Loan FAQs

How can I draw credit when I need it?

If you want a reserve of funds you can draw on in the future, choose our Home Equity Line of Credit. You’ll have the credit you need when the need arises – and you make no monthly payments until you draw on it. Be ready for future expenses like medical bills, emergency home repairs, tuition, and more.

What is an appraisal and who completes it?

The appraisal determines the value of the property in question, which becomes a prime factor in determining the Loan-to-Value – or LTV – ratio (the amount of your loan divided by the value of your property). Your LTV is important because it determines your equity in the property. With the exception of leveraged equity and some second mortgages, we will arrange an appraisal of your property to verify its value. An appraiser is an authorized professional who estimates the value of the property and sends the information to us and to you.

What is an Impound/Escrow Account?

An Impound Account or an Escrow Account (the terms are interchangeable – each used in different states) is the name of the account in which a lender collects payments you make toward your property taxes and hazard/fire insurance. If you have an Impound/Escrow account, each of your monthly payments will contain a fraction of your annual property tax and insurance costs. Your lender keeps these funds in the Impound/Escrow Account and then pays your taxes and insurance directly when they become due.

An Impound/Escrow Account can be a convenient and trouble-free manner of ensuring that your insurance and tax payments are made on time. Additionally, choosing the convenience of an Impound/Escrow Account allows us to offer you a better rate or lower fee. Please note that Impound/Escrow Accounts are mandatory for Purchase or Refinance Loans where the loan amount is 80.01% or more of the property value (Loan-to-Value ratios of 80.01% or more), unless otherwise restricted by laws in your property’s state (in California, Impound Accounts are required for Refinance Loans, Purchase Loans with LTV of 90% or greater, and for second mortgages with LTVs of 80.01% or greater).

What is an Income-to-Debt ratio?

Your income, debt, and mortgage payments make up your Income-to-Debt ratio. These are the primary factors that affect whether or not you qualify for a loan. If you do qualify for a loan, you can apply, and we will move to the next step of checking to see if you can be approved. To determine your qualification, the first thing we will do is divide the monthly payment of your proposed loan by your gross monthly income. This provides your Housing-to-Income ratio. If the resulting percentage falls within a certain range, the next step is to divide your total monthly debt by your gross monthly income. This provides your Debt-to-Income ratio. Again, if the ratio falls within prescribed limits, you are qualified for the loan.

The limits within which your Housing and Debt ratios must fall are determined primarily by the size of the loan, the value of the property, and the ratio between the two (known as the Loan-to-Value ratio, or LTV). This Loan-to-Value ratio is one of the most important factors in determining a home loan.

What is the decision process?

After you complete your application, we will review your information in order to assess the risk involved with your particular loan and situation. We also prepare the necessary documentation to process the loan and satisfy government regulations.

If you are approved, you will be presented with a short list of documents you will need to provide to allow us to process your loan. These items will primarily include verification of your income, and perhaps a request for W-2s, income tax returns, or similar information.

What is a cash-out option?

If your equity in your property qualifies, you can refinance with a loan amount greater than your current mortgage – and keep the difference! Use it for home improvement, debt consolidation, or whatever you desire.

What is PITI?

Principal, Interest, Taxes, and Insurance – PITI

PITI is the acronym referring to the above-referenced components of your monthly mortgage payments. That is, each month your payment to your lender will consist of:

Funds to be applied to the Principal – to repay the actual money you borrowed.

Funds to be applied to the Interest – to repay the interest you’re being charged on the loan, over the life of the loan.

Funds being collected in an Impound/Escrow Account to pay your property taxes when they come due.

Funds being collected in an Impound/Escrow Account to pay your hazard/fire Insurance when it comes due.

What is PMI?

Private Mortgage Insurance (PMI) is usually mandatory for loans when the ratio of the amount of the loan to the value of the subject property is greater than 80% – that is, 80.01% or more of the property is being paid for by the loan. Loan-to-Value ratio (LTV) knows this as the Loan. Basically, the lower your Loan-to-Value ratio, the higher your equity in the property. You can think of equity as the part of your property you actually own. If you sold your property (for its appraised value), equity is the amount of cash you’d have left after you repay your loan balance in full.

Common wisdom holds that the more equity a borrower has in a property, the lower the risk of them defaulting on the loan. Thus, Private Mortgage Insurance (or PMI) must be paid for lower equity (high LTV) loans to safeguard the lender from possible loan defaults.

Can I or my co-borrower be self-employed and still qualify for a loan?

Yes, we provide loans to individuals who are self-employed. Income documentation may be requested with certain loan products.

Why is the Loan-to-Value ratio important?

Your Loan-to-Value ratio (LTV) shows your equity in the property. Your equity is basically the amount of the property you own, expressed as a monetary figure. Another way of thinking of your equity is that it’s the amount of money you’d receive if you sold your property at its valued price, less what you’d have to return to your lender to repay the loan. Example: $100,000 value minus $50,000 to repay loan = $50,000 equity. Your LTV and equity are crucial because common wisdom among lenders is that the higher the LTV (and the lower the equity), the higher the risk of a borrower defaulting on his or her loan. Thus, low equity loans present lenders with greater risk, forcing them to increase their costs.

Will a second mortgage allow me to borrow funds against my existing property?

If you want a reserve of funds you can draw on in the future, choose our Home Equity Line of Credit. You’ll have the credit you need when the need arises – and you make no monthly payments until you draw on it. Be ready for expenses like medical bills, emergency home repairs, tuition, and more.

Home Equity Loan
If you want to borrow up to 100% of your home’s value at a fixed rate of interest, choose our Home Equity Loan. Use those funds for a purchase opportunity, home maintenance, debt consolidation, or major expenses.

High Loan-To-Value
If you want a large sum of cash, try one of our high loan-to-value products. With low equity – even no equity – we can still loan you the funds you need to make home improvements, consolidate debt, buy a car, or make an investment.

To learn more about these and other products, call us any time at (800) 998-FUND.

What is a “Good Faith” estimate?

It is an estimate of the fees that you will pay to close your loan.

How do I calculate my Loan-to-Value ratio (LTV)?

The Loan-to-Value ratio (or LTV) is one of the most important factors in your loan process. It is used to determine the limits within which your Housing and Debt ratios must fall for you to be approved. It can also determine which fees you will be charged for your loan, and the amount of these fees. It will also determine whether you must pay Private Mortgage Insurance (PMI) and use an Impound/Escrow Account.

Your Loan-to-Value ratio (LTV) is simply the amount you are borrowing divided by the value of the subject property you are purchasing or refinancing. This gives you a simple ratio. For example, a house valued at $100,000 which you intend to purchase with an $80,000 loan (and a $20,000 down payment of your own cash) is said to have an LTV of 80% – that is, the loan represents 80% of the value of the house.

The value of your property is its appraised value OR the amount you pay for the property (the market value), whichever is lower. In the initial stages of qualification and approval, your property’s value is understood to be an estimate. It will be confirmed, if necessary for your particular loan, by a professional appraiser hired by us.

How do I calculate the value of my property?

Property appraisal – property value

Since a mortgage is a loan secured by a piece of real property, a crucial factor is in the correct value of the property in question.

Property value can be determined in a number of ways:
The Market Value of the property: that is, what a buyer will pay for it, and what other comparable properties (comps) in the neighborhood have recently sold for.

The Appraised Value of the property – that is, what a trained and licensed professional deems the property to be worth based on an inspection, comps, and a thorough analysis of the property and its neighborhood.

Additionally, the appraiser estimates the replacement value of the property, that is, the cost to build a house of similar size and construction in a vacant lot. The appraiser reduces this cost by an age factor to take into account deterioration and depreciation.

How much can I borrow and why?

Your income, debt, and mortgage payments – loan qualification

Income, debt, and mortgage payments are the primary factors which affect whether you qualify for a loan. If you do qualify for a loan, you can apply and we will move to the next step of checking to see if you can be approved.

To determine your qualification, the first thing we will do is divide the monthly payment of your proposed loan by your gross monthly income. This provides your Housing-to-Income ratio.

If the resulting percentage falls within a certain range, the next step is to divide your total monthly debt by your gross monthly income. This provides your Debt-to-Income ratio. Again, if the ratio falls within prescribed limits, you are qualified for the loan.

The limits within which your Housing and Debt ratios must fall are determined primarily by the size of the loan, the value of the property, and the ratio between the two (known as the Loan-to-Value ratio, or LTV). This Loan-to-Value ratio is one of the most important factors in determining a home loan.

How much can I borrow and why?

Closing costs are sometimes also called settlement costs. These are the costs a lender charges for funding and completing your loan and are generally charged at the time of closing (or settlement). They often include Discount Points, which are fees paid to lower your interest rate. Settlement costs/closing costs vary greatly depending on your state, county, and/or metropolitan area. They also vary from one lender to another, so it pays to shop around.

What are closing costs?

Closing costs are sometimes also called settlement costs. These are the costs a lender charges for funding and completing your loan and are generally charged at the time of closing (or settlement). They often include Discount Points, which are fees paid to lower your interest rate. Settlement costs/closing costs vary greatly depending on your state, county, and/or metropolitan area. They also vary from one lender to another, so it pays to shop around.

What are income, debt and mortgage payments?

These are the primary factors that affect whether you qualify for a loan. In order to determine if you qualify for a loan, your lender will calculate two defining ratios: the Housing-to-Income ratio and the Debt-to-Income ratio. The first of the two ratios, the Housing-to-Income ratio, is calculated by dividing the monthly payment of your proposed loan by your gross monthly income. If the resulting percentage falls within a pre-determined range, the lender will then go on to calculate your Debt-to-Income ratio. The Debt-to-Income ratio is calculated by dividing your total monthly debt by your gross monthly income. Once again, if this ratio falls within prescribed limits, the lender will qualify you for the loan. The limits within which your Housing and Debt ratios must fall are determined primarily by the size of the loan, the value of the property, and the ratio between the two (known as the Loan-to-Value ratio, or LTV). This Loan-to-Value ratio is one of the most important factors in determining a home loan.

What are prepaid interest and Impound/Escrow funds?

Prepaid interest and Impound/Escrow funds are costs generally associated with a mortgage. At the time of closing your loan, a lender will often require you to provide the funds to establish your Impound/Escrow accounts (so your taxes and insurance can be paid on time) and to pay the interest for the time period between the loan closing date and the end of the closing month.

What are the appraisal costs?

For a purchase loan, we pay the appraisal cost and do not charge you until your loan closes. Unlike with most lenders, with us, as long as you lock the rate, you pay no expenses until your loan closes. We will hire the appraiser. Most lenders pass this cost on to you immediately.

The appraisal determines the value of the property in question, which becomes a prime factor in determining the Loan-to-Value (LTV) ratio (the amount of your loan divided by the value of your property). Your LTV is important because it determines your equity in the property.

What does a lender look at to approve me?

At the heart of approving a potential borrower is what lenders call “the three C’s of Underwriting:”

Credit – your credit history
Collateral – the value of the property securing the loan (your house)
Capacity – your financial ability to assume and repay debt

Taken together, these create a portrait of a potential borrower’s risk – that is, whether or not he or she will pay back his or her loan. If the risk seems high, the lender will be reluctant to make the loan. Depending on the degree of risk, a lender may choose to charge higher rates and/or fees, or decline to make the loan altogether.

An additional factor crucial to your approval for a specific loan is the Loan-to-Value ratio (or LTV) represented in the transaction.

What does “rolling-in” fees mean?

We give you the option of rolling these funds into your loan amount. This allows you to get your loan with no out-of-pocket expense, but your loan amount will be slightly higher. The alternative to rolling the costs into your loan is to provide the funds yourself when the loan closes. You’ll be borrowing a smaller loan than with a roll-in, but you will incur immediate out-of-pocket expenses.

What is amortization?

Amortization means paying down your principal. You repay your loan in monthly installments. If you have a fixed mortgage (that is, an interest rate that remains fixed for the entire term of the loan), your payments will always be the same amount. Part of the payment goes toward the payment of the interest, and part toward the repayment of the money you’ve borrowed (the principal).

The balance of the principal (what you still owe at any given time) is reduced with each payment. As a result, your monthly payment will pay the principal in increasing amounts over time. With a fixed interest rate, the amount of interest you owe will decrease as your principal balance decreases.

You can create an amortization schedule for fixed loans when they are originated. This schedule will show how much of each payment will go towards interest and how much will go towards principal over the life of the loan.

As your principal decreases, your equity in the mortgaged property increases. Equity is a very important factor in mortgage financing.

How do I determine the points I want to pay?

Points are paid when the loan closes, not at the time you apply for the loan. Generally speaking, points are fees added on to loans. One point equals 1% of the loan amount.
When you get a loan, you’ll have the opportunity to “buy down” the interest rate by paying discount points – essentially paying a fee to lower your interest rate.

By lowering your interest rate, you will be lowering your monthly payment and the amount of interest you’ll be paying over the life of the loan. You pay more at the beginning of your loan but will save money in the long run. Keep this in mind as you determine whether to pay points.
Paying points requires a higher immediate expenditure, so it may not be for you. In that case, let the loan do its job – allowing you to borrow the money you need and pay it back as you can.

What are rates, terms, and APR?

All mortgages have an interest rate, a term, and an Annual Percentage Rate (APR). For example, a mortgage might be defined as a 30-Year Fixed Rate Loan at 7.625%, with an APR of 7.800%.
In this example, the mortgage term is 30 years. As the borrower, you will pay back the loan in installments over the course of 30 years.

The interest rate in this example is 7.625%. This means you must pay interest on the money you’ve borrowed at a rate of 7.625% per year. That is, in addition to paying back the loan, you will pay your lender an additional 7.625% of the current loan balance every year. This interest is basically the fee your lender charges you in return for lending you the money.

The Annual Percentage Rate (APR) is a measure of the cost of credit, expressed as a yearly rate. Because APR includes points and other costs such as origination fees, it’s usually higher than the advertised rate. The APR allows you to compare different mortgages based on actual annual costs.

What is equity?

Equity is a crucial aspect of home loans. Equity is simply the value of a homeowner’s unencumbered interest on real estate. Equity is computed by subtracting the total of the unpaid mortgage balance and any outstanding liens or other debts against the property from the property’s fair market value. A homeowner’s equity increases as he or she pays off his or her mortgage or as the property appreciates in value. When a mortgage and all other debts against the property are paid in full, the homeowner has 100% equity in his or her property.

Equity exists in conjunction with your Loan-to-Value ratio (or LTV). Your LTV is a ratio expressing the value of your property to the amount of your loan. You determine your LTV by dividing your loan amount by your property’s value or selling/purchase price, whichever is lower.
For example, you buy a $100,000 home with a $20,000 down payment of your own money, and cover the remaining $80,000 with a mortgage – 80,000 divided by 100,000 gives you a Loan-to-Value ratio of 80% and equity of 20%.

Equity and LTVs are important because lenders prefer a borrower to have as much equity as possible. Traditional wisdom holds that the higher the LTV on a loan, the higher the risk of default; alternatively, the higher the equity, the lower the risk – and therefore the lower the interest rate, cost, and fees associated with doing the loan. Equity also determines how much a lender will allow you to refinance your property for, and how much they will lend you for a second mortgage.

Another way to think of equity is as the amount that you’ll receive when you sell the property and pay back the remaining loan balance. Again, for a $100,000 house bought with an $80,000 loan and sold for $100,000, you would get $20,000 in cash back – or 20% of the home’s value.

What is a mortgage?

A mortgage is a loan you acquire in order to purchase property, but you can also get cash for other purposes using the property as equity. In return for the loan, you pledge real property (land and/or a building) as security in case you fail to live up to your obligation.

When you borrow money against property, you commit to two financial documents:

The NOTE that is a personal obligation to repay the loan on a timely basis.

The MORTGAGE DEED OF TRUST that is the pledge of the property as security. The mortgage deed of trust defines your obligations to your lender, as well as your rights and those of the lender.
You are pledged to repay the mortgage loan, along with an additional charge for the lender’s service of lending you the money. The cost of borrowing the money is the interest rate specified in your note. The amount of time you have to pay back the loan is the note’s term.

Can I make extra principal payments so I can pay off the loan more quickly?

Depending on the loan, and what your state permits, it is feasible for you to make extra payments on the loan. Extra payments will have an effect on the amortization schedule over the remaining term of your loan.

Do I get a tax advantage from having a mortgage?

You should consult a tax attorney or accountant for specific details, but interest on a mortgage is usually tax deductible. Interest on credit cards or automobile loans is not normally tax deductible.

Do you offer loans for mobile homes (manufactured houses)?

In some cases, we will provide loans on manufactured houses. The house must be at least a “double-wide” and be permanently attached to a foundation.

How do I know how much equity I have in my property?

Equity is the value of a homeowner’s interest in real estate. Equity is computed by subtracting the total of the unpaid mortgage balance and any outstanding liens or other debts against the property from the property’s fair market value. A homeowner’s equity increases as he or she pays off his or her mortgage or as the property appreciates in value. When a mortgage and all other debts against the property are paid in full, the homeowner has 100% equity in his or her property.

How do I know what my loan rate will be?

Rates vary primarily based on the type and purpose of the loan, your credit history and income, loan amount, value of the property, and the number of points you are willing to pay.

What are points and how many do I have to pay?

Generally speaking, points are fees added on to loans. One point is equal to 1% of your loan amount. Points are paid when the loan closes, not at the time you apply for the loan.

What closing costs will I pay?

We offers loan with and without closing costs depending upon what type of loan you want and the amount of money you are borrowing.

What is the difference between an Equity Line of Credit and another type of second mortgage?

An Equity Line of Credit is money in an account that can be used as you need it. You can use any portion of it at any time and pay it back at any time. The interest rate is usually variable and is tied to the prime rate. Other types of second mortgages, such as the Home Equity Loan, 110% Reward, and 125% Freedom loans are simple interest products. You borrow a lump sum and pay it back over a period of years with interest. The interest rate for these products is fixed.

What kind of security does this Web site have?

We are certified as a Thawte Secure Site.

Protecting your personal information is very important to us. We know that it is essential to keep our communication with you private. That’s why we have obtained a Secure Server ID from a trusted third party.

Secure Server IDs are also known as digital certificates. They bind an identity, in this case us, to a pair of electronic keys that can be used to encrypt and sign digital information. Our unique Secure Server ID ensures our authenticity to you, assuring that you are really dealing with us and not an imposter. It also allows our communication with you to be encrypted so that no third parties can access it. It guarantees that only we will be able to see the personal information you exchange with our site.

It is important that eBusinesses obtain Secure Server IDs from a trusted third party, also called a Certification Authority.

What if I want to talk to a loan agent?

You can talk to a loan agent at any time by calling (800) 998-FUND

What happens after I apply for a loan online?

Our loan agent will confirm the information on your application and will contact you. He or she will then turn the application over to a loan processor who will monitor the progress of your application until closing, or will notify you in writing that your loan has been declined.

What do I do if I have trouble filling out a section of the online application?

You can talk to a loan agent at any time by calling (800) 998-FUND

Will I have to pay any loan fees if I apply for a loan on the web site?

Our fees are the same regardless of application method.