- What is a Truth-in-Lending disclosure Statement and why do I receive it?
Your Disclosure Statement contains information which Federal law requires us to provide. The purpose of the statement is to give you information about your loan and help you compare us to other lenders.
- What is the ANNUAL PERCENTAGE RATE?
The Annual Percentage Rate, or A.P.R., is the cost of your credit expressed in terms of an annual rate. Because you may be paying "points" and other closing costs, the A.P.R. can be compared to other loans for which you may have applied and give you a fair method of comparing price.
- What is the AMOUNT FINANCED?
The amount financed is the mortgage amount applied for MINUS prepaid finance charges and any required deposit balance. Prepaid finance charges include items such as loan origination fees, commitment or replacement fee (points), adjusted interest, and initial mortgage insurance premium. The Amount Financed represents a NET figure used to allow you to accurately assess the amount of credit actually provided.
- Does this mean I will get a lower mortgage than I applied for?
No, if your loan is approved for the amount you applied for, that is how much will be credited toward your home purchase or refinance at settlement.
- Why is the ANNUAL PERCENTAGE RATE different from the interest rate for which I applied? Why is the AMOUNT FINANCED different?
The Amount Financed is lower than the amount you applied for because it represents a NET figure. If someone applied for a mortgage of $50,000 and their prepaid finance charges total $2,000, the amount financed would be shown as $48,000, or $50,000 minus $2,000. The A.P.R. is computed from this LOWER figure, based on what your proposed payments would be. In a $50,000 loan with $2,000 in prepaid finance charges, and an interest rate of 14%, the payments would be $592.44 (principal and interest) on a loan with a thirty year loan term. Since the A.P.R. is based on the NET amount financed, rather than on the actual mortgage amount, and since the payment amount remains the same, the A.P.R. is higher than the interest rate. It would be 14.62%. If this applicants loan were approved he would still receive a $50,000 loan for thirty years with monthly payments @ 14% or $592.44
- How will my payments be affected by the Disclosure Statement?
The Disclosure Statement only discloses your estimated payments. The interest rate determines what your monthly principal and interest payment will be.
- What is the FINANCE CHARGE?
The Finance Charge is the cost of credit. It is the total amount of interest calculated at the interest rate over the life of the loan, plus prepaid finance charges and the total amount of mortgage insurance charged over the life of the loan. This figure is ESTIMATED on the Disclosure Statement and is estimated in any adjustable rate transaction.
- What is the TOTAL OF PAYMENTS?
This figure indicates the total amount you will have paid, including principal, interest, prepaid finance charges, and mortgage insurance if you make the minimum required payments for the entire term of the loan. This figure is ESTIMATED on the Disclosure Statement and is estimated in any adjustable rate transaction.
- My statement says that if I pay the loan off early, I will not be entitled to a refund of part of the finance charge. What does this mean?
This means that you will be charged interest for the period of time in which you used the money loaned to you. Your PREPAID finance charges are not refundable. Neither is any interest which has already been paid. If you pay the loan off early, you should not have to pay the full amount of the "finance charges" shown on the disclosure. This charge represents an estimate of the full amount the loan would cost you if the minimum required payments were made each month through the life of the loan.
- Why must I sign the Disclosure Statement?
Lenders are required by law to provide the information on this statement to you in a timely manner. Your signature merely indicates that you have received this information, and does not obligate either you or the lender in any way.
- What is the difference between a pre-qualification and a pre-approval?
A pre-qualification shows you what you can afford and a pre-approval is confirming with bank statements, pay stubs and credit reports what you have provided verbally for the sake of achieving a full loan approval.
- Is it okay to use on-line bank statements?
Only if the statements have the bank logo, name and correctly reflect your account number.
- What is meant when locking my interest rate and when do I lock?
It means that a commitment has been made between my company and the investor on your behalf regarding the interest rate in your mortgage loan. Your loan officer watches the market on a daily basis to make sure that when we lock your interest rate, it is in the best interest for you and your loan.
- How do rates move?
Rates can move more than daily, but on a typical day rates do not move very much. This is why it is important to employ Fairway to assist you in making the determination of when to lock your loan. Things that will affect the interest rate moving are strong swings in the equity or stock market and indications from our economic position in not only the U.S. market but the world market as well.
- Do you sell my loans?
Yes. It is called transferring and it is done at closing. Fairway will provide all the information about your investor.
- What is a target rate?
Your target rate is the rate we will discuss to be the original optimal rate of interest for your mortgage.
- Am I committed to you because I have signed or reviewed my loan application?
No. We would love for you to do business with Fairway and if there are any problems, please consult with your loan officer or our Sr. Vice President/Branch Manager-Joel Hammond. The only commitment you have is when you have completed the signatures on the closing documents and the loan funds.
- Where will I be closing, how much do I bring to close and can I bring a personal check?
The contract will specify where you will be closing. 3-5 days prior to closing Fairway will contact you regarding how much to bring and to bring it in the form of a cashiers check made payable to the title company. You can have a check of up to $1000.00 for any difference in the amount you are told and the actual amount needed.
- How will I be updated on my loan?
Fairway will contact you with anything prior to the completion of your application and we will contact you after the application has been originated. Once your loan is approved and the appraisal is in, we will contact you regarding any pertinent information. Finally you will be contacted 7-10 days prior to closing for confirmation of details and 3-5 days before closing to go over final figures.
- What is Private Mortgage Insurance (PMI)?
Private mortgage insurance is required on conventional loans and may allow you to purchase a home for as little as 5% down. This coverage requires a monthly insurance fee to be paid. PMI is only required if your loan-to-value is 80% and above.