Mortgage FAQ's

What is an adjustable rate mortgage?

A mortgage with an interest rate and payment that change periodically over the life of the loan based on changes in a specified index.

What is a Conventional mortgage?

A mortgage loan that is not insured or guaranteed by the federal government.

What is the annual percentage rate (APR)?

What is a loan default?

A default is the failure of a borrower to comply with the terms of a note or the provisions of a mortgage.   Generally, this event means that the entire obligation becomes due immediately (this is called an acceleration clause) and, unless a suitable resolution is reached, a lender will generally enforce their rights through the legal system through a foreclosure action.   To learn more about foreclosures, kindly visit www.wesaveyourhouse.com

What is Underwriting?

The process of evaluating a loan application to determine the risk involved for the lender. It involves an analysis of the borrower's ability and willingness to repay the debt and the value of the property.

What is mortgage insurance (MI)?

Insurance that covers the lender against some of the losses incurred as a result of a default on a home loan. Mortgage insurance is usually required in one form or another on all loans that have a loan-to-value higher than eighty percent. Mortgages above 80% LTV that call themselves "No MI" are usually a made at a higher interest rate. Instead of the borrower paying the mortgage insurance premiums directly, they pay a higher interest rate to the lender, which then pays the mortgage insurance themselves. Also, FHA loans and certain first-time homebuyer programs require mortgage insurance regardless of the loan-to-value.   MIP, or mortgage insurance premiums, are the lump sum amount paid by a mortgagor for mortgage insurance, either to a government agency such as the Federal Housing Administration (FHA) or to a private mortgage insurance (MI) company

What is Forbearance?

The lender's postponement of legal action when a borrower is delinquent. It is usually a written agreement granted when a borrower makes satisfactory arrangements to bring the overdue mortgage payments up to date.

What is Credit enhancement?

A method to reduce credit risk by requiring collateral, letters of credit, mortgage insurance, corporate guarantees, or other agreements to provide an entity with some assurance that it will be recompensed to some degree in the event of a financial loss.

What is a credit scoring?

A process that uses recorded information about individuals and their loan requests to assess - in a quantifiable, objective, and consistent manner - their future performance regarding debt repayment. To learn more about your credit score and how it can be improved, kindly visit www.realtycorpofamerica.com and click on "About credit scores".

What is the Loan-to-value (LTV) ratio?

Loan to value is the relationship between the dollar amount of a borrower's mortgage loan and the value of the property.   For example, if an LTV is 85% and the home is worth $100,000, the lender will loan $85,000 against the property.

What's a Mortgage-Backed Security?

A Fannie Mae security that represents an undivided interest in a group of mortgages. Principal and interest payments from the individual mortgage loans are grouped and paid out to the holders of these securities

What is a "Buydown"?

A buydown usually refers to a fixed rate mortgage where the interest rate is "bought down" for a temporary period, usually one to three years. After that time and for the remainder of the term, the borrower's payment is calculated at the note rate. In order to buy down the initial rate for the temporary payment, a lump sum is paid and held in an account used to supplement the borrower's monthly payment. These funds usually come from the seller (or some other source) as a financial incentive to induce someone to buy their property. A "lender funded buydown" is when the lender pays the initial lump sum. They can accomplish this because the note rate on the loan (after the buydown adjustments) will be higher than the current market rate. One benefit is that the borrower may get to "qualify" at the start rate and can qualify for a higher loan amount. Another benefit is for a borrower who expects their earnings to go up substantially in the near future but wants a lower payment right now.

What is a Reverse mortgage?

A financial tool which provides seniors with funds from the equity in their homes. Generally, no payments are made on a reverse mortgage until the borrower moves or the property is sold. The final repayment obligation is designed to not exceed the proceeds from the sale of the home.   Realty Corporation of America Mortgage Services originates reverse mortgages so kindly let us know if you think this loan product is something you would like to consider.