Why should I refinance my home loan?

There are several reasons why refinancing your home may be beneficial to you. You may want to consolidate your high-interest debt (such as credit cards) into a low monthly payment, it may be the right time to convert your adjustable rate into a fixed-rate mortgage or you may want to combine a first and second mortgage. Talk to one of our knowledgeable mortgage specialists today to learn how we can help you meet your financial goals.

What is a fixed-rate mortgage?

A fixed-rate fully amortizing mortgage is a loan with an interest rate and monthly payment that remains fixed for the life of the loan. A fixed-rate mortgage is designed so that the borrower has repaid the loan at the end of the term. Fixed-rate mortgages are available for 30 years, 20 years, 15 years and even 10 years.

What is an adjustable-rate mortgage?

An adjustable-rate mortgage (ARM) is a loan with an interest rate that adjusts on a regular schedule, usually once or twice a year. The interest rate and payments rise and fall with the index that the loan is based on (such as the Treasury Bill, Cost of Funds or LIBOR.) Most ARMs come with an interest rate cap that limits the total amount your rate can change over the life of the loan. In a traditional ARM, although the payments may be adjusted based on changes in the index, the payments are fully amortizing, meaning the borrower's obligation is satisfied at the end of the term, assuming all payments are made as scheduled.

Is a fixed-rate or adjustable-rate mortgage better?

There are distinct advantages associated with each of these types of programs. It's not necessarily a question of which loan is better, but which is better for you and your needs. With a fixed-rate mortgage, you have the security of knowing that your interest rate and payment will not change during the life of the loan. The main advantage of an ARM is that it typically offers a lower initial interest rate than a fixed-rate loan. Then, after a specific period of time, the interest rate on an ARM will begin adjusting - either up or down - on a regular basis (usually once or twice a year.

What is an interest-only home loan?

With an interest-only mortgage, you can pay only the interest portion of your monthly payment for a specific period of time, usually 5 or 10 years. At the end of the interest-only period, your payments will be amortized over the remaining period of the loan. As a result, your payments after the interest-only period will be higher than they would be in a traditional regular amortizing loan.

Why would I choose an ARM over a fixed-rate mortgage?

Many homeowners find adjustable-rate mortgages appealing because they usually offer lower interest rates than conventional loans, so they usually have a lower monthly payment for a fixed period. An ARM may be a good option if you only expect to spend a few years in your home, or you wish to buy a home that costs more than you could otherwise afford.

What is a mortgage prepayment penalty? Why would I consider a mortgage that has one?

A prepayment penalty on a mortgage allows the lender to charge a borrower additional interest, typically six months' worth, when a mortgage is repaid during the penalty period. (The penalty period is usually the first three to five years.) If a mortgage has a prepayment penalty, it must be clearly stated in the loan documents. The advantage of taking a mortgage with a prepayment penalty is that it could have a lower interest rate.

What is the most important consideration when selecting a mortgage?

The most important thing to consider when dealing with mortgages is: LEAVE IT TO THE PROFESSIONALS!!

How do I determine which mortgage program is best suited for my personal situation?

Please see Application.

What are points?

One point is equal to one percent of your loan amount. For example, one point on a $100,000 loan would be $1,000. Paying points is a way to reduce your interest rate (and monthly payment) when you purchase or refinance your home. In general, it makes sense to pay points if you plan to keep your loan long enough for the savings in your monthly payment to exceed the extra fees you pay up front.

What is APR and how is it calculated?

APR stands for annual percentage rate and is used in disclosures required by the federal Truth in Lending Act. The purpose of APR is to measure the "true cost of a loan." APR factors in certain closing costs and fees in addition to the interest rate. It is calculated by spreading these costs over the life of the mortgage, along with the interest rate set forth in the Note.

Note: since different lenders calculate APR differently, consumers may find it easier to simply compare the Good Faith Estimate (GFE) received from each lender when shopping for a loan. A GFE will show all points, lender fees, and the interest rate. Simply add up all the lender fees and compare the total cost in dollars, not APR.

What fees will I have to pay?

Closing costs, prepaid fees (such as taxes and insurance) and title fees are all part of most loan transactions. Once you have completed a loan application, you will receive a Good Faith Estimate that lists all of your fees.

Are the closing costs associated with my refinance tax-deductible?

Please consult with your tax advisor. Or visit http://www.irs.gov/ to find an outline of this information.

Will an appraisal of my property be required to approve a new loan? If so, will I receive a copy of it?

Yes. Your property is the collateral for the mortgage, so an appraisal is almost always required. And you are always entitled to receive a copy of it.

What documentation will the lender typically require to process my mortgage?

For a typical, fully documented mortgage application (where the borrower is looking to qualify based on their income), the borrower will usually need to provide:

• One month's current pay stubs
• W-2 forms for the prior two years
• Bank and investment account statements for the prior 2-3 months

If an applicant is self-employed or has income that is difficult to prove, additional documentation could be required.

What if I'm self-employed or my income is difficult to prove?

ELoanOffers.com offers a variety of programs designed to help borrowers in these situations. We even offer mortgages for individuals who may not be able to verify either their income or assets. In exchange for a slightly higher rate, these programs require little or no documentation to prove income. You should speak to a mortgage specialist to help direct you to the best product for your needs.

What is an escrow or impound account?

An escrow or impound account is set up by your lender during the loan closing to pay property taxes, fire and hazard insurance premiums, mortgage insurance premiums, and other escrow items on a monthly basis. If you have an escrow account, each of your monthly mortgage payments will contain a fraction of your annual property tax and insurance costs so there is enough money to pay these bills when they are due. Escrow accounts can be a convenient way to ensure your insurance and tax payments are made on time.

How much homeowner's insurance coverage will I need to close the new mortgage?

Lenders often recommend or require a "guaranteed-replacement-cost" policy. This type of policy will generally pay out 20-50% more than the face value of your policy. If there is severe damage - from a fire, for example - you can use this money to have your home rebuilt. A replacement-cost policy will usually adjust each year to the rising costs of construction in your area. Unfortunately, even guaranteed-replacement-cost polices do not always cover these new construction expenses. For this reason, some insurers may go even further to offer an "endorsement" that will pay for the upgrading cost. It's a good idea to consider an endorsement on your replacement-cost policy.

Why do I need to pay for another policy of title insurance when we already own the property and purchased title insurance when we bought the house?

A new policy is needed to protect the new lender and the subsequent investor of your new mortgage. Before your new mortgage closes, the lender must be certain that the title to the property will be free of prior defects and indebtedness. Both a homeowner and prospective lender need to be certain that what is available on the property is what is referred to as a "marketable title." A title company researches the legal history of the property, which involves searching public records in the office of the county recorder. A policy of title insurance protects a homeowner's title and the insurer covers the cost of any legal challenges.

What is PMI and how can I avoid having to get it on my mortgage?

The lender may require you to pay for ELoanOffers.com private mortgage insurance (PMI) if your loan amount is more than 80% loan-to-value. Many borrowers who have less than 20% equity in their homes choose a combination first and second mortgage to avoid having to buy PMI. However, ELoanOffers.com offers 100% finance options with no mortgage insurance requirement.

What is a credit score?

A credit score is a number, in the range of 300 to 850, derived by a mathematical formula that is used by lenders as one factor in determining an applicant's creditworthiness. Credit scores are based on information in your credit files with the major credit reporting agencies. A FICO score is a type of credit score produced by a proprietary system owned by the Fair Isaac Corporation. The FICO score is only one of many factors that lenders consider in evaluating your loan application.

How can I get/improve my credit score(s)?

There are three major credit bureaus: Equifax, Experian and Transunion, each of which makes personal credit reports, including related credit scores, available to consumers. Generally speaking, individuals should review their credit report at least once a year to check for inaccuracies or signs of identity theft.

If you do have blemishes on your credit report, remember, improving your credit scores takes time, but making payments on time and paying down the balances on credit cards and other debts is always a step in the right direction.

What is loan-to-value?

Loan-to-value (LTV) is a ratio reflecting the amount of the loan as a percentage of the current market value of your home. You can calculate your LTV by dividing your existing loan amount by the current value of your home. For example, if you borrow $150,000 and your home is valued at $200,000, your loan-to-value ratio is 75%.

What is a debt-to-income ratio?

Your debt-to-income ratio calculates your monthly debt obligations against your current income. It is used as a risk indicator to help determine your ability to pay back a home loan. A borrower with a higher debt-to-income ratio is considered to be a greater risk to the lender.