Bestrate Mortgage, Home Purchase Loans and Refinance

"You don't need a bank to get a mortgage with a low, low rate."

Rates as low as 2.875% (2.869% APR)          Call 248-310-5300 for immediate assistance.

Bestrate Mortgage, Home Purchase Loans and Refinance

"YOU DON'T NEED A BANK TO GET A MORTGAGE WITH A LOW, LOW RATE."

Rates as low as 2.875% (2.869% APR)           Call 248-310-5300 for immediate assistance.

Bestrate Mortgage, Home Purchase Loans and Refinance

"YOU DON'T NEED A BANK TO GET A MORTGAGE WITH A LOW, LOW RATE."

Rates as low as 2.875% (2.869% APR)           Call 248-310-5300 for immediate assistance.

Mortgage Basics

Jump in and get an overview on common mortgage terms


Application Checklist

Below is a list of documents that are required when you apply for a mortgage. However, every situation is unique and you may be required to provide additional documentation. So, if you are asked for more information, be cooperative and provide the information requested as soon as possible. It will help speed up the application process.

Your Property

*    Copy of signed sales contract including all riders
*    Verification of the deposit you placed on the home
*    Names, addresses and telephone numbers of all realtors,
      builders, 
insurance agents and attorneys involved
*    Copy of Listing Sheet and legal description if available (if
      the 
property is a condominium please provide             
      condominium declaration, 
by-laws and most recent       
       budget)

Your Income

*    Copies of your pay-stubs for the most recent 30-day
       period and
year-to-date
*    Copies of your W-2 forms for the past two years
*    Names and addresses of all employers for the last two       
      years
*    Letter explaining any gaps in employment in the past 2     
      years
*    Work visa or green card (copy front & back)

If self-employed or receive commission or bonus, interest/dividends, or rental income:

* Provide full tax returns for the last two years PLUS year-to-date Profit and Loss statement (please provide complete tax return including attached schedules and statements. If you have filed an extension, please supply a copy of the extension.)

*    K-1's for all partnerships and S-Corporations for the last two years (please double-check your return. Most K-1's are not attached to the  1040.) Completed and signed Federal Partnership (1065) and/or  Corporate Income Tax Returns (1120) including all schedules, statements and addenda for the last two years. (Required only if your ownership position is 25% or greater.)

If you will use Alimony or Child Support to qualify:

*    Provide divorce decree/court order stating amount, as well as, proof
 of receipt of funds for last year

If you receive Social Security income, Disability or VA benefits:

*    Provide award letter from agency or organization

Source of Funds and Down Payment

*    Sale of your existing home - provide a copy of the signed sales contract on your current residence and statement or listing agreement if unsold (at closing, you must also provide a settlement/Closing Statement)
 

*    Savings, checking or money market funds - provide copies of bank statements for the last 3 months

*     Stocks and bonds - provide copies of your statement from your broker  or copies of certificates


*    Gifts - If part of your cash to close, provide Gift Affidavit and proof of receipt of funds

*    Based on information appearing on your application and/or your credit report, you may be required to submit additional documentation

Debt or Obligations

*    Prepare a list of all names, addresses, account numbers, balances, and monthly payments for all current debts with copies of the last three monthly statements

*    Include all names, addresses, account numbers, balances, and monthly payments for mortgage holders and/or landlords for the last two years

*     If you are paying alimony or child support, include marital  settlement/court order stating the terms of the obligation

*    Check to cover Application Fee(s)

CREDIT

Credit history is a recorded file of past and current credit that is utilized to compile a credit score. Read about credit, how it works, how to improve your score and more by clicking learn more below.

Credit Report

Your credit payment history is recorded in a file or report. These files or reports are maintained and sold by "consumer reporting agencies" (CRAs). One type of CRA is commonly known as a credit bureau. You have a credit record on file at a credit bureau if you have ever applied for a credit or charge account, a personal loan, insurance, or a job. Your credit record contains information about your income, debts, and credit payment history. It also indicates whether you have been sued, arrested, or have filed for bankruptcy. 

Do I Have A Right To Know What's In My Report?

Yes, if you ask for it. The CRA must tell you everything in your report, including medical information, and in most cases, the sources of the information. The CRA also must give you a list of everyone who has requested your report within the past year-two years for employment related requests.

What Types Of Information Do Credit Bureaus Report and Sell?

Credit bureaus collect and sell four basic types of information:

Identification and employment information
Your name, birth date, Social Security number, employer, and spouse's name are routinely noted. The CRA also may provide information about your employment history, home ownership, income, and previous address, if a creditor requests this type of information.

Payment history
Your accounts with different creditors are listed, showing how much credit has been extended and whether you've paid on time. Related events, such as referral of an overdue account to a collection agency, may also be noted.

Inquiries
CRAs must maintain a record of all creditors who have asked for your credit history within the past year, and a record of those persons or businesses requesting your credit history for employment purposes for the past two years.

Public record information
Events that are a matter of public record, such as bankruptcies, foreclosures, or tax liens, may appear in your report.

WHAT IS CREDIT SCORING?

Credit scoring is a system creditors use to help determine whether to give you credit. Information about you and your credit experiences, such as your bill-paying history, the number and type of accounts you have, late payments, collection actions, outstanding debt, and the age of your accounts, is collected from your credit application and your credit report. Using a statistical program, creditors compare this information to the credit performance of consumers with similar profiles. A credit scoring system awards points for each factor that helps predict who is most likely to repay a debt. A total number of points -- a credit score -- helps predict how creditworthy you are, that is, how likely it is that you will repay a loan and make the payments when due.

The most widely use credit scores are FICO scores, which were developed by Fair Isaac Company, Inc. Your score will fall between 350 (high risk) and 850 (low risk).

Because your credit report is an important part of many credit scoring systems, it is very important to make sure it's accurate before you submit a credit application. To get copies of your report, contact the three major credit reporting agencies:

Equifax: (800) 685-1111
Experian (formerly TRW): (888) EXPERIAN (397-3742)
Trans Union: (800) 916-8800
These agencies may charge you up to $9.00 for your credit report.

You are entitled to receive one free credit report every 12 months from each of the nationwide consumer credit reporting companies – Equifax, Experian and TransUnion. This free credit report may not contain your credit score and can be requested through the following website: https://www.annualcreditreport.com

WHY IS CREDIT SCORING USED?

Credit scoring is based on real data and statistics, so it usually is more reliable than subjective or judgmental methods. It treats all applicants objectively. Judgmental methods typically rely on criteria that are not systematically tested and can vary when applied by different individuals.

HOW IS A CREDIT SCORING MODEL DEVELOPED?

To develop a model, a creditor selects a random sample of its customers, or a sample of similar customers if their sample is not large enough, and analyzes it statistically to identify characteristics that relate to creditworthiness. Then, each of these factors is assigned a weight based on how strong a predictor it is of who would be a good credit risk. Each creditor may use its own credit scoring model, different scoring models for different types of credit, or a generic model developed by a credit scoring company.

Under the Equal Credit Opportunity Act, a credit scoring system may not use certain characteristics like -- race, sex, marital status, national origin, or religion -- as factors. However, creditors are allowed to use age in properly designed scoring systems. But any scoring system that includes age must give equal treatment to elderly applicants.

HOW RELIABLE IS THE CREDIT SCORING SYSTEM?

Credit scoring systems enable creditors to evaluate millions of applicants consistently and impartially on many different characteristics. But to be statistically valid, credit scoring systems must be based on a big enough sample. Remember that these systems generally vary from creditor to creditor.

Although you may think such a system is arbitrary or impersonal, it can help make decisions faster, more accurately, and more impartially than individuals when it is properly designed. And many creditors design their systems so that in marginal cases, applicants whose scores are not high enough to pass easily or are low enough to fail absolutely are referred to a credit manager who decides whether the company or lender will extend credit. This may allow for discussion and negotiation between the credit manager and the consumer.

WHAT CAN I DO TO IMPROVE MY SCORE?

Credit scoring models are complex and often vary among creditors and for different types of credit. If one factor changes, your score may change -- but improvement generally depends on how that factor relates to other factors considered by the model. Only the creditor can explain what might improve your score under the particular model used to evaluate your credit application.

Nevertheless, scoring models generally evaluate the following types of information in your credit report:

*    Have you paid your bills on time? Payment history typically is a significant factor. It is likely that your score will be affected negatively if you have paid bills late, had an account referred to collections, or declared bankruptcy, if that history is reflected on your credit report.


*    What is your outstanding debt? Many scoring models evaluate the amount of debt you have compared to your credit limits. If the amount you  owe is close to your credit limit, that is likely to have a negative effect on your score.


*    How long is your credit history? Generally, models consider the length of your credit track record. An insufficient credit history may have an effect on your score, but that can be offset by other factors, such as timely payments and low balances.


*    Have you applied for new credit recently?  Many scoring models consider whether you have applied for credit recently by looking at "inquiries" on your credit report when you apply for credit. If you have applied for too many new accounts recently, that may negatively affect your score. However, not all inquiries are counted. Inquiries by creditors who are monitoring your account or looking at credit reports to make "prescreened" credit offers are not counted.


*    How many and what types of credit accounts do you have?  Although it is generally good to have established credit accounts, too many credit card accounts may have a negative effect on your score. In addition, many models consider the type of credit accounts you have. For example, under some scoring models, loans from finance companies may negatively affect your credit score.


Scoring models may be based on more than just information in your credit report. For example, the model may consider information from your credit application as well: your job or occupation, length of employment, or whether you own a home.

To improve your credit score under most models, concentrate on paying your bills on time, paying down outstanding balances, and not taking on new debt. It's likely to take some time to improve your score significantly.


WHAT HAPPENS IF YOU ARE DENIED CREDIT OR DON'T GET THE KIND OF TERMS YOU WANT?


If you've been denied credit, or didn't get the rate or credit terms you want, ask the creditor if a credit scoring system was used. If so, ask what characteristics or factors were used in that system, and the best ways to improve your application. If you get credit, ask the creditor whether you are getting the best rate and terms available and, if not, why. If you are not offered the best rate available because of inaccuracies in your credit report, be sure to dispute the inaccurate information.

If you are denied credit, the Equal Credit Opportunity Act requires that the creditor give you a notice that tells you the specific reasons your application was rejected or the fact that you have the right to learn the reasons if you ask within 60 days. Indefinite and vague reasons for denial are illegal, so ask the creditor to be specific. Acceptable reasons include: "Your income was low" or "You haven't been employed long enough." Unacceptable reasons include: "You didn't meet our minimum standards" or "You didn't receive enough points on our credit scoring system."

If a creditor says you were denied credit because you are too near your credit limits on your charge cards or you have too many credit card accounts, you may want to reapply after paying down your balances or closing some accounts. Credit scoring systems consider updated information and change over time.

Sometimes you can be denied credit because of information from a credit report. If so, the Fair Credit Reporting Act requires the creditor to give you the name, address and phone number of the credit reporting agency that supplied the information. You should contact that agency to find out what your report said. This information is free if you request it within 60 days of being turned down for credit. The credit reporting agency can tell you what's in your report, but only the creditor can tell you why your application was denied. 


 FAIR CREDIT REPORTING ACT

The Fair Credit Reporting Act (FCRA) is designed to help ensure that CRAs furnish correct and complete information to businesses to use when evaluating your application.

Your rights under the Fair Credit Reporting Act:

*    You have the right to receive a copy of your credit report. The copy of your report must contain all of the information in your file at the time of your request.

*    You have the right to know the name of anyone who received your credit report in the last year for most purposes or in the last two years for employment purposes.

*    Any company that denies your application must supply the name and address of the CRA they contacted, provided the denial was based on information given by the CRA.

*    You have the right to a free copy of your credit report when your application is denied because of information supplied by the CRA. Your request must be made within 60 days of receiving your denial notice.

*    If you contest the completeness or accuracy of information in your report, you should file a dispute with the CRA and with the company that furnished the information to the CRA. Both the CRA and the furnisher of information are legally obligated to reinvestigate your dispute.

*    You have a right to add a summary explanation to your credit report if your dispute is not resolved to your satisfaction.

Closing Cost

WHAT HAPPENS AT CLOSING?

"Closing" is the last step of buying and financing a home and when the property is officially transferred from the seller to you. At Closing you and all the other parties in the mortgage loan transaction sign the necessary documents.

Your Closing may include some or all of these entities: real estate agents, your attorney, the seller’s attorney, lender's representative, title and escrow firm representatives, clerks, secretaries, and other staff. Closing can take anywhere from 1-hour to several depending on contingency clauses in the purchase offer, or any escrow instructions needing to be executed.

Most paperwork in closing or settlement is done by attorneys and real estate professionals. You may or may not be involved in some of the closing activities; it depends on who you are working with.

Prior to closing you should have a final inspection, or "walk-through" to insure requested repairs were performed, and items agreed to remain with the house are there such as drapes, lighting fixtures, etc.

In most states the settlement is completed by a title or escrow firm in which you forward all materials and information plus the appropriate cashier's checks or bank wire so the firm can make the necessary disbursement. Your representative will deliver the check to the seller, and then give the keys to you. 

STATUTORY CLOSING COSTS

These are expenses you have to pay to state and local agencies, even if you paid cash for the house and didn't need a mortgage:

Transfer Taxes – Required by some localities to transfer the title and deed from the seller to the buyer.

Deed Recording Fees – To pay for the County Clerk to record the deed and mortgage, and to change the property tax billing.

Pro-Rated Taxes – Property taxes may need to be split between the buyer and the seller since they are due at different times of the year. For example, if taxes are due in October and you close in August, you would owe taxes for 2-months, and the seller would owe for the other 10-months. Pro-rated taxes are usually paid based on the number of days, not months of ownership. Some lenders may require you to set up an escrow account to cover these bills. If not, you may want to set one up yourself to insure the funds are set aside for these important expenses.

State & Local Fees – Other state and local mortgage taxes and fees may apply. 


THIRD-PARTY COSTS

There may be expenses paid to others like agents, attorneys, inspectors or insurance firms, even if you paid cash for the property:

Attorney Fees – You may want to hire an attorney when purchasing a home. They usually charge a percentage of the selling price up to 1%, or some work on an hourly basis or for a flat fee.

Title Search Costs – Usually your attorney will perform or will arrange for the title search to ensure there are no obstacles such as liens or lawsuits regarding the property. Or you may work with a title company to verify a clear property title.

Homeowner's Insurance – Most lenders require you prepay the first year's premium for homeowners insurance, sometimes called hazard insurance, and must show proof of payment at the closing. This insures that the investment will be secured even if the property is destroyed.

Real Estate Agent's Sales Commission – The seller pays the real estate agent's commission, and if one agent lists the property and another sells it, the commission is usually split. The commission is negotiable between the seller and the agent.

LENDER CHARGES

Origination Fee – For processing the mortgage application there may be a flat fee, or a percentage of the mortgage loan.

Credit Report – Most lenders require a credit report on you and your spouse, or an equity partner. This fee is often a part of the origination fee.

Points – One point is equal to 1% of the amount borrowed and can be payable when the loan is approved either before or at closing. Points can be shared with the seller which is negotiable in the purchase offer. Some lenders will let you finance points which will add to the mortgage cost. If you pay the points up front they are tax deductible in the year they are paid. Different deductibility rules apply to second home loans.

Lender's Attorney's Fees – For your attorney to draw-up documents and to ensure that the title is clear, and for representation at the closing.

Document Preparation Fees – There are several documents and papers prepared during the home-buying process ranging from the application to the closing. Lenders may charge for this, or the fees may be included in the application and/or attorney’s fees.

Preparation of Amortization Schedule – Some lenders will prepare a detailed amortization for the full term of your mortgage. This is usually done for fixed mortgages or adjustable mortgages.

Land Survey – Lenders may require that the property be surveyed to ensure it has not been encroached and to verify the buildings and improvements to the property.

Appraisals – Professional Appraisers can do a comparison of the value of the property to that of other recently sold neighborhood properties. Lenders want to be sure the property is worth the value of the mortgage loan.

Lender's Mortgage Insurance – If your down payment is 20% or less, many lenders require that you purchase Private Mortgage Insurance (PMI) for the loan amount. If you should default on your loan, the lender will recover their money. These insurance premiums will continue until your principal payments, plus the down payment equal 20% of the selling price and may continue for the life of the loan. The premiums are usually added to any amount you must escrow for taxes and homeowner's insurance.

Lender's Title Insurance – Even with a title search for any property obstacles, liens or lawsuits, many lenders require insurance to protect their mortgage investment. This is a 1-time insurance premium usually paid at closing, and is for the lender only, not the homebuyer.

Release Fees – If the seller has worked with a contractor who put a lien on the house and is expecting payment from the proceeds of the house sale, there may be fees to release the lien. The seller usually pays these fees which could be negotiated in the purchase offer.

Inspections Required by Lenders – The lender may require a Termite Inspection if you apply for an FHA or a VA mortgage loan. In many rural areas a water test may be required to ensure the well and water system will maintain an adequate water supply to the house; for quantity not quality. Depending on the sales contract and property type, additional inspections may be required.

Prepaid Interest – The first regular mortgage payment is usually due from 6-8 weeks from closings; however, interest costs begin at closing time. The lender will calculate the interest owed for that period of time, and that fraction of interest is sometimes due at closing.

Escrow Account – Lenders often require that you set-up an Escrow Account, where you will make monthly payments to, for taxes, homeowner's insurance, and sometimes PMI (Private Mortgage Insurance). The amount placed in this account at closing depends on when property taxes are due and the timing of the settlement transaction. The lender can give you a cost approximation during the application process of your mortgage loan.

OTHER UP-FRONT EXPENSES

The major portion of other up-front expenses is the deposit or binder you make at the time of the purchase offer, the remaining cash down payment you make at closing, or can include:

Inspections – Lenders may require inspections, and you can make your purchase offer contingent based on satisfactory completion of some other inspections such as structural, water quality tests, septic, termite, roof and radon tests. You and the seller can negotiate these inspection fees.

Owner's Title Insurance – You may want to purchase title insurance in case of unforeseen problems so you're not left owing a mortgage on property you no longer own. A thorough title search ensures a clear title.

Appraisal Fees – You may want to hire an Appraiser either before you sign a purchase offer, or after reviewing the lender's appraisal report.

Money to the Seller –
You'll need to pay for items in the house you want that were not negotiated in the purchase offer such as appliances, light fixtures, drapes, lawn furniture, or fuel oil and propane left in tanks.

Moving Expenses – If you are changing jobs, your new employer may pay for your relocation, otherwise you must figure in the moving costs such as truck rentals, professional movers, cash for utility deposits like telephone, cable, electricity, etc.

Repair Expenses – In the purchase offer, you can request that the seller set up an Escrow Account to defray any costs for major cleanup, radon mitigation procedures, house painting, appliance repairs, etc. Depending on the purchase offer contract and contingency clauses, you may discover that you have expenses upon moving in.
                        
Example:


    Your purchase offer contract has a clause making the purchase contingent on a satisfactory structural inspection, and it’s determined that the house needs a new roof. You can negotiate to have the seller arrange for the work to be done but, this will delay the closing date. You may have to agree to a higher price for house, or to pay some of the new roof repair expenses. Or you and the seller may split the cost using    estimates from a contractor of your choice, and each of you will put funds into an Escrow Account. Or, the seller may be willing to reduce the sale price of the house, but either way cash will be needed for the new roof.

Time Investment – One often overlooks major up-front costs in buying a home. The time and expenses invested in house-hunting, which can take up to 4-months, plus the time spent searching for the best mortgage for you, the right real estate agent, an attorney, and other related things that take up your valuable time.


WHAT IS RESPA?


The Real Estate Settlement Procedures Act (RESPA) contains information regarding the settlement or closing costs you are likely to face. Within 3 business days from the time of your mortgage application, your lender is required to provide you a "Loan Estimate" which is an estimate of settlement or closing costs based on their understanding of your purchase contract. This estimate will indicate how much cash you will need at closing to cover prorated taxes, first month's interest, and other settlement costs.

Appraisals

A closing cost is a payment required to finalize a home loan and is separate from a down-payment. Read about closing cost, their purpose, how you can pay them and more by clicking learn more below.

WHAT IS AN APPRAISAL?

An Appraisal is an estimate of a property's fair market value. It's a document generally required (depending on the loan program) by a lender before loan approval to ensure that the mortgage loan amount is not more than the value of the property. The Appraisal is performed by an "Appraiser" typically a state-licensed professional who is trained to render expert opinions concerning property values, its location, amenities, and physical conditions.

WHY GET AN APPRAISAL?

Obtaining a loan is the most common reason for ordering an Appraisal, however there are other reasons to get one:

*    Contesting high property taxes
*    Establishing the replacement cost for insurance purposes
*    Divorce settlement
*    Estate settlement
*    Negotiating tool in real estate transactions
*    Determining a reasonable price when selling real estate
*    Protecting your rights in an eminent domain case
*    A government agency requirement
*    A lawsuit


WHAT ARE APPRAISAL METHODS?

There are 3 common approaches, or Appraisal Methods, used by Appraisers to establish property value. After thorough exercise of all 3, a final value estimate is correlated. When evaluating single-family, owner-occupied properties, the Sales Comparison Approach is heavily weighted by an Appraiser.

1. Cost Approach – A formula is used to obtain the property value: Land value (vacant) added to the cost to reconstruct the appraised building as new on the date of value, less accrued depreciation the building suffers in comparison with a new building.


2. Sales Comparison Approach – The Appraiser identifies 3 to 4 comparable comps, recently sold properties in the neighborhood, ideally, sold in the previous 6 months and within ½ mile of the subject property. A comparison is done between the recently sold properties and the subject property including square footage, number of bedrooms and bathrooms, property age, lot size, view, and property condition.


3. Income Approach –The potential net income of the property is capitalized to arrive at a property value. Capitalization is the process of converting a future income stream into a present value. This approach is suited to income-providing properties and is used in conjunction with other valuation methods.


 WHO OWNS THE APPRAISAL?

The mortgage company owns the appraisal even though the borrower paid for it. This is because the mortgage company orders the appraisal on the borrower's behalf, and the Appraiser lists that mortgage company on the report. The borrower does have the right to receive a copy; however it's the mortgage company's discretion to give the borrower the original appraisal report.


CAN ANOTHER MORTGAGE APPRAISAL BE USED AFTER THE COMPLETED APPRAISAL?

Yes. In most cases you will not have to pay for another appraisal if you change your mortgage company, and depending on the loan program typed, the first lender can transfer it to the new lender. Some appraisal firms may charge a small fee because additional clerical work is required to reflect the new mortgage company; this is called an "Appraisal Retype Fee". The original mortgage company has the right to refuse to transfer the appraisal to another lender. In this case, a new appraisal is needed.



WHO DETERMINES THE MARKET VALUE OF A PROPERTY?

The property seller sets the price, especially for residential property, not the Appraiser. Sellers usually don't order an appraisal because they want to obtain the highest price for their home and therefore don't want to be bound by the Appraiser's assessment.

The real estate agent receives a percentage of the price as compensation and often represents the seller in the transaction and assists them in setting the sale price. They perform a Comparative Market Analysis (CMA), which real estate agents in most states are allowed to perform without an Appraiser's License or Certification. The CMA is vital to the agent’s preparation for a listing examining recent property sales in the neighborhood to arrive at a listing price. Typically the agent will suggest a price to the seller based on the CMA however the seller may choose to list their property for a higher price.


HOW CAN I ASSIST MY APPRAISER?


It's to your advantage to help the Appraiser perform the assessment by providing additional information:

*    What is the purpose for the appraisal?


*
    Is the property listed for sale, and if so, for what price and with whom?


*
    Is there a mortgage? And if so, with whom, when placed, for how much and what type (FHA, VA, etc.), at what interest rate, or other type of financing


*
    Are any personal properties or appliances included in the property?


*
    With an income-producing property, what is the income breakdown and expenses for the last year or two? A copy of the lease may be required.


*
    Provide a copy of the deed, survey, purchase agreement, or additional property papers.


*
    Provide a copy of the current real estate tax bill, statement of special assessments, or balance owed on anything, i.e. sewer, water, etc.


Lighting Design

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Architectural Design

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Private Mortgage Insurance (PMI)

What is Private Mortgage Insurance (PMI)?

On a conventional mortgage, when your down payment is less than 20% of the purchase price of the home mortgage lenders usually require you get Private Mortgage Insurance (PMI) to protect them in case you default on your mortgage. Sometimes you may need to pay up to 1-year's worth of PMI premiums at closing which can cost several hundred dollars. The best way to avoid this extra expense is to make a 20% down payment, or ask about other loan program options.

How Does Private Mortgage Insurance (PMI) Work?

PMI companies write insurance policies to protect approximately the top 20% of the mortgage against default. This depends on the lender's and investor's requirements, the loan-to-value ratio, and the type of loan program involved. Should a default occur the lender will sell the property to liquidate the debt, and is reimbursed by the PMI company for any remaining amount up to the policy value.

Could Obtaining Private Mortgage Insurance (PMI) Help Me Qualify for a Larger Loan?

Yes, it will help you obtain a larger loan, here’s why. Let's say that you are a family with $42,000 Annual Gross Income and monthly revolving debts of $800 for car payment and credit cards, and you have $10,000 for your down payment and closing costs on a 7%-interest mortgage. Without PMI the maximum price you can afford is $44,600, but with PMI covering the lender's risk you now can buy a $62,300 house. PMI has afforded you 39% more house.

How Much Does Private Mortgage Insurance (PMI) Cost? 

PMI costs vary from insurer to insurer, and from plan to plan. Example: A highly leveraged adjustable-rate mortgage requires the borrower to pay a higher premium to get coverage. Buyers with a 5% down payment can expect to pay a premium of approximately 0.78% times the annual loan amount, $92.67 monthly for a $150,000 purchase price. But, the PMI premium would drop to 0.52% times the annual amount, $58.50 monthly if a 10% down payment was made.


PMI costs vary from insurer to insurer, and from plan to plan. Example: A highly leveraged adjustable-rate mortgage requires the borrower to pay a higher premium to get coverage. Buyers with a 5% down payment can expect to pay a premium of approximately 0.78% times the annual loan amount, $92.67 monthly for a $150,000 purchase price. But, the PMI premium would drop to 0.52% times the annual amount, $58.50 monthly if a 10% down payment was made.

How is Private Mortgage Insurance Paid?

PMI fees can be paid in many ways depending on the company used:

*    Borrowers can choose to pay the 1-years premium at closing, and     then an annual renewal premium is collected monthly as part of the     house payment.

*    Borrowers can choose to pay no premium at closing, but add on a
    slightly higher premium monthly to the principal, interest, tax, and     insurance payment.

*    Borrowers who want to sidestep paying PMI at closing but don't     want to increase their monthly house payment can finance a     lump-       sum PMI premium into their loan. Should the PMI be canceled before     the loan term expires through refinancing, paying off the loan, or     removal by the loan provider, the borrower may obtain the rebate of     the premium.

How Does the Buyer Apply for PMI?

Typically the buyer covers the cost of PMI, but the lender is the PMI company's client and shops for insurance on behalf of the borrower. Lenders usually deal with only a few PMI companies because they know the guidelines for those insurers. This can be a problem when one of the lender's prime companies turns down a loan because the borrower doesn’t fit its risk parameters. A lender might follow suit and deny the loan application without consulting a second PMI company which could leave all parties in an undesirable position. The lender has the difficult task of being fair to the borrower while shopping for the most effective way to lessen liability.


What is the History of Private Mortgage Insurance (PMI)?

The Private Mortgage Insurance industry originated in the 1950's with the first large carrier, Mortgage Guaranty Insurance Corporation (MGIC). They were referred to as "magic" as these early PMI methods were deemed to "magically" assist in getting lender approval on otherwise unacceptable loan packages. Today there are 8 PMI underwriting companies in the United States. 

Cancellation of Private Mortgage Insurance (PMI)

The Homeowners Protection Act of 1998 established rules for automatic termination and borrower cancellation of Private Mortgage Insurance (PMI) for home mortgages. These protections apply to certain home mortgages signed on or after July 29, 1999 for the home purchase, initial construction, or refinance of a single-family home. It does not apply to government-insured FHA or VA loans, or to loans with lender-paid PMI.

With certain exceptions (home mortgages signed on or after July 29, 1999) your PMI must be terminated automatically when 22% of the equity of your home is reached, based on the original property value and if your mortgage payments are current. It can also be canceled at your request with certain exceptions, when you reach 20% equity, again based on the original property value, if your mortgage payments are current.

Exceptions:


    1. If your loan is "high risk"
    2. You have not been current on your payments within the year prior to termination time or cancellation

    3.  If you have other liens on your property

Ask your lender or mortgage servicer for information about these requirements. If you signed your mortgage before July 29, 1999 you can request to have the PMI canceled once you exceed 20% home equity. But, federal law does not require your lender or mortgage servicer to cancel the insurance.


PMI Companies


Amerin Guaranty Corporation
303 East Wacker Drive, Suite 900
Chicago, IL 60601
Tel: 800-257-7643
Fax: 312-540-0564

PMI Mortgage Insurance Company
601 Mongomery Street
San Francisco, CA 94111
Tel: 800-288-1970
Fax: 415-291-6175

Commonwealth Mortgage Assurance Company
1601 Market Street
Philadelphia, PA 19103-2197
Tel: 800-523-1988
Fax: 215-496-0346

Republic Mortgage Insurance Co.
P.O. Box 2514
Winston-Salem, NC 27102-9954
Tel: 800-999-7642
Fax: 919-661-0049

G.E. Capital Mortgage Insurance Corporation
P.O. Box 177800
Raleigh, NC 27615
Tel: 800-334-9270
Fax: 919-846-4260


Triad Guaranty Insurance Corp.
P.O. Box 25623
Winston-Salem, NC 27114
Tel: 800-451-4872
Fax: 919-723-0343


Mortgage Guaranty Insurance Corporation
P.O. Box 488
Milwaukee, WI 53201
Tel: 800-558-9900
Fax: 414-347-6802

United Guaranty Corporation
P.O. Box 21567
Greensboro, NC 27420
Tel: 800-334-8966
Fax: 919-230-1946


Fair Credit Reporting Act

The Fair Credit Reporting Act (FCRA) is designed to help ensure that CRAs furnish correct and complete information to businesses to use when evaluating your application.

Your rights under the Fair Credit Reporting Act:

*    You have the right to receive a copy of your credit report. The copy of your report must contain all of the information in your file at the time of your request.


*
    You have the right to know the name of anyone who received your credit report in the last year for most purposes or in the last two years for employment purposes.

*
    Any company that denies your application must supply the name  and address of the CRA they contacted, provided the denial was  based on information given by the CRA.

*    You have the right to a free copy of your credit report when your  application is denied because of information supplied by the CRA. Your request must be made within 60 days of receiving your denial notice.

*
    If you contest the completeness or accuracy of information in your report, you should file a dispute with the CRA and with the company  that furnished the information to the CRA. Both the CRA and the furnisher of information are legally obligated to reinvestigate your dispute.

*
    You have a right to add a summary explanation to your credit report if your dispute is not resolved to your satisfaction.


Refinance

When Should I Refinance?

It's generally a good time to refinance when mortgage rates are 2% lower than the current rate on your loan. It may be a viable option even if the interest rate difference is only 1% or less. Any reduction can trim your monthly mortgage payments. Example: Your payment, excluding taxes and insurance, would be about $770 on a $100,000 loan at 8.5%; if the rate were lowered to 7.5%, your payment would then be $700, now you're saving $70 per month. Your savings depends on your income, budget, loan amount, and interest rate changes. Your trusted lender can help you calculate your options.

Should I Refinance If I Plan On Moving Soon?

Most lenders charge fees to refinance a loan. So, if you plan to only stay in the property for a couple of years, your monthly savings may not accumulate to recoup these costs. Example: A lender charged $1,000 to refinance your loan that resulted in saving you $50 each month; it would take 20-months to recoup your initial costs. Some lenders will charge a slightly higher than average interest rate on refinance loans, but will waive all costs associated with the loan. This will depend on the interest rate on your current loan.

How Much Will It Cost Me To Refinance?

Starting with an application fee for $250 - $350, you may need to pay an origination fee typically 1% of your loan amount. In most cases you will pay the same costs you had with your current home loan for the title search, title insurance, lender fees, etc. The total sum could cost up to 2-3% of the loan amount. If you don’t have the funds to pay for associated loan costs, you can search for lenders that offer "no-cost" loans which will charge a slightly higher interest rate.

What Are Points?

A point is a percentage of the loan amount, or 1-point = 1% of the loan, so one point on a $100,000 loan is $1,000. Points are costs that need to be paid to a lender to get mortgage financing under specified terms. Discount points are fees used to lower the interest rate on a mortgage loan by paying some of this interest up-front. Lenders may refer to costs in terms of basic points in hundredths of a percent, 100 basis points = 1 point, or 1% of the loan amount. 

Should I Pay Points To Lower My Interest Rate?

Yes, if you plan to stay in the property for a least a few years. Paying discount points to lower the loan's interest rate is a good way to lower your required monthly loan payment, and possibly increase the loan amount that you can afford to borrow. However, if you plan to stay in the property for only a year or two, your monthly savings may not be enough to recoup the cost of the discount points that you paid up-front.

What Does It Mean To Lock The Interest Rate?

Mortgage rates can change from the day you apply for a loan to the day you close the transaction. If interest rates rise sharply during the application process it can increase the borrower’s mortgage payment unexpectedly. Therefore, a lender can allow the borrower to "lock-in" the loan’s interest rate guaranteeing that rate for a specified time period, often 30-60 days, sometimes for a fee.

Should I Lock-In My Loan Rate?

It's unsure how interest rates will move at any given time, but your lender may estimate where interest rates are headed. If interest rates are expected to be volatile in the near future, considering locking your interest rate may be good because it allows you to qualify for the loan. Or, if your budget could handle a higher loan payment, or lender's lock fees, you may want to let interest rates "float" until the loan closing.

I've Had Credit Problems In The Past. Does This Impact My Chances Of Getting A Home Loan?

Even with poor credit getting a home loan is still possible. A lender will consider you to be a risky borrower and to compensate for this they will charge you a higher interest rate, and expect a higher down payment usually 20%-50%. The worse your credit history is, the more you can expect to pay.

I've Only Been Late A Couple Of Times On My Credit Card Bills. Does This Mean I Will Have To Pay An Extremely High Interest Rate?

Not necessarily, if you've been late with your payments less than 3-times in the past year, and the payments were no more than 30-days late, you still have a good change at getting a competitive interest rate. Most lenders will accept certain reasons for this like an illness, or job-change, but explanations are required.
 
Should I Choose The Lender With The Lowest Interest Rate And Costs?

There are two important things to consider when choosing one lender over another one:

*    Quality of Service –Especially for first-time homebuyers who will have     many questions about the total financing process and available loan     options. Finding a lender with outstanding service skills that you trust     will comfortably guide you every step of the way, so ask questions, even     before you fill-out an application.

*    Cost of Services – It’s good to ask potential lenders upfront what they     charge for their services and any fees involved. They should be able to     give you facts and get you through the financing process so that you feel     confident knowing that you made a good decision by choosing them.

Buyer Agent Services

• EFFICIENCY: The best thing about working with a buyer’s agent is that they can help you search for a home or a buyer. This can be a very time consuming process. The aid of a real estate professional can be of exceptional use. The best thing about a knowledgeable real estate agent is that they are proficient at sorting through real estate properties that will suit your needs. They belong to an MLS, (Multiple Listing Service), which lists available properties which features more more detailed information than what the public has access to.

Mortgage Glossary

1003 Uniform Residential Loan Application.

A & D LOAN Acquisition and development loan- a loan for the purchase of raw land for the purpose of development.

Abstract Title A written history of the ownership of a parcel of land.

Acceleration Clause Allows the lender to speed up the rate at which your loan comes due or even to demand immediate payment of the entire outstanding balance of the loan should you default on your loan.

Acknowledgment A declaration by a notary, certifying, by way of personal knowledge or written identification, the identity of the signer.

Adjustable Rate Mortgage (ARM) Is a mortgage in which the interest rate is adjusted periodically based on a pre-selected index. Also sometimes known as the renegotiable rate mortgage, the variable rate mortgage or the Canadian rollover mortgage. (ARM)

Adjustment Interval On an adjustable rate mortgage, the time between changes in the interest rate and/or monthly payment, typically one, three or five years, depending on the index.

Affidavit A sworn statement in writing.

American Land Title Association (ALTA) An organization of title companies specializing in Real Property Law which has standardized forms and coverage on a national basis. This is standardized coverage.

Amortized / Amortization Amortization refers to the principal portion of the loan payment and is the loan payment by equal periodic payments calculated to pay off the debt at the end of a fixed period, including accrued interest on the outstanding balance. A fully amortized loan will be completely paid off at the end of the loan term.

Annual Percentage Rate (APR) An interest rate reflecting the cost of a mortgage as a yearly rate. This rate is likely to be higher than the stated note rate or advertised rate on the mortgage, because it takes into account points and other credit costs. The APR allows homebuyers to compare different types of mortgages based on the annual cost for each loan.

Appraisal An estimate of the value of real property, made by a qualified professional called an "appraiser." An appraisal will be needed to determine the value of your property.

Assumption The agreement between buyer and seller where the buyer takes over the payments on an existing mortgage from the seller. This must be approved by the lender and be allowed by the note, which was originally signed by the seller.

Back End This refers to the debt-to-income ratio calculated using principal, interest, taxes, insurance and consumer credit obligations divided by gross monthly income. It is expressed as a percentage.

Balloon Usually a short-term fixed-rate loan which involves small payments for a certain period of time and one large payment for the remaining amount of the principal at a time specified in the contract.

Beneficiary The entity funding the loan. This is the entity to which the loan is owed.

BK / Bankruptcy A reorganization or discharge of debts. Could also be referred to as Chapter 7, 11 or 13.

Broker An individual in the business of assisting in arranging funding or negotiating contracts for a client but who does not loan the money himself. Brokers usually charge a fee or receive a commission for their services.

Buy Down When the lender and/or the home builder subsidizes the mortgage by lowering the interest rate during the first few years of the loan. While the payments are initially low, they will increase when the subsidy expires.

Cap The highest rate that an adjustable rate mortgage may reach. It can be expressed as the actual rate or as the amount of change allowed above the start rate. For example, a 7.99 % start rate with a 6% rate change cap would have a maximum interest rate cap of 13.99%.

Cash Out Any funds disbursed directly to the borrower.

Certificate of Occupancy A certificate issued by local city government to a builder, stating that the building is in proper condition to be occupied.

Certified Copy A true copy, attested to be true by the officer holding the original. It should have a stamp and signature stating that it is a true copy.

Clear-to-close Loan is ready to be closed with no additional conditions.

Closing The meeting between the buyer, seller and lender or their agents where the property and funds legally change hands. Also called settlement.

Closing Costs Usually include an origination fee, discount points, appraisal fee, title search and insurance, survey, taxes, deed recording fee, credit report charge and other costs assessed at settlement. The costs of closing usually are about 3 percent to 6 percent of the total mortgage amount. Or any costs being charged to facilitate granting of the credit request.

Commitment An agreement, often in writing, between a lender and a borrower to loan money at a future date subject to the completion of paperwork or compliance with stated conditions.

Community Property Property owned in common by a husband and wife, which was not acquired as separate property. A classification of property peculiar to certain states. In community property states, assets may be owned in part by a spouse even if their name does not appear on the title.

Comp. / Comparable A property with the same basic characteristics as the property you are attempting to find the value of (usually a real estate appraisal.) It should have been sold recently and be as similar as possible.

Condominium A property owned as a group, with rights to occupy specific units of the structure. An overseeing board, often referred to as a Homeowners Association, governs the property.

Construction Loan A short term interim loan for financing the cost of construction. The lender advances funds to the builder at periodic intervals as the work progresses.

Consumer Credit Credit owed by the individual, not secured by real estate.

Conventional Loan A mortgage not insured by FHA or guarantee by the VA or Farmers Home Administration (FMHA).

Conversion Clause A provision in some ARMS, (Adjustable Rate Mortgage) that allows you to change the ARM to a fixed-rate loan at some point during the loan term.

Credit Ratio The ratio, expressed as a percentage, which results when a borrower's monthly payment obligation on long-term debts is divided by his or her net effective income (FHA/VA loans) or gross monthly income (Conventional loans).

Credit Report History of buyers past credit performance.

Credit Score The score given to an individual to determine the credit worthiness. These scores come from TRW, Equifax and Trans Union.

D.R. / Debt Ratio The customer's monthly obligations divided by their monthly gross income. See also Back End.

Deed Legal document which conveys the title to a property.

Deed of Trust A document used which pledges real property to secure a debt. In some cases a deed of trust can replace a mortgage.

Default Failure to meet legal obligations in a contract, specifically, failure to make the monthly payments on a mortgage.

Deferred Interest See Negative Amortization

Delinquency Failure to make payments on time. This can lead to foreclosure.

Department of Veterans Affairs (VA) An independent agency of the federal government which guarantees long-term, low- or no-down payment mortgages to eligible veterans.

Derog Letter A letter written by the borrower giving an explanation for any derogatory credit.

Derog This is short for derogatory and refers to negative credit items.

Discharge Following a completed bankruptcy proceeding, discharged debts are no longer owed or collectable. Lenders will require copies of the discharge papers on any prior bankruptcy filings.

Discount Points Prepaid interest assessed at closing by the lender. Each point is equal to 1 percent of the loan amount (e.g. two points on a $100,000 mortgage would cost $2,000).

Dismissal If a bankruptcy is dropped without being completed, a Bankruptcy Dismissal document will be needed to proceed with the loan. Either the court or the debtor can prompt the dismissal.

Down Payment Money paid to make up the difference between the purchase price and mortgage amount. Down payments usually are 10 percent to 20 percent of the sales price on Conventional loans, and no money down up to 5 percent on FHA and VA loans.

Due-On-Sale Clause A provision in a mortgage or deed of trust that allows the lender to demand immediate payment of the balance of the mortgage if the mortgage holder sells the home.

Earnest Money Money given by a buyer to a seller as part of the purchase price to bind a transaction or assure payment.

Easements An interest in property, owned by another that entitles the holder to a specific limited use or privilege, such as the right to cross or to build adjoining structures on the property.

Encroachment A fixture of a piece of property which intrudes on another's property.

Equal Credit Opportunity Act (ECOA) Is a federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status or receipt of income from public assistance programs.

Equity The difference between the fair market value and current indebtedness, also referred to as the owner's interest.

Escrow Instructions Instructions to the escrow agent giving the parameters and contingencies involved in the transaction and agreed upon by both parties.

Escrow Waiver Request for a borrower to pay their own taxes and insurance. Escrow wavers are rarely granted with less than a 25% equity position (

Escrow Refers to a neutral third party who carries out the instructions of both the buyer and seller to handle all the paperwork of settlement or "closing." Escrow may also refer to an account held by the lender into which the homebuyer pays money for tax or insurance payments.

Farmers Home Administration (FMHA) Provides financing to farmers and other qualified borrowers who are unable to obtain loans elsewhere.

Federal Home Loan Mortgage Corporation (FHLMC) Also called Freddie Mac, is a quasi-governmental agency that purchases conventional mortgages from insured depository institutions and HUD-approved mortgage bankers.

Federal Housing Administration (FHA) A division of the Department of Housing and Urban Development. Its main activity is the insuring of residential mortgage loans made by private lenders. FHA also sets standard for underwriting mortgages.

Federal National Mortgage Association (FNMA) Also known as Fannie Mae. A tax-paying corporation created by Congress that purchases and sells conventional residential mortgages as well as those insured by FHA or guaranteed by VA. This institution, which provides funds for one in seven mortgages, makes mortgage money more available and more affordable.

Fee Simple The most common form of ownership where the vestee owns both the land and the structures.

FHA Loan A loan insured by the Federal Housing Administration open to all qualified home purchasers. While there are limits to the size of FHA loans, they are generous enough to handle moderate-priced homes almost anywhere in the country.

FHA Mortgage Insurance Requires a small fee (up to 3 percent of the loan amount) paid at closing or a portion of this fee added to each monthly payment of an FHA loan to insure the loan with FHA. On a 9.5 percent $75,000 30-year fixed-rate FHA loan, this fee would amount to either $2,250 at closing or an extra $31 a month for the life of the loan. In addition, FHA mortgage insurance requires an annual fee of 0.5 percent of the current loan amount.

Fixed-Rate Mortgage A mortgage on which the interest rate is set for the term of the loan.

Flood Insurance A mandatory insurance for some homeowners whose property is built in a designated flood zone.

Foreclosure A legal procedure in which property securing debt is sold by the lender to pay a defaulting borrower's debt.

Free and Clear This means the property is completely paid for and has no liens attached.

Functional Obsolescence A detraction from the property value due to the design or material being less functional than the norm.

GFE Good Faith Estimate of Buyers Loan Charges.

Government National Mortgage Association (GNMA) Also known as Ginnie Mae, provides sources of funds for residential mortgages, insured or guaranteed by FHA or VA.

Graduated Payment Mortgage (GPM) A type of flexible-payment mortgage where the payments increase for a specified period of time and then level off. This type of mortgage has negative amortization built into it.

Grant Deed A Grant Deed is the most common form of title transfer deed. A Grant Deed contains warranties against prior conveyances or encumbrances.

Gross Monthly Income The total amount the borrower earns per month, before any expenses are deducted.

Guarantee A promise by one party to pay a debt or perform an obligation contracted by another if the original party fails to pay or perform according to a contract.

Hazard Insurance A form of insurance in which the insurance company protects the insured from specified losses, such as fire, windstorm and the like, it would not cover earthquake, riot, or flood damage.

Homestead The dwelling (house and contiguous land) of the head of the family. Some states grant statutory exemptions, protecting homestead property (usually to a set maximum amount) against the rights of the creditors. Property tax exemptions are also available in some states.

Housing Expenses-to-Income Ratio The ratio, expressed as a percentage, which results when a borrower's housing expenses are divided by his/her net effective income (FHA/VA loans) or gross monthly income (Conventional loans).

Impound That portion of a borrower's monthly payments held by the lender or servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Also known as reserves.

Index A published interest rate against which lenders measure the difference between the current interest rate on an adjustable rate mortgage and that earned by other investments (such as one- three-, and five-year U.S. Treasury Security yields, the monthly average interest rate on loans closed by savings and loan institutions, and the monthly average Costs-of-Funds incurred by savings and loans), which is then used to adjust the interest rate on an adjustable mortgage up or down.

Interest Bearing A form of interest calculation where the loan is charged at a daily or monthly rate (1/365 or 1/12 of the annual interest rate) on the current outstanding balance.

Investor Money source for a lender.

Impound That portion of a borrower's monthly payments held by the lender or servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Also known as reserves.

Index A published interest rate against which lenders measure the difference between the current interest rate on an adjustable rate mortgage and that earned by other investments (such as one- three-, and five-year U.S. Treasury Security yields, the monthly average interest rate on loans closed by savings and loan institutions, and the monthly average Costs-of-Funds incurred by savings and loans), which is then used to adjust the interest rate on an adjustable mortgage up or down.

Interest Bearing A form of interest calculation where the loan is charged at a daily or monthly rate (1/365 or 1/12 of the annual interest rate) on the current outstanding balance.

Investor Money source for a lender.

Joint Tenants A form of holding title where the owners have 100% rights of survivorship unless redirected by a will.

Jumbo Loan A loan which is larger (more than $424,100) than the limits set by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. Because jumbo loans cannot be funded by these two agencies, they usually carry a higher interest rate.

Land Contract An agreement between the seller and the buyer where the title is withheld until a time where the required payments have been completed.

Leasehold Estate A kind of real estate ownership where the lessor does not hold title to the property but has use of the property subject to the terms of the lease.

Legal Description A method of geographically locating a piece or parcel of land, which is acceptable in a court of law.

LIBOR London InterBank Offered Rate. LIBOR is the base interest rate paid on deposits between banks in the Eurodollar market.

Lien A claim upon a piece of property for the payment or satisfaction of a debt or obligation.

Loan Committee Generally the Underwriting process.

Loan Risk The rate category assigned to the loan, which estimates the probable risk of delinquency and loss in the future.

Loan-To-Value Ratio (LTV) The relationship between the amount of the mortgage loan and the appraised value of the property expressed as a percentage.

Margin The number of percentage points the lender adds to the index rate to calculate the ARM interest rate at each adjustment.

Market Value The highest price that a buyer would pay and the lowest price a seller would accept on a property. Market value may be different from the price a property could actually be sold for at a given time.

Mortgage Escrow Accounts The account set by the Lender to pay Taxes and Insurance on behalf of the Borrower.

Mortgage Insurance Money paid to insure the mortgage when the down payment is less than 20 percent. See Private Mortgage Insurance or FHA Mortgage Insurance.

Mortgagee The lender.

Mortgagor The borrower or homeowner.

Negative Amortization Amortization means that monthly payments are large enough to pay the interest and reduce the principal on a mortgage. Negative amortization occurs when the monthly payments do not cover all of the interest cost. The interest cost that isn't covered is added to the unpaid principal balance. This means that even after making many payments, a borrower may owe more than was owed at the beginning of the loan.

Net Effective Income The borrower's gross income minus federal income tax.

Non-Assumption Clause Statements in the mortgage contract forbidding the assumption of the mortgage without the prior approval of the lender.

Non-Owner Occupied A property not used as a residence by the owner of the property.

Notary Public A person, designated by the state, which can certify the identity of a person when signing various documents.

Note Short for promissory note. This document gives the parameters of the loan and legally obligates the borrower to pay back the debt.

Obligations Any debt, or recurring payment the borrower is obligated to pay, including mortgage payments.

Origination Fee The fee charged by a lender to prepare loan documents, make credit checks, inspect and sometimes appraise a property; usually computed as a percentage of face value of the loan.

Owner Occupied Designation given to property used as the owner's residence.

Owners Policy A policy of the title insurance which protects the buyer against problems with the title.

P & I Principal and Interest. This refers to the principal and interest portions of the monthly mortgage payment.

P & L / Profit and Loss A statement of a businesses gross income, cost of goods, operating costs and net profit or loss.

P.I.T.I. Principal, interest, taxes and insurance. The complete monthly cost associated with financing a property.

P.U.D. Planned Unit Development. Property owned as a group, where individuals own the specific piece of land and structure they occupy, but also have a divided interest in a common area. A board, often referred to as a Homeowners Association, will govern the development.

Piggy Back Loan Financing obtained, subordinate to the first mortgage, to facilitate closing the first mortgage. Also known as a Secondary Financing.

Points A point is equal to one percent of the principal amount of a mortgage, see also Discount Points.

Power of Attorney An authority by which one person enables another to act on his or her behalf. Power of attorney can be limited to specific areas or be general in some cases.

Pre-Approval The Buyer has actually begun the application process and an underwriter has approved their income, funds and credit. Beware of any conditions on the approval.

Prelim. / Preliminary Title Report The title report generated at the beginning of the application process. It tells the mortgage company what liens are on the property and gives advice as to what will need to be done to gain clear title prior to recording the trust deed.

Prepaid Interest The portion of interest, collected at loan closing, which covers the time period between funding and the beginning of the first 30-day period covered by the first payment. For example, if the loan closed on 2/15, the first payment due on 4/1 would pay interest from 3/1 to 4/1. The prepaid interest would cover the period from 2/15 to 2/28.

Prepaids Expenses necessary to create an escrow account or to adjust the seller's existing escrow account. Can include taxes, hazard insurance, private mortgage insurance and special assessments.

Prepayment Penalty Money charged for an early repayment of debt. Prepayment penalties are allowed in some form (but not necessarily imposed) in 36 states and the District of Columbia.

Prepayment A privilege in a mortgage permitting the borrower to make payments in advance of their due date.

Pre-Qualified Buyer has discussed their financial situation with a loan expert. No attempt has been made to verify the validity of any of the borrowers information. PRE-Qualification is only an indication of what the buyer should qualify for.

Principal The amount of debt, not counting interest, left on a loan.

Private Mortgage Insurance (PMI) In the event that you do not have a 20 percent down payments, lenders will allow a smaller down payment, as low as 5 percent in some cases. With the smaller down payments loans, however, borrowers are usually required to carry private mortgage insurance. Private mortgage insurance will require an initial premium payment of 1.0 percent to 5.0 percent of your mortgage amount and may require an additional monthly fee depending on your loan's structure. On a $75,000 house with a 10 percent down payments, this would mean either an initial premium payment of $2,025 to $3,375, or an initial premium of $675 to $1,130 combined with a monthly payment of $25 to $30.

Purchase Agreement The agreement made between the buyer and seller of a property, containing the purchase price and contingencies of the sale

 Quit Claim A deed operating as a release; intended to pass any title, interest or claim, which the grantor may have in the property, but not containing any warranty of a valid interest or title in the grantor.

Rate Float Assuming market risk on an interest rate in the hopes that it will go lower prior to closing.

Rate Lock Choosing to have no change to a rate for a specific length of time.

Ratios How a buyers housing expense and debt picture relates to their income.

Real Estate Settlement Procedures Act (RESPA) RESPA is a federal law that allows consumers to review information on known or estimated settlement costs once after application and once prior to or at settlement. The law requires lenders to furnish information after application only.

Realtor A real estate broker or an associate holding active membership in a local real estate board affiliated with the National Association of Realtors.

Rescission The cancellation of a contract. With respect to mortgage refinancing, the law that gives the homeowner three days to cancel a contract in some cases once it is signed if the transaction uses equity in the home as security.

Recon / Reconveyance A release of lien filed with the county recorder by the trustee.

Recording Fees Money paid to the lender for recording a home sale with the local authorities, thereby making it part of the public records.

REFI Slang for refinance, or a new mortgage on a property that does not change ownership.

Request for Reconveyance Verification given by the beneficiary to the trustee that the conditions of the lien have been fulfilled and request that the lien be canceled.

Reverse Annuity Mortgage (RAM) A form of mortgage in which the lender makes periodic payments to the borrower using the borrower's equity in the home as security.

Rate Float Assuming market risk on an interest rate in the hopes that it will go lower prior to closing.

Rate Lock Choosing to have no change to a rate for a specific length of time.

Ratios How a buyers housing expense and debt picture relates to their income.

Real Estate Settlement Procedures Act (RESPA) RESPA is a federal law that allows consumers to review information on known or estimated settlement costs once after application and once prior to or at settlement. The law requires lenders to furnish information after application only.

Realtor A real estate broker or an associate holding active membership in a local real estate board affiliated with the National Association of Realtors.

Rescission The cancellation of a contract. With respect to mortgage refinancing, the law that gives the homeowner three days to cancel a contract in some cases once it is signed if the transaction uses equity in the home as security.

Recon / Reconveyance A release of lien filed with the county recorder by the trustee.

Recording Fees Money paid to the lender for recording a home sale with the local authorities, thereby making it part of the public records.

REFI Slang for refinance, or a new mortgage on a property that does not change ownership.

Request for Reconveyance Verification given by the beneficiary to the trustee that the conditions of the lien have been fulfilled and request that the lien be canceled.

Reverse Annuity Mortgage (RAM) A form of mortgage in which the lender makes periodic payments to the borrower using the borrower's equity in the home as security.

Tenants in Common A percentage interest in a property by two or more individuals without rights of survivorship.

Term Mortgage See Balloon Payment Mortgage.

Title Insurance The insurance policy insuring the lender and/or the buyer that the liens are as stated in the title report. Any claim arising from a lien other than that disclosed is payable by the title insurance company.

Title Search An examination of municipal records to determine the legal ownership of property. Usually is performed by a title company.

Title A document that gives evidence of an individual's ownership of property.

Trust Deed The Trust Deed attaches the note as a lien on the property. This is the document which conveys the ability to collect from the proceeds of the property.

Truth-in-Lending A federal law requiring disclosure of the Annual Percentage Rate to homebuyers shortly after they apply for the loan. Also known as a TIL.

Two-Step Mortgage A mortgage in which the borrower receives a below-market interest rate for a specified number of years (most often seven or 10 years), and then receives a new interest rate adjusted (within certain limits) to market conditions at that time. The lender sometimes has the option to call the loan, due within 30 days notice at the end of seven or 10 years. Also called "Super Seven" or "Premier" mortgage.

Underwriting The decision whether to make a loan to a potential homebuyers based on credit, employment, assets, and other factors and the matching of this risk to an appropriate rate and term or loan amount.


VA VETERANS ADMINISTRATION

VA Loan A long-term, low-or no-down payment loan guaranteed by the Department of Veterans Affairs. Restricted to individuals qualified by military service or other entitlements.

VA Mortgage Funding Fee A premium of up to 2 percent (depending on the size of the down payment) paid on a VA-backed loan. On a $75,000, 30-year fixed-rate mortgage with no down payment, this would amount to $1,406 either paid at closing or added to the amount financed.

Variable Rate Mortgage (VRM) See Adjustable Rate Mortgage.

Verification of Deposit (VOD) A document signed by the borrower's financial institution verifying the status and balance of his/her financial accounts.

Verification of Employment (VOE) A document signed by the borrower's employer verifying his/her position and salary.

Wraparound Results when an existing assumable loan is combined with a new loan, resulting in an interest rate somewhere between the old rate and the current market rate. The payments are made to a second lender or the previous homeowner, who then forwards the payments to the first lender after taking the additional amount off the top.

Zoning The division of a city or county into areas (zones) specifying the uses allowable for the real property in these areas.

Lighting Design

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Architectural Design

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Home Purchase Loans and Refinance in Birmingham, MI

Call 248-310-5300 for immediate assistance.

Welcome to the official site of Bestrate Mortgage. We are a full service mortgage company based in Birmingham, MI. We specialize in Home Purchase Loans and Refinance in Birmingham. We also serve the surrounding cities in Oakland County. Whether you are buying a home or refinancing in the zip code 48009, we can help you realize your dream of home ownership or save you money when getting your new lower monthly payment.

In terms of Purchase Loan programs, we offer the following:

FHA | VA | Jumbo | Conventional

Refinancing? We can help you with that, too!

We offer a wide range of refinance options, designed to best meet the needs of local borrowers. If you're looking for cash out, or to just get a better rate and term, we can assist you. We offer the following Refinancing Programs:
FHA Streamline | VA Streamline | Conventional | Jumbo

Contact Bestrate Mortgage today to discuss your mortgage loan options, and find out which loan program will best suit your needs.

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"Mike is the best! It took us months to find our new home and he was patient and always willing to work with our ever changing and extremely tight situation. I cannot thank him enough for being ever willing to answer my silliest of questions. The mortgage process was made a tolerable because you was handling it. Thank you very much!"

Lakshmi Nair 

"You guys were wonderful Mike was quick, attentive, and explained everything out and everything got done real fast. —"

Leslie Pietila 

"Mike is an outstanding mortgage professional who really works hard to get his clients a great low rate and to make the process easy and hassle free. If you're looking to get a mortgage to buy a home, or if you want to see about refinancing, you definitely need to talk to Mike!"

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Loan Process

The first step in obtaining a loan is to determine how much money you can borrow. In case of buying a home, you should determine how much home you can afford even before you begin looking. By answering a few simple questions, we will calculate your buying power....

Mortgage Basics

Applying for a mortgage can seem like a daunting and scary process. To help, we’ve created a checklist of things for you to compile, complete and acknowledge before applying. See the fill list by clicking learn more below....

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To assist you in your mortgage process, we have provided certain forms you might need along the way. Included is obviously the Mortgage Application Form which you can download and print....

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33687 Woodward Ave
Birmingham, MI 48009

Best Rate Mortgage

33687 Woodward Ave
Birmingham, MI 48009
Phone: (248)-310-5300
mikem@bestrate.one

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