Frequently Asked Questions
How are Interest
Rates determined?
What are "Discount
Points"?
How are monthly
payments determined and calculated?
Will my monthly
mortgage payment always be the same?
How do I determine
the mortgage amount for which I qualify?
When should I apply
for a mortgage loan?
After I submit my
mortgage loan, what happens next?
What does it cost
to submit a mortgage loan application?
What is the difference
between pre-qualification and pre-approval?
What is the difference
between APR and Interest Rate?
What options are
there with no money down and no cash for closing costs?
Is it possible to
buy a house with no money down?
What first-time
buyer programs are available?
Can I receive a
loan if I am self-employed?
How are Interest
Rates determined?
Mortgage Loans are
bought and sold daily by large privately owned multinational corporations
such as Prudential Insurance Company, semipublic entities, as well as
by quasi-governmental organizations such as the Federal National Mortgage
Association (known as Fannie Mae) and the Federal Home Loan Mortgage
Corporation (known as Freddie Mac). These groups set a price they
will pay for loans every day, prices that can be locked in for a prescribed
number of calendar days out into the future. These are called
"forward commitments," and generally translate into rates
which can be offered to individual borrowers for "locking-in"
a rate for their home loan.
Since billions of dollars
in home loans are bought and sold every day, the rate/point combinations
offered by most lenders are remarkably similar. The biggest difference
occurs when one lender or another needs to charge more to cover a higher
overhead expense. Factors which negatively affect interest rate
are past credit problems of the borrower, inability or unwillingness
to prove income or assets, low equity positions, and unique property
situations.
What are "Discount
Points?"
Discount points refers
to percentage points of the loan amount. Usually, one point or
more is charged as a loan origination fee to compensate the mortgage
loan company and mortgage specialist arranging your loan. These are
called "Origination Points". Also, additional discount points
or partial points may be paid to lower the interest rate from the "par"
rate, with "par" being the rate achieved by paying only one
"point." These are referred to as "Discount Points,"
since they can lower your interest rate. When you hear the term
"zero points loan", this refers to a loan with no discount
points and with a interest rate usually about 1/4% higher than a loan
with one origination point.
How are monthly
payment determined and calculated?
Your monthly loan payment
is usually determined by using an "amortization" table.
To amortize a mortgage loan, it means to gradually pay off, and all
home loans must eventually be repaid. Using the total mortgage
loan amount, the mortgage interest rate, and the term of the home loan,
one can determine the minimum monthly payment needed to pay of a home
loan by the end of the term, and this what lenders do when they calculate
your minimum monthly mortgage payment.
Sometimes lenders require
that you pay the monthly amount for property insurance and property
taxes along with your loan payment. This is called "impounding"
your taxes and insurance so that you won't have to come up with a large
lump sum periodically during the year, potentially causing a strain
on your budget. Even if the lender doesn't require that monthly
tax/insurance payments be included with your loan payment, you can request
that this be done.
Click here to use one of
our Mortgage Calculators.
Will my monthly
mortgage payment always be the same?
If you have a fixed
interest rate and term mortgage, your payment will not change from month
to month as long as you make payments on time. If you have an
adjustable interest rate and term home loan, your mortgage payment will
change according to the mortgage loan terms.
How do I determine
the mortgage amount for which I qualify?
We look at several
factors in determining the type and amount of home loan for which you
qualify. Factors include, but are not limited to, whether or not
you own a home, the amount of equity you have in your home, the total
amount of debt you carry, your income, and credit payment history.
Click here to use one of
our Mortgage Calculators.
When should I apply
for a mortgage loan?
It is highly recommended
that you apply for a mortgage loan or home loan, before you start looking
for a home to purchase. It is an essential piece of information as part
of the home-search process to determine your affordable price range
using today's mortgage interest rates.
Click here to Apply Online
today.
After I submit my
mortgage loan, what happens next?
Once your mortgage
loan has been submitted, one of our loan officers will be assigned to
your account and will be calling you with information about your loan.
Click here to
read more about the Mortgage Loan Process.
What does it cost
to submit a mortgage loan application?
Nothing. You
can submit your mortgage loan application and become pre-approved for
a purchase loan or refinance loan without incurring any charges. Later
on, fees may be incurred for a property appraisal and eventually closing
costs (in new purchase loans).
What is the difference
between pre-qualification and pre-approval?
Pre-qualification is
a lender's opinion of your ability to purchase a home and is based on
your verbal statement of income, employment history and available down
payment.
Pre-approval is a lender's
underwriting decision that you are conditionally qualified and is subject
to the lender's review of your completed application, credit check,
appraisal and home inspection. You will receive a conditional
pre-approval shortly after applying for your loan at Heartland Financial
Corporation. You will receive an unconditional pre-approval after
we process the financial documentation you supply us after your application.
When it comes to writing
an offer for a home, a pre-approval letter contains stronger language
to the seller and the listing agent than a pre-qualification.
You, the buyer, have the increased negotiating leverage of cash buyer
status because the mortgage is already in place. A pre-approval
can often be a determining factor in winning the contract in a competitive
bid situation.
What is the difference
between APR and Interest Rate?
The APR, or Annual
Percentage Rate, is often higher than the quoted interest rate, or mortgage
note rate. This is because the APR includes, in addition to interest,
some of the additional costs of obtaining your home loan or mortgage
financing. Simply stated, if there were no costs in obtaining
financing, your mortgage note rate and your APR would be the same.
Your APR will be noted
on your Truth-in-Lending disclosure that you receive after your mortgage
loan application.
What options are
there with no money down and no cash for closing costs?
In recent years, though,
there has been new availability of zero-down loans in the conventional
mortgage arena. For those who qualify, though, a 100% LTV (loan
to value) mortgage can be an easier step to homeownership. You
will need a very good credit rating to take advantage of these mortgages.
In addition, if your debt-to-income ratio is higher than the standards
(around 45% including all debts) then you may want to concentrate on
decreasing your debt load. Finally, if you have thoughts of moving
to another home in a short period (say less than 3-5 years) then these
100% LTV mortgages are almost certainly not for you. Since you
are financing the full current price of the home, should you need or
want to sell in a year or two it is very possible that you could not
accomplish the sale without digging into your pocket to pay selling
expenses, since your mortgage loan balance will be near (or more than)
the value of the home.
Is it possible to
buy a house with no money down?
Yes! No down
payment is one of the top two reasons most people continue renting.
Well, with a "No Money Down" loan program, the days of saving
up for a large down payment are over. If you have decent credit
and fall into a certain income range, you could be on the road to owning
a home with absolutely no money down! Many people unfortunately
get stuck in the "Rent Trap". That being, you may be
able to afford a new home but coming up with a substantial down payment
is difficult because of monthly rent. Several no money down loan
programs are available these days, just consult one of our experienced
loan officers for more information.
What first-time
buyer programs are available?
Many first-time home
buyer programs are locally developed and administered. Each state,
province or local community is much more likely to have a program available
than on a national level. Our highly trained and knowledgeable
loan officers can generally review with you the availability of first
time home buyer programs in your area.
What mortgage options
are there for those with poor credit?
Heartland Financial
Corporation has hundreds of mortgage loan programs available for many
of those with tarnished credit records. One of the mistakes commonly
made by new homebuyers involves their credit report. Some buyers
assume that their credit is worse than it really is, and may well have
been able to secure a more advantageous mortgage. Other buyers
are unaware of problems in their credit report and need to scramble
to get the problems handled. You can avoid many of these hassles
by getting a copy of your credit report up-front and examining it both
for errors that need to be corrected and accounts that need to be handled.
Contact one of our loan officers for a copy of your credit report.
Click here for more information
on credit repair.
Can I receive a
loan if I am self-employed?
Absolutely, we offer
many different mortgage loan options. You should contact one of our
loan officers to review your many available mortgage loan options.
