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Frequently Asked Questions
1) What if I’ve had
credit problems?
2) Which type of loan is best for me?
3) What is the Interest Rate & Annual Percentage Rate?
4) What will you look at when I apply for a mortgage?
5) How much time does it take to close?
6) What will my mortgage payments include?
7) What closing costs will I have to pay?
8) What documents do I need to provide ?
9) What are discount points and should I pay them?
10) How do I know how much house I can afford?
11) What is the difference between a fixed-rate
loan and an adjustable-rate loan?
12) How do I know which type of mortgage is best
for me?
13) What does my mortgage payment include?
14) How much cash will I need to purchase a home?
1) What if I’ve had credit problems?
Your credit history is only one factor in qualifying
for a loan and having made some late payments doesn’t
have to keep you from buying a home. Someone who
has consistently made payments on time in the past
may have more financing options than someone who
has not, but that doesn’t mean a mortgage is off
limits if you’ve had credit problems.
2) Which type of
loan is best for me?
We would like to find out more about you before
throwing out loan options. You wouldn’t want a doctor
to suggest surgery before they assessed your medical
situation, would you? We will gather information
about you and your financial goals before suggesting
a certain loan type. Check out these loan types
and we will explain the pros and cons to each. Then
we will decide together which loan is right for
you.
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Fixed-Rate Loans: You will pay the same
interest rate and same monthly payment of principal
and interest for the duration of the mortgage. The
most common terms are 30, 20 & 15 years. Fixed-rate
mortgages are best if you plan on being in your
home for a while.
Adjustable-Rate Loans: (ARM)
The interest rate stays fixed for an initial interest
rate period, which ranges from 1-7 years. Then
the rate will adjust up or down annually for the
life of the loan based on a specified index. An
RM is a good option if you believe interest rates
will go down over the next few years or if you
plan on staying in your 5 to 7 years or less.
Combination Loan: A loan where
you receive a first mortgage combined at the same
time with a second mortgage. This option may help
you avoid the costs of mortgage insurance and/or
the higher rate of a larger loan with as little
as 10% down. The most popular combinations are 80-10-10
(80% first mortgage, 10% second mortgage, 10% down)
or 75-15-10 (75% first mortgage, 15% second mortgage,
10% down)
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3) What is the Interest Rate
& Annual Percentage Rate?
The Annual percentage rate (APR) is derived by
a complex calculation that includes the interest
rate and all the other related lender fees divided
by the loan’s term. However, keep in mind that:
• There is no way to accurately compute an APR
for an adjustable loan
• And APR does not account for early payoffs.
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4) What will you
look at when I apply for a mortgage?
We will consider many factors in evaluating your
loan application, but we will mainly focus on:
• Income and Debt: How much money
you make and what other bills you have to pay
helps us determine whether you can afford to make
mortgage payments.
• Assets: We need to make sure
you have enough money to cover the costs of buying
a home.
• Credit: Whether you’ve met
other financial obligations helps us predict whether
you will repay your mortgage.
• Property: The home you want to
buy has to be worth enough to act as collateral
for the mortgage.
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5) How much time
does it take to close?
Average loan processing time periods fall between
21 & 45 days. To properly write a purchase
contract, you will need to include a closing date,
and that date should be coordinated with your
real estate agent and Old Virginia Mortgage, Inc.
- Virginia Beach Branch . We will evaluate your
loan and anticipate:
• How quickly do you want to close?
• Are there any obstacles that could possibly
prolong a closing?
• How long after final application approval will
the loan close?
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6) What will my mortgage
payments include?
For most borrowers, each monthly mortgage payment
goes toward the following:
• Principal:
the total outstanding balance of the loan (interest
not included).
• Interest: the cost of borrowing
money.
• Taxes: Levied on the property
by the local government.
• Insurance: protects the owner
and the lender from the losses caused by fire and
natural hazards.
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7) What closing costs
will I have to pay?
Closing costs vary (generally 2-3%) based on a
number of factors. You will be provided an estimate
of your closing costs soon after your application
has been received. Closing costs depend on the
mortgage type, the mortgage program, purchase
contract, and location, but closing costs usually
include the following:
• Lender Fees: Included in these
are appraisal fees, credit report fees, origination
points and discount points.
•Third Party Fees: Charges for
services not provided by Old Virginia Mortgage,
Inc. - Virginia Beach Branch , including settlement
fees, title insurance and attorney’s fees.
• Prepaid
Items: Certain mortgage costs must
be paid to Old Virginia Mortgage, Inc. - Virginia
Beach Branch in advance. The most common of these
are pre-paid interest, hazard insurance and deposits
to set up an escrow account.
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8) What documents
do I need to provide ?
Other documentation may be required depending
on your loan situation, but the most common requirements
are:
• Pay stubs covering the most recent 30
day period.
• W-2 forms for the most recent 2 years.
• Most recent 2 months bank statements (all
pages) for all bank accounts.
• Photo ID and evidence of Social Security
Number.
• Tax returns for the most recent 2 years
will be required for self employed clients.
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9) What are discount
points and should I pay them?
Discount points are equal to 1% of the loan amount.
Therefore, 2 points on a $100,000 loan cost is $2,000.
This is often called “buying down” your rate. The
more points you pay, the lower the interest rate.
In addition, discount points are tax deductible.
So does paying points make sense for you? The answer
depends primarily on how long you plan to stay in
your home. First, we’ll let you know how much lower
your monthly payments will be if you pay point.
Then, we will calculate how long it will take for
those monthly savings to add up to the cost of the
points. If it would take five years to break even
and you’re planning on staying in your home for
at least ten years, paying discount points may be
a smart move.
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10) How do I know
how much house I can afford?
Generally speaking, you can purchase a home with
a value of two or three times your annual household
income. However, the amount that you can borrow
will also depend upon your employment history, credit
history, current savings and debts, and the amount
of down payment you are willing to make. You may
also be able to take advantage of special loan programs
for first time buyers to purchase a home with a
higher value. Give us a call, and we can help you
determine exactly how much you can afford.
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11) What is the difference
between a fixed-rate loan and an adjustable-rate
loan?
With a fixed-rate mortgage, the interest rate stays
the same during the life of the loan. With an adjustable-rate
mortgage (ARM), the interest changes periodically,
typically in relation to an index. While the monthly
payments that you make with a fixed-rate mortgage
are relatively stable, payments on an ARM loan will
likely change. There are advantages and disadvantages
to each type of mortgage, and the best way to select
a loan product is by talking to us.
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12) How do I know
which type of mortgage is best for me?
There is no simple formula to determine the type
of mortgage that is best for you. This choice depends
on a number of factors, including your current financial
picture and how long you intend to keep your house.
Old Virginia Mortgage can help you evaluate your
choices and help you make the most appropriate decision.
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13) What does my
mortgage payment include?
Principal: Repayment on the amount borrowed
Interest: Payment to the lender for the amount
borrowed
Taxes & Insurance: Monthly payments are normally
made into a special escrow account for items like
hazard insurance and property taxes. This feature
is sometimes optional, in which case the fees will
be paid by you directly to the County Tax Assessor
and property insurance company.
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14) How much cash
will I need to purchase a home?
The amount of cash that is necessary depends on
a number of items. Generally speaking, though,
you will need to supply:
Earnest Money: The deposit that is supplied when
you make an offer on the house
Down Payment: A percentage of the cost of the
home that is due at settlement
Closing Costs: Costs associated with processing
paperwork to purchase or refinance a house.
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