Common Questions and Answers

Common Questions and Answers

Q: What type of loans programs do you have?
A: We offer First and Second mortgages, and Home Improvement loans with Fixed or Variable Rates. We also offer loans for those with past credit problems and Low Income loans.

 
Q: How much do I need for a down payment?

A: Down payment requirements depend on the type of loan you get. We can offer home loans with as little as 0% down. Some sellers can carry paper to help finance a down payment, resulting in an even lower down payment. The VA loan is a true 100% loan to value, which means the seller can pay the closing costs and there is no money out of pocket.
 
Q: How long does it take to get approval?
A: Approval times vary depending on the complexity of your loan application. The typical time frame is 1-2 days for approval. You can save time, however, by pre-qualifying for your loan. Fill out our OnLine Pre-Qualification Form and e-mail or fax it to us today.
 
Q: What are closing costs?
A: Closing costs are fees charged to cover appraisals, title search, document preparation, recording fees, flood certification, etc. Closing costs can be included in the loan amount for some transactions, resulting in no out of pocket costs.
 
Q: What is the best type of loan for me?
A: Choosing the right loan depends on many things. Such as how long you plan to keep the property; how much of a down payment you can afford; how much of a monthly payment you can afford; future earnings; etc. Pre-qualify to find out what is available to you by filling out our OnLine Pre-Qualification Form.
 
Q: What if I have had credit problems in the past?
A: Mid Valley Financial works with many lenders and is able to find loans for those who have had credit problems in the past. We can obtain financing for virtually anyone regardless of past credit. Simply fill out the OnLine Pre-Qualification Form and send it to us today.
 
Q: When should I apply for my loan?
A: If you apply today, you can get pre-qualified and know what is available to you before you go shopping for your new home. You will know in advance how much house you can afford. Just fill out the OnLine Pre-Qualification Form to be pre-approved when you shop, return it to us by e-mail, fax.
 
Q: Why Should I Be Pre-Qualified?
A: By Pre-Qualifying you know what price range of home you can afford. This will put you ahead of the game by knowing what you can afford. Fill out our OnLine Pre-Qualification Form and send it to us today.
 
Q: What is PMI?

A: In the event that you do not have a 20 percent down payment, lenders will allow a smaller down payment - as low as 0 percent in some cases. With the smaller down payment loans, however, borrowers are usually required to carry private mortgage insurance. Private mortgage insurance will usually require an initial premium payment and may require an additional monthly fee depending on you loan's structure.
 
Q: What are points?
A: There are two types of points, Discount and Origination. Discount points are charge for the purposes of obtaining a lower rate. Origination points are a fee charged by the lender for doing the loan. A point is equal to 1% of the loan amount.

 
If you have questions which are not answered here, please see
the Glossary or Contact Us for more information.
 


Common Refinancing Questions

Q: Mortgage rates are at favorable levels. Is it time for me to refinance?
A: When interest rates fall, a homeowner should definitely call Mid Valley Financial Services about refinancing, but he or she should discuss their entire financial situation and goals before making any final decision. Is your goal to lower your monthly payment? Consolidate debts? Get cash out for large purchases? Change your interest deduction expense for your taxes? Ask Mid Valley Financial to provide a couple of refinancing scenarios for you, showing how your loan term length, monthly payment and your total interest expense on the loan will change. After looking at these scenarios, it will be clear whether or not you should spend the money to refinance.
 
Q: How do I know when I should refinance my current mortgage loan?
A: It is often said that you should refinance when mortgage rates are 2% lower than the rate you currently have on your loan. Refinancing may be a viable option even if the interest rate difference is less than 2%. A modest reduction in the loan rate can still trim your monthly payment. For example, the monthly payment (excluding taxes & insurance) would be about $770 on a $100,000 loan at 8.5%. If the rate were lowered to 7.5%, the monthly payment would be about $700, a savings of $70. The significance of such savings in any scenario will depend on your income, budget, loan amount and the change in interest rate. Mid Valley Financial can help calculate the different scenarios.
 
Q: Should I try to pay as many discount points as possible to lower my loan's interest rate?
A: If you plan on staying in the property for at least a few years, paying discount points to lower the loan's interest rate can be a good way to lower your required monthly loan payment (and possibly increase the loan amount that you can afford to borrow). If you only plan to stay in the property for a year or two, your monthly savings may not be enough to recoup the cost of the discount points that you paid up-front. Contact MVFS to see how long it would take for your monthly savings to recoup the costs of the discount points.
 
Q: What does it mean to lock the interest rate on a mortgage loan?
A: Due to the nature of interest rate movements, mortgage rates can change dramatically from the day you apply for a mortgage loan to the day you close the transaction. If interest rates rise sharply during the application process, it could make a borrower's mortgage payment larger than he/she previously thought. To protect against this uncertainty, a lender can allow the borrower to 'lock-in' the loan's interest rate, guaranteeing the borrower the prevailing loan rate for a specified period of time (often 30-60 days). Call us for details and pricing on this service.
 
Q: Should I lock-in my loan rate when I apply for a mortgage loan?
A: No one knows for sure how interest rates will move at any given time, but we may be able to give you an estimate of where it thinks mortgage rates are headed. If interest rates are expected to be volatile in the near future, you may want to consider locking your interest rate if rising rates will no longer allow you to qualify for the loan. If your budget can handle a higher loan payment, you might want to consider allowing the interest rate to 'float' until the loan closing.
 
Q: I've only been late a couple of times on my credit card bills. Does this mean I will have to pay an extremely high interest rate?
A: Not necessarily. If you have been late less than three times in the past year, and the payments were no more than 30 days late, you probably have a pretty good chance at getting a home loan at a competitive interest rate. If the late-pays were 60+ days late and cannot be explained, you may have to settle for a higher interest rate. Contact MVFS for further information.


If you have questions which are not answered here, please see
the Glossary or Contact Us for more information.
 
Common Questions Regarding ARM Loans

Q: When interest rates are low, should I consider an Adjustable Rate Mortgage Loan?
A: One of the advantages of Adjustable Rate Mortgage (ARM) loans is that they can have lower interest rates (during the first couple of years) than a fixed rate loan program. Even when fixed interest rates are low, the starting rate on ARM loans are still lower. Of course, this lower rate may be only temporary, depending on future interest rate movements. One of the questions that you need to ask yourself is: How long do you think you will live in the property? If you plan on moving in a couple of years, ARM loans can save you interest costs without exposing you to much risk of future payment changes.
 
Q: I only plan to live in my house a few years. Is an ARM loan a good option for me?
A: Many people choose the traditional 30 year fixed-rate mortgage loan because they want payment stability. If you only plan to stay in the home a couple of years, you may not want to pay for this security that you are not using. You may want to consider getting some type of Adjustable Rate Mortgage (ARM) loan. They offer lower starting interest rates than the 30 year fixed-rate loan. Some ARM programs will start with interest rates as low as 1%, but the interest rate will be subject to change every month. The one year ARM loan will usually have a starting interest rate 1-2% below the prevailing 30 year fixed-rate, and will be subject to change every year.
 
Q: If I am not sure how long I plan to stay in the property, should I still consider an ARM loan?
A: There are several types of ARM loans available, with different levels of 'payment-change' risk. You can choose a loan with an interest rate that adjusts every 6 months or a year. These loans usually have the most attractive introductory rates. There are also loans that will offer a fixed interest rate for 3, 5, 7 (or even 10 years), before turning into 1 year adjustable rate loans. These loans offer some payment stability, while at the same time offering a lower rate than could be obtained with a fixed rate loan. But remember, loans with fewer rate adjustments usually charge a higher introductory rate.
 
Q: If I get an adjustable rate mortgage loan, how does my lender determine what the rate will be from year to year.
A: Although your interest rate can be subject to change, Mid Valley Financial will calculate the interest rate at each adjustment period by adding its margin (an interest rate that is specified when you get the loan) to an established monetary index. The margin will vary and you should contact Mid Valley Financial Services for more detailed information.
 
Q: What types of indexes are used on ARM loan?
A: A variety of adjustable rate programs are available that use different indexes. Contact us today for the most recent information.


If you have questions which are not answered here, please see
the Glossary or Contact Us for more information.
      

Questions on Fixed and Adjustable Rate Mortage

Q: Aren't there really just two kinds of mortgages: fixed and adjustable rate?
A: You could say that, because all mortgages fall into one of these two categories -- that is, the interest rate you pay is either the same (fixed) for the life of the mortgage, or it can change (adjust) over the life of the mortgage.

Fixed-Rate Mortgages
With this type of mortgage your monthly payments for interest and principal never change. Property taxes and homeowners insurance may increase, but generally your monthly payments will be very stable. Fixed-rate mortgages are available for 50 years, 40 years, 30 years, 20 years, 15 years and even 10 years. There are also "bi-weekly" mortgages, which shorten the loan by calling for half the monthly payment every two weeks. (Since there are 52 weeks in a year, you make 26 payments, or 13 "months" worth, every year.)

Adjustable-Rate Mortgages (ARMS)
These loans generally begin with an interest rate that is 2-3 percent below a comparable fixed rate mortgage, and could allow you to buy a more expensive home. However, the interest rate changes at specified intervals ( for example, every year) depending on changing market conditions; if interest rates go up, your monthly mortgage payment will go up, too. However, if rates go down, your mortgage payment will drop also.
 
Q: How do I know which type of mortgage is best for me?
A: There isn't a single, simple answer to this question. The right type of mortgage for you depends on many different factors:
• Your current financial picture
• How you expect your finances to change
• How long you intend to keep your house
• And how comfortable you are with your mortgage payment changing from time to time

For example, a 15-year fixed-rate mortgage can save you many thousands of dollars in interest payments over the life of the loan, but your monthly payments will be higher. And an adjustable rate mortgage may get you started with a lower monthly payment than a fixed-rate mortgage -- but your payments could get higher when the interest rate changes.

The best way to find the "right" answer is to contact Mid Valley Financial Services and discuss your finances, your plans and financial prospects, and your preferences.
 
Q: How much will my credit history affect my ability to get a mortgage?

A: Many home buyers are very worried about this issue. Most people don't need to worry about the effects of their credit history. However, you can be better prepared if you get a copy of your credit report to review before you apply for your mortgage. That way, if there are any errors you can take steps to correct them before you make your application. If you have had credit problems, be prepared to discuss them honestly with us -- and come to your application meeting with a written explanation. We know that there can be legitimate reasons for credit problems, such as unemployment, illness or other financial difficulties. If you had a problem that's been corrected, and your payments have been on time for a year or more, your credit will probably be considered satisfactory.

 
If you have questions which are not answered here, please see
the Glossary or Contact Us for more information.
 
    
Why Do Mortage Rated Respond to Economic Events?

Q: Why are mortgage rates tied so closely to economic and financial market events?
A: When a person borrows money from a lender, the person must sign a promissory note promising to repay the home loan and a mortgage note (or deed of trust) to serve as collateral for the loan. The bearer of these notes has a legal claim to the property until the mortgage loan is either paid in full or refinanced. When a lender has loaned out all of its available funds, the lender will often raise money by selling groups of these notes (mortgage loans) to investors. The selling of mortgage loans to investors is referred to as the `secondary mortgage market.' In order to attract investors, this secondary mortgage market must be competitive with similar investment markets. Since a mortgage loan is a long term debt, the Treasury bond market (debt issued by the federal government) is used as a benchmark for determining appropriate value.
 
Q: Why is bad economic news good news for mortgage rates?
A: Inflation is the primary factor that affects the Treasury bond markets and interest rate levels. Treasury bond investors do not like inflation because it eats away at the value of their fixed return investments. When the economy slows down, the threat of inflation is subdued and investors become more comfortable investing in long term debt. This is the reason the Treasury bond market rallies (bond prices move higher) on weak economic news. When the price of a Treasury bond moves higher an investor is forced to pay more for this investment, so its yield (return on investment) to the investor declines. When the yield on Treasury bonds decline the yield on all similar investments (including mortgage loans sold in the secondary market) decline as well. If a lender can sell mortgage loans at a lower interest rate to investors, they are likely to pass on these lower rates to you, the borrower.
 
 
If you have questions which are not answered here, please see
the Glossary or Contact Us for more information.

 


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