often hitting bottom 2 or 3 times during the cycle. Bottom line is give your loan officer time to get your loan approved and cleared to close before considering locking in so you can use a 15 day rate lock to get the lowest possible rate.

Another reason to float your rate at application is with the implementation of the HVCC a lender now owns your appraisal and will not release it to another lender should rates drop. So if you locked in at application and three weeks into the process rates drop you are stuck with the higher rate. The lender will not lower your rate and will not release your appraisal that you paid for leaving you with the choice of accepting the higher rate or paying $385.00 on average for another appraisal to have your loan officer move your loan to another lender with the lower rate. Floating your rate at application gives you the options.

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SOUTH COUNTY MORTGAGE

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