Mortgage Industry FAQ – Part 5

Q81.   Can an application be made online?

A.   Several lending institutions have websites detailing their services. You may visit the websites and check out if they have a facility for online applications. You may fill up the online application form by entering the information asked for. A home mortgage consultant of the institution will call you up for the follow up process.

Q82.   Can an online application be made with a co-borrower?

A.   An online application with another borrower may be made. The mortgage consultant will ask for information on the other borrowers.

Q83.   Are the services of an attorney required for purchasing a mortgage loan?

A.   It is generally not essential to have an attorney for refinancing mortgages. Attorneys are used in real estate purchases. The decision of using the services of an attorney rests with the borrower.

Q84.   What is meant by a mortgage closing?

A.   A mortgage closing refers to the finalizing of the purchase agreement of the mortgage loan.

Q85.   How long does it take to close a mortgage loan?

A.   The time required to close a mortgage may vary. Once a borrower has been approved for a mortgage program, closing takes place after 45 to 60 days.

Q86.   Who are concerned with the closing process?

A.   The prospective homebuyer, the seller of the property, and the lender are present at the closing of the loan. If the services of attorneys were retained during the application and approval of the loan, they need to be present at the closing. At the closing, the relevant documents are reviewed and signed. The lender offers the check to the buyer for the mortgage. The seller hands over the keys to the house to the buyer. The buyer receives the title to the property at the closing.

Q87.   What are mortgage-closing costs?

A.   Mortgage closing costs are the various kinds of payments that have to be made when the purchase of the loan is finalized. The costs may not be the same for all states.

Q88.   Which agency determines the costs?

A.   A mortgage closing cost comprises several components. Some of the costs are decided by the law of the land, a part of the cost is determined by the lender and others are characteristic of the region.

Q89.   What are the components of a mortgage closing cost?

A.   A typical mortgage closing cost consists of the loan origination fee, title insurance, escrow deposits for taxes, points and private mortgage insurance (see Q 17), if applicable.

Q90.  What is a loan origination fee?

A.   The origination fee is charged for services rendered in making the application for the loan and processing it. It includes the fees of the lenders and brokers involved in the process.

Q91.   What is title insurance?

A.   The payment of the title insurance fee grants protection to the lender or borrower from a possible event of a third party trying to claim ownership of the concerned property by producing a deed.

Q92.   What are escrow deposits for taxes?

A.   Mortgage companies provide escrow services for the loans. If a borrower pays the escrow deposits at the time of closing the loan, the monthly mortgage payments take care of the municipal, property and insurance taxes. An escrow deposit has to be paid while refinancing a mortgage, as well.

Q93.   What are points?

A.   You may pay points at the time of closing the mortgage to reduce the interests incurred. One point constitutes 1% of the principal. The greater the number of points availed, the lesser is the interest rate. Paying for more points may increase the closing costs by a few thousand dollars. However, the scheme will ensure a greater saving, in the end. If you plan to take up a property for a long time, it makes sense to invest in points.

Q94.   Is it required to produce homeowner insurance at closing?

A.   A proof of the homeowner insurance has to be furnished before the closing of the mortgage loan. An insurance coverage for one year has to be paid.

Q95.   How is homeowner insurance different from private mortgage insurance?

A.   Homeowner insurance policy covers any kind of damage to the property and the possessions within it from accidents. On the other hand, a private mortgage is required if the borrower pays less than 20% down payment. This protects the mortgage lender if the client defaults on the monthly payments.

Q96.   If a borrower has an existing mortgage and wants a loan for further refinancing from the same lender, will he be required to pay fresh closing costs?

A.   The borrower will have to pay closing costs every time he closes a deal with the lending institution. These costs are required to process the new application. The closing costs cover other items related to the closing of the fresh deal.

Q97.   What does the term seasoning imply in the case of refinancing?

A.   If a borrower has an existing mortgage and want a further refinancing program for the same property, the lender may require the property owner to make monthly mortgage payments for a period of at least 12 months before allowing the refinancing. This is called seasoning. The lender wants to ensure that the borrower is capable of making regular payments.

Q98.   Can the monthly mortgage payments be made by deducting the amount from a savings account each month?

A.   Yes. After closing a mortgage loan, the borrower is given an option to enroll in a monthly payment procedure. The exact amount is debited on a specific date every month.

Q99.   Can the monthly payments be made online?

A.   You may make your monthly payments online and view all the details online. Managing the mortgage account online is fast, simple and free. You may get the necessary information from the mortgage consultant at the lending institution to get the necessary details.

Q100.   Can the mortgage payments be made ahead of the appointed time?

A.   Yes. If a borrower can afford to make extra monthly payments, he may speed up the process of repaying the mortgage. Do not forget to bring to the notice of the lender that you have made the extra payment towards the loan. Inquire from the lender about the prepayment details.

 

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