Frequently Asked Questions

   Yes. Making periodic extra payments or sending in extra money with your normal payment will add up and greatly reduce the payoff time for your loan. Some lenders charge a prepayment penalty if you pay your loan off early, but nowadays it is more likely that you will not encounter prepayment penalties.

   Points are a dollar amount paid to a lender for making a loan. A point is one percent of the loan amount. When getting a mortgage loan, a borrower generally has the option to "buy" one or more points, in order to bring his interest rate down. Normally for each point "bought," the interest rate is reduced by one-fourth of a percentage point.

   Private Mortgage Insurance. PMI is required if you put down less than 20% of the selling price (or if you have less than 20% equity in your house). PMI is insurance taken out by the lender to cover the expenses incurred should you default on your home loan.

   An account to set aside a part of your monthly loan payment, which is distributed throughout the year to cover your homeowner's insurance and property taxes. Borrowers usually have the option to pay their tax and insurance bills on their own each time they are due, but it is often a good idea to pay towards those expenses each month and let your mortgage company handle the paperwork.

   Your interest and principal balance will always be part of your monthly payment. In addition, depending on whether you have escrow accounts set up, the monthly amount will also go towards your property tax and homeowner's insurance costs for the year.

   The interest rate will determine several things, such as how much total money you can borrow, how high your mortgage payments will be, and it could even affect how long your loan term will be.

   Real Estate Settlement Procedures Act. It is an act which was initiated to protect consumers by requiring lenders to disclose certain information to the borrower. Under RESPA, lenders must inform the borrower of things such as all closing costs, interest rates, escrow accounts, and several other factors that are involved with your mortgage.

   These are the expenses involved in the mortgage process, from the initial application all the way through the finalization of your loan. Closing costs are paid by the borrower and may include an application fee, appraisal costs, clerical expenses, and a variety of other things.

   Title companies are third party participants in the mortgage process. They often handle the processing of legal documents and the transfer of money between the home seller, the home buyer, and the lender.

   The finalization of the mortgage loan, the transfer of title to the property, and the payment for the property to the seller all take place at closing. All involved paperwork is explained, usually by a representative from the title company. All of the paperwork is then signed by the appropriate parties, and the transfers of property and funds are made.