Costs of a Mortgage Loan

The same care and consideration you give to finding the right home should be applied to your search for the right mortgage lender. For most home-buyers a major determining factor in selecting a lender is the cost of the mortgage loan. But how do you determine the cost of a mortgage loan?

While most buyers concentrate on interest rates, it is best to look at all the costs associated with a mortgage loan. Mortgage loans include the quoted interest rate, points and closing costs.

Shopping for a Mortgage

More Than Interest

Compare APR

Locking In

Penalties

Money Isn't Everything

More than Just Interest

A number of fees are associated with the mortgage loan, including:

• Appraisal - A carefully documented opinion of value by a licensed, professional appraiser.
• Credit Report - A detailed report of your credit, employment and residence history prepared by a credit bureau.
• Principal - The amount owed on a mortgage which does not include interest or other fees.
• Document Fees, Loan Fees and Processing Fees - Miscellaneous fees charged by the lender.
• Discount Points - Points paid in addition to the loan origination fee to get a lower interest rate. (1 point = 1 percent of loan amount)
• Origination Points - the total number of points paid by the borrower at closing. (1 point = 1 percent of loan amount)
• Interest Rate - A percentage of a loan or mortgage value that is paid to the lender as compensation for loaning funds.

Using the Annual Percentage Rate (APR) to Compare Mortgage Loans

The APR was designed to help borrowers understand the relative costs of a mortgage loan. The APR takes into account the various fees associated with the loan, which is why it is often higher than the interest rate. Understand that not all lenders calculate a loan's APR in the same way. That is why this should be only one of the factors used in selecting the best mortgage for you.

Locking-in Interest Rates

Another factor to consider when selecting a lender is whether the lender will lock-in the mortgage's interest rate and points.

Prepayment Penalty Mortgages (PPMs)

These loans restrict your right to prepay part or all of the principal in the loans early years. A prepayment fee is charged by the lender to the borrower who wishes to pay part or all of the loan ahead of the regular schedule. The advantage of a PPM is that they often have a lower interest rate than other mortgages.

Money Isn't Everything

When considering lenders, factor in the level of service they will provide throughout the loan process. I'll be glad to provide a list of lenders who have successfully helped clients in the past. You can also ask friends and family in the area for their recommendations.

Types of Mortgages

Private Sector

Conventional Loans - The only security guarantee is the value of the property.

Conforming Loans

Conventional loans that follow the terms and conditions established by the guidelines of Fannie Mae and Freddie Mac:

• Fixed-Rate Mortgage
  The interest rate and the principal payments remain fixed throughout the loan. Keep in mind your monthly escrow account payment could vary from year-to-year as taxes and insurance rateschange.
• Variable or Adjustable-Rate Mortgage
  The interest rate on the loan fluctuates over the period of the loan. Periodic adjustments to the interest rate are made based on changes to a defined index. The loan's interest rate is determined by adding a fixed number of points to the defined index.
• Balloon Loan
  Short term, fixed-rate mortgage that has monthly payments usually based on a 30-year amortization schedule and a lump sum payment due at the end of term, usually 3, 5 or 7 years. The interestrate on balloon loans is usually less than a 15- or 30-year fixed-rate mortgage.
• Piggyback Loan
  A second mortgage that closes with the first. Often the first mortgage is for 80% of the purchase price and the "piggyback" is for 10%. The home buyer covers the remaining 10% with their down payment. (Some lenders will write a second mortgage of 15% or even 20% of the purchase price.)
• Housing Finance Agencies
  These agencies offer special loan programs to low- and moderate-income buyers, buyers interested in rehabilitating a home in a targeted area, and other groups as defined by the agency. Working through a housing finance agency, you can receive a below market interest rate, down payment assistance and other incentives.
• Jumbo and Non-Conforming Loans
  Loans above the maximum amount established by the guidelines of Fannie Mae and Freddie Mac. Often the interest rate charged for a jumbo or non-conforming loan is higher than that of a conforming loan.
• B/C Loans
  Loans for borrowers who cannot meet the credit guidelines established by Fannie Mae and Freddie Mac. The purpose is to offer temporary financing to someone whose credit history disqualifies them for a conforming loan (including someone who has recently filed for bankruptcy, foreclosure or late payment on their credit report). Typically the interest rates run higher and vary depending upon the individual credit situation.

Government

• FHA Loans
  The Federal Housing Authority (FHA), which is part of the U.S. Department of Housing and Urban Development (HUD), plays a significant role in helping low- to moderate-income families qualify for mortgages. FHA assists first-time buyers and others who would not qualify for a conventional loan, by providing mortgage insurance to private lenders. Interest rates for an FHA loan are usually the going market rate, while the down payment requirements for an FHA loan are lower than conventional loans. The required down payment can be as low as 3 percent and the closing costs can be included in the mortgage amount.
• VA Loans
  VA Loans are guaranteed by the U.S. Department of Veterans Affairs. Service persons and veterans can qualify for a VA Loan, which usually offers a competitive fixed interest rate, no down payment and limited closing costs. While the VA does not issue the loans, it does issue a certificate of eligibility required to apply for a VA loan.
• RHS Loan Programs
  The Rural Housing Service (RHS), which is part of the U.S. Department of Agriculture, guarantees loans from private lenders to help low- to moderate income families qualify for mortgages.

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Types of Mortgage Lenders

Primary Mortgage Lenders

There are a number of types of primary mortgage lenders that you may encounter when shopping for your mortgage loan. To give you a better understanding of these service providers, a brief explanation is provided below.

Mortgage Bankers typically originate loans and then sell these loans to the secondary mortgage market shortly after funding. (The mortgage banker may or may not sell the servicing of the loan.) Often mortgage bankers have attractive loan programs and rates.

Portfolio Lenders make loans with the institution's own funds and keep the loan on the institution's books rather than immediately selling it to the secondary mortgage market. Many institutions engage in mortgage banking as well as portfolio lending.

Since portfolio lenders fund the loans, they are not confined to Freddie Mac/Fannie Mae guidelines. After a portfolio loan has reached its one year anniversary date without any late payments, it is considered seasoned and may be sold to the secondary mortgage market even if it does not meet Freddie Mac/Fannie Mae guidelines.

If a portfolio loan is sold to the secondary mortgage market, the portfolio lender may continue to service the loan.

Direct Lenders fund their own loans. Direct lenders usually fall into the category of a mortgage banker or portfolio lender.

Correspondents act on behalf of one or several lenders (sponsors) throughout the origination and closing. The loan is usually underwritten by the sponsor. The correspondent acts as the lender's agent. The correspondent may also service the loan for the lender

Mortgage Brokers work as intermediaries between lenders and borrowers. Mortgage brokers have access to a number of lenders and often offer the most variety in loan programs. Brokers assist the borrower in filling out the loan application, obtaining the credit report and appraisal, selecting a loan program and finding a lender to fund the loan. In general, brokers do not make the decision to extend the loan and do not fund the loan.

The mortgage broker may be paid by the borrower or the lender. Payment to the broker is typically included in the closing costs as either fees or points.

Wholesale Lenders underwrite and fund mortgage loans. Wholesale lenders may also service the loan payments and ensure the loan's compliance with underwriting guidelines.

Banks, Credit Unions and Savings & Loans use funds gathered from their customers through checking, savings and certificates of deposit to make mortgage loans. The institution may hold the loan in its portfolio or sell it to a secondary mortgage market.

Secondary Mortgage Market

When you apply for a home mortgage, you may be under the impression that the mortgage lender will be servicing the loan until it is paid off. This may not be the case. It is common practice for the mortgage loan to be bought and sold to a secondary mortgage market investor, sometimes more than once in the life of a loan.

These transactions will not affect your mortgage amount or your mortgage payment. The secondary mortgage market is comprised of investors like Fannie Mae and Freddie Mac. Selling loans to the secondary mortgage market provides primary lenders with funds needed to issue new mortgage loans.

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Your FICO Score

Scoring your Credit - How's your FICO?

In today's increasingly automated society, it should come as no surprise that when you apply for a mortgage, your ability to pay can be reduced to a single number. All the years you've been paying your mortgage, car payments, and credit card bills can be analyzed, sliced, diced, spindled and mutilated into a single indicator of whether you're likely to meet your future obligations.

FICO Scoring Criteria

All three of the major credit reporting agencies (Equifax, Experian and TransUnion) use a slightly different system to arrive at a score. The best known is called the FICO score, based on a model developed by Fair Isaac and Company (hence the name) and used by Experian. Equifax's model is called BEACON, while TransUnion uses EMPIRICA. While each of the models considers a range of data available in your credit report, the primary factors are:

• Credit History - How long have you had credit?
• Payment History - Do you pay your bills on time?
• Credit Card Balances - How much do you owe on how many accounts?
• Credit Inquiries - How many times have you had your credit checked?

Each of these, and other items, are assigned a value and a weight. The results are added up and distilled into a single number. FICO scores range from 300 to 850, with higher being better. Typical home buyers likely find their scores falling between 600 and 850.

FICO scores are used for more than just determining whether or not you qualify for a mortgage. Higher scores indicate you are a better credit risk, and thus may qualify for a better mortgage rate.

What Can You Do About Your FICO SCORE?

Unfortunately, not much. Since the score is based on a lifetime of credit history, it is difficult to make a significant change in the number with quick fixes. The most important thing is to know your FICO score and to ensure that your credit history is correct. Conveniently, Fair Isaac has created a web site (www.myFICO.com) that let's you do just that. For a reasonable fee, you can quickly get your FICO score from all three reporting agencies, along with your credit report. Also available is some helpful information and tools that help you analyze what actions might have the greatest impact on your FICO score. Each of the credit services offers similar services on their web sites: www.equifax.com, www.experian.com, and www.transunion.com.

Armed with this information, you will be a more informed consumer and better positioned to obtain the most favorable mortgage available to you.

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Preferred Mortgage Lender

When it comes to buying or refinancing a home, it's nice to know that someone is watching out for you. Whether you need advice on the size of a loan, are investigating the best way to finance a project, or are seeking the lowest interest rates, Movement Mortgage is there for you every step of the way.

At Movement Mortgage we've earned a reputation for putting our customers first. That's why no matter how large or small a loan you're looking for, we'll be there to guide you and help you with all the details.

Call us today to experience the Movement Mortgage difference!

The Secret to Our Success

Our talented operations team strives to underwrite each loan within only six hours and finishes processing each loan within only 7 business days. Currently, over 70% of our loans are processed within just 7 days of receiving the application. This allows Movement Mortgage to issue preliminary HUDs weeks before closing and regularly move closing dates up when requested by our agent partners. Exceeding expectations is what we do!

Backwards Processing

Movement fully underwrites every file at the beginning of the loan process, not at the end. This integral step provides our real estate agents and borrowers with a clear road map to closing. It takes a little more work on our end, but provides a huge benefit to our valued clients!

We completely restructured our entire operation. In most cases, our loans are completely processed by the time the appraisal comes in. The loan is then sent to closing early, and the instructions also go out early. This allows the title company to properly do its job because it doesn't have to deal with last minute surprises. All of these steps allows the agent, buyer, and seller to move the closing date up if they want.

NC I-147620 | Movement Mortgage, LLC is an Equal Housing Lender | NMLS ID# 39179 | www.nmlsconsumeraccess.org | 877-314-1499. Movement Mortgage, LLC is licensed by NC # L-142670. Interest rates and products are subject to change without notice and may or may not be available at the time of loan commitment or lock-in. Borrowers must qualify at closing for all benefits. “Movement Mortgage” is a registered trademark of the Movement Mortgage, LLC, a Delaware limited liability company. 841 Seahawk Cir, Virginia Beach, VA 23452.