Dorothy Reid, Your Mortgage Specialist
 

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TODAY'S RATE 03/23/2018

Conforming rates based on loan amount of $175,000+ and credit score of 740+, 40 day lock

CONFORMING

30 YR. FIXED @ 4.25%

15 YR. FIXED @ 3.75%

FHA 30 Yr. Fixed @ 4%

USDA 30 Yr. Fixed @ 3.75%

VA 30 Yr. Fixed @ 4%

ARMS - Conventional

5/1 @ 3.375%

7/1 @ 3.5%

SHOP AROUND!

I WILL MEET OR BEAT ANY LOCAL COMPETITORS WRITTEN QUOTE ON REFINANCES AND PURCHASES OF EXISTING HOMES.  SAME DAY QUOTES ONLY.  Dorothy Reid

 

1. How do I know how much house I can afford? Answer
2. What is the difference between a fixed-rate loan and an adjustable-rate loan? Answer
3. How is an index and margin used in an ARM? Answer
4. How do I know which type of mortgage is best for me? Answer
5. What does my mortgage payment include? Answer
6. How much cash will I need to purchase a home? Answer
7. Do any of your loans have a prepayment penalty? Answer
8. What type of closing costs will I have? Answer
9. Can I roll in my closing costs and prepaids into my loan? Answer
10. What is PMI? Answer
11. What does "0+0" -- "0+1" -- "1+1" mean? Answer
12. Should I get pre-approved before shopping for a home? Answer
13. What does pre-qualified mean? Answer
14. Will my loan be sold? Answer
15. Will I be able to have my mortgage payment on automatic bank draft? Answer
16. How long does it take to close? Answer
17. If I lock in a rate and it goes up, am I protected? Answer
18. If I lock in a rate and it goes down, can I get the new, lower rate? Answer
19. If rates appear to be dropping, why shouldn't I wait to lock a rate? Answer
20. If I submit an application, how long does it take before I know if I am pre-approved? Answer
21. Why can't I choose my own appraiser? Answer
22. Do I need to get a survey for my loan? Answer
23. Do I need a terminte contract or bond or wood infestation report for my loan? Answer
24. Can I have my appraisal transferred to another lender? Answer
25. How much homeowners insurance coverage on my dwelling do I need? Answer
26. I am buying a home that needs some work.  Can the seller give me a credit or allowance? Answer
27. I am buying a home that needs repairs and renovations, is there anyway I can finance these repairs into my new loan? Answer
28. I am purchasing a home but won't be moving into it right away.  The seller plans on renting it back from me.  Is this okay? Answer
29. I am purchasing a home that was a rental property, will I have to pay higher property taxes? Answer
30. I am purchasing new construction that was vacant or still being built as of October 1.  What kind of taxes will I have? Answer
31. I don't like my taxes and insurance being escrowed.  Do I have to pay them in my mortgage payment each month? Answer
32. I am refinancing.  Does my loan fund at closing? Answer
33. My spouse will not be on the loan, does she have to come to the closing? Answer
34. What do I need for my closing? Answer
35. What is an interest only loan? Answer
36. Can I get 100% financing? Answer
37. My home is for sale, can I still refinance? Answer

Q : How do I know how much house I can afford?
A : Generally speaking, you can purchase a home with a value of two or three times your annual household income. However, the amount that you can borrow will also depend upon your employment history, credit history, current savings and debts, and the amount of down payment you are willing to make. You may also be able to take advantage of special loan programs for first time buyers to purchase a home with a higher value. Give us a call, and we can help you determine exactly how much you can afford.
 
Q : What is the difference between a fixed-rate loan and an adjustable-rate loan?
A : With a fixed-rate mortgage, the interest rate stays the same during the life of the loan. With an adjustable-rate mortgage (ARM), the interest changes periodically, typically in relation to an index. While the monthly payments that you make with a fixed-rate mortgage are relatively stable, payments on an ARM loan will likely change. There are advantages and disadvantages to each type of mortgage, and the best way to select a loan product is by talking to us.
 
Q : How is an index and margin used in an ARM?
A : An index is an economic indicator that lenders use to set the interest rate for an ARM. Generally the interest rate that you pay is a combination of the index rate and a pre-specified margin. Three commonly used indices are the One-Year Treasury Bill, the Cost of Funds of the 11th District Federal Home Loan Bank (COFI), and the London InterBank Offering Rate (LIBOR).

Most of your Adjustable Rate Mortgages use the 1 Year LIBOR Index and a margin of 2.25%.

 
Q : How do I know which type of mortgage is best for me?
A : There is no simple formula to determine the type of mortgage that is best for you. This choice depends on a number of factors, including your current financial picture and how long you intend to keep your house. I can help you evaluate your choices and help you make the most appropriate decision.
 
Q : What does my mortgage payment include?
A : For most homeowners, the monthly mortgage payments include three separate parts:
  • Principal: Repayment on the amount borrowed
  • Interest: Payment to the lender for the amount borrowed
  • Taxes & Insurance: Monthly payments are normally made into a special escrow account for items like hazard insurance and property taxes. This feature is sometimes optional, in which case the fees will be paid by you directly to the County Tax Assessor and property insurance company.
  • And if the down payment is less than 20%, Private Mortgage Insurance (PMI).
  •  
    Q : How much cash will I need to purchase a home?
    A : The amount of cash that is necessary depends on a number of items. Generally speaking, though, you will need to supply:
  • Earnest Money: The deposit that is supplied when you make an offer on the house
  • Down Payment: A percentage of the cost of the home that is due at settlement
  • Closing Costs: Costs associated with processing paperwork to purchase or refinance a house
  • Prepaids: Interest on your new loan, annual homeowners insurance; an escrow account for property taxes and homeowners insurance.
  • The funds needed for the closing are paid to the closing attorney.  Contact the closing agent or attorney for instructions on the payment method and amount.

     
    Q : Do any of your loans have a prepayment penalty?
    A : No.  There is never a prepayment penalty.
     
    Q : What type of closing costs will I have?
    A : Your lender closing costs go hand and hand with your interest rate.  The market or par rate will have a 1% or less Broker Fee (also known as an Origination Fee).  You will have an appraisal fee charged by a third party vendor between $450 to $470; a tax service fee ranging from 0 to $58; a flood certification fee ranging from 0 to of $142; broker processing fee of $350 and a lender processing fee ranging from $750 to $795 & possible a MERS Assignment Fee of $11.95, depending on the lender.  Any other fees are NOT charged by The Hutson Company or its lender.  You will be given a guaranteed breakdown of all charges once you have locked in.  At this point, we will know the interest rate and lender you are locked with and their current fees.  An estimate will be given upon your quote.

    Third party closing costs consist of closing attorney/agent, title insurance, recording fees, AL tax stamps for both refinances and purchases.  Purchases may also have additional closing costs per the sales contract.  For example, a survey or wood infestation report.  Third party closing costs will be the same no matter what lender you choose.

    In addition to closing costs, there will be additional settlement charges referred to as PREPAIDS.  These will be the same no matter what lender you choose.  Prepaids are comprised of your prepaid interest from the day of closing to the first of the month; a years worth of homeowners insurance on a purchase; the pro-ration of property taxes on a purchase; and the setting up of a new escrow account for a purchase or refinance to collect for upcoming property taxes and homeowners insurance when due.

     

     
    Q : Can I roll in my closing costs and prepaids into my loan?
    A : Yes, on a refinance, provided you do not exceed any required loan to value.

    No, on a purchase.  You can, however, ask the seller to pay your closing costs and prepaids.  If your downpayment is 20% or more, the seller can pay up to 6% of the sales price to be applied towards your closing costs and prepaids.  If your down payment is 5% to 19.9%, the limit is 3%.

     
    Q : What is PMI?
    A : PMI is Private Mortgage Insurance.  On a conventional loan, if you are putting down less than 20%, you will have PMI.  Many years ago, you could not obtain a mortgage unless you had a 20% down payment.  Today, you are allowed to purchase a home with less than a 20% down payment thanks to Private Mortgage Insurers.  This is default insurance and benefits the lender.  However, you pay the premium either upfront and financed into your loan amount or monthly.  PMI can be tax deductible.  Contact your accountant for full details.
     
    Q : What does "0+0" -- "0+1" -- "1+1" mean?
    A : The first digit refers to discount points and the zero (0) signifies that for the quoted rate, you will not be charged any discount points.

    The second digit refers to loan origination or broker fees and the zero (0) signifies that for the quoted rate, you will not be charged a loan origination or broker fee.  This means the rate is slightly higher than the market or par rate and the lender is paying the broker a Yield Spread Premium (YSP) instead of you paying the broker.

    On the second digit, the 1 signifies that you are being charged 1% of your loan amount for the lower interest rate.  This is the rate that you see published or hear about in the news.

    If the first digit is also a 1, then you are buying down your interest rate by paying one (1% of the loan amount) in the form of a discount point.

    These are no longer used as of 2012.  Now all of my loans do have an origination fee; however, you are given a choice of interest rate depending upon how much you would like your net closing costs to be.  Now rates comes with lender credits that change daily.  The credit is applied to your closing costs and the credit helps lower your overall cost at the closing table.  It is possible to get a credit large enough to pay all your closing costs.

    You need to look at all options -- 0+0 or 0+1 or anything inbetween!  Often a larger loan amount will have less than a 1% fee.

    New in 2010 is a new Good Faith Estimate.  If you have chosen an interest rate with a "0+0" option, you will be charged an origination fee then given a credit with the Yield Spread Premium to conform with Government requirements.

     

     
    Q : Should I get pre-approved before shopping for a home?
    A : Definitely!  Completing an application and getting pre-approved is extremely important and is the first step in buying a home.  Before you waste your time house hunting, be sure you are eligible for a loan.

    Pre-approval is based on income, assets, debt ratio, and credit scores.  By completing and submitting an application to us, we can determine the right loan program that fits your own personal needs.  We will then be able to quote you an accurate rate and closing costs based on that program and your credit score.

    We can help you determine the sales price range that best fits your budget.

     
    Q : What does pre-qualified mean?
    A : Nothing!  It just means that based on some general information you have provided with no verifications and no knowledge of credit scores, you can buy a home in a certain price range based on the income you have disclosed to us.

    Your income and how we are required to calculate income may not be the same.

    There may be credit blemishes on your credit report that need to be addressed and we would have no knowledge of this on a pre-qualification.

     
    Q : Will my loan be sold?
    A : Yes.  The Hutson Company does not service your loan and you will not make any payments to us.  We will choose a lender and close in that lender's name.  Then that lender will most probably sell your loan.

    This does not change your loan in any way.  Rate and term remain the same.  Only who will service your loan will change.

     
    Q : Will I be able to have my mortgage payment on automatic bank draft?
    A : Yes but not until the first payment is made.
     
    Q : How long does it take to close?
    A : The time period varies.  If rates are low and many people are refinancing, the rurnaround time can be up to 60 days from start to close on USDA.

    Currently, from time of application to close is 3 to 4 weeks on FHA, VA and conventional loans.   The Government prohibits any loan closing in less than seven (7) days from date of application.

    Foreclosures and short sale purchases may take longer than 30 days due to the seller, not lender procedures.

     
    Q : If I lock in a rate and it goes up, am I protected?
    A : Definitely!!!
     
    Q : If I lock in a rate and it goes down, can I get the new, lower rate?
    A : No.  A rate lock is an agreement between you and us that a specific interest rate will be provided to you for a specific period of time (the rate lock period).

    We will confirm and lock your interest rate with your verbal or written authorization. 

    Because we have already purchased money to fund your loan at a specific rate, we cannot go back to the lenders we work with and buy your mortgage at a lower rate.  Think of it like buying a stock.  If you purchased a strock at $45 a share and the price goes to $43 the next day, you cannot call your broker and tell them you want the stock at the lower price.  In essence, you own the rate lock you have agreed to.  In the even that rates drastically drop before your closing, we will contact our investor for a rate change consideration but we cannot guarantee a rate reduction.

     
    Q : If rates appear to be dropping, why shouldn't I wait to lock a rate?
    A : An important question for you to ask is this: What would be more disappointing?  Locking a rate lower than you currently have and then finding that you may have missed the "lower" rate (but you are still saving money) or NOT locking your rate and rates go up?  Be very careful here.  If you are sitting with a high interest rate waiting for rock bottom rates, each month you are throwing away your money.

    It is our objective as your mortgage advisor to assist you in determing an optimal time to lock into an interest rate given our professional assessment.

    No one has a crystal ball and the news media always lags behind on mortgage rate news.  We offer free advise and consultation.

     
    Q : If I submit an application, how long does it take before I know if I am pre-approved?
    A : Your loan application should be processed within 24 hours.
     
    Q : Why can't I choose my own appraiser?
    A : Effecitve May 1, 2009, the Feds implemented the HVCC or House Value Code of Conduct which requires a third party independent vendor to order all appraisals.

    A builder, Realtor, Loan Officer, Banker, Broker and Borrower is prohibited from ordering an appraisal or speaking to the assigned appraiser.

    When applying for a loan, whether for a purchase or a refinance, the appraisal fee is due at the time of application in order for the appraisal to be ordered.  The appraisal typically costs from $420 to $475 and the fee is paid to the third party vendor chosen by the lender.

     
    Q : Do I need to get a survey for my loan?
    A : No, as long as the title company issues a short form title endorsement, we are fine.  However, it is a good idea to get a copy of an existing one or a new one.
     
    Q : Do I need a terminte contract or bond or wood infestation report for my loan?
    A : The answer is no on a conventional loan.  A termite bond/contract is no longer required in order to obtain a conventional loan.  A Wood Infestation Report is also not rquired.  However, I do recommend that you get both.

    For FHA and VA, a wood infestation report will be required.  All active infestation must be treated prior to closing. 

     
    Q : Can I have my appraisal transferred to another lender?
    A : No, appraisals are not transferrable.  They are the property of the lender. 

    You are required to receive a copy of your appraisal at least 3 days prior to your closing.  However, I will provide you a copy as soon as it becomes available.

    Appraisal fees are $420 or $475 and are non-refundable.

     
    Q : How much homeowners insurance coverage on my dwelling do I need?
    A : First, your deductible cannot exceed $1,000 OR 1% of the dwelling coverage.  (i.e. dwelling coverage is $200,000, deductible can be no greater than $2,000; dwelling coverage is $90,000, deductible cannot exceed $1,000).

    Next, your dwelling coverage should be equal to or greater than the loan amount.  If less than the loan amount, the policy must have full replacement cost coverage or a percentage that when added to the dwelling coverage will result to an amount equal to or greater thant he loan amount.

     

     
    Q : I am buying a home that needs some work.  Can the seller give me a credit or allowance?
    A : No.  When obtaining a conventional mortgage, a seller is prohibited from giving a buyer any money for repairs or pay an incentive to the buyer.

    The seller can lower the sales price, do the repairs prior to the closing, pay the contractor for future work at the closing with the repair on the HUD-1 and check payable to the contractor, or pay a portion of the buyer's closing costs and/or prepaids in lieu of a direct payment to the buyer.

    There are some lenders that will allow a small escrow at 1 1/2 times the contractor's estimate but this is not always the case.  If there is a possibility of a small escrow, before you lock in, this must be known as you must be locked in with a lender that will allow the escrow.

     

     
    Q : I am buying a home that needs repairs and renovations, is there anyway I can finance these repairs into my new loan?
    A : Yes.  FHA has a 203K loan for that purpose.  I  do not originate 203K loans but will be happy to refer you to the only two lenders in Alabama that can help you with this type of loan.  I do, however, origination FHA loans that do not require a repair and renovation allowance.
     
    Q : I am purchasing a home but won't be moving into it right away.  The seller plans on renting it back from me.  Is this okay?
    A : Your sales contract cannot state that a seller is renting back the home from you for more than a 10 day period.  Otherwise, the lender will consider it rental property.  You may want to reconsider the time period in your sales contract negotiations.  Consult your Realtor.
     
    Q : I am purchasing a home that was a rental property, will I have to pay higher property taxes?
    A : Yes.  If the home currently has a non-homestead tax rate, that rate will continue until September 30.  The tax year runs from October 1 to September 30.

    In January, you can request the county to provide you with your new homestead tax rate, call your lender and ask how you can get your escrows readjusted.

     
    Q : I am purchasing new construction that was vacant or still being built as of October 1.  What kind of taxes will I have?
    A : You may either be taxed at the lot rate and your escrows will be low.  If you do not notify your lender that they have increased in the next tax year, you will have a shortage in your escrow account.

    If the county has assessed it as substantially completed, it will be at the non-homestead tax rate for full value.  Therefore, you will have double taxes the first year.

    Once you have declared homestead and the new tax year has arrived, you will need to get, in writing, your new tax amount and contact your lender to get your escrows readjusted.

    If you are building and can close before October 1, do so! If you close on Oct. 1, you now have double taxes!!!

    Talk to your Realtor about this and further advise.

     

     

     
    Q : I don't like my taxes and insurance being escrowed.  Do I have to pay them in my mortgage payment each month?
    A : Yes and no.  If your loan to value is greater than 80%, you will have to escrow.

    If your loan to value is 80% or less, you have the option of waiving escrows.  All lenders will charge .25% of the loan amount to waive escrows.

    You can either pay the .25% at closing (a one time fee) or you can increase your interest rate by 1/8th and have your broker pay it on your behalf by using the Yield Spread Premium received from the lender.

     
    Q : I am refinancing.  Does my loan fund at closing?
    A : If the refinance is for an investment property or second home, then your loan will fund on the day of closing.  Your existing mortgage will be paid off and if you are getting any cash back, you will receive it at closing.

    If you are refinancing your primary residence, there is a three day right to cancel.  This means that once you close, you have three days to change your mind.  On the 4th day (Sundays and Holidays are not counted), your loan will fund.

     
    Q : My spouse will not be on the loan, does she have to come to the closing?
    A : YES!  In the State of Alabama, the spouse must consent and sign certain documents at the closing on a primary residence.  Not true if a second home or investment property.
     
    Q : What do I need for my closing?
    A : Unexpired drivers license and another form of identification, preferably with a photo.

    If this is a purchase, a certified bank check made payable to the closing attorney/agent.

     
    Q : What is an interest only loan?
    A : Your monthly mortgage payment would consist of property taxes, homeowners insurance (if you are escrowing) and an interest only payment.  There is not a required "principal" payment.

    Your monthly interest only payment is your loan amount multiplied by your interest rate then divided by 12.

    You can make payments toward your principal balance at any time.

    An interest only loan is ideal for a commissioned borrower.  On good months, you can increase your mortgage payment to pay down principal and on slow months, you are only required to make your minimum interest only payment.

    It is not recommended to never pay toward principal.  Remember interest is paid in arrears and when you go to refinance or sell your home, if you never made any payments toward principal, you will owe more than you borrowered as your accrued interest will be added to your loan balance.

     
    Q : Can I get 100% financing?
    A : Yes and no.

    First, if the property you are purchasing is eligible for the USDA Rural Housing Program, you can get 100% financing with no PMI.  It is address specific in a specific geographic area.  You can ask the listing Realtor or go on the USDA Rural Housing website.  There are income limitations for qualifying.  I can help you with USDA mortgages.

    Next, you may be eligible for the Alabama Housing program either using bond money (First Step) or getting a FHA loan and a second through Alabama Housing for 3% and you would then only need 1/2% for the down payment.  There are also income limitations for qualification and you will have a non-refundable upfront commitment fee due at time of application.  You will have mortgage insurance.  I will be happy to assist you with your FHA loan. 

    Another option with a minimum down payment is a FHA loan.  You only neeed 3.5% down and it can all be gift money.  You will have an upfront mortgage fee of 1.75% of the loan amount financed into your loan AND monthly mortgage insurance at the rate of 1.35% of the loan amount.  The seller can pay up to 6% of the sales price and pay your closing costs and prepaids.  The loan limit is $271,050 including the mortgage insurance.  Minimum credit score is 620.  I will be happy to assist you with your FHA loan.  This is an ideal loan for first time home buyers.

    If you are purchasing a HUD foreclosure with the $100 incentive, you can get a FHA loan with just $100 down.  This is for HUD foreclosures only.  Ask you Realtor about HUD owned homes for sale.

    The most popular is the Fannie Mae or Freddie Mac conventional/conforming loan with a maximum loan amount of $417,000.  You will need at least a 5% down payment and an excellent credit score.  The 5% must be your money and not gift money.  These loans are my speciality.

    And if you are eligible for a VA loan, you do not need a down payment.

     

     
    Q : My home is for sale, can I still refinance?
    A : No!  You can not refinance a home that is for sale.  In fact, new requirements state that your home cannot have been listed for sale in the last 6 months and the appraiser must verify this and state this information in the appraisal.