Residential Questions

February 20th, 2008 by admin

What are points?
A point is a percentage of the loan amount (one point = one percent of the loan). One point on a $200,000 loan would be $2,000. Points are costs that are to be paid to a lender in order to receive specific mortgage financing. Points are used to lower the interest rate on a mortgage loan (essentially you are lowering your rate by paying some of the interest up-front).

What is PMI?
If you take out a loan amount that is more than 80% of a residential property’s appraised value conventional lenders generally require that the loan carry a Private Mortgage Insurance (PMI). PMI protects the lender if the loan were to go into default. One obvious way to avoid this extra cost is to make a 20% down payment. There are also other ways to eliminate PMI such as using 2nd mortgage financing for the loan portion greater than 80%. To fully understand all of your available options, contact us today for more information!

What does LTV (Loan-to-Value) mean?
LTV is one of the most basic calculations in regard to mortgage financing. LTV is your mortgage amount divided by the value of your property (LTV = Total Mortgage/Home Value). When it comes to a purchase transaction, value is determined by the purchase price or appraised value, whichever is lower.

What does DTI (Debt-to-Income) mean?
DTI is used to analyze a borrower’s ability to pay back a financed amount. DTI is the amount of monthly debt divided by gross monthly income (DTI = Total Monthly Obligations/Total Gross Monthly Income).

What does it mean to lock the interest rate?
Interest rates can change multiple times a day. To protect our customers from this uncertainty, our lenders will allow The Satori Group to “lock” the loan’s interest rate. This guarantees an interest rate as long as the loan closes and funds on or before the expiration date (anywhere from 7 to 365 days). A lender does not usually charge for this service. But the longer that a rate is locked, the higher the rate and more fees are involved.

How do I improve my Credit Score?
Credit Scoring methods are very complex, but when explained are easy to understand and manage. Our Sales Reps understand how the scoring models work. We train our staff on the functionality and factors that affect credit. In order to fully understand your own credit situation, ask our Sales Representatives about a FREE credit consultation or our affiliated Credit Repair program.

What does APR mean?
The Annual Percentage Rate (APR) is an interest rate reflecting the cost of a mortgage as a whole. This rate is likely to be higher than the note rate that is on your mortgage. Taking into account points and other mortgage costs, the APR allows homebuyers to compare different types of mortgages based on the annual cost for each loan. The APR is designed to measure the “true cost of a loan.” It creates a level playing field for lender and prevents lenders from advertising a low rate and hiding fees. The APR does not affect your monthly payment; your monthly payment is strictly a function of the interest rate and term of the loan. Different lenders can calculate different APR’s, the best way to compare a loan is to ask your Sales Representative to provide you with a Truth-in-Lending statement.

What type of documents will I need?
Below is a standard list of documents that are required for a mortgage. Every loan situation is unique, so you may be required to provide some additional documentation. In the case that you are asked for more information, provide the information requested as soon as possible, this will help speed up your application process.

Copy of your most recent pay stub(s) for the most recent 30-day period, including your year-to-date earnings
Copies of your W-2’s for the past 2 years
The names, addresses and phone numbers of all your employers in the last 2 years
A letter explaining any gaps in employment in the past 2 years

If you are self-employed or receive commission or bonus, interest/dividends, or rental income: Provide full tax returns for the last 2 years PLUS a year-to-date Profit & Loss statement (please provide the complete set of returns including attached schedules and statements. If you have filed an extension, please supply a copy of the extension.)

If you used Alimony or Child Support to qualify, provide the divorce decree or court order stating the amount, as well as a bank statement for proof of receiving the funds
If you receive Social Security income, Disability or VA benefits, provide the award letter from the agency or organization
Savings, checking or money market funds - provide copies of bank statements for the last 2 months
Stocks and Bonds - provide copies of your statement from your broker or copies of your certificates
Gifts (if part of your cash to close), provide a Gift Letter and proof of the receipt of funds